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[rant]
So I've been renting a house for a while now while I get some money stashed away, my credit score nice and purty, and stabalize my income (which is hard to do when starting a company).

Anyway, I'm getting the point where I want to start looking for a house. I currently live in a nice neighborhood just outside of Los Angeles (Glendale, for those of you in the know) & would like to be in a similar situation after a purchase. My next door neighbor's house just went on the market & seems that it might fit the bill. It's smaller than the house I'm in (it's just under 1800 sq ft), but it has a nice yard and seems to have gone through some decent improvements. It has hardwood floors, and even though it was built in the 30's, it looks nice and fairly new.

So I go over yesterday for their open house remembering my research from about 3 years ago & that homes in my area were going for anywhere between $300K - $500K. I figure that it's probably going to be quite a bit more being that three years have passed, but think it might be still be up my alley being that it's only 1800 sq ft. Man, was I wrong - they're asking $1,125,000!!!!! FOR THE LOVE OF ALL THAT IS GOOD AND HOLY!!

I now have absolutley no regrets buying the Elise without first buying a home because I simply cannot afford to purchase anything but sqaller in this market.

... I know it's not the only place on the market, but a quick search through helpusell.com shows that right now is most definitely a sellers market.
[/rant]

that is all.. you can go on about your business. thanks for listening. :)
 

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It is nuts right now. The home across the street from me in San Diego (average neighborhood of older homes under 2000 sq ft) is listed at over $700k and it's in dire need of updating and has no view.

Homes here went up 41% in the last 12 months.
 

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Home/condo/apartments in the Glendale area are outragous. I have a real estate friend there who believe the real estate bubble in CA may burst in a few years. Maybe then I can afford to return. Miss Chevy Chase Drive.
 

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I hear you

First went in the West LA home market 4 years ago, and decided that homes were overpriced THEN. So I decided to wait for a correction. Since then, home prices have nearly doubled

Hard to know exactly what will happen now, but I do believe there's a significant bubble in LA/San Diego. Once interest rates climb, a correction will follow, but not for a while. Consider that something like 30% of new mortgages are ARMs -- this despite historically low interest rates. A lot of buyers are absolutely leveraged to the hilt, and they are effectively 'speculating' on their value of their home. Unfortunately, they are going to be badly hurt.

To buy now, one has to be in it for the long term, and I think one has to expect minimal growth at best. For me, I'm just saving and waiting...
 

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house p/e ratio

If its any consolation, go back to 1991 or so and look at the last bubble. There was a long, slow, ugly, painful decline and when I bought a house in 1995 my friends (many who bought in 1989-1991) generally thought it was a really bad idea. I sold that place Fall 2000 thinking it was near a peak, and got a 'cheaper' house. So much for predictions.

but if you want to see an interesting economist's take on housing, here's a followup to 'your house has a P/E ratio"

http://www.uclaforecast.com/forecast/forecastdisplay.asp?iForecastID=61&iAccess=1&sForecastType=Article

also go to the home page and check out the video by Dr. Ed Learner who wrote the series.

and yes- no reason not to enjoy an Elise while waiting for the popping noise. just don't fiance it for 30 years (i.e. use a longterm equity line to pay for it- the equity might just be gone someday, and the Elise will depreciate!)
 

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grudkin said:
Consider that something like 30% of new mortgages are ARMs -- this despite historically low interest rates. A lot of buyers are absolutely leveraged to the hilt, and they are effectively 'speculating' on their value of their home. Unfortunately, they are going to be badly hurt.
While that may be true, there IS another explanation to account for some of those ARM buyers. My wife and I, for example, chose a 5 year ARM not because we couldn't afford a fixed rate, but rather, we don't plan on living in this house more than 2-3 years so we end up saving money this way.
 

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My wife and I, for example, chose a 5 year ARM not because we couldn't afford a fixed rate, but rather, we don't plan on living in this house more than 2-3 years so we end up saving money this way
Of course, one can rationalize this many ways. But to buy a home with the intent of staying only 2-3 years constitutes real estate speculation. You are speculating that prices will increase in the short term, which may or may not happen. Taking a short term view involves more risk. Nothing wrong with that -- perfectly fine as long as you are prepared to ride out a correction.
 

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Agreed, there is risk regarding the house price for short term plans. In our case, we felt the tax deduction we'd get (we were renting previously) outweighed that risk. We're also hoping the 'correction' has already happened! ;)
 

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grudkin said:
Of course, one can rationalize this many ways. But to buy a home with the intent of staying only 2-3 years constitutes real estate speculation. You are speculating that prices will increase in the short term, which may or may not happen. Taking a short term view involves more risk. Nothing wrong with that -- perfectly fine as long as you are prepared to ride out a correction.
I doubt he's speculating. If one plans to live in California long-term, it just doesn't make sense to buy a house, wait for the price to run up and sell. Every other house has gone up in cost, as well, so you just end up swapping like for like homes.

Then there's the Prop 13 tax considerations. If your house doubles in value in five years, then you sell and buy another house of approximately equal value and...your property taxes double over what they would have been if you had stayed put.

The one advantage is to take the $500K income tax exclusion every two years.

Right now successful buyers are bidding significantly over the asking prices. The house next door to me just sold, after one week on the market, at $220K over the sellers asking price. There are just very few homes for sale in SoCal.
 

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I agree it's speculation, but you try to hedge against it by selecting the variables that you can control (i.e. location.)

In Huntington Beach, prices are going through the roof. Even on condos and townhouses (which traditionally are the last to increase in value and the first to decline in value.) My neighbor just listed his townhome for $719,100 (4 bedroom, 3.5 bath, 2,700 square feet, 3 car garage.) He got multiple offers over asking and went into escrow at $744,000. Someone else sold a townhouse like mine (3 bedroom, 3.5 bath, 2,200 sq. ft., 2 car garage) for $660,000 about 3 months ago. (I paid in the low $400's a year-and-a-half ago.)

Heck... there's builders here in Huntington Beach buying older properties on 10,000 sq. ft. lots and dividing them into two 5,000 sq. ft. lots with narrow tri-level homes on them. They're about 2,200 - 3,000 sq. ft. and the price has jumped from $600K about 2 years ago to $1,060,000 now.

I don't know what to think about the prices. I went with a 5 year ARM because it was a great rate and I will probably move again within 5 years. But remember that the tax shielding is $250,000 per person after 2 years of ownership. So if you're married, you're first $500,000 of capital gains is shielded.

I think your best bet is to look for a condo or townhouse in North Glendale or Pasadena and ride it out. Even new townhomes in Pasadena are over $600,000 now.

Good luck!

Bob
 

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shay2nak
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Originally posted by BrianK
So I go over yesterday for their open house remembering my research from about 3 years ago & that homes in my area were going for anywhere between $300K - $500K.
I've lived in Glendale for 16 years. The prices you've writen were true back in the early 80s. LOL You wouldn't believe the prices for some of the crappy looking houses I've seen. It's all about the location. I've been looking for a house over 2 years now. Looked in Glendale, Burbank, Pasadena, Woodland Hills, Westlake Village, Calabasas, EVERYWHERE! Same crap! Overpriced! So I go down to 2 bedrooms and a townhouse/condo. Still the same crap. Those are even worse with the stupid association fee. That's why I posted the thread about taking back your deposit in case I find a house.
 

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Shay2Nak, unless you HAVE to buy (kids on the way, etc), why not wait a bit more? All markets are cyclical. Homes in SoCal cannot continue to appreciate like they have. At most, prices will be flat for YEARS, once rates go up. And they will probably go down, perhaps substantially.
 

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I'm hoping for a decline. After 5 or so years, if I'm not making bookoo bucks or the price of homes hasn't dropped, I'm just going to pull anchor and leave. Status of the [hollywood dependant] company be damned. There's plenty of alcohol to be consumed elsewhere. ;)

shinoo - Temecula, eh?

shay2nak - if you take a look at the LA county assessors website, you can get the recent selling prices of properties all over Los Angeles county. That's how I did my previous research and the houses, even up by me (Western & Bel Aire) were down in the 400's just a few years ago - granted, they may have been smaller than my current place or my neighbor's place, but still...

... and while you're into snooping around, looking at everyone's property values, date of build, last selling price, square footage, etc, go ahead and take a look at how much they've donated to their politcal parties: http://www.fundrace.org/
 

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Here's hope Brian...Change may be in the air. higher rates and this note from the local paper..............

Thousands in S.D. get a move on

More left county than came here last year
By Lori Weisberg
UNION-TRIBUNE STAFF WRITER
April 9, 2004

San Diego County continues to lose its luster as the destination of choice for many Americans as thousands more people in the last year exited the region than moved here from within California and elsewhere in the nation.

According to new figures released yesterday by the Census Bureau, San Diego County's population growth is being fueled exclusively by births and foreign immigration. The trend is likely to continue.

Anemic job growth and escalating housing prices that have put homeownership out of reach for most renters are probably driving people from the San Diego region to more affordable areas, demographers and economists say.

In fact, the county's overall growth rate appears to be slowing and dipped below 1 percent for the first time in nearly a decade. The population is 2,930,886, according to the latest estimates.

Census numbers do not show where people are moving, but it's a safe bet that many are relocating to Riverside and San Bernardino counties, where housing prices are significantly less than in San Diego.

Riverside County was the fastest-growing county in California with a population increase of more than 5 percent between July 2002 and July 2003. While 15,000 more people left San Diego County than moved here from elsewhere in the United States, Riverside County experienced a net inflow of more than 65,000 people, not including immigrants. Many are likely transplants who still commute to jobs in San Diego, Orange and Los Angeles counties.

"The word in coastal California is 'Go east,' " said demographer William Frey of the Washington, D.C.-based Brookings Institution. "There's still an attraction of immigrants (to Southern California) who are willing to double up to get a foot in the door, but at the same time middle-class domestic migrants are leaving and want the middle-class amenities; they just can't do it in San Diego."

During the past year, nearly 18,300 more immigrants settled in San Diego County than moved away. However, the county's single biggest growth factor was "natural increase" – births minus deaths – amounting to more than 23,000.

With the median price of a home exceeding $400,000, it shouldn't be surprising that young people and entry-level home buyers are forced to move out of the county, said San Diego State University geography professor John Weeks.

"No matter how much people are talking about the bubble (in housing prices) bursting, it hasn't happened," Weeks said. "The bubble doesn't burst; it just runs out of gas a little bit. So it means for the foreseeable future this will be a less affordable place and it will drive migration trends."

Declining job growth has been a contributing factor to San Diego's slowdown in growth, believes Kelly Cunningham, economist for the Greater San Diego Chamber of Commerce.

While the county was adding between 40,000 and 53,000 jobs a year from 1997 to 2000, job growth last year slipped to 11,400, he said.

"People who are older, wealthy, or retiring are coming to San Diego and buying those $800,000 condos downtown," Cunningham said. "But people just starting out are not able to do it and having to go places like Riverside and even Mexico."

In fact, coastal counties throughout California are experiencing an eastward flight. That is especially true in Northern California, as aspiring home buyers seek affordable living in inland areas like the Central Valley.

San Francisco County's population actually shrank – by 10,000 – as did those of Marin, Santa Cruz, Alameda and San Mateo counties

"Some of this movement in California may be a staged movement, with the first stage going to the Central Valley or Riverside and then from there out to Nevada or Arizona," Frey said.

"In a lot of ways, California is two states: a coastal metropolis and the central part of the state that's growing because of this migration for affordable housing. But the state can't take up all the slack."
 

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shay2nak
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Hi Brian,

Thanks for the sites! I'll just wait to save more money until things calm down. This way I can still buy the Elise!

As for Jay's article, I heard this morning that to be able to afford an average priced home in LA of $400k, the median income must be $91k. This is up from $77k two years ago. Simply amazing. I'm single (no kids), but I may get something with my family.

Ara
 

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I heard about the income thing on the NBC news broadcast last night. It's staggering to think that it requires a $91K combined household income (or in my case, single earner income) to afford an average home. Ugh.

But I have to admit that what I heard (when I was looking for homes 4 years ago) is true: It's easier to buy a home when you've already got a home. The equity you build makes it easier to step into a bigger home later on. Don't overstretch your budget and buy a "dream home" right away. Work your way up to it.

Bob
 

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i wil be happy to sell you one of my houses. i have 2 both in the same town in n.w. ark. although it might be a long commute. the one im selling has been on market for almost 1 year. its less than 7 years old has 2 car garage and 2880 square ft nice area asking $179000. i dont see how real estate can vary that much, but i can see why your mad!!! the one im keeping is in town on top of mtn on 2 acres 5000 sq ft 4 car garage and i paid less than $400000
 

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I took the Muni from my apartment near Ocean Beach to downtown, there are more for rent signs that I can keep track off. And this is just the train route.

Sellers are not dropping the ask, thinking that happy days are just around the corner and renters will line up to pay $2500/mo for a 3 bedroom apartment, and real estate price will go up double digit again.

Real estate has been appreciating only about 5% a year here in the NoCal because sellers are just not selling. But there are not many buyers either.

I have a friend who has an apartment with a vacant unit (out of 8 units) for over a year, while a real estate salesman tells him that the property worth only $5million and is going up 20% a year. Renting is optional because the real estate price can only go up.

With more and more high paying jobs being offsourced, I sense a crash scenario is brewing.

Remember, the median household income, even in the supposely high paying Bay Area, is only in the mid 70K. In short, the housing price is already beyond the ability of the working class to pay.

The current real estate price is only supported by very low interest rate and speculation.

So, be a good poker player, know when to hold them and, more importantly, know when to fold them.
 

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William Baumol, Alan Blinder, and Edward Wolff have written a new book entitled “Downsizing in America.” The authors make some important observations. They stated that, of the 100 million men and women with full-time jobs in 2001, more than half earned less than $35,000; 84% earned under $65,000; 10% made between $65,000 and $100,000; and only 5.7% made above $100,000. In addition, they note that, in two-thirds of households with wage earners, the workers hold two or more jobs. For families with children, two-thirds of the mothers work. However, fewer than half the households have adults with two full-time jobs. There are serious implications resulting from the trends towards less full-time jobs, the average weekly work hours declining, weekly paychecks declining, and benefits dwindling.


and this from doug noland:

California Bubble Watch:

April 8 – “The percentage of households in California able to afford a median-priced home stood at 24 percent in February, a 6 percentage-point decrease compared to the same period a year ago when the Index was at 30 percent, according to a report released today by the California Association of Realtors (CAR)… CAR’s monthly housing affordability index measures the percentage of households that can afford to purchase a median-priced home in California… The index is the most fundamental measure of housing well-being in the state. The minimum household income needed to purchase a median-priced home at $394,300 in California in February was $91,690, based on a typical 30-year, fixed-rate mortgage at 5.74 percent and assuming a 20 percent downpayment. The minimum household income needed to purchase a median-priced home was up from $77,220 in February 2003, when the median price of a home was $326,640 and the prevailing interest rate was 5.93 percent.”
 
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