No_Strings
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The OC
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Efficient
| CA Real Estate Market Study
From First American Financial, a study that discusses the cyclical nature of the real estate market. For markets with strong cycles, the Los Angeles area is used as one examples.
I'm in no position to judge the objectivity of this paper, but it does cover the basics: defining terms, citing examples with supporting data. It does not read like a giant advertisement.
With our frequent discussions about the market and its impact on all of us, I thought it was relevant.
»www.firstamres.com/pdf/May18%202···INAL.pdf |
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major marco
Res Firma Mitescere Nescit
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join:2003-02-13
Stepford, CA
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1 edit | Cali real estate hyper-inflated market is headed for another crash, that much is certain. It will make the last one that occured a decade ago look like a day at the beach in comparison. Even if you know absolutely nothing about the market, it's common sense that what goes up must always come down. And given the way things have been on Main Street, U.S.A., and the way the shitheads in D.C. have been looting the federal treasury, we are headed for some serious shit to hit the fan in a big, big way.
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laserjobs
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join:2004-05-02
Las Vegas, NV
 ·Cox HSI
| reply to No_Strings
SoCal is in for a big correction in prices. The fed lowered rates to reduce the effect of the tech bubble to spur the availability of cheap money. In effect adding fuel to the fire. Lots of properties purchased with sketchy loan products like short term ARMs with teaser rates. Inventory is starting to build rapidly and if history repeats itself we should see the really price drops happen in 8-12 months when investors can not hold anymore.
Historically in California the affordability rate has been around 40% on average. Now it is sitting in the low teens.
There are a few factors that would help retain some of the prices from dropping off. Inflation across the board including salaries. Availability of longer loans like a 40 or 50 year term mortgage. Local economic stimulus like a new company coming to town with more local jobs created.
If I was to guess I would think that the fed is going to try to deflate us out of debt like we have done in the past.
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jig
join:2001-01-05
Hacienda Heights, CA
| reply to No_Strings
hmmm.. how to keep something of value around (cash? copper?) so that one can purchase one of the multitudes of homes to be sold at auction when payments aren't made....
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RR Conductor
RailRoadDude
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join:2002-04-02
Redwood Valley, CA | reply to No_Strings
Two words can sum it up-OUTRAGEOUSLY EXPENSIVE. |
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81399672
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join:2006-05-17
Los Angeles, CA
| reply to No_Strings
i see 10-20% correction, no more unless we have an earthquake . Also, what comes down will go back up. From 92/93 sales in socal were flat thru 1997. Starting from 97-to present price been going up. Usuall cycle is around 5-6 years, we are currently in uncharter waters. Lets not forgfet UCLA been predicting for big correct for the last 6 years and it haven't happened yet. |
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jinjimbob
Troy Mcclure
join:2001-11-13 | reply to No_Strings
"SoCal is in for a big correction in prices."
I have been hearing that for almost 5 years myself. They might stop going up as fast, but they won't go down. |
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laserjobs
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join:2004-05-02
Las Vegas, NV
·Cox HSI
| said by jinjimbob  :"SoCal is in for a big correction in prices." I have been hearing that for almost 5 years myself. They might stop going up as fast, but they won't go down. Then answer me this, what made the prices go sky high?
Do you think the reversal of the same thing might cause the reverse effect?
Here is a clue: Interest rates and lending practices
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jig
join:2001-01-05
Hacienda Heights, CA | i think it's more a function of demand. and that isn't reversing. |
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81399672
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join:2006-05-17
Los Angeles, CA
| reply to laserjobs
said by laserjobs :said by jinjimbob :"SoCal is in for a big correction in prices." I have been hearing that for almost 5 years myself. They might stop going up as fast, but they won't go down. Then answer me this, what made the prices go sky high? Do you think the reversal of the same thing might cause the reverse effect? Here is a clue: Interest rates and lending practices Demand, prices in California historically always been much higher then average prices across the world. Yes prices will go down but it will not crash like some people think it will. UCLA been saying 10% reduction for the last 3-4 years will happen and it haven't happened yet. The main reason why price may go down is because majority of speculators have left california real estate marketed and moved to Nevada. I am talking about those that buy the property hold it for 2-3 month and then sell it. Also prop 13 does help price stay up.
It seems people on this board want the prices to go down and praying it will go down because a)they can't afford the prices b)they can't immagine them self paying so much for the property. If you are in the b catigory then i am afraid you will have to wait for long time before you see high enough reduction in real estate prices |
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RR Conductor
RailRoadDude
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join:2002-04-02
Redwood Valley, CA
·Comcast
| reply to No_Strings
In so much of California if you own a home, you are set, if you are like me and have yet to own one, but hope to someday, then things don't look so bright. I love this state more than anything, but the real estate prices need to be reigned in, and soon.
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No_Strings
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join:2001-11-22
The OC | Even with the relatively lower prices up there, fairly low interest rates, I'd would have thought that a conductor's wages would cover a mortgage and then some. No?
(I have no idea what the pay range is for that.) |
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laserjobs
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join:2004-05-02
Las Vegas, NV
·Cox HSI
| reply to 81399672
said by 81399672 :said by laserjobs :said by jinjimbob :"SoCal is in for a big correction in prices." I have been hearing that for almost 5 years myself. They might stop going up as fast, but they won't go down. Then answer me this, what made the prices go sky high? Do you think the reversal of the same thing might cause the reverse effect? Here is a clue: Interest rates and lending practices Demand, prices in California historically always been much higher then average prices across the world. Yes prices will go down but it will not crash like some people think it will. UCLA been saying 10% reduction for the last 3-4 years will happen and it haven't happened yet. The main reason why price may go down is because majority of speculators have left california real estate marketed and moved to Nevada. I am talking about those that buy the property hold it for 2-3 month and then sell it. Also prop 13 does help price stay up. It seems people on this board want the prices to go down and praying it will go down because a)they can't afford the prices b)they can't immagine them self paying so much for the property. If you are in the b catigory then i am afraid you will have to wait for long time before you see high enough reduction in real estate prices Why would the prices go down 10% in the last 3-4 years? There was no fundamental change that happened in those years to create a turn. Actually there was "creative" options developed to add fuel to the fire (interest only adjustable rate hybrids and 40-50 terms) Now we have a market full of speculators, questionable lending and rising interest rates with affordability at an all time low. Get out in the field and tell me their is not slowing market momentum and rising inventories.
When inventories go over the 9 month supply range then we will see the drop happen. It takes time for sellers to succumb to pressure of lowing prices so inventory rises first.
The only thing an open house is good for these days is to provide the neighbors with some free snacks. 
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Bush has spent more $$$ than all other presidents combined in over 200 years!!!
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jig
join:2001-01-05
Hacienda Heights, CA
| said by laserjobs :The only thing an open house is good for these days is to provide the neighbors with some free snacks. in some areas and at some prices. i'd agree with some orange county spots, maybe west la, houses above the 1.2 mill pricepoint, but east of the 710, in the $400-800k range, open houses aren't needed, the houses get offers within a week (days) of being on the market site unseen. the cocktail sausages are a waste of money.
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin |
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dogma
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join:2002-08-15
Boulder City, NV
| reply to No_Strings
I read this report in it's entirety. The author pretty much states the obvious, however adds his own made up "index" of affordability. He however does not include a complete discussion of current lending practices. The current crop of seemingly unregulated, zero risk to the buyer, mortgage products are indeed the real culprit here. Without that discussion, I think the author falls flat on his face.
We all purchase on price or terms. If I (or anyone) could buy a $3 Million home, for $1 down & $1 per Month, I would. Price is unimportant to me because the terms are so attractive. If someone came to my door the next day and offered $3.5 Million because his terms were $2 down & $2 Month, I would sell...my $500K would be real. And the next day, a knock would come at his door and the pyramid would grow yet again.
Over 50% of ALL mortgages in the past 3 years have been interest-only products. Much akin to minimum down/minimum per month.
In the last 60 days a new mortgage product was introduced; a 50-year, 0 down, negative amortization, pay option, interest only adjustable rate mortgage. Targeted at financially-challenged subprime customers. This literally means a person or couple, with a 560 FICO, can purchase a $1 Million home, with no money down (other than closing) for less than $3200/Mo. Of course there is a helluva balloon payment down the road.
Again, this is why real estate has been over inflated. There were many people that believed in the dot-com stock market, many believed Enron was not a house of cards. At the end of the day we all realized it was simply a giant Ponzi scheme.
Like the dot com era, at some point, the party must come to an end and the piper must be paid. The two immutable dynamics are interest rates, and the adjustment horizon for existing ARM's. As I pointed out in other threads here, the reality is real household income can not support the weight of adjusted payments, and therefore will not justify housing values. |
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aztecnology
O Rly?
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join:2003-02-12
Murrieta, CA
 ·Verizon FIOS
| said by dogma :Like the dot com era, at some point, the party must come to an end and the piper must be paid. The two immutable dynamics are interest rates, and the adjustment horizon for existing ARM's. As I pointed out in other threads here, the reality is real household income can not support the weight of adjusted payments, and therefore will not justify housing values. Exactly right. Even more so, incomes have not kept up with the speculation in the housing market. On top of all that, people forget what the SoCal housing market was like 10-15 years ago...
»thehousingbubbleblog.com/
»www.oftwominds.com/wEssays.html - under housing bubble watch
»www.socalbubble.blogspot.com/
»www.piggington.com/
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81399672
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join:2006-05-17
Los Angeles, CA | reply to laserjobs
You will have to ask UCLA economics why they predicts for the last 3-4 years that real estate prices will go down 10%. I personally didn't see it but do see it now. With that being said, i do not see what other seem to which is real estate collapse |
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laserjobs
Premium
join:2004-05-02
Las Vegas, NV
·Cox HSI
1 edit | reply to No_Strings
What I have been hearing lately is a total 180 degree change in sediment. It has moved from "priced out" to "priced in". Meaning that people are not going to be priced out of the market like so many like to believe but they will be priced in because they have to stay in the house because of negative equity and huge debt accumulation.
Now I do not believe either side of the story. The only way someone would be priced out of the market is they are not keeping up with inflation. On the other side if the equity on the house becomes negative then just hand in the keys to the bank and take your lumps.
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Bush has spent more $$$ than all other presidents combined in over 200 years!!!
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81399672
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join:2006-05-17
Los Angeles, CA
| Actually in the recent years it was pretty easy to be priced out. Prices of the houses have been going up at higher rate then the wages during the same time. Unless a person(couple) made 100k+ a year, it was pretty easy for them to be priced out if they waited to long to get in to real estate market and wanted to buy in neighberhood that was out of their reach. |
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laserjobs
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Las Vegas, NV
·Cox HSI
| reply to jig
said by jig :said by laserjobs :The only thing an open house is good for these days is to provide the neighbors with some free snacks. in some areas and at some prices. i'd agree with some orange county spots, maybe west la, houses above the 1.2 mill pricepoint, but east of the 710, in the $400-800k range, open houses aren't needed, the houses get offers within a week (days) of being on the market site unseen. the cocktail sausages are a waste of money. Just remember "shit rolls downhill". Higher priced properties will see the effects first. One of my friends has a $10 Million plus estate he has not been able to move for 2 years because the buyer pool dried up. Now it is starting to hit the $1-2 Million price points. Soon it will take the lower end markets. Because real estate is a local market some areas will be less effected than others. Unfortunately all of California looks like it is overbought at this time.
I don't know what Open Houses you have been going to but I have been eating sushi and drinking good wine.
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Bush has spent more $$$ than all other presidents combined in over 200 years!!!
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