WatchWe're looking for a $1.4-2.2M house in the Los Angeles area, and although the prices have come down a little, it's taking much longer than the rest of the housing market. I always see homes on the internet where the buyer purchased it at the height of the bubble, and is now trying to get out without incurring a loss, or better yet is trying to make a profit. I'm assuming the only thing to do is wait for these homes to go into foreclosure or sell as a short sale?
I was hoping to buy in 2012, but maybe 2014 will be better? I've been waiting for years for this whole mess to unfold, and it's infuriating that we can't speed up the inevitable.
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housing market doesn't care that you're impatient. it'll correct when it corrects. it's an incredibly slow process.
you have all the power. you decide if you'll buy now, or wait for the market to come to you.
most people buy as soon as they can because they want instant gratification and lack discipline.
i prefer to be the last one to buy after everyone else. i like investing (not houses but stocks/bonds) and know how important it is to be patient.
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Hysteresis says
Why don't you just invest in a deluxe coffin.. Because you'll be spending far more time in that then your home if you are hoping to be the "last one to buy"! :)
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LAO says
maybe i should've clarified: last one to buy after all the bubble heads bought...
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Madison, WI
If your waiting for the 1% to lose their homes, you be waiting quite a long time. With that kind of money/backing you should be able to wheel and deel.
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Timing the market is difficult. My advise is rather than try to forecast when (or if) prices will drop –know what you can spend and stick to it. Try to find value, but be realistic – the price the market will bear may be more than your personal “valuation”. You can’t compete with stupid. Rates are still low and prices aren’t going up rapidly any time soon so as of right now, time is still on your side. Heck I’ve been waiting for over ten years – no exaggeration.
At some point personal circumstances may necessitate you make a move – even if it is reluctantly. So long as you are in the game for the long haul (ten plus years) and don’t stretch to the limit of your means, you should end up fine no matter what.
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Victorville, CA
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Way I see it if you got millions to spend on a house, you shouldn't worry about bubbles.
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San Jose, CA
nw888 says
The name of the game is kick the can down the road.
Hysteresis says
Do you understand the science of can kicking? Our politicians are deliberately slowing down the correction in hopes of maintaining the supposed status quo.
EastCoastBubbleBoy says
We're in the ZIRP Liquidity trap. Rates cannot go up a significant amount.
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Pleasanton, CA
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You know what is getting even older? All that lumber on the 25-40 year old million dollar homes. Go ahead, buy one and break it down and see.
I agree with other comments, though. The price range you are considering puts you in a class where conventional mortgages hardly play. These owners are normally much more wealthy than just the house, so can weather better as you can see. The problem is people who had all their wealth (leveraged 5-1, sometimes 10-1, sometimes infinity-1) and now are poorer than when they were born. Sucks
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Outside of Santa Monica and the Palisades, you can buy a lot of house with 1.4 to 2.2M, and prices have come down form the peak. Granted the price ranges that have been the most affected have been condos under 1M.
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South Pasadena, CA
Another perpetual "waiter" here... :-) Almost got divorced over the stupid house; guess what? my better half is much less impatience these days, in fact she enjoys our rental (2M property) so much, we hardly ever talk housing any more!!! life is good... :-)
I think we'll buy eventually, most likely with 100% cash when interest rates are sky high; I am not in any hurry though; I hope more of fellow Americans will see house for what it is - a place to enjoy and raise your kids NOT the "best investment of your life"... :-O)
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Los Angeles, CA
AlexG says
Y'all say this like its inevitable. The way I see it...interest rates are going to be low for a very long friggin time. And when interest rates eventually rise, then its a sign that the economy is actually recovering = home prices will go up right along with it.
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Pacifica, CA
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SubOink says
By then our cash will earn higher interest, too, right?
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Los Angeles, CA
OP, where are you trying to buy?
If you MUST have Santa Monica or South Pas, or if you have some ridiculous requirement like 2 acres or something....well good luck to you....
other than that, I don't really see what your issue is.
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Victorville, CA
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dodgerfanjohn says
The man just wants to be happy. I don't see the mystery.
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"Timing the market is difficult. My advise is rather than try to forecast when (or if) prices will drop –know what you can spend and stick to it. Try to find value, but be realistic – the price the market will bear may be more than your personal “valuation”. You can’t compete with stupid."
I agree with this post. Ten years is a long ass time to be dealing with landlords and feeling like you're waiting for your dream to manifest. Look for a deal that works for you and buy.
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Time is on your side. It is just unfortunate that you are caught up in the mess with heavy Fed intervention. It will stretch longer then you think as Fed will want to see banks lend money at 0% at the cost of taxpayers. Can't wait? then go for it. I don't blame you for being impatient.
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dodgerfanjohn says
Haha, you nailed it! We're of course mostly looking at South Pasadena or San Marino. We like the area, is pretty close to the our work, and it has very good schools. All combos that make the area expensive, I know!
The real frustration is that I see a home that sold for $2M in 2007, has no improvements, and has just been listed for $2.2M today.
Basically these sellers are trying to get their money back. All of them. Even though the markets has gone down, apparently their home hasn't. I get it though. They don't want to lose money on the deal. And all of these home are sitting there for 3-8 months or longer, but financially these sellers don't have to budge. So I wait. And wait. And then I wait some more.
Maybe it's time to just rent one of these homes for half of what a mortgage would be.
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nw888 says
Good conclusion.
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JodyChunder says
Quote of the day.
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TPB says
Agree. Most people think 500k is an insane amount for a house. But 1.2-2.2 Million?
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Timing a market may be difficult, but it is important. Just ask the homeowners in Japan who bought in 1994 after prices had dropped 30% from the peak. Their homes (on average) have dropped ANOTHER 40% in value from those 1994 prices. Real-estate prices in Japan have been dribbling downwards for over 20 years.
No one wants to get caught in a situation where their homes values are in perpetual decline, losing 30%, 40%, or 50% of their values in 15 or 20 years. Timing may indeed be tough, but getting caught in the wrong part of the market cycle can crush you.
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edvard2 says
I'm inclined to agree that it's a lot of money, although it's surprising what you actually get for that amount. I do disagree, though, that just because you have the money, doesn't mean you can afford to be reckless with it and overpay for something.
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nw888 says
For 1.1 to 2.2 million dollars you could quite easily move to a nice second tier city- like Austin TX, buy a house for cash, and retire. That's the way I look at it anyway. Sure, its easy to see that in very select particular areas of coastal Cali 1 million gets you nothing. I live in the Bay Area and parts of Silicon Valley have neighborhoods where 1 million bucks buys a small 60's- 70's rancher home- complete with 1970's Autumn Gold" colored un-updated appliances since the former owner probably lived there for 40+ years. On the other hand 30 miles down the freeway that same home is around 450-500k, which though still pricey is still drastically cheaper.
But as others have said its not really possible to time the market. I'd also imagine that the consumers that have 1 million+ to spend on a house are perhaps less inclined to be financially pressured and thus less concerned about prices in general when it comes to either buying or selling. Then again, I'm not in that group so that's simply a guess. But good luck just the same. In some ways its a bit refreshing to see that its not just people like us who think prices are crazy. Good to see upper wage earners making the same comments
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San Diego, CA
JodyChunder says
Typically, people in that situation have millions to spend because they worry MORE about bubbles, where there money is going, and how their assets are doing. Not worrying about things like this is one of the reasons most people never find themselves in that situation.
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Los Angeles, CA
edvard2 says
Agreed. That has been my mantra for years now. We might even go third-tier city just to get out of the rat race. At this point, we'd like to opt out of the system as much as possible.
Anybody getting pissy about spending $1mill+ in LA--have you actually been here? To actually live *in* LA, as opposed to around/outside of LA (a.k.a., 45 minutes to get anywhere and good luck if you live in The Valley or dirttown Inland Empire--kiss hours of your life away every day rotting in traffic) you *will* spend $1mill just for a 2000 sqft house with a dinky yard. If you want 2500 and a neighborhood that is a bit nicer, $1.5-2 is the norm. All reasons we are done with Big City Living.
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Shawn says
Word.
Philistine says
Yeah, it's frankly ridiculous. I'm starting to feel the same way about moving somewhere nice that is a lot cheaper. My wife and I could live in a stellar home, work 2 days a week, and then spend the rest of our time raising our children and doing the things we want to do.
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Los Angeles, CA
Philistine says
nobody needs to live what you call "in" LA. LA is not like NY, with Manhatten being the part of town where everything is.
LA is spread out. Depends on where you work, Santa Monica, Inland Empire, The Valley, Thousand Oaks, northridge...
There is no such thing as "in" LA. There is only LA and it takes 45min max to get to anywhere from anywhere, not a big deal. Take care of your phonecalls while driving, catch up with everybody and BAM you are home.
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Boca Raton, FL
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I would never want to live in LA. Too many damn vampires.
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Oakland, CA
nw888 says
my opinion 2014 will be worse. Inflation will be higher interest rates will be higher there will be more people employed and more competition.
House prices may be lower or maybe not that's anyone's guess.
The best time to buy was probably 2009 and it's gotten progressively worse since then.
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nw888 says
Please provide the following information:
1. household income
2. investable assets
3. age
It is hard to comment without knowing anything about your financial situation. Do you have $2M in assets and a salary of $50K or do you have $500K in assets and a salary of $500K?
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bubblesitter says
This potential buyer and anyone saying "time is on your side" should post their age... Then let average life span determine if that is really true :)
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Time IS on your side. As I mentioned earlier, prices have been falling steadily in Japan for over 20 years. Anyone who bought even after prices had fallen 30% from the 1989 peak are 30% to 50% under water today.
The US could very well be heading into a multi-decade period of deflation similar to what Japan has seen. If this is the case, the numbers won't work out for anyone. Not unless their time horizon is on a 30 or 50 year range.
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LAO says
Now you are trying to rationalize your decision. I just want the asset that will not go down in value the next day. I can rent the same house instead of buying. How does age matters if you are living the same house as a renter or an owner? Huh?
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LA and rest of SoCal have dropped nicely...
http://www.housingbubblebust.com/OFHEO/Major/SoCal.html
http://www.dqnews.com/Articles/2012/News/California/Southern-CA/RRSCA120215.aspx
http://www.dqnews.com/Charts/Monthly-Charts/OC-Register-Charts/ZIPOCR.aspx
Southland Home Sales Flat, Prices Edge Down
Februry 15, 2012
La Jolla, CA---The Southland housing market started 2012 with slightly higher sales and slightly lower prices despite record-low mortgage interest rates. Home sales skewed toward the lower price ranges, which is normal for January, as many traditional buyers retreated and investors snapped up homes at a record level, a real estate information service reported.
A total of 14,523 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 24.5 percent from 19,247 in December, and up 0.4 percent from 14,458 in January 2011, according to DataQuick of San Diego.
Sales have increased year-over-year for five of the last six months. The sharp sales decline from December is normal for the season. Last month’s sales count was 17.8 percent below the 17,671 average for all the months of January since 1988.
A total of 669 newly built homes sold in January, the lowest number for any month since DataQuick started keeping track in 1988.
“January numbers have never been very good at providing an indication of what upcoming activity will be like. For that we need to wait until March. What we can determine is that the mortgage market remains dysfunctional. It will be interesting to see how a potential surge of refinance activity plays into the purchase market once the administration’s new guidelines are implemented,” said John Walsh, DataQuick president.
The median price paid for a Southland home last month was $260,000, down 3.7 percent from $270,000 for both December and January last year. The median was the lowest since $249,000 in May 2009. The median’s low point for the current real estate cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The peak-to-trough drop was due to a decline in home values as well as a shift in sales toward lower-cost homes, especially inland foreclosures.
Distressed sales made up more than half of January’s resale market.
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Mikhail says
Today is 2012... by 2015-16 (not that far away!) will mark the 10 years from the housing bubble peak (2005).. but we see we are no where near the bottom or fixing the housing issue... so 2005 plus 15-20 years may not be out of the realm of possibilities, just to get back to the norm we once saw once before in early-mid 1990s. Yes, very much like Japans deflationary years.
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San Francisco, CA
The Japan comparison is informative, but only to a point, right? Japan has markedly different demographics, among other things obvious and not so obvious. I don't think we'll see a 20 year slide from here - if only bc the echo-boomers are going to need a place to live. Lots of them, especially in nicer areas, will have strong parental $backing$. I'd love to see continued price dropping, but I don't think the powers that be would allow such a slide...
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LAO says
Like everthing it does take time.. education, job, career, first home, etc etc. Patients and focus pays off.
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Belmont, CA
nw888 says
I want this badly as well.
Im tired. The rat race is an unwinnable game for those not in the 0.01% It time for me to get out of the Bay Area apocalypse.
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Where are all these great deals on rental homes that everyone on this site lives in? I want a million dollar home that rents for $2500 too!
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Belmont, CA
Mikhail says
Unlikely. Gas, food and rent prices are increasing. Salaries are stagnant. Inflation is the only tool that the US government can use anymore - insolvent? Change the water level.