patrick.net

nw888 says

Maybe it's time to just rent one of these homes for half of what a mortgage would be.

Good conclusion.

JodyChunder says

Way I see it if you got millions to spend on a house, you shouldn't worry about bubbles.

Quote of the day.

TPB says

Way I see it if you got millions to spend on a house, you shouldn't worry about bubbles.

Agree. Most people think 500k is an insane amount for a house. But 1.2-2.2 Million?

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.

edvard2 says

TPB says

Way I see it if you got millions to spend on a house, you shouldn't worry about bubbles.

Agree. Most people think 500k is an insane amount for a house. But 1.2-2.2 Million?

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.

nw888 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.

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

JodyChunder says

Way I see it if you got millions to spend on a house, you shouldn't worry about bubbles.

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.

edvard2 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

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.

Shawn says

JodyChunder says

Way I see it if you got millions to spend on a house, you shouldn't worry about bubbles.

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.

Word.

Philistine says

edvard2 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

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.

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.

Philistine says

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)

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.

I would never want to live in LA. Too many damn vampires.

http://www.youtube.com/embed/CAmQjOcplf8

nw888 says

I was hoping to buy in 2012, but maybe 2014 will be better?

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.

nw888 says

We're looking for a $1.4-2.2M

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?

bubblesitter says

Time is on your side.

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 :)

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.

LAO 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 :)

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?

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.

Mikhail says

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.

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.

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...

LAO 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 :)

Like everthing it does take time.. education, job, career, first home, etc etc. Patients and focus pays off.

nw888 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

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.

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!

Mikhail says

The US could very well be heading into a multi-decade period of deflation similar to what Japan has seen.

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.

The responses in this thread are sorta off the wall. OP has a very specific situation most of us don't fall into, and the answer is relatively simple with one caveat:

OP should buy only if he is ok taking a loss when he sells.

Provided that caveat, the amount of money he is talking in San Marino and South Pas just doesn't go far. That leaves OP with three options IMO:

1.) Buy a smallish house in S. Pas anyway.

2.) Rent in S. Pas

3.) Buy in great areas nearby where your money will go farther...Arcadia or La Canada. Tremendous schools, nice upscale areas.

First: It is very hard to catch the exact top or exact bottom of any market (stock or real estate). If you catch most of the swing you are doing well. If you wait too long you miss the entire market move. Most investors or traders who try and catch the exact bottom usually end up with nothing. I have never been able to catch an exact bottom, but I can get close.

Second: It is hard to get a good price by watching just one property. You will get a good price by putting out many "ridiculous" offers until you flesh out the seller who is realistically in touch with this market.

I decided last summer to buy a beach front condo in Ventura County as a second home. I made several unsuccessful offers over the summer and fall, and had some near deals. Finally, in the dead of winter I made an outstanding deal and closed a condo at a price lower than the seller paid 20 years ago.

I have done this in many real estate market swings. I bought and sold a second home in Lake Arrowhead in the 2000 swing, and bought and still own my home in Westlake Village in the 1987 swing. I have bought and sold many commercial properties over three decades the same way.

Each time I have to spend many months making offer after offer just to find a seller. You need an agent with a thick skin, or several of them you can wear out along the way. You also need to just be patient and wait.

Each time I never knew if the market would ever recover, and each time it did. This time again, I do not know if this market will ever recover. Even if it does not, I really like the condo and will just keep it if this market is the "new normal."

Vbcoder-That's really good advice. Thank you.

Are you investing in a house or are you buying a home?

edvard2 says

a nice second tier city- like Austin TX

Dallas is better. Money goes further and you get a lot better stock of houses. I have a rental in Fort Worth.

nw888 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.

Word.

But the bubble is over dudes. There is calculating risk and there is analysis paralysis. The point is this jockeys already willing to sink 2 mill for a dwelling. That right there puts you in loco territory. It's like saying you are worried that paying forty dollars for a gallon of milk instead of 34 dollars for the same gallon when you know its insane either or. I don't want to overpay too much, but I am still willing to overpay by a lot.

So no residence is worth 2 millions dollars? It could be a mansion with every posh finish and upscale add on you could possibly think of, and 100 acres of land with a pool and pool house and guest house and theres no way that residence will be worth 2 million? Some people say some really dumb things on here.

"Theres no way wood and brick can ever cost 2 million dollars!"

thomas.wong1986 says

LA and rest of SoCal have dropped nicely...

True, and a few sales occur. However, I have two more properties that have magically appeared, disappeared, and reappeared on the MLS. The higher end one, I thought, yeah, someone bought that one. The cheap one, I thought, yeah, someone bought that one. But no, the magical mystery magician whoever he or she is has made them reappear on the market.

http://www.redfin.com/CA/Encino/5301-Balboa-Blvd-91316/unit-K2/home/4777314

http://www.redfin.com/CA/Tarzana/18530-Hatteras-St-91356/unit-302/home/4061045

woppa says

So no residence is worth 2 millions dollars?

What makes something worth 2 million dollars? If I can get forty people to spend one hundred dollars on a kit kat bar, does that make kit kats worth 100 dollars? If I can sell someone the Brooklyn Bridge for 50K does that make it worth 50K?

No one single residence is worth 2 million dollars unless it is sitting on oil rich land and you have mineral rights.. Or maybe if it comes with a fleet of robots that will massage you and blow you every morning.

JodyChunder says

If I can get forty people to spend one hundred dollars on a kit kat bar, does that make kit kats worth 100 dollars?

Yes. It does :)

And to further your example in the other direction, if you have a piece of Gold in your hand that you think is worth $1000.- but nobody wants to give you 1000 for it....then its not worth 1000.-

Whatever it is...its worth what somebody is willing to pay for it. As simple as that.

When you are stuck on the island and have no food that same exact kit kat bar could be worth 2000 dollars to somebody.

:)

Really? This is an issue?:
http://www.redfin.com/CA/Redondo-Beach/638-Avenue-C-90277/home/7706089

http://www.redfin.com/CA/Hermosa-Beach/3201-Tennyson-Pl-90254/home/6705877

http://www.redfin.com/CA/Manhattan-Beach/3617-Pacific-Ave-90266/home/6708747

http://www.redfin.com/CA/Playa-Vista/13048-NORTH-ICON-Cir-90094/home/40191191

http://www.redfin.com/CA/Marina-Del-Rey/134-Topsail-Mall-90292/home/6783262

http://www.redfin.com/CA/Venice/46-Wavecrest-Ave-90291/home/6733930

These are all nice places at the lower end (or less) of what you are willing to pay.

SubOink says

Yes. It does :)

No, it doesn't. It means there is an extreme mania or exogenous factor distorting the relative equilibrium of the supply and demand curves. Historically, such extreme manias require facilitation by way of incentives or lax lending as in the case of our credit bubble from 1998-06 as desire to pay any price for something is not always enough to realize such gross distortions.

The island analogy is a perfect example of an extreme scenario. :-D

Waitingtobuy says

Really? This is an issue?:

I don't know about it being an issue, but those houses are Fugly, for one thing, and for another, they are smallish for the price and appear poorly built.

2nd one is pending in 6 days. looks like all cash

Hysteresis says

housing market doesn't care that you're impatient. it'll correct when it corrects. it's an incredibly slow process.

no, it'll really correct when politicians stop preventing the correction with all kinds of homeowners/banks bail outs.

and we have some control over politicians, it is an election year after all.

JodyChunder says

I don't know about it being an issue, but those houses are Fugly, for one thing, and for another, they are smallish for the price and appear poorly built.

I just picked out 6 random houses from RB to Venice whether they were pending or not to illustrate the point. Obviously, there are hundreds, if not thousands, of houses in LA that will satisfy the OPs requirements. As for style, that is in the eye of the beholder. And qualitywise, hard to tell from the pics, but if you really want quality, you are looking in the wrong state. Very few stone or brick construction homes in California because of earthquake codes.

I dont consider 3848 sq ft (Playa Vista) to be smallish. Maybe in Victorville, but not near the ocean.

JodyChunder says

I don't know about it being an issue, but those houses are Fugly, for one thing, and for another, they are smallish for the price and appear poorly built.

That's just silly! Those are amazing houses in an amazing location. Small? How big of a house do you need??

Definitely beats the cookie cutter style homes in Victorville that go for $120k a pop.

I only looked at the first 2...its not healthy to look at houses in that price range :)