housing crash

Quote from stevempaq:

You would look at those numbers and think that it would be a pain to find buyers that could afford the houses. But the houses I have been selling are in the 800k to 1.2mil range are sold before the house is even built and if not within a week of them being listed.

You can still find decent homes in so cali for a semi fair price (for cali standards) if your willing to live in the outer areas.
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We all need at least $250K salary to be able to afford a median-priced home in most coastal areas of California. Problem is less than 5% of the families are paid that well.

The discrepancy between 50% of the houses and 5% of the population is huge. That means 45% of the houses are either owned but not used as primary homes by the very rich people or owned by people who can not really afford them.

As time goes by, speculators or home owners out stretch themselves will have to give up. The longer they hold the houses, the more money they will lose. We're just running out of high income people to keep the pyramid game going.

The day of judgement is coming. Market always punishes excesses.



http://www.santacruzsentinel.com/archive/2005/May/10/local/stories/02local.htm

"One realtor says the easy money loans are propping up the market. "The continuing high housing prices, said Szychowski, are the result of those low interest rates, combined with low inventory and the loans available."

"The interest-only loans have pulled in another huge buying pool,' he said. 'We’re seeing a lot of dual incomes and a lot of big down payments on the move-up buyers, which is new equity created by this run-up."
 
Quote from Bob111:

will you be able to make same 100K in TX,where you planning to move?

Thank you!
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lol...

It is not my situation. The post was quoted from an article. Thought everyone would see the * " * marks and the link.

I have no plans to move, although I too live in California. If I did, it would not be to Texas!

Thankfully I own my own home, although I don't think I could afford it today unless it involved interest-only-variable type loans.

You know, the kind of loan everyone in California uses these days!

It has gotten that stupid out there.
 
re:
We all need at least $250K salary to be able to afford a median-priced home in most coastal areas of California. Problem is less than 5% of the families are paid that well.The discrepancy between 50% of the houses and 5% of the population is huge. That means 45% of the houses are either owned but not used as primary homes by the very rich people or owned by people who can not really afford them.



Don't forget those people who have owned a home through the run up in prices and simply apply that equity to the new home that they buy..... The true loser in this situation is the first time home buyer who has no equity in real estate or the new resident that moved from an area of the country that has more reasonable home values.
 
Quote from Midas:

re:Don't forget those people who have owned a home through the run up in prices and simply apply that equity to the new home that they buy..... The true loser in this situation is the first time home buyer who has no equity in real estate or the new resident that moved from an area of the country that has more reasonable home values.
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Yup, and most of those "fortunate" homeowners who had purchased a long time ago had fixed interest rate mortgages. They recently have gotten caught up in "gold fever" and swapped lower dollar fixed debt into a much higher debt (2 or more properties often) variable with a longer term than they had before! In just a few years I think they will be kicking themselves (or worse).

I know someone that bought a home for $240k in 1994. Between paying down the loan and his original down payment...he had paid down the loan to something like 180k. He recently sold that house, bought a new car, and bought a new $850k house with a variable loan. I'm sure he has a nice property tax bill to match.

Thank god the lenders just got the new bankruptcy laws passed through! I think Wal-Mart will have too many applicants for elderly greeters in the future.
 
Yahoo News

http://news.yahoo.com/s/sddt/majorityofcaliforniansmakelessthanhalftheincomenee

Majority of Californians make less than half the income needed to buy a home

Thu May 5, 4:31 PM ET

LOS ANGELES -- California households are making less than half the income necessary to buy a median-priced home in the first quarter of 2005.

Statewide households, with a median household income of $53,540, are $60,380 short of the $113,920 qualifying income needed to purchase a median-priced home at $488,600 in California, according to the California Association of Realtors (C.A.R.) Homebuyer Income Gap Index (HIGI) report for the first quarter of 2005.

The association's HIGI is a quarterly analysis of the difference between the median household income and the qualifying income needed to purchase a median-priced, single-family home in the state and for selected regions within the state.

The HIGI is calculated with the same assumptions used to generate C.A.R.'s monthly Housing Affordability Index (HAI); a 20 percent down payment and a monthly payment for principal, interest, taxes and insurance (PITI) that is no more than 30 percent of a household's income.

For Southern California, the median-priced home was $477,660, which required a qualifying income of $111,370 to make the monthly PITI payment of $2,780. However, the median household income for Southern California was $52,050, leaving an income shortfall of $59,320.

"These numbers are particularly troubling for would-be first-time homebuyers, who often are locked out of homeownership because of the lack of affordable homes for sale," said C.A.R. President Jim Hamilton. "While home sales statewide continue to surge, the California real estate market is being dominated by repeat homebuyers, who account for three out of four home purchases in the state."

The HIGI for California increased 44.9 percent during the first quarter of 2005 compared to the first quarter of 2004, when the gap stood at $41,660, the median household income was $52,320, and qualifying income needed to purchase a median-priced home at $407,710 was $93,980.

"At $100,000, the household incomes of repeat homebuyers are much greater than the population as a whole," Hamilton said. "Repeat buyers also are able to take advantage of equity gains in their current homes, with many making a down payment on their new home that's frequently greater than 20 percent.

"For those repeat buyers, the income gap can fall as low as $23,320. Even though repeat buyers fare better than first-timers, that's little consolation to Californians spending a significant portion of their income servicing their monthly mortgage," Hamilton added.

According to the report, potential homebuyers in the Central Valley, with a median household income of $41,040, had the smallest income gap at $32,660, and needed a qualifying income of $73,700 to purchase a median-priced home at $316,100.

The San Francisco Bay area had the highest gap in the state at $92,930, where potential homebuyers had a median household income of $67,770 but needed qualifying income of $160,700 to purchase a median-priced home at $689,240.
 
leaving alhambra? aren't you going to miss all the good chinese food?

i feel your pain. my friend graduating this year will earn about 60k/year if he choses to go FT at his current PT job. at that rate, he will not be able to afford his own place around this area. it is insane to pay 450k for a piece of shit house in this area.

if young professionals can't afford these houses, who's going to hold up the market?


Quote from onewaypockets:

http://thehousingbubble.blogspot.com/2005/05/tracking-down-reality-in-la.html#comments


"I'm leaving LA.

I'm 33 years old. We have a family income of 100k, minus @15,000/year in student loan payments, so effectively 70-80k. Two young children, ages 2 and 5 months. My wife stays home with the kids, we don't want her to have to go back to work just so that we can afford a house.

We live in a 1 BR apartment in Alhambra. Obviously, 1BR is much too small w/2 adults and 2 kids (both cribs are in our bedroom). Carpeting is 30 years old, place is falling apart, neighbors are nice people, retirees, postal workers, etc. But it's cheap -- $670 per month. Would like to get a bigger apartment but that would cut into our house savings so we stay.

Last year we saved $25,000 of my salary. (@10k was put into in 401k). Total savings for downpayment equal @25k. No help from family, they aren't in a position to do that; we saved it all ourselves. No credit card debt, $800/month in car payments, both cars will be paid off late next year.

Alhambra/San Gabriel/Monterey Park/Montebello area is a middle-class part of LA in every sense of the word. Not "middle class" in the well-educated urban professional sense of the word, truly middle class. SAT scores in 50th percentile, median family incomes in 50th percentile, etc., etc. A few rich Asian immigrants but most really aren't as wealthy as they appear to be, just hardworking conspicuous consumers.

Currently, 750 sq ft 2br/1ba 50 year-old starter tract home in Alhambra is $450k. These homes are shitholes. Neighbors are inches away, house is in disrepair, etc., etc. The classic middle class home -- 2 stories, backyard big enough for a volleyball net and a BBQ, 3 br/2ba, 1800-2000 sq ft, 2 car attached garage -- is $675 - $800k. Condos are around 300 for 2br/2ba, go up to about 500 for 3br/2ba. Most condos are in decrepit condition, the new ones are 500k.

Maximum 30-yr conventional mortgage I qualify for is $166k per Washington Mutual web site. With "creative financing" the sky is the limit, of course, but that is suicidal in this environment and I am a conventional guy in any case.

It is frustrating as hell.

But in a way, I am glad to be in this position. Becuase it has forced me to think carefully about where life is going.

We have a friend in Plano, TX, a suburb of Dallas. There, a five year old, 2800 sq ft, 4br/3ba McMansion with a HUGE backyard is $200k. A 3br/1ba ranch house can be had for $80k (fixer-upper) to $125k (new). Go to Realtor.com and do a search for between $150-250k and see for yourself.

Of course, Dallas isn't Los Angeles, but it isn't Peoria, either. I like living in a sophisticated city like LA and understand that smaller towns aren't quite the same. But Dallas? It's a major city with all of the big-city amenities. Not LA but close enough. And the salaries are comparable there, at least in my line of work.

Other cities are equally affordable.
Last November I was in Columbus, Ohio. In the Columbus suburbs the classic middle-class 3br/2ba two-story home is around $140k.

Right now, in Plano, I can get the house of my DREAMS for $200k. Not a starter home, not an okay home, but the house I've always wanted. A McMansion with lots of luxury amenities, marble countertops, study, etc., etc. The American dream.

Now back to LA. Suppose prices fall by 50% over the next three years. Then the stereotypical middle-class home -- not the house of my dreams, just a cookie-cutter middle class home -- would cost "only" $355 to $400k. The house of your dreams would be $600k after a 50% decline. That means a monthly debt service/taxes/reserve for repairs of $2500 - $4000 per month. AFTER the crash. For 30 years. Then you have to eat, save for your childrens' college, retirement, purchase things like clothing, cars, insurance, etc. -- it's just not worth it. And if you want to get out of a middle class burg like Alhambra and live in a NICE neighborhood -- the West Side, the beach communities, etc., etc. -- it'll cost you much, much more.

I love Los Angeles. I am not a native but consider it my home. I don't want to leave. But I'm probably leaving just as soon as we can.

To me, Texas is a chance to have a real future. It's a chance to buy a decent home without shackling myself to a lifetime of debt and stress. I'm sure it will have its drawbacks -- every place does -- but the prices don't lie.

Even if prices decline by 50% here, LA will still be way too expensive. It just isn't worth it, and I want out."
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Quote from lilboy716:


if young professionals can't afford these houses, who's going to hold up the market?
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Locals upgrading, moving to another part of town etc.

For example my folks sold their home for 1.3 M having paid 49,500 bucks in 1974. It allowed them to get into another home in town (also inflated) and they don't seem to care if the market tanks and they end up under water 'cause they only paid 49,500 to begin with. :D

I'm about an hour from downtown L.A. and have seen over 300% appreciation in 4-years. Its crazy and there is definitely a temptation to cash in. My problem is that I have a 15-year 4.5% fixed so I just want to stay put. My neighboors have all taken second mortgages and have motor homes and boats parked all over their property.

Just crazy..
 
How about this for a bank???


http://www.coastcapitalsavings.com/Personal/Borrowing/Mortgages

"No Worry Mortgages

Coast Capital Savings No Worry Mortgages™ now make it easier than ever to become a homeowner. We’ve relaxed our lending guidelines to the point where just about anyone qualifies.

There are all kinds of tiny credit blemishes, like a forgotten parking ticket that can make you hideously unattractive to other lending institutions. But we’re not that picky. Even from here we can say you look good to us. Honestly, we barely say no to anyone."
 
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