Why Manhattan Beach Will Never be Affordable.

OK.. I'm just going to come right out and say it....Manhattan Beach is not in most buyers' price range. Nor is Hermosa Beach, Redondo Beach or El Segundo. The median income in LA County is $56,200. These cities will never be in the average buyer's price range. Home prices will always be too high for most buyers in Los Angeles County. Prices will never drop enough in the beach cities for most people to afford to live here. Guess what... it's always been that way.

In 1979 when I quit teaching I at the top of the pay scale for LA Unified based on 12 years seniority and I made $18,000 a year. The price of a home in Manhattan Beach was about $125,000 for a 2 bedroom 1 bath house in east Manhattan and more west of Sepulveda. At that time you needed to have 20% in cash as a down payment and interest rates were 11%. I certainly didn't have $40,000 for a down payment and closing costs nor if I had the cash could I have qualified for the loan payments. The payment with 20% down would have been almost $1200 per month with taxes and insurance..and I was only taking home about $1300 per month after taxes.

That was almost 30 years ago. The prices of homes sound so cheap today but back then they were as expensive for us as they are today. Most of the people I knew who bought property were in partnerships. A lot of people pooled their money to buy 2-4 unit buildings and each person would live in one unit. I knew people who had money in three or four places and rented one bedroom apartments because they couldn't afford to live in their properties. Ten years later they sold and were able to buy homes but not the first time out.

Buying a home in California has always been a challenge. If you want to live at the beach it's a bigger challenge. Prices will never come down to accomodate those who want to live here. The population in LA County is more then that in a lot of states. Let's face it.. if you have to work in the Los Angeles area most people are going to want to live by the beach. Supply and demand dictate prices not wishes.

Will there be foreclosures in the beach cities.. sure.. but there have always been foreclosures and short sales. The problem is that unless the entire economy tanks most people won't lose their homes. And the truth is that if the economy tanks you may not have a job and can't buy a house anyway... just ask a few aerospace engineers about the '90's. If you check the notices of default in the Daily Breeze you will find that 95% of them are not in Manhattan, Hermosa, Redondo or El Segundo. If you look at the people who bought property during 2000-2005.. they were mainly owner occupants. According to an LA Times article dated January 15, 2007 flippers in LA County accounted for 2.5% of sales in 2003, 3.9% in 2004, 4.4% in 2005 and 3.6% in 2006. These numbers reflect a very minor part of the market.

Some places will always be expensive. Prices will never drop enough to make them affordable to the majority of buyers. If prices in Manhattan Beach dropped 50% the average buyer still couldn't afford to live here. I doubt that even the most avid Bubble Blogger thinks that will happen. Here is another thing to consider... most people who continue to rent praying for home prices to fall will probably never be able to afford to buy. If the prices fall the interest rates will probably go up and you will still be out of the market. Now not buying is not a terrible thing.. lots of people never buy a home. I know a number of people who would rather spend their money on other things. Nothing wrong with that. But downline people who own property are financially better off then those who don't. It's something to think about...