Sure we can talk about subprime loans, greedy bankers and terrible real estate agents but the reality is that when it comes to LA County housing..we are pretty much built out.... yet everyone still wants a single family home on a nice lot.. in a great area.. with no heavy traffic, good schools, lots of open space with parks, quaint shops and good restaurants. Oh yes.. and prices should be about the same level they were 15 years ago.
Hello... people living here just don't get it.. if you want affordable housing... you have to build it and that means density.. a lot of it and no one is willing to do that. Every city has had "NIMBY" etched on the Welcome to our Community sign when it comes to affordable housing..
People are upset about the traffic and the toll a growing population takes on our infrastructure but we continue to do nothing about the problem except gripe. Everyday more people come to our area.. and that means more competition for what amounts to a nice house in that "good" neighborhood. Guess what folks.. that translates to prices going up.. and even if they come down it won't be enough to go back to that 1990 level. There is no place we see this more clearly then in the South Bay-Beach Cities
The South Bay is a very desirable market and a lot of people want to live here. Yet we don't build more housing.. especially affordable housing. Residents in the South Bay are up in arms at the mention of more housing even as the demand for existing housing goes up. Econ 101 said it.... as supply decreases and demand increases... prices will go up.. you may not like it but deep down you know it's true.
We made a number of housing choices in our communities. If we don't want to increase the housing supply we are going to see prices continue to go up beyond the level of the average consumer. Those with the most money are the ones who will buy homes perceived to be in the best areas. It 's probably not fair but it is what has happened. Certainly some of the high housing costs in California are associated with cheap money and no doc loans but not all of them.
There is this strange perception that anyone who bought a home over $500,000 must have had lousy credit, no money down and will soon be in foreclosure. Sorry but it's just not true. Sure some of the people who bought in the Beach Cities got in over their heads but the fact is that most people who bought homes in Manhattan, Hermosa, Redondo and El Segundo could afford to buy those homes and will not lose them.
I don't get this whole mind set that says I want my friends and neighbors to lose their homes because I didn't buy when they did. Since when did we become a nation of people who believe that they are owed something at another's expense? I understand the frustration of buyers who have been priced out of certain markets. What I don't understand is this self-righteous smug attitude that seems to be expressed by so many people.
I'm not in favor of lender bailouts or of trying to save people who never should have bought a home in the first place. Bailouts will not solve the problem. If you reward bad behavior you will get more bad behavior. There was nothing wrong with most of the loans that were on the market. Many presented good solutions for people who didn't fit the mold. The problem is that these products were abused. Someone with bad credit should not be able to buy a home until they clear up their credit problems. This isn't rocket science... it's basic common sense.
8 comments:
Excellent post. At the end of the day, the issue really comes down to supply and demand. From the last census, there are around 14,500 households in MB. Of those, 5000 households report they are renters. The occupency rate of rentals is 97%. There are typically only about 200 or so total homes for sale in MB. In the big picture, hardly anyone sells their home which means no supply. Add the huge demand evidenced by the rental market and you can begin to see that although prices may soften, a free fall is unlikely.
"Since when did we become a nation of people who believe that they are owed something at another's expense?...What I don't understand is this self-righteous smug attitude that seems to be expressed by so many people."
Now wait a minute, Kaye, "people who believe that they are owed something" could just as easily apply to home owners who want to sell their houses at 2005 and 2006 prices, because, well, "I'm not just going to give it away"...even if they have owned the house for less than a year.
And "self-righteous smug attitude" could just as easily apply to owners that saw prices double and almost tripple in 5 years time...as in "wow, 'rich' people want to live next door to me now, and my house is 'worth' so much more now, I'm one of the 'landed gentry' right now...I can't wait to talk to my friends about how much my house is worth!"
"I don't get this whole mind set that says I want my friends and neighbors to lose their homes because I didn't buy when they did."
Kaye, the mindset isn't that...it's actually this: "I'm tired of people with no ability to save a down payment and no fiscal responsibility getting 100% down, cash back at closing, teaser rate negative amortization loans competing for, and driving up prices of, houses in the area. If *they* lose their homes, well, it's their own fault. Maybe without banks and investors throwing money at them any more, and with their home loans reverting back to the actual monthly cost and causing many of them to have to go back to renting, prices may come down some and I might actually be able to afford a reasonable home in a nice neighborhood with 20% down and a 30 year, fixed rate mortgage."
And, no, I'm not a "bitter renter". But I did want to present to you some food for thought.
- arroyogrande
Arroyogrande- Yes you have given me some food for thought and you put forth some excellent examples.. You are correct that some people truly believe...
"I'm tired of people with no ability to save a down payment and no fiscal responsibility getting 100% down, cash back at closing, teaser rate negative amortization loans competing for, and driving up prices of, houses in the area. If *they* lose their homes, well, it's their own fault".... and I agree with them..
But you have to admit that many others seem to believe that they are entitled to buy at significantly lower prices then the market has dictated for the past 15 years..
Those hoping to see the market crash by 50% aren't concerned about people who bought when they should not have.. or people who may have bought at the top of the market.. they want to see the market crash.. thinking they will now be able to buy low and make lots of money when the market goes up next time.. and for that to happen it must be at the expense of those who bought 6-10 years ago. Why should these people pay a price because they took on the commitment of homeownership and others did not.
I'm curious.. just why if someone bought in 2005 or 2006 do they need to sell at a price other then the one they want.. They can choose not to sell rather then take a lesser price.. what is wrong with that?
"Maybe without banks and investors throwing money at them any more, and with their home loans reverting back to the actual monthly cost and causing many of them to have to go back to renting"...
The truth is that while low interest rates had an effect on the market.. there were not a lot of investors in the Beach Cities.. Most of the people who buy in our area are buying a home to live in....
And here is something to contemplate.. If prices drop drastically it will probably be because interest rates jump dramatically.. a one point increase in the interest rate makes a major difference in affordability.. so the price may go down but the payment will be about the same.. which means many who think they are going to get a deal will still find themselves out of the market because they don't qualify at the higher rate.
This issue is not as simple as some would like it to appear. Nor will it resolve itself in the way many believe. People love to talk about home prices 15 years ago but how many think about wages 15 years ago. Everyone wants to roll back prices but keep their same wage level and have a hot stock market. These things do not always go hand in hand..
I strongly suspect that this may be a case of be careful what you wish for... because you are liable to get it..
anonymous 11:52: WOW.. someone who agrees with me..
One thing many don't notice is that we are losing rental housing in MB.. When I came here in the late 60's there were lots of funky places that were for rent west of Valley.. but each year they continue to disappear. As you note we have a low rental vacancy rate and rents are very high.
Right now inventory is less the half the number of homes that were on the market at the same time last year.
You are correct.. prices will soften but free fall is probably not going to happen..
How does your theory jive with the market between 91-97? Did MB prices not fall then? Just because there's no aerospace layoffs now doesn't mean that the same thing can't happen. The layoffs meant less demand, so prices went down. Now we have significant tightening of the credit markets, which will also induce less demand.
Not everyone who thinks that the market is going down is a bitter curmudgeon hoping that their neighbors fall on bad times... some of us just think that that's the reality of the situation. Prices in socal are going to go down, and when starter and midpriced home prices go down, the upper range will eventually come down with it.
Anon- The problems in the 90's were much different.. almost 70% of people in the South Bay worked in aerospace or an industry tied to aerospace. We have a far more diverse economy in the South Bay today.
We didn't have a few layoffs.. we had much of the population out of work and they were unable to get new jobs. You had mid-upper level employees who had worked at these companies for 30+ years without jobs. They went through their savings and lost everything.
Most were not only older but over qualified and no one would hire them.. even at reduced salaries and benefits. The layoffs didn't mean less demand.. they meant massive foreclosures and no demand. There were no jobs so it didn't matter what prices were... no one could buy.
A lot of people left the state either to move back with family or trying to find employment elsewhere.
Certainly I don't think everyone is a "bitter renter". Of course prices will come down....they already have.. They just may not reach the level so many are hoping to see unless there is a catastrophic event. If that happens then it may be that no one will be able to buy because they will not be employed.
Prices in the South Bay have always been higher then in other areas.. the idea of homes being 2-3 x the median salary has always been off in the Beach Cities. I quit teaching because I could not buy a home on a teacher's salary after working for 12 years.... and that was 1979.
My thought still is... be careful what you wish for.. you just might get it..
Kay, I enjoy reading your posts.
I rent in Redondo Beach and have been looking for a property to buy for the past couple years.
I am an artist and I do a lot of local art festivals in the area - Manhattan Beach, Hermosa Beach, PV, and Torrance. Over the past few years, my sales numbers have come down dramatically in the area. Just this past weekend at the Hermosa Beach Fiesta, I was off my sales from a year ago by 65% (the majority of vendors were down from a year ago).
However, my shows outside of the South Bay (San Francisco and San Diego Area) and retailers I sell to around the country have been steady or increasing. I have concluded that my fall off in sales in the South Bay is probably related to the over valuation in our local real estate market.
As bad as I want to see the market come down and be more affordable, I don't want to see my business drop like it has in the past few years here in the South Bay.
Just wanted to share my prespective, Thanks
Anonymous- That's interesting and something I would not have thought about.. I'm guessing that as people become more concerned about the economy the amount of discretionary income for "fun" items decreases.
San Diego is facing a slightly worse market then we are... yet you are not seeing the decrease in spending there or in SF..Hmmmm ... I wonder why.
Could be that everyone is just pulling back a little.. Are you going to be at the Hometown Fair?... If so would love to know how that one appears as it is slightly more upscale then the Hermosa Festival
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