Congestion is Driving Southern California's Market... (renting, refinance, loan)

[mcmsinger]

Originally Posted by SoCal35

I hear Detroit (where negative growth is all too real) is wonderful in January.

You can literally buy a MANSION in Detroit for under half a million which could cost a few good million should decide to get a comparable in LA or Southern California.

The point I'm trying to make is that CONGESTION INCREASES DEMAND....

The more people you have... The more demand you have.... The more higher prices will be...

It doesn't matter how good you may say something is. Something can be great but until you don't have a dying need for it, you simply won't want to pay as much.

Prices are determined through how bad you need something, it's scarcity and supply.

In Southern California, congestion has made land unusually expensive due to congestion.

Population can only go up so much until it becomes a health risk. Eventually people will realize to move...

There is a boom for something as well as a crash...

[JohnG72]

Congestion isn't driving prices on real estate in Los Angeles.

If it was, then rents would be about 2.5x what they currently are.

What is driving real estate prices in LA is banks artificially constricting the market supply by failure to foreclose combined with failure to list foreclosures. I saw one study where one particular bank had foreclosed on 6500 LA County homes last year, but only 300 or so had hit the MLS.

A secondary factor is investor/realtor shennanigans where realtors used false or misleading comps to gain kickbacks from investors who are able to then purchase rehab projects for cash at a price point that would not be available to the general public via the MLS.

Fortunately, the situation favors the patient. Those buying in LA County at the moment are knife catchers of the first order. This thing is gonna take years to shake out. So the question becomes, do you want that house in Sherman Oaks at $700K now, or can you wait 5 years until it sells at $450K? You want that Santa Monica 1000 sq ft place for $800K now? Or can you wait 5 years until it sells at $500K?

[mcmsinger]

^ Foreclosures are another thing effecting the market. I already know about the whole supply and inventory of homes gamed by the banks.

I don't think banks can however play this game for too long...

[Lovehound]

Originally Posted by JohnG72

What is driving real estate prices in LA is banks artificially constricting the market supply by failure to foreclose combined with failure to list foreclosures. I saw one study where one particular bank had foreclosed on 6500 LA County homes last year, but only 300 or so had hit the MLS.

There's a simple reason for that. If the banks put all the foreclosures on the market at the same time not only would LA house prices collapse (or in any real estate market) and all the banks' properties would become virtually worthless, causing the banks to collapse too, and causing the corporate officers to become unemployed and the stock shareholders' investment to become worthless.

Not very many people quite understand that the housing market across the nation is walking dead, like some zombie out of a horror movie. The only thing that keeps it going is that nobody wants a total collapse of the real estate market and banks, and even possibly a collapse of the US economy. Thus we are all pretending that the banks are solvent and the houses are worth something, and we continue to buy and sell and take out mortgages, and even keep our savings in banks, those of us who have savings.

Originally Posted by JohnG72

Fortunately, the situation favors the patient. Those buying in LA County at the moment are knife catchers of the first order. This thing is gonna take years to shake out. So the question becomes, do you want that house in Sherman Oaks at $700K now, or can you wait 5 years until it sells at $450K? You want that Santa Monica 1000 sq ft place for $800K now? Or can you wait 5 years until it sells at $500K?

It's a game of chicken, except with money and houses instead of cars (like in "Rebel Without a Cause" with James Dean). We all pretend that we aren't playing chicken.

[mcmsinger]

You know how they say "Now is the time to buy"...

Nope!

Go they other way - Now is the time to RUN...

Bank are trying to extend the debt to homeowners. They are attempting to sell people worthless assets compared to what they paid for it.

The market crash BUT not FULLY...

The banks are first waiting to get the liability off their hands & on to somebody else...

I however don't believe this game can be played for too long...

[Ultrarunner]

Originally Posted by mcmsinger

You know how they say "Now is the time to buy"...

Nope!

Go they other way - Now is the time to RUN...

Bank are trying to extend the debt to homeowners. They are attempting to sell people worthless assets compared to what they paid for it.

The market crash BUT not FULLY...

The banks are first waiting to get the liability off their hands & on to somebody else...

I however don't believe this game can be played for too long...

When I bought my first home in 82-83 the economy was bad... many reported it was the worst since the Great Depression.

I was in school, very young and figured it was better to put my rent money into a mortgage... it worked out really well... there were so many vacant homes in Oakland CA that owners just wanted out.

Friends, family and colleagues all did their best to discourage me... especially buying a run down house on a small inner-city lot... the day I closed escrow on my own home in my early 20's was a milestone for me...

It's hard to go wrong when you stick to the fundamentals and buy within your means... at least this is my experience...

I spent the next year using all my spare time making improvements... got to know my neighbors and they couldn't have been nicer because I was transforming the neighborhood eye-sore.... amazing what a little water to green up the landscaping and a few gallons of paint can do for curb appeal.

[Charles]

Originally Posted by Ultrarunner

When I bought my first home in 82-83

Those years had super high mortgages too, putting downward pressure on house prices (opposite of today, low rates helping support house prices).

So, you bought low, probably refinanced, and rode housing prices up through the late 1980s? Sound about right?

[Lovehound]

Just to address the topic, congestion is not drivinng SoCal's market. It is entirely the opposite, that the market is so hot (particularly because people want to live here, be here, reside here) that their wants and needs are the primary force behind making the SoCal market move. You wouldn't be able to sell a house here in this high cost market without holding a gun to somebody's head if it weren't for the fact that so many people want to be here and live here.

SoCal is the place. More people want to be here than not, and many of them are willing to pay premium real estate prices to move here. Our market would be dead dead dead if that weren't true.

[hsw]

Congestion is a moronic argument in modern, suburbanized, Mercedes-oriented, tech-oriented, virtualized regions like CA or TX...which are far cheaper and less congested than Luddite NYC region

Most in LA w/money and/or legit jobs live within 20 mins of their offices...whether in CentCity or SM or 1000 Oaks or NwptBch

And Detroit's Bloomfield Hills or Chic's Winnetka/LP ain't all that "cheap", esp given the crappy weather/topography/crappy roads/high taxes/lack of edible grub/lack of smart people who would want to live anywhere in MI or IL (incl AnnArbor/Urbana)

Ironically, in many ways, coastal CA (either SF Peninsula or LA's Westside) offers highest-value QOL of any region in world, for any upwardly mobile capitalist...but not for commies who hope for wealth redistribution to solve their laziness/ineptitude

[mcmsinger]

@ LoveHound,

You just proved myself right. People want to be here so bad & so many people want to be here - that it's exactly what is creating prices to go up. You have too many people wanting the same thing: which is a similar definition of CONGESTION...

So you are right - the market would be dead if that stopped which will happen in the future. Eventually the bubble will pop & a crash will follow.

And the problem is that the majority of these people are NOT paying for anything. They are borrowing money from lenders. They do not pay anything because they can't afford too. California has been built by debt. A crash in my humble opinion is waiting... And a big one.

@ hsw

New York is a far better buy. Long Island in particular. Do the research and math.

And this nothing to do with "wealth redistribution" but everything to do with consequences for actions. That's what Capitalism is about. Wealth redistribution is the notion of not facing the consequences of something but being bailed out.

The real estate boom was driven with the notion that you could be lazy, do nothing and make money by producing nothing - just by buying RE with a crazy loan & then selling the property later. It was also driven by the need to impress and keep up with others.