Apart from a few “the world is flat” realtors, everyone realizes that home prices are falling in Los Angeles County. Those that are expecting a quick turn around from this bubble are dreaming. The last cycle took about 11 years to reach peaking pricing from the previous peak. Here are your Los Angeles County vanilla medians between 1989 and 2000: http://www.laalmanac.com/economy/ec37.htm

1989: $214,831
2000: $215,900

Pretty amazing, someone who purchased the “median home” for 214,831 sold for 215,900 11 years later. However, this bubble appears even larger that the 1989 run up as depicted in the following graph: http://latimesblogs.latimes.com/laland/2008/04/where-we-stand.html . However, prices are falling faster, so perhaps we can reach a bottom faster.

In my opinion this would generally be a terrible time to “invest” in real estate, unless you must buy now (because of a 1031 exchange, for example). All leading indicators are pointing in the same direction as to the Los Angeles market, (i) inventory has increased, (ii) sales transaction volume has slowed dramatically, (iii) lending standards have tightened (pulling thousands of potential buyers from the market), (iv) notices of defaults and foreclosures are at records levels, (v) the economy is slowing (looking more and more like a recession) and (vi) literally thousands of high paying mortgage and other real estate related jobs have been lost in southern California over the past year. All of these things will put downward pressure on pricing for some time to come.

The reality is that prices will almost certainly be lower later this year, likely lower in 2009 and possibly even lower in 2010. Real estate cycles take many years to play out and we are at the early stages of a down cycle.

With that said, if someone can truly afford the home with a large down payment and conventional financing and they don't care about prices dropping further, they should consider the purchase. But they SHOULD NOT purchase with the expectation of future price gains for a long time. If history is any guide, prices will not rebound quickly when the bottom is finally reached.

NewportFiji

Fri May 2 2008, 16:25

Tristan, and other buyers on here, how do you determine that prices are good? Everyone's definition is different. Some people will throw most of their paycheck and feel good about it, others have and unlimited bank account, and yet others want to still have a life in addition to a mortgage payment. So how exactly do you define "prices are good".

Personally I don't feel prices are good, prices have dropped considerably in some places, but in my opinion they are not good.

Good to me means 1/3 of my gross with at least 20% down. So that means 30 year fixed mortgage. I would consider other products as well but the baseline for me is a 30 year fixed with 20% down.

Fri May 2 2008, 12:43

As a buyer, I'm waiting to see how low it can go and find the "perfect" place... Am worried about what it will take to get a loan though, prices are good, but now I have to have a higher down...

Fri May 2 2008, 12:22

Happy Friday all!

I am including a link to an article which contains interesting insight regarding home values in the U.S.

Thanks!
~ jordan elias

Fri May 2 2008, 09:45

Oh boy, another shill made up in someones wine cellar ....

Member since: 05/01/08 ...

Thu May 1 2008, 18:00

JR is an honest realtor. Can we name JR the Simon of Trulia?

Thu May 1 2008, 16:16

One complaint I hear from buyers is that while there are a lot of homes on the market, there are not enough good home. Only home owners that need to sell, for whatever reason, are selling right now. I know people that have been waiting to buy homes in particular neighborhoods, but new listings in those neighborhoods are rare.
~~~~~~~~~~~~
Not only are you correct about that, but of the homes that ARE listed, when we put in offers we find out many are not really for sale.

Wed Apr 30 2008, 10:00

Glad to see all of the recent activity on the thread!!

Deborah,
Congrats on being the three-hundredth response!

Hey Yev,
Thank you for noting the Coldwater Canyon price drop. I previewed this house a few months ago when it was listed in (or near) the 900k range. I am going to send you a private message with my thoughts on the house as I don't find it ethical to discuss my thoughts with the possible Seller/Listing Agent/Buyer participating on this site.

Hi S.,
I am responding to your most recent comments collectively. I feel as though many of your statements are blanket statements about why one should or should not buy or sell, not taking into consideration the various specific needs that individuals face. You appear stuck on the fact that Realtors as a whole are in the profession only to make money. As I'm sure some are, I believe the great majority are not. They have chosen this profession because they enjoy it; they enjoy working with people, helping people. Many Buyers and Sellers choose their Realtor because of familial relations or trusting referrals. In my business, it does not behoove me to misguide a client because there is a dollar sign at the end of the road. The happier my clients are after the sale/purchase, the better the chance my past clients will refer me new clients.

Tman,
I feel the need to respond to your statement, "Let's just be honest about it .. 2 years ago when it came to making a $15,000 commission or telling the client the property was priced $95,000 over market, the commission won".
There is a reason Realtors have a place in the housing market. One of the reasons is to assist Buyers in making an educated decision about their future purchase. Everytime I sit down with a Buyer who has decided to write an offer on a property, I show them the comparable properties. I show them the properties that have sold in recent months in their area that match the specifications of their future home, I show them the properties that are currently in escrow, and I show them the properties that are currently for sale. With this information, the Buyer is aware that they are placing an offer that is either below the current market value, near the current market value, or above the current market value. It is then the decision of the Buyer, and the Buyer alone, to submit the offer or not. You seem familiar with the process Tman so I am sure none of the above is new to you, but the content of your comment surprised me.

Thanks all and have a great Wednesday!
~ jordan elias

Wed Apr 30 2008, 09:59

S, Coldwater is a major commuting street ( I live in the area), but anything South of the Blvd. has been pretty expensive. So a drop like that is significant for that area of Coldwater

Wed Apr 30 2008, 09:05

One complaint I hear from buyers is that while there are a lot of homes on the market, there are not enough good home. Only home owners that need to sell, for whatever reason, are selling right now. I know people that have been waiting to buy homes in particular neighborhoods, but new listings in those neighborhoods are rare.

Wed Apr 30 2008, 08:49

Mary Anne,

I don't think it takes an expert to determine the market, local or otherwise, is in trouble. I also think buyer's are sophisticated enough to understand that all areas are not subject to the same down-turns. In Sacramento, we have areas that hold their value better than others. I think it's difficult for any group, buyer or seller, to be an expert today with the current condition of the housing market since we are experiencing something never before seen.

I have no fear of 'missing the boat' with all the REO's and foreclosures on the market. I doubt anything in this housing market will happen quickly.

Guy

Wed Apr 30 2008, 08:16

Jordan, check out this house on Coldwater south of the blvd., don't know if its a typo or maybe a smart seller trying to get out with some profit, after all they did pay only 240K for the house in 1993. But a 300K drop will certainly look like a deal to someone :)

http://www.redfin.com/CA/STUDIO-CITY/3540-COLDWATER-CANYON-A…

Wed Apr 30 2008, 08:06

Most buyers think they are experts and often rely on media to let them know when the market is at its best to either buy or sell. What they miss is the local facts and trends that show the very local market and, as a result, when the local market they are looking in does level, it does so very quickly and starts to head the other direction and the buyers miss the boat. If the interest rates are favorable and the price is affordable, then its time to buy!!

Wed Apr 30 2008, 07:44

The biggest reason buyers are not jumping on the oportunities is that they don't want to end up in the same mess as the people losing all the houses. The loan qaulifications has been tightened also. It is harder for people to go out and get money.

Wed Apr 30 2008, 07:38

S, don't get me wrong, I'm still prospecting for listings, and I send out cards asking if you want to sell, also. However, I determine whether or not they HAVE to sell or are just kicking the idea around to see how much they can pull out and let's just try listing 75,000 more than the comps show to see if the bus from Mars stops on the corner, with the buyers who don't read the news and watch TV. I like to put food on my table, too.

Wed Apr 30 2008, 05:33

Tman: It's easy to say today "I am advising homeowners right now not to sell" ... of course you'll say that, they are asking too much and it will probably take 11 months to sell it - you're going to move on to the easiest property .l.o.l.. .. just be truthful about it.

JR: Thanks for proving my point: You are like a homeowner during the pricing part of my presentation: you want me to lie rather than tell the truth about what your house is worth. You want real estate agents to give advice, but no matter what they say "move now" or "bad time to sell right now", we're darned if we do darned if we don't. You have an agenda and it comes thru loud and clear.

Tman: That brings us back to: .. wasn't it their own personal real estate agent standing right next to them pushing and prodding their buyer to offer more and more money.?

JR: The people I'm advising to sell right now paid 70,000 for their house in 1980 and we're deciding wwhere to list it. I think 625,000. He thinks 690,000. So no, he wasn't prodded into anything. I'm tryiing to figure out if he wants me to LIST his house or SELL it, because at 690,000 it's just going to be a listing.

Tman: Let's just be honest about it .. 2 years ago when it came to making a $15,000 commission or telling the client the property was priced $95,000 over market, the commission won ...

JR: Let's be honest about something else. TODAY, if it comes to listing a house for months and possibly making $15,000 but possibly not because it's overpriced, many agents will list. I will not gamble my time and money with a possibly unmotivated seller. Now let's be honest about your agenda, why are you trying to put words in my mouth? NO, I was not pushing sellers to list too high: I don't LIST, I sell. I price the listings right. Even in a rising market, to price a house almost 100,000 over FMV, it's not going to sell fast enough to satisfy that homeowner and I'm going to lose it when it expires.

Wed Apr 30 2008, 05:29

JR,

I totally disagree with a homeowners abuse of funding and using their home as an ATM ...

I look at credit reports everyday, and if you'll look .. a large minority of home buyers debt ratio usually doubles waaay before their ARM ever comes due ... so their sad mortgage stories aren't really so sad after you back track their 4/5 year credit history after the closing ...

But that's one issue all to itself .. it has nothing to do with what got them there.

It's easy to say today "I am advising homeowners right now not to sell" ... of course you'll say that, they are asking too much and it will probably take 11 months to sell it - you're going to move on to the easiest property .l.o.l.. .. just be truthful about it.

That brings us back to: .. wasn't it their own personal real estate agent standing right next to them pushing and prodding their buyer to offer more and more money.?

Let's just be honest about it .. 2 years ago when it came to making a $15,000 commission or telling the client the property was priced $95,000 over market, the commission won ...



: ^)

Wed Apr 30 2008, 04:14

I do not wish agents to give selective advise. They should just do what is right when someone comes to them. It sounds like JR is trying to do the right thing. Here in Ca agents are still pushing themselves on sellers to list - I still get solicitations in the mail every week - "I can sell your home for top dollar etc etc" and they are pushing the buyers to pay more than they should - telling us "better buy now, prices will only be up next week" or "better increase your bid or you won't get this house and there may not be another house" - agents are playing both sides of the fence and hoping that we are all too naive to catch on. But all this aside - the point is buyers can change the market - buyers created the frenzy that drove up the prices so let's fix it and just stop buying until they go back down where they should be.

Tue Apr 29 2008, 19:18