As the previous experts already stated, now is a great time to buy! There's a reason its called a Buyer's Market!! Take afvantage of the great prices, reductions, shorts sales, and bank owned properties. Prices may decline just a little bit more in the next few months, but you won't know that they've hit rock bottom, till they actually start rising again...then its too late to get on those great deals.
Try to hang on to the property for a few years, probably about 5, and all will work toward your advantage.
You can seach the MLS on our website, http://www.myLARealEstateGroup.com,. Feel free to contact us with any questions or comments you may have about a specific property or the market in general. We offer free consultations at no obligation.
Lou & Alex
LA Real Estate Group
In the last bubble, which peaked in 1990, many people who bought in 1991 and 1992 held for 5 years and still lost money, as the graph makes clear, and as it's easy to see from tracing individual sales from any number of public records. This is the biggest real estate bubble in American history, and it has barely begun to unwind. The best time to buy is unlikely to be before 2011. There may be a lot on the market right now, but most listings I've seen involve sellers still in deep denial... people who bought in 2005 or 2006 at vastly inflated prices, and are still looking for a small profit, or at least avoiding a loss. People who bought in, say, 1999 are trying to stay away, hoping it will all be over soon. In terms of price vs. income, or price vs. rent, Southern California housing prices are still inflated by AT LEAST 25%. At prime lending standards, your mortgage payment isn't supposed to be above 28% of income. A rough estimate is that the price of a house shouldn't be beyond 4 times your annual income. But the average house in LA County is still $550,000, so you need to make roughly $137,500 a year to afford a house here. Meanwhile, the median income in LA is only $43,000. No realtor can explain how that disparity can exist.
In 2002, even homes in Bel Air and Brentwood averaged under $400/sq. foot (you can find these records on Trulia itself!) Now, I still see plenty of marginal properties in bad locations and bad school districts trying to get $800-$1000/sq. ft. all the time. Trust me, we have a long way down to go. I feel for these realtors, as a lot are likely to lose their job, but any buyer's agent who was TRULY working for the buyer would tell their client to wait a few years. Unless you're a foreigner, paying in Euros or Australian dollars, buying now is shear stupidity.
Although the realtors on this site will attack me for the following comment, in my opinion this would be a terrible time to buy, unless you must buy now (because of a 1031 exchange, for example). Inventory has increased, sales transaction volume has slowed dramatically, lending standards have tightened (pulling thousands of non-qualified buyers from the market), notices of defaults and foreclosures are increasing substantially, the economy is slowing (looking more and more like a recession) and 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 next 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 very beginning of a down cycle. I disagree with many realtors who say that it does not matter what price you pay if you are looking to hold on for the property for 5 to 10 to 15 years. Let's say you buy now for $1,000,000 and prices drop 20% (actually, Forbes in a recent article estimated a 26% anticipated decrease from June '07 prices by 2010 for Los Angeles and Orange counties) over the next couple of years. You would have lost $200K in future equity by having not waited. Additionally, you would have to service the $200K by paying property taxes and interest on the $200K. Unlike a stock, when you buy at the wrong time, you need to service your hasty decision through increased property taxes and interest.
I have an MA in Economics from USC and have been in the real estate business for 15 years. In my opinion, this real estate bubble will take many years to play out. The previous down cycle was from 1990-1996 and values dropped approximately 20 - 25% in nominal pricing (40 - 45% in real numbers when factoring inflation). The 82 -85 down cycle was a bit shorter. However, that was a period of higher inflation which masked much of the decrease in real prices.
With cash in hand, time is your ally. Unlike stocks which are very subject to dramatic short term fluctuations, real estate is illiquid and cycles move slowly. If you are paying attention, you likely will not miss the change as prices tend to remain flat for an extended period flowing stability in the home market. Clues will be increasing transaction volume and a closer cost ratio in comparing the costs of renting versus owning. Simply stated, following a down cycle, people are generally more conservative in real estate purchases so prices will not likely rebound quickly.
Despite what the spin doctors at the NAR and realtors would like the public to believe â€“ it is NOT always a good time to buy.
With that said, if you have sufficient assets, you may not care about whether your home decreases substantially in value and there are benefits from home ownership. But, in my opinion, there are ample rental opportunities to wait out the deflating real estate bubble.
Best of luck, and if you want an objective opinion, don't waste your time listening to cheerleading realtors, who have a self interest in being overly optimistic about the real estate market.
Its actually a really good time right now, plenty of inventory, more realistic pricing, great interest rates. As long as you are planning to live in the home for at least 5 years...then now would be a great time to buy. There is less competition out there from other buyers and most of the homes on the market today are priced to sell, not see how much the market will bear.
Feel free to contact me if you would like more information!
It is very interesting to read the comments on this post from my fellow real estate agents and others. The fact is that NO ONE on this planet can predict the future...of anything, let alone when is the right time to buy or sell real estate.
Many factors come into play when one is deciding when to purchase real estate:
The purchase price is huge as it reflects your property tax base. Should we "expect" that our property taxes will remain lower than most states (thanks to Prop 13)? ....And buying later when it seems safe because there is a better chance of appreciation just means a higher purchase price...and higher property taxes.
The manner in which you purchase the home is huge. Right now cash-is-king. And that will remain this way for a while (actually, cash has ALWAYS been king, but most consumers do not know how to be disciplined with their finances). Cash will always get the best deal...always! I assume that when you decide to purchase that you will be getting a mortgage. Can anyone predict where the interest rates will be in 3-4 years? They most certainly will not be where they currently are...approx 5.125% for 30/yr fixed. A 1-2% rate increase on loans (which is still a great rate) could drastically affect the affordability for many buyers.
The holding period in which you own the home should be greatly considered. If you foresee yourself settling into a community for 5-10 years, than this is a wonderful time to purchase a home. If home values fall further, you are in a much stronger position to wait it out, and you would most likely still have equity in your home.
Bottom line, unlike investment real estate, everyone needs a home with a roof over their heads. The tax incentives for owning a home in this country are financially beneficial to every homeowner. If you have a loan on the property, then paying down the principle via amortization (even if only by a small amount in the first few years) provides increased equity through a "forced savings" effect.
Lastly, I have been purchasing single family homes throughout Southern California as long-term rentals since last June 2008. I currently own 7 home rentals with strong tenants. Have my investment properties dropped in value since last year?...yes! Am I concerned?...no! I am not concerned because 1) when I purchased these homes most of the fallout had occurred, 2) I am planning on holding them for 10 years minimum, 3) my credit is excellent, 4) and NO ONE ELSE WAS BUYING!
One of Warren Buffet's most famous quotes is to paraphrase "buy when people are fearful, and sell when people are buying".
Best of luck to you!
anyway,now you have a few different opinions. i am a realtor in santa clarita as well, and i see a lot of opportunities for people. have a nice weekend!
The Santa Clarita area has been affected recently by both foreclosure activity and reduced buyer demand, but that trend seems to be changing. More buyers are now willing to buy (rather than just looking), and the foreclosure activity is shifting. Investors are starting to buy again as well, which is a good sign.
Foreclosures are down in the Santa Clarita area, and in fact they were never very high as compared to the rest of the Los Angeles County area. The foreclosures and short sales (pre-foreclosures) that are on the market are now receiving multiple offers from buyers, and many of these are going in to escrow. I've seen as many as 17 offers on pre-foreclosure homes recently, and although many of these are low offers, the bid-up process allowed that home to sell for much higher than the original asking price.
It's hard to say whether the Santa Clarita real estate market has bottomed out yet or not, but the increased buyer and investor activity is a good sign that this region is starting to recover.
For Santa Clarita real estate statistics, including foreclosure activity, visit:
All my best,
The Chance Team