General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsSouthern California home prices soar 28.3% in June — a year-to-year record
Southern California home prices skyrocketed more than 28% in June compared to a year ago, real estate information firm DataQuick reported Wednesday.
The dramatic 28.3% jump was greater than any year-over-year pop seen during the housing boom and the most since January 1989, the first time DataQuick generated the figure.
The Southlands median sales price reached $385,000 last month, 4.6% more than May and the highest dollar amount in more than five years.
This markets getting really interesting, DataQuick President John Walsh said Wednesday in a news release announcing the figures.
Walsh said there are signs the blistering pace of rising home prices wont continue, citing rising mortgage rates and the belief that the price gains will spur more home owners to place their houses on the market.
more
http://www.latimes.com/business/money/la-fi-mo-home-prices-soar-20130717,0,254160.story
haele
(12,681 posts)The only people who can afford to buy are white collar workers, the investor class, flippers and developers.
If your household is taking home the median California income of $47K a year, you aren't going to be able to afford a house over $300K, unless you have $150K in hand to put down on it or you're in the military and get VHA (the military housing subsidy based on local housing prices) on top of your wages. If your credit is perfect, and you can get a 30-year fixed at 4%, with fees, tax and insurance, you're looking at paying $1K a month mortgage. But most working people don't have enough to bring a $300K house down to $150K, so if they can put down enough to bring the house down to $250K, they're going to be paying $1500 - $1700 a month at the rate above.
And if you are buying in any type of development that was built after 1983, you might find yourself paying an extra $150 to $500 a month in Mello-Roos on top of your mortgage.
Now, at $47K a year, you're looking at being able to legitimately afford a mortgage of no more than $15K a year in payments when everything is taken into account and still be able to pay all the bills associated with raising a family. (And that's still over 1/3 of the median household income).
A "median priced California home" at $385K will cost up to 2/3 or 3/4 of the median monthly household income just on the house.
How can someone raise a family - pay for basic utilities and insurance - if almost all their after-tax money goes to pay off a house? Sure, they'll get a "tax deduction" at the end of the year, but as I keep telling the kids, "it doesn't matter how much you'll give me later when you get the money to pay for it yourself, I don't have the money to give you to pay for it now..." It doesn't matter if you get all your income taxes back when you make your deductions next Feb./Mar if you don't have enough left in savings after paying your mortgage to buy groceries or pay for medicines or gas October through January.
Not to mention that credit is harder to get, and most people looking to buy nowadays who aren't totally squeeky-clean-perfect-no-potential-risks apparent (i.e., a DINK, as the costs of raising kids is a risk in figuring the amount of money available to pay a mortgage over the future) are still going to paying 4.5 to 5%.
Guess it means owning a house is only for those lucky enough or well off enough who are able to make cash deals or afford $2K plus a month in mortgage. Us median-income serfs who work paycheck to paycheck have got to make due with renting (which often costs more than the average mortgage because you're paying for the owner's mortgage and property management fees...) or living in a cheap trailer park mobile home circa 1965...
(not that there's anything wrong with buying a decent mobile home if you can get one cash and still pay $400 - $1500 a month in lot rental for the rest of your life - there's just no equity in a mobile home unless it's a re-classified as a permanently set manufactured home on land you own.)
Haele
Liberal_in_LA
(44,397 posts)haele
(12,681 posts)The owner of the 980 sq. ft 3 bdrm,1ba house I rent has owned it since it was built in 1955, and is paying the same $450 a year for property taxes post Prop 13, when his house and property were locked into around a $50K appraisal value for tax purposes.
I think he might be paying another $200 a year in the various city bond measures and $700 a year for garbage service, and that's pretty much it, other than the property management fees that get taken out of the rent we're charged - $1500 a month. And there hasn't been many upgrades done to the house other than the regular house maintenance that was done before the owner moved out after the wife passed five years ago.
According to Zillow, the average rent for a 3bdrm house similar to ours in our neighborhood is supposed to be $2000 a month, while the average mortgage is $750 a month P/I. There are lots of slum lords who snapped up the $150K - $200K for closures and short sales with cash or 1/2 down in the area are making money hand over fist charging that much or more to families that don't have perfect enough credit or make enough to buy (other than those for closures and short sales) and are now forced into a high rent situation if they have kids and need anything larger than the ubiquitous semi-affordable 2 bedroom apartment.
Another problem I have with California is that the majority of offers are 600-700 sq ft. 2 bedroom, 1 bath bungalows for under $300K or 2500 sq ft. 5 bedroom, 4.5 bath Mc-Mansions for over $600K when you're looking at property to purchase.
No one seems to want to make simple, affordable, livable properties for families with two or more kids.
It's a corporate property-owner's paradise down here in SoCal. Not so good for individual owners or renters.
Haele
bluestate10
(10,942 posts)and those at the bottom. You touched on what, from my experience, is driving up home prices. White collar couples can earn upward to $300,000 annually before special income like bonuses and dividends. People in high income brackets snap up all the available homes in desirable areas, then start to encroach on low income areas, forcing up housing prices in those areas as old homes get torn down or restored then sold for high prices.
I don't see the situation changing. California will continue to be an economic juggernaut due to the diversity of it's population and the high education level of it's population. The state's fortunes don't depend on any one country, money flows in from all over the world, gets invested, grows and in return fuels high housing prices, among other side effects.
If you are a parent, the most valuable gift that you can pass to your children is education, have them educated so that they are flexible and can take advantage of the current and future economies that place a high premium on a good education coupled with the ability to use that education to maximum effect.
flamingdem
(39,328 posts)Yesterday the LA Times had an article about extreme rent hikes in San Francisco.
I don't really get what people are supposed to do to afford these rent prices. I suppose it means multiple roommates or leaving the area.
Liberal_in_LA
(44,397 posts)Safetykitten
(5,162 posts)Cal Carpenter
(4,959 posts)Speculators? What kind of cracked out speculation are they doing?
"Traditional home buyers and investors have battled over an extremely low number of homes for sale, creating bidding wars and driving up prices. "
This is just going to keep happening until we change the whole fucking system. Seriously. There will be an increasingly frequent and increasingly extreme series of economic crises because of this shit. And until the economic system is radically changed, it ain't gonna stop.
Do the math. There is no other way, and it is never gonna add up right.
Fuck. I'm not really surprised but I'm still disgusted.
Starry Messenger
(32,342 posts)There is going to an absentee corporate landlord class for renters who will never be able to own a home here. It was already crazy as it was but it's gotten worse.
Dreamer Tatum
(10,926 posts)Starry Messenger
(32,342 posts)Dreamer Tatum
(10,926 posts)Wow.
I work in real estate analytics. Investment buying in CA is way overblown. Believe it or not, people have money and will spend it. Very few livable homes are on the market, however, and they are bid up.
Starry Messenger
(32,342 posts)Good for you. I live here. There's plenty more articles out there too.
Dreamer Tatum
(10,926 posts)It happens now, it happened then. So what?
Starry Messenger
(32,342 posts)Dreamer Tatum
(10,926 posts)So?
And I happen to know that the bulk of sales are to single buyers, anyway.
Starry Messenger
(32,342 posts)The people who can buy should certainly have concerns that they will have several neighbors who don't care about their properties.
Dreamer Tatum
(10,926 posts)Sorry, the narrative gets confusing sometimes.
Starry Messenger
(32,342 posts)I guess I could see how you'd think that.
Cal Carpenter
(4,959 posts)that are driving up the prices. Again. To skim more money off the housing market. Again. Driving up housing prices for people whose wages aren't rising, whose benefits are being cut. Still. Again.
And that's the point. That's the issue here.
From the article in the OP:
Traditional home buyers and investors have battled over an extremely low number of homes for sale, creating bidding wars and driving up prices.
Dreamer Tatum
(10,926 posts)People are underwater or simply want higher prices. They won't sell until they are sure
prices are stable.
Buyers think the pendulum has swung too far, or they have money and want to buy no matter what.
Supply is low until prices are stable and higher. Demand is therefore pushing up prices.
Whether that is stable remains to be seen.
Cal Carpenter
(4,959 posts)grows and grows.
Hopefully this type of stuff will open people's eyes to what our country's religious devotion to "private property" really means.
Even owning a house doesn't make you a member of the ownership class, and a flat screen TV is the not private property the powerful are trying to protect.
It's not just a landlord. It's a rentier. And this applies to a lot more than housing. Privatization of all things necessary and public. Schools. Parks. Roads, transportation, and other infrastructure. More money, power and control being sucked up that narrow tube to the top.
Starry Messenger
(32,342 posts)prices. I think those of us who are stuck renting have gotten the memo, but the "creative class" hasn't yet. I've been documenting Silicon Valley capitalism and labor for a year. It will be interesting to look in another year where we are .
Cal Carpenter
(4,959 posts)faster than before. Maybe it's just a weird month/quarter, maybe it will just inflate again even faster and greedier than before... It's hard to believe (as a rust belter) that there is a whole lot of money left to suck outta there, but there seems to be. And that creative class, as you put it, may soon learn a lesson that millions of others already have. The lines are sharply drawn, and you may not stand where you think you do.
Seeing how this progresses will be interesting indeed, and your perspective on this, along with many other things that are going on over there, is always much appreciated Starry.
Starry Messenger
(32,342 posts)There is money, and people buying houses. The wealth disparity here is growing though. Hard to say how that's going to play out. It's certainly true CA's economy is doing well, but that conceals a growing problem with poverty. http://abclocal.go.com/kgo/story?section=news/local/south_bay&id=6529932
bluestate10
(10,942 posts)per year range or higher. The money that those types of couples can allocate to housing is substantial. The societal issue is that the less well paid have long commute, or are driven into the fewer and fewer low cost living communities within metropolitan areas.
KamaAina
(78,249 posts)that get poor fuel mileage, making that long commute an expensive one as well. As your housing costs go down, your transportation costs go up.
Plus, some of those cars barely pass Smog Check, so the most polluting vehicles on the road are driving the longest distances.
haele
(12,681 posts)If you have $100K - $150K cash in hand, it is possible purchase a listed $400K house for $200K plus fees from most sellers, including bank-owned property.
There is less risk to the seller having the property sit for months due to escrow falling through, bidding war issues dependent on available credit, lenders backing out because of property issues, if the buyer comes to the table with a significant offer in hand that can cover the majority of principle owed.
Multiple purchases also assume a lot of immediate cash in hand; if you are a corporation and can get a loan for part or all of $1mill to purchase, say, ten forclosed homes, that will be looked on far more favorably by the holders of the titles for those homes than ten individuals coming to them with $100K in hand to buy one home each. It's all book-keeper accounting tricks concerning inventory liabilities, shareholder equity, and earnings.
The title holders don't want to hold on to those houses for any length of time, but it looks worse on the books if they sell the houses out piecemeal than if they can get rid of them bulk.
Cash in hand is pretty much the only way to buy a house in SoCal anymore.
Haele
PasadenaTrudy
(3,998 posts)a $450K fixer-upper here in Pasadena. She's a teacher, single parent. Guess she did the FHA thing.
hedgehog
(36,286 posts)bluestate10
(10,942 posts)Under any financing scheme, people like that would get granted loans.
hedgehog
(36,286 posts)running up real estate prices by accepting that the price will stay high. If, for example, I tried to sell my house at $3 million, and I got someone to make the offer, my local banker would laugh his ass off when the buyer came in to negotiate a mortgage.
Look for the banks to be making money on originating the loans, then by packaging them and selling them off - we've been here before!
bluestate10
(10,942 posts)Housing prices track with the popularity of living in a location, unfortunately for those that struggle to pay for expensive housing. In a negative way, the prices increases are more indication that California's economy is back at full throttle.
hedgehog
(36,286 posts)while they can. It's sort of like people living on a flood plain selling out - to other people who then will be living on the flood plain!
bluestate10
(10,942 posts)likely wrong on your assessment. The great majority of those people were un-impacted by the Great Recession, even as the state itself struggled with Arnold debt. The situation is dire for people from lower income brackets, people in that strata face long commutes to be in a position where they can afford to buy a home, or, they live in the rapidly shrinking low income enclaves within metro areas of the state. How the situation resolves itself is anyone's guess, what I do know is that it holds the seeds of some negative consequences for California society long term.
hedgehog
(36,286 posts)On that we agree!
I'd say, California and the entire country!
Tikki
(14,559 posts)When we refinanced four years ago..the appraisal was a joke.
The difference between then and now is just about 30% higher. Sounds correct to me.
We are truly a middle class family and why shouldn't our property keep in pace with the gains the 1%
are making on their investments.
The Tikkis from California.
ps...location, location. location...you can buy a larger home in California for well under $385,000.00...
Half that price, for sure...Just not likely nearer the Coast.