Reply #14: I'd bet the L.A. area is in for more of a deflation than a pop [View All]

[PurityOfEssence]

Yes, homes here are radically overvalued, but land is dear and everything's been built up. Here in Silver Lake, things are moving slower, but they're still moving.

When the correction comes, it'll be because of interest rates going up. Prices will then fall, and a little more inventory will come on the market, but houses are still inherently very valuable: lots of people live here, and lots want to.

Of course, if we have some serious inflation, the selling will flatline and there will be many foreclosures due to adjustable rate mortgages skyrocketing. Personally, I think that people looking to buy here should do so now: the fixed rates are still reasonable, and some cooling's already occurred in prices. Most scenarios that have prices correcting even more are ones where interest rates cause it, and that will be a huge headache when shopping for a mortgage.

Both times I've bought in this market have been horrible times (December '90 and December '03) but over the long run, it'll probably be fine. Our last place certainly appreciated a lot, although much of that was my sweat equity and carpentry.

Prices around here are astonishing, though, and for those of you looking, I can only send you my good wishes: it's exhausting and incredibly stressful, even if you have a realtor doing much of the legwork for you.