Monday, July 30, 2007

Linkage and Whatnot

I am not alone! According to Manhattan Beach Confidential, lots of buyers feel just like I do.

Only in Hollywood: Pigeon's are on the pill. Yes! That pill.

I've been seeing this a lot: neighboring sellers undercut each other in a pricing war.

Whenever I see exclamation points in an MLS description, it gets my hopes up about a buyer's market. And if this isn't an exclamation point incarnate, I don't know what is.


Anonymous said...

No, Kate, you are not alone. I looked for houses in the past two months and just gave up. I will start again in a year or two, maybe more, when the prices start to make sense.

My wife and I are making very good money. We are in the top 5% higher income in our neighborhood but still we cannot afford a house unless we move to the San Bernardino Valley.

I started my career in investment banking and have a pretty good understanding of what investing is. Investing in real estate in LA today is as risky as buying exotic derivatives...

I understand it's nice to "own" a house, but I'd rather live happy in a rented house than own a small and far house that makes my life miserable - carpe diem!

Kate said...

Hello Anon!

Our search is in super low gear now. I have come to accept that in all likelihood we will be renting through the holidays and possibly into next summer.

It's kind of depressing, but I try to think of it like this: We are poised to jump into a peak buyer's market.

Thanks for reading!

Anonymous said...

Hi Kate, I'm really enjoying reading your blog. (I'm a diff. anon. than above, by the way). Can I ask what your thought process is on waiting a year to buy, vs. going for it in the last quarter of '07/first quarter of '09?

Kate said...

Hi Anon2:

I am suspecting that we won't be seeing very dramatic price reductions during the coming low season (Nov 07 - Feb 08). And by "dramatic" I mean more than 10%.
Prices are notoriously sticky coming down.

Next summer ('08), I expect to see reductions possibly as high as 30% year over year. But I am prepared for to take until '09. I don't feel like I need to get in at rock bottom, but this is still roughly the top of the market.

Like the first commenter, my household income is in the to 5 - 10% for my neighborhood and yet the houses are about five times my household income. Thus, my neighbors who bought in the last two years are either exceedingly wealthy or exceedingly in debt. And I'll wager it's the latter.

It's shocking to me that I could afford a home in my neighborhood before I went to law school, but just a couple of years after law school I could not afford the very same house even though my income tripled. I'm not going to move to a cheaper neighborhood when I know that home prices have to reduce back to two or three times the average home-owner's income.

Anonymous said...

Well, my husband I are attorneys, as well, so I totally hear your feelings of shock re. housing prices. It's a slightly Through the Looking Glass feeling for us; we know a fair number of relatively high-income professionals sitting on the sidelines renting while people with much lower incomes own places we can't touch, due to a few years difference and a more cautious attitude about trying to compete with people willing to do all kinds of crazy financing. I agree, it's very frustrating.

Why do you guess that prices will drop around 30% next summer? Is that a gut instinct, or are you basing that figure on something?

I'm not that great at math, but doesn't that mean that a house currently priced at $800k would be selling for 560k? Or a home that sold for 1 million last summer (or this summer) will sell for 700k next summer? Even in more desirable neighborhoods? I hope you are right, I'd be thrilled!-- Anon2

Kate said...


To some extent, my estimates are nothing more than gut feelings. However, my gut is reacting to a combination of the historical housing cycles going back to about 1890 (you can see it here) and current Case-Schiller Index (see post today.

Also, I've been watching the local market very closely for about six months and I think that actually viewing the houses each Sunday gives you a better feeling for what an $825k house looks like today versus six months ago.

And while your numbers/projections sound too good to be true today, in the last bust there were 50% reductions in Bel Air so it's not like it hasn't happened before. With all the fraud in recent years, it seems like there's no way to avoid it.

Westside Bubble said...

You may find an opportunity to buy a stale listing late in the year when most people are busy with holidays. I noticed some that went cheaper in Santa Monica at the end of 2006.

I've been following Santa Monica and adjacent closely for a couple of years, which led to my blog. Still waiting for falling prices, though. Inventory has remained tight, and prices pretty flat, with a price uptick on the upper end this spring.

I'm still waiting for more meaningful drops.

Anonymous said...

Kate: Fascinating 1890 graph. Thanks for the link- -Anon 2