Is the appreciation party over for LA?

Question

Have we finally hit the top? How long is your prediction for this flat spot? 3, 5 or 10 years?

Does this carry over to the other SoCal areas?

http://touch.latimes.com/#section/-1/article/p2p-8...

Thanks,

Matt

Leonard L. · Answer

Don't panic folks.  There is no reason to conclude that a flat market over two months presages years of stagnation.  More likely, this is a breather in the market to allow wages and employment to catch up with the breathtaking price increases in 2013.  My crystal ball says there will be more increases ahead.

Aaron Norris · Answer

We're in research mode at the moment as we prepare for our January timing report. 25 chapters so I'm told but I only have about 12 at the moment. There's a lot more we have to look at this time around because of government intervention, and not just in the housing market. In 2008, they enticed people off the sidelines with the tax credit which made many homes a no-down transaction. Could it happen again? Politically, are they going to allow the market to slip with affordability still at lows and interest rates at lifetime lows?

You've also got to think about changing demographics. If you haven't watched I Survived Real Estate on video (it's free online), there's some really great chat about life events being pushed back as Millennials wait to get married and have kids because they are going back to school. Is there a way to get this demographic off the sidelines? Some of my best friends (Gen X) live in LA, make great money, but has zero interest in owning at this point. He's in his late 30s and just hasn't decided where he wants to land and feels owning will tie him down. Our under 40 group also just watch people get annihilated in the downturn. Housing just doesn't look as sexy and interest rates have been so low for so long, they have no reference point for when they were over 8%.  Many are still shocked my Dad refinanced his home in the 80s at 17.5% to become a full time real estate investor. That just seems like ancient history. We're spoiled.

Anyway, we're headed into winter which typically gets a little soft. I was at a CAR meeting two weeks ago that featured the new HUD Secretary who has taken a decidedly different tone when it comes to home ownership. "For those that are ready," it looks like the government is trying to make financing more available. Will it all get caught up in politics? Perhaps. Can loosening credit make a big impact and get people off the fence?

Maybe we should convince @Joshua Dorkin to run for Congress. He'd get in there and fix, right? Happy Thanksgiving all.

Jon Huber · Answer

@Matt Rosas   The article is basing it's data over the past 2 months. It does indicate that the past two months have been flat, but they have not been declining. I think everyone knows that the end of the year is the slowest time for real estate. I wouldn't look at the past two months of growth and speculate that the Los Angeles real estate market has peaked and will begin tanking. I live on the westside and there are 10+ identical units on my block. In the past 2 months alone, I've seen 4 units sold, with a 3-5% increase from the sale before. Of course, the westside of LA is very different than the eastside, or downtown, or Orange County, or San Diego. This article is looking at SoCal as a whole. I can only speak on my neighborhood... and I have seen steady growth.

Ewa Reza · Answer

Things will pick up end of January as always. I've got 5 clients currently that are just waiting to file their taxes and they're ready to go... But I don't see a possibility of prices skyrocketing next year as it happened in 2013 and 2014. Rather modest appreciation of 5-7% depending on area of LA... I think it's a good thing! No more flippers making offers based on speculating future price increases.

Brian P. · Answer

The party is over when you can't make any money. A broker I know in L.A county just told me he is having his best Oct-Nov ever. But one thing he is noticing is many of his baby boomer sellers are leaving the state.

I have been watching the Sacramento Let"s Get Ours Club and feel true help is eating and drinking to much at the lobbyist waterhole and real change for the better  is still something in the future.

Matt R. · Answer

No doubt Aaron the LA demographics are in flux. Besides the new behaviors for GenX/millenials is the fast aging LA population. LA County is considered ground zero for the country on this front. That is it is predicted LA will lose 600k school age kids and gain 800k seniors in the next decade or so. We will see some schools actually close down in certain hoods. This happened before but a new influx of buyers took up the slack in a relatively short timeframe (10ish years).

Studies are indicating that LA is officially settled and that a new influx of families is not likely to happen this time around and or an accelerated version of the exact opposite is forecasted. The demand for walkable areas is the future as opposed to the 5+3s in less walkable hoods and where the schools will be closing soon. We have already seen the leading edge of this factor with the changing crime stats and a shift of wealth from the outer burbs to the cityscape. Increasing suburban housing supply coupled with lower demand is not a great recipe for appreciation history has shown. If you think about it for a bit...what GenX or senior now wants a 5+3 in Granada Hills or even Valencia moving forward?

Mark Mynhier · Answer

I listened to Bruce Norris talk about this a couple of months ago. This isn't new. Bruce (if I may be so bold as to give his opinion) said that this occurrence happened and that it didn't necessarily mean that things were bad. He said that this was unprecedented and that the experts couldn't agree to what it means.

No matter what the economy or the trends are doing, there are always ways of making money in real estate, you just have to study the market and be aware of what is happening and be knowledgeable and flexible enough to go with it.

Matt R. · Answer

For sure Jon, perhaps West LA will be the last place in LA to feel this flat spot or maybe it will be the exception that would not surprise me. Is your prediction the party is not over for LA/OC yet?

Thanks, Matt

Is the appreciation party over for LA?

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