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Housing Bubble: Why it may be worse than previously thought
A housing bubble is a run-up in housing prices fueled by demand, speculation and exuberance. ... Speculators enter the market, further driving demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts.
If this is the definition of a housing bubble according to investopedia.... LA may be heading into some serious trouble.
Median LA housing price = $685,000 (zillow avg. of median home value & median listing price)
Income required to qualify = $125,000 (0% down, 4.5% mortgage)
Income required to qualify = $118,000 (5% down, 4.5% mortgage)
Median LA household income = $54,000 (argue accuracy of data with census bureau)
How much home can a household buy with $54,000 = $260,000
Primary factor driving LA prices = Speculation (may also argue demand)
Originally posted by @Matt R.:
Originally posted by @Account Closed:
lol... is this a paid advertisement? :-)
Do you work for a fund that's shorting la real estate paper and getting crushed on this and leading to this desperation? It's beyond stupid how aggressive you've gotten with everyone unless you have some back door agenda. So instead of always acting like a child when several have explained why you are wrong why don't you stop annoying everybody's keyword alerts with your spam
Still there are serious issues with affordable housing in LA that also impact attracting workers. You could have challenges in job growth if few can afford to live there is one biggie. Currently the afford index is 29%. Personally I think it is lower or these numbers are in lag time. That number for affordability was single digits last peak though.
Originally posted by @Matt R.:
Originally posted by @Account Closed:
Idk how closely the feds track LA real estate and my guess is they don't spend much time forecasting LA RE.
However this guy and others at UCLA do full time. This example is actually from Hong Kong I think.
:-) lol, you are correct, I cant see LA on the map. I'll send in your complaint
Originally posted by @Matt R.:
Still there are serious issues with affordable housing in LA that also impact attracting workers. You could have challenges in job growth if few can afford to live there is one biggie. Currently the afford index is 29%. Personally I think it is lower or these numbers are in lag time. That number for affordability was single digits last peak though.
Matt thanks for bringing up a more relevant metric.. the Affordability index.
I think last time we stopped buying here it was below 17-18% back in like 2005-6. Anyways right now I'm still buying value add, but being a lot stricter, always seeking opportunistic props, and adjusting strategy.
If your strategy is sound you can make money in any market, mitigate risk/adjustments in downturns. If the market downturns I'll just get more aggressive again. I had units in the last crash. We had some turnover, and things have stabilized. Definitely not just speculating or banking on appreciation in this market.
Headlines like "Gentrification" "Housing bubble" "affordability crisis" are great news "click bait"
Mike- What's the obsession you have with LA? Perhaps you could invest in one of the 50 cities within 20 miles of LA instead? We get it. It's fun to say we're on the verge of a crash after a runup like this. You're more likely to be right after a runup. How bad will it crash/ correct/ stabilize etc though, no one knows..
There's unaffordability in parts of LA, and opportunities in others. Within LA county there's some emerging market areas and inland Southern Cali there's plenty more opp. There's places in East LA, Inglewood, South LA, Long Beach, Palmdale/Lancaster, Riverside, Inland Empire/ San Bernardino, OC and SD counties with opportunities just like Wash DC has Baltimore as it's opp market. Opportunity for value-add, opportunistic, and development all over LA.
We all more or less can see where we are in the RE cycle, we've come a long ways off the bottoms of the "great recession". Los Angeles county is 20 mill population and there's areas with opportunity within it's boundaries and 'cheap' houses within 50 miles. Even in a down turn you can ride the California waves, buy more and keep on trekking. I like the other post above ABB ;-)
California has a population of 40 million and is projected to keep growing see the stats on other's posts. Los Angeles and it's surrounding areas are fine for the time being as long as you know what you can adjust your strategies.
I'm more interested now in investing out of state. I've done it before, still have some out of state property that's finally stabilized. Had major issues out of state, I guess they're learning experiences now...
Originally posted by @Matt R.:
Still there are serious issues with affordable housing in LA that also impact attracting workers. You could have challenges in job growth if few can afford to live there is one biggie. Currently the afford index is 29%. Personally I think it is lower or these numbers are in lag time. That number for affordability was single digits last peak though.
From the investor's standpoint, if the majority of LA's labor force, wage earners, do not earn an income that can qualify them for an average house, this is an investment risk -- you have a very limited pool of buyers who have qualifying income to buy.
If you go on any of the job sites (indeed.com etc.) to filter how many job postings in the City of LA have advertised wages in excess of what is the qualifying income (use $135,000 for instance), you would be shocked. Even in the tech sector.
The number of posted job count is not what reflects the health of the economy.
Originally posted by @Account Closed:
Originally posted by @Matt R.:
Still there are serious issues with affordable housing in LA that also impact attracting workers. You could have challenges in job growth if few can afford to live there is one biggie. Currently the afford index is 29%. Personally I think it is lower or these numbers are in lag time. That number for affordability was single digits last peak though.
From the investor's standpoint, if the majority of LA's labor force, wage earners, do not earn an income that can qualify them for an average house, this is an investment risk -- you have a very limited pool of buyers who have qualifying income to buy.
If you go on any of the job sites (indeed.com etc.) to filter how many job postings in the City of LA have advertised wages in excess of what is the qualifying income (use $120,000 for instance), you would be shocked. Even in the tech sector.
The number of posted job count is not what reflects the health of the economy.
REI is considered high risk. Understand with supply constraints you don't need large pools of qualified buyers. Where my dad lives the median is 150k. A townie came up for sale in his complex and it was the first listing in 12 years. There were 24 offers the first day. 675k got it. It was probably worth 775k the next day. Having enough buyers or investors in LA is usually not the problem.
Someone mentioned that they did not think the Fed was paying attention to the LA housing market. That is completely false. The LA branch of the San Francisco Fed is all over it. The Fed in general has more than 150 PhDs that consider domestic real estate on an on going basis. They also have a huge number of people collecting data.
You can find much of their work product online.
@Account Closed
How do you feel about your current housing bubble being in NYC... seeing as the median income is only 53k and median home price is 685k. I don't get how anyone could be even living in NYC with 53k a year but hey you know the census data def is correct.
Originally posted by @Account Closed:
Someone mentioned that they did not think the Fed was paying attention to the LA housing market. That is completely false. The LA branch of the San Francisco Fed is all over it. The Fed in general has more than 150 PhDs that consider domestic real estate on an on going basis. They also have a huge number of people collecting data.
You can find much of their work product online.
That might be me, although I said Idk how much they track LA vs not tracking. If forecasting is their focus...they certainly did a horrible job of publically communicating ( or adjusting rates / lending guidelines to prevent) that to RE investors last GFC.
Originally posted by @Matt R.:
Originally posted by @Account Closed:
Someone mentioned that they did not think the Fed was paying attention to the LA housing market. That is completely false. The LA branch of the San Francisco Fed is all over it. The Fed in general has more than 150 PhDs that consider domestic real estate on an on going basis. They also have a huge number of people collecting data.
You can find much of their work product online.
That might be me, although I said Idk how much they track LA vs not tracking. If forecasting is their focus...they certainly did a horrible job of publically communicating ( or adjusting rates / lending guidelines to prevent) that to RE investors last GFC.
The federal reserve's responsibility is more along the lines of managing the economy, regulating financial institutions and some consumer protection. They focus extensively on achieving a target natural rate of unemployment and controlling inflation. In terms of the 2008 crises, part of the job would include implementing policies that ensure such events don't occur and if they do, implement yet again more policies to dig you way out of it. There are both proactive and reactive elements of the job.
@Matt R. They have much more power now. Many of the changes that could have prevented the problems would have needed to have been corrected by congress.
Investors also do not like it when people point out how risky their investments are.
The fact that extremely risky mortgages securities were being re-bundled so they could get a AAA rating from a company that says their ratings should not be used for investment decisions is ridiculous. Most people to this day do not understand how this was done. I doubt anyone one wants to hear it.
