Can Someone Please Explain How the SoCal Real Estate Market Works

[saymyname]

Originally posted by: spidey07

Originally posted by: JS80
Wow you guys must have some crappy paying jobs...

agree.

It's the entitlement mentatlity rearing it's head again.

Although I agree I think it's partially that and partially the terrible feeling of feeling poor when you are a first time home buyer and make something respectable like $50K a year. In most other parts of the country that is a lot of money. Here it isn't.

I remember being in college and dreaming of making $30K or $40K a year. The reality wasn't what I daydreamed about even though I made more than that within months of graduation. $40K is $2250 after taxes iirc. That's pretty tough with rent/mortgages the way they are around here. You hear people say "it's not fair" quite a bit.

 

[Starbuck1975]

agree. It's the entitlement mentatlity rearing it's head again.

I don't think it is necessarily an entitlement mentality. My parents were able to make a decent living for their family considering that neither of them have college educations...were able to afford a small home in the suburbs, within a reasonable commute of NYC, which they upgraded and added to over time...this is what I am accustomed to...go into a humble home, and over time and a little patience, transform it into your dream home.

In SoCal, there is no middle ground...your options are either a $1M McMansion, or a 1940s era bungalow in neighborhoods that require bars on the windows...I don't expect my starter home to have a walk in closet larger then my current apartment, a fireplace in every bedroom, and a jacuzzi style tub. The problem is, there really aren't many options for starter homes in SoCal.

I make more then a decent living...I don't know how to say this without coming across as arrogant, but my salary is comfortably into six figures. At 30, I am ready to settle down and purchase a home...just find it sad and a bit troubling that with the money I am making, I don't have many options for building equity. Every month when I send that rental check to my apartment community leasing office, I feel a little sting...it's essentially money down the toilet.

I also recognize that my salary is well above the median for SoCal, so how are these other families managing to get by...not all of the home owners in my area have been here since the 90s, and I can't see how all of these households could possibly be bringing in 200k+ a year...if that were the case, the median household income for SoCal would be a lot higher then the statistics indicate.

 

[Garet Jax]

They can't. My wife and I lived in Northern California and experienced the same frustrations as you.

Quality of life was poor because of overcrowding and its side effects => lines everywhere, traffic, increased costs.....

We were presented an opportunity to move to Maryland and we jumped on it. We now own a nice home (which has experienced some increased ~25% in value over the last few years) and live in a great neighbourhood. I work a similar job, but have a much better quality of life

You have to decide what is important for you. My wife and I wanted her to stay at home to raise our kids - we were able to afford rent on one income, but could not have purchased a house unless we lived 2+ hours from the city. In Maryland, it is much more attainable.

 

[Garet Jax]

Originally posted by: amish

i'm going to go with they make more money than you.

That is partially true, but I think there are two other factors:

1) A lot of people are buying homes on dual incomes
2) Willingness to use "creative" financing to get into the house and potentially leave themselves overextended.

 

[Garet Jax]

Originally posted by: bennylong

Originally posted by: JS80
Wow you guys must have some crappy paying jobs...

If you ain't making over $100k, then yes, you have a crappy paying job in CA

Even then....

 

[Starbuck1975]

You have to decide what is important for you. My wife and I wanted her to stay at home to raise our kids - we were able to afford rent on one income, but could not have purchased a house unless we lived 2+ hours from the city. In Maryland, it is much more attainable.

We decided on a similar option, and hope to transfer back east in the next year...I guess my only gripe is the necessity to do so. Fairly sad state of affairs where a decent education and a white collar job isn't enough to afford a home.

 

[Garet Jax]

Originally posted by: Starbuck1975
We decided on a similar option, and hope to transfer back east in the next year...I guess my only gripe is the necessity to do so. Fairly sad state of affairs where a decent education and a white collar job isn't enough to afford a home.

There are still times my wife and I miss SF (her more than me), but overall it is a much better arrangement.

 

[JeepinEd]

Originally posted by: TXHokie
That's why we have lots of people moving here to Dallas from Calif, selling they dumpy house there for big profit and they buy big a$$ house here all paid for and still got lots of money left over. Timing is everything.

That's exactly what I'm doing.
I used to think that apartment living was great, until I got married and had children. Who wants their kids to grow up in a cell, where nighbours will complain if they make too much noise or jump up and down. Not to mention, the lack of a back yard where they can go out and play?

In 2001, I decided to bite the bullet and purchased a home in the Antelope Valley (high desert) for 100K. A similar home just sold for $390K on my block and I've had similar offers for mine. I'm now looking at property in Texas and we are considering a move there, which would allow us to pay cash for a big house w/pool and have $$ left over, or a nice downpayment on the same house and have enough $$ to start a small business.

Living in the high desert has given me a different perspective of L.A. I now hate it. It takes 30 minutes to drive a few miles, people are rude, the crime sucks and it's just stressful all around. I grew up in the Beverlywood area, about 2 blocks from Aaron Spelling's house, and even there, it's starting to get ugly. I prefer the small town life with the option of going to the city if I need something that is not available near by.

 

[shortylickens]

Originally posted by: Garet Jax

Originally posted by: amishi'm going to go with they make more money than you.

That is partially true, but I think there are two other factors:
1) A lot of people are buying homes on dual incomes
2) Willingness to use "creative" financing to get into the house and potentially leave themselves overextended.

Oh hell yes.
The easiest thing to do in America in put yourself in debt.

 

[HeroOfPellinor]

Originally posted by: Starbuck1975

You have to decide what is important for you. My wife and I wanted her to stay at home to raise our kids - we were able to afford rent on one income, but could not have purchased a house unless we lived 2+ hours from the city. In Maryland, it is much more attainable.

We decided on a similar option, and hope to transfer back east in the next year...I guess my only gripe is the necessity to do so. Fairly sad state of affairs where a decent education and a white collar job isn't enough to afford a home.

Why do you have to live in LA to be in CA? The future of California is going to be Sacramento. It has nearly unlimited space and a very solid infrastructure. The hilly area s to its east are actually quite picturesque and Microsoft, Sun, Intel, HP, Oracle, etc all have presences up here.

Your problem is that you need to think outside the box.

 

[bobdelt]

LA is a unique situation, where the rich people who live there DO NOT WORK! So stop all this nonsense of median income vs med. housing costs!

You can't afford to live in LA? GOOD! Move! SOCAL sucks balls! I left, and havent looked back and havent been happier.

[cliche BS] Supply and Demand [/cliche BS] When well then LOWER DEMAND and move to where its in your favor. The real estate industry is an active market. It cannot truly be overpriced. Sure it will have a correction, but only because of idiots over paying, and the correction shouldnt be that large (esp considering a 30 year mortgage!). So if you think the market is BS, then MOVE!

If you dont like it MOVE! There is nothing else you can do. Go bitch somewhere else if you dont like it, cuz bitching aint going to get you anywhere. Move to Riverside or the SCV and drive 4 hours a day like thsoe people. If you dont like it MOVE! Move to the east coast where you can get to work without have to get into a caR! Its amazing!!!

 

[HeroOfPellinor]

Originally posted by: bobdelt
Move to the east coast where you can get to work without have to get into a caR! Its amazing!!!

Screw that, I love driving everywhere. Good excuse for owning a sweet ride too.

 

[SampSon]

The sky isnt falling(yet), but the fundamentals that are holding up values are pretty shaky at best. Youve 25-40% of homes sold recently to investors who are going to dump them on the market as prices start to drop. The expanding supply with decreasing demand (no more investors buying) will cause prices to drop. Add in the ARM resets and builders dumping the rest of their stock, and you have a lot of desperate sellers on the horizon.

I understand what you are trying to say. Can you show any data to support all of the numbers you are just throwing out there? I do have access to quite a few MLS's and were part of a few boards in certain california areas. I'd like to see any supporting data for your numbers. Speculators always end up getting burned at the end of a hot market of any kind.

Understood, I'm a public accountant.

In order to take the tax breaks you have to spend the money. You are not earning equity by paying 1.1-1.3% of your home value in property taxes and on a medain home price of $700K that is a good $700+/month. Add in water/sewer/garbage/ home-owners insurance, repairs and the cost of owning depreiciating assets like refrigerators and it starts to tip the favor to a renter paying $800 - $1200 a month.

If you expect those 20% gains I too agree that home-ownership is the way to go. Historically it is closer to 3-5% and when the median is $700K there is not much room for advancement as a a couple of double digit years of gains we will all be in a million dollar 1300 sq ft ranch houses. In order to get the gain on your home you hve to sell it and that requires you to depart with 6% of your home value to a realtor!

Sure you may lose 2-3% a year versus buying a house, however you will not be house-poor and living that lifestyle. You will not be earning sweat equity, you will have fresh countertops, new appliances, and new carpet. In a home, not!

This year I'll have travelled to:
Boston
Chicago
Dallas
Reno
Las Vegas
Washington DC

My house poor co-workers talk about laying sod................

I own properties (personal and income producing) and I'm still able to travel (though I'm not sure why everyone seems to equate happiness and success with the ability to travel). I think that you look down upon home ownership because you live in that bubble reality called Southern California. In most of the rest of the nation life doesn't flow like it does in SoCal. Sure NYC, Boston and other major metropolitan areas operate like that, meaning its "cheaper" to rent than to own, but most of thoes areas you simply cannot find a single family home within many miles of the city.

I write off more in interest on my loans than most people contribute to their 401Ks every year. On top of that the income properties have consistant positive cash flow. Then when I'm done paying for the houses I have very large property assets on top of investing in traditional vehicles like 401K. At the end of 5, 10, 20+ years of renting you have absolutely nothing to show for it, while I'm sitting on hundreds of thousands of dollars of value. Renting would just be flushing money down the toilet for me.

Then there are the benefits of home ownership. Apartment living sucks for the most part. You have other people on the other side of your wall, usually no outside amenities, shared parking areas, cramped living areas, lack of ability to really get into adapting your living space to your taste, and then in most cases you have to pay all of your utilities. Apartment living was hip while in college, after that the charm wore off quickly. Then there is that time when you potentially grow-up and decide to have a family, at that point apartment living is like being in jail. Many people also -like- owning a house and all that goes with it, I know I do. I know that when I lived in apartments I had to put in more service calls to their maintenence guys in the time that I lived there than times I've had to repair something at my house. Part of ownership is the ability to put in what you want, at what quality you want and have control over what you have. Apartment owners save money by installing junk, and unless you're willing to spend an incredible amount of money, you're not gonig to get anywhere near top notch.

Though if ownership isn't for you then that's all good. Of course living in a hell hole like SoCal doesn't help.

 

[atybimf]

Damn, I'm glad I live in Missouri..

 

[saymyname]

Originally posted by: HeroOfPellinor

Originally posted by: Starbuck1975

You have to decide what is important for you. My wife and I wanted her to stay at home to raise our kids - we were able to afford rent on one income, but could not have purchased a house unless we lived 2+ hours from the city. In Maryland, it is much more attainable.

We decided on a similar option, and hope to transfer back east in the next year...I guess my only gripe is the necessity to do so. Fairly sad state of affairs where a decent education and a white collar job isn't enough to afford a home.

Why do you have to live in LA to be in CA? The future of California is going to be Sacramento. It has nearly unlimited space and a very solid infrastructure. The hilly area s to its east are actually quite picturesque and Microsoft, Sun, Intel, HP, Oracle, etc all have presences up here.

Your problem is that you need to think outside the box.

I've lived all over the state and I don't think the future is in Sacramento at all. It's 110F during the summer and freezing cold during the winter. I personally couldn't wait to get out of there. Unless you are in love with Skiing or Snowboarding then there's not much there. It's a strip mall city where you have to drive across town to get anything done.

I could have bought a house there cheap. I didn't buy there for the same reasons I don't buy in the Inland Empire. Why bother living in California if you aren't taking advantage of what it offers? If you love Sacramento, what you're really saying is that you love Tahoe and in that case you might as well live up there. The masses of people that live in Sacramento and commute to the city have longer drive times than people in L.A. rush hour traffic. That's just not worth it.

Arco Arena, 4th of July on the river, and Skii trips up to Tahoe. That's all Sacramento has.

 

[magomago]

I read the entire thread because lecture is boring me to death....

and even though I don't think the market will crash at all, I would love for it to crash. Though even if it crashes, the nicer areas I like (Irvine) are just still too expensive.

Though I've heard of MANY people heading off to texas right now...Seems you can get a house for a good price. I love So Cal, but I'm not going to overpay for a bad housing situation

edit:
even on a generous income of 70K a year for a fresh undergrad (08 baby!!) I can't do much....even if I had someone for a combined income of 120-150 a year it is still not very feasable.

 

[Starbuck1975]

Why do you have to live in LA to be in CA? The future of California is going to be Sacramento. It has nearly unlimited space and a very solid infrastructure. The hilly area s to its east are actually quite picturesque and Microsoft, Sun, Intel, HP, Oracle, etc all have presences up here.

Well I live about an hour south of LA, which is my entire point...growing up in NY, everyone knows that living in proximity to NYC costs a lot...but get an hour outside of NYC, and you can find affordable and quite nice housing.

In SoCal, the suburbs in that happy middle ground between LA and San Diego cost the same as urban living...without any of the advantages or benefits of urban living.

And as my current job is in SoCal, moving isn't entirely an option for the time being.

LA is a unique situation, where the rich people who live there DO NOT WORK! So stop all this nonsense of median income vs med. housing costs!

I wasn't referring to LA, but the suburbs.

If you dont like it MOVE!

I probably will, but that isn't the point of this thread...many people don't move, and I simply was curious as to how THEY were able to afford homes.

 

[dquan97]

Originally posted by: saymyname

Originally posted by: HeroOfPellinor

Originally posted by: Starbuck1975

You have to decide what is important for you. My wife and I wanted her to stay at home to raise our kids - we were able to afford rent on one income, but could not have purchased a house unless we lived 2+ hours from the city. In Maryland, it is much more attainable.

We decided on a similar option, and hope to transfer back east in the next year...I guess my only gripe is the necessity to do so. Fairly sad state of affairs where a decent education and a white collar job isn't enough to afford a home.

Why do you have to live in LA to be in CA? The future of California is going to be Sacramento. It has nearly unlimited space and a very solid infrastructure. The hilly area s to its east are actually quite picturesque and Microsoft, Sun, Intel, HP, Oracle, etc all have presences up here.

Your problem is that you need to think outside the box.

I've lived all over the state and I don't think the future is in Sacramento at all. It's 110F during the summer and freezing cold during the winter. I personally couldn't wait to get out of there. Unless you are in love with Skiing or Snowboarding then there's not much there. It's a strip mall city where you have to drive across town to get anything done.

I could have bought a house there cheap. I didn't buy there for the same reasons I don't buy in the Inland Empire. Why bother living in California if you aren't taking advantage of what it offers? If you love Sacramento, what you're really saying is that you love Tahoe and in that case you might as well live up there. The masses of people that live in Sacramento and commute to the city have longer drive times than people in L.A. rush hour traffic. That's just not worth it.

Arco Arena, 4th of July on the river, and Skii trips up to Tahoe. That's all Sacramento has.

So far this summer, the temp has gone over 100F for about two weeks. And it doesn't usually reach freezing temp during the winters. I like living in sac and having to drive 5mins to get groceries or to get to a Target or Walmart. In terms of commerce, Sacramento is the place to be if you're into gov't work or contracting.