The baby boomers forgot about their kids: Do we have any housing bulls in their 20s and 30s, the traditional age of first time buyers in high priced areas?

Baby boomers with their infinite housing lust have largely forgotten about one thing on all those blurry tacos Tuesdays.  What about the kids?  Many boomers in high priced California cities find themselves house rich but cash poor.  The notion that somehow your home valued at $700,000 or $1 million is throwing off cash is counter to what most investors understand.  You have taxes, insurance, and your regular upkeep on a property.  And how many boomers sniffed the HGTV fumes and upgraded their homes with granite countertops, stainless steel appliances, and polished off hardwood floors?  Home Depot isn’t successful because people frugally maintain their homes.  In large part, boomers in their golden sarcophagus have forgotten about their offspring.  Recent data continues to highlight the growing divide in wealth disparity.  California led in the growth of millionaires but also those on food stamps.  Sales reach a multi-year low last month yet 12 zip codes in So-Cal reached non-inflation adjusted highs in prices.  Boomer wealth versus those in their 20s and 30s coming to terms with being part of the renter generation.

The generations by names

The generation that once fought the “man” has largely become it.  Policies simply reinforce high prices for those already in the party but you need to sell to someone.  So far, investors have picked up the slack.  There is a reason for the record high number of young Americans now living at home late into their 20s and even 30s.  Across the country in more “affordable” places your late 20s and early 30s is the typical time of first-time home buyers.  But even across the nation given the jump in home prices caused by a flood of investors, first-time buyer rates have plummeted:

first-time-home-buyer

The rate fully collapsed with the rally in 2013.  Higher home prices with stagnant incomes is no good unless you follow the louder drum of those simply preaching that buying is always a great decision, in the long-run.  As Keynes said, “in the long run we are all dead” and some see this as a rallying cry to buy and take on a big mortgage while others decide to rent and keep a larger portion of their income free (many at this point have no choice even if they want to buy).  In the graveyard of the 7,000,000 foreclosures I’m sure you will have some that carry a more nuanced view on purchasing real estate but why ask them?  Let us talk about the person that bought that beach property and suddenly is a real estate millionaire!  Let us only talk about the person that bought Google at IPO and not AOL at the peak.  People have a massive tendency to confirming their own bias.  The audience on this site is largely baby boomers so I may be saying something that people already know in that many are house rich and cash poor.  Those trying to get in right now face a very inflated market.  The Fed has made us all speculators given that they now own the mortgage market.  Not by a little, but essentially make up the entire market when buying mortgage backed securities.  So yes, when making your biggest purchase you should think a little (remember that since the crisis hit a stunning 7 million homeowners have faced foreclosure).  Even in California we still have 1.4 million homeowners underwater despite the rally:

NegEquity1

So yes, you should run the numbers (and think) before making this massive leap.  Recent sales figures show that many cannot satisfy their housing lust and not because of a lack of burning desire.  I take it that most readers that frequent sites like this modest one are thinking individuals that rather not follow the herd.  I love it when some readers have their conversion moment and suddenly the argument is done.  Checkmate!  I bought therefore you should go out and buy that piece of crap $700,000 home.  Inspections?  Contingencies?  Who needs a job with double-digit annual appreciation forever!  Make sure to lock your car door and don’t pay attention to the fumes of the freeway in your backyard.  Don’t you know that ex-“hood” is now the next Newport Coast?

The generation window looks like this:

Gen-Breakdown

Baby boomers were born between 1946 and 1964.  In general, we are looking at those with ages between 50 to 68.  It should be no surprise that this is the fastest growing segment of our population since you can’t escape time in spite of all the plastic surgery:

age california

The trend isn’t escaping California.  It isn’t uncommon for a baby boomer to own their home or with a modest mortgage yet be cash poor because of blowing all their cash throughout time.  I know many that are well into their 50s and the only asset to their name is their house.  Little to no retirement funding but a home that is “worth” nearly $1 million.  However, they have no desire to move and unlock that wealth.  So then what?  You tap that equity out and the bank once again owns your place.  Heck, even those with paid off condos in California need to generate something like $500 to $1,000 a month simply for taxes, HOAs, and random upkeep.

Most home “owners” in California carry a mortgage.  It should also be no surprise that older home owners are also highly leveraged:

household age breakdown

Culver City recently hit a $700,000 median home price in the 90230 zip code.  You can buy with 10 percent down ($70,000) plus you will carry a healthy $5,062 monthly payment after you include taxes, insurance, and PMI.  Those that think that 20 percent is common are not looking at the stats.  You have all cash buyers, move up buyers, and those massively stretching their budgets (i.e., ARMs, etc).  Plus, how many of those in their 20s and 30s can save up $140,000?  Not many and that is why you see many in their 20s and 30s moving back home with mom and dad.  Last month 30 percent of all purchases in SoCal came once again from all cash buyers.

I was curious to see what $700,000 would buy us in the 90230 zip code today.  Let us take a look:

culver city

11232 Segrell Way, Culver City, CA 90230

3 beds, 2 baths – 1,082 square feet

This is what $689,000 will buy today.  Like I said, go in with 10 percent down (more realistic than $140,000) and you are facing a $5,000 payment for 30 years.  Miss a few payments and enter the 7,000,000 club.  The rent estimate on this place is $2,820:

rent estimate

A $5,000 nut or $2,820 a month for rent?  Heck, let us even say you have the 20 percent down.  Congrats!  You now carry a $4,000 nut.  I highly doubt that a young professional couple is going to buy this place without stretching to the max and plus, this is 1,000 square feet!  Even a boomer with equity is unlikely to make this big move.  Speculation is rampant and those speaking about rental parity need to realize that this is a sword that cuts both ways.  Right now there is absolutely no rental parity here.  So then what?  Either incomes race up or prices adjust, right?  It isn’t like you bought and your point in time is suddenly the rental parity nucleus of all-time.  Of course some will simply increase the down payment until they “find” rental parity.  All cash buyers are beyond rental parity from day one.  Does that mean it is a good time to buy?

This is why sales are coming to a screeching halt:

socal homes sales

Source:  DataQuick

I’ve gotten numerous e-mails from house lusting people in their 30s itching to buy mostly because of biological reasons (i.e., pressure from family, setting roots, etc).  Some are drinking the Kool-Aid.  Ironically people hold property for seven years on average so the nostalgic idea that somehow this 1,000 square foot place will be the place you live in “forever” is a powerful marketing myth.  Once you own, you suddenly drink the Kool-Aid of the day and it is on to the property ladder races!

I have no horse in this game.  If you want to buy and a bank is willing to throw a giant mortgage your way, go for it.  You might even run the numbers and it will make sense.  Great!  But in many areas take a look at what it will cost to rent versus what it will cost to buy.  If you are speculating (which you are) then run the numbers for the stock market and alternative investments.  To think housing is this safe investment is nonsense.  It is safe if you can carry the nut 30 years forward but the nut is large enough to crush the squirrel (the 7 million foreclosures don’t lie).  But to think that it is a simple decision especially in this insane market is delusional.  Keep in mind in California only 54 percent actually own their property (i.e., most with a mortgage of course):

owner occupied

Boomers are going nowhere so many will be living as I have said, in a golden sarcophagus.  They will fill their bowls with Purina before selling that World War II lottery ticket.  Taco Tuesday For Life (TTFL).  Everything has a balance and many of their children are coming back to fill those nests.

I’d be interested to see your anonymous situation if you are in your 20s and 30s and stand in a situation where you are considering to buy in this market.  Feel free to post in the comments.  We have a nice balance of folks on both sides of the fence here so you may even get some sage advice.

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187 Responses to “The baby boomers forgot about their kids: Do we have any housing bulls in their 20s and 30s, the traditional age of first time buyers in high priced areas?”

  • Hello Doc. I have taken the liberty of posting the original article on those ’12 zip codes where home prices are now higher than during the bubble peak’ from LA Times a couple days ago:

    Housing prices surpass bubble peak in some Southland ZIP Codes. Most are in the San Gabriel Valley or on the Westside, markets driven by Asian buyers and the tech industry. Still, many areas remain well below their pre-recession highs.
    By Andrew Khouri March 12, 2014

    In some corners of the Southland, it’s as if the housing crash never happened. Home prices in a dozen Southern California ZIP Codes have passed their peaks during the housing bubble, according to research firm DataQuick. Most are either in the San Gabriel Valley, a magnet for buyers from Asia, or on the Westside, where the technology industry is booming.
    Across the region, home prices remain far below their peaks despite an explosive run-up in the first half of 2013. But nominal prices in some affluent neighborhoods have entered uncharted waters. The return of bubble-era pricing could foreshadow a spillover effect, experts said. As buyers get priced out of prime areas, they may look to adjacent neighborhoods — juicing demand there and pushing up prices.

    Many other regional markets have stalled since last summer. Higher prices and mortgage rates, along with a shortage of homes, have turned off many would-be buyers. Sales have tumbled overall, but they continue to climb in wealthy communities.

    Of the 12 ZIP Codes where the non-inflation-adjusted median price has passed its bubble-era peak, six are in the San Gabriel Valley and one is in affluent Irvine. All are hubs for buyers from China looking to move to the U.S. or invest here. Another is ritzy Los Feliz, where homes near Griffith Observatory command top dollar.

    4 other areas are on Los Angeles’ Westside: in Venice, Palms, Mar Vista and Culver City. Buyers from the area’s burgeoning technology industry — known as Silicon Beach — have fueled price increases, along with broader gentrification.

    Despite steep prices, experts don’t see a bubble forming in these areas. “There are important, fundamental reasons that prices moved up,” said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate.

    The neighborhoods are near job centers, the urban core and, often, good public schools, Gabriel said. The areas have also recovered faster because prices there simply didn’t fall as steeply as in other areas during the crash. And each has unique factors driving the current price growth.

    In the San Gabriel Valley, an influx of Chinese buyers has shifted the market into overdrive, real estate agents say. Many Chinese see U.S. real estate as a solid investment, cheaper and more stable than in China.Others buy homes with their children in mind, seeking cleaner air and solid schools. An epicenter for previous waves of Asian immigration, the valley is a natural landing place.
    In Arcadia’s 91007 ZIP Code, the median sale price for a previously owned house reached $1.33 million last quarter — 30.5% higher than its peak in 2007. In the city’s 91006 ZIP Code, prices are 23.7% higher. Other areas with nominal prices exceeding their peaks, though less dramatically, are Walnut, Temple City, San Marino and a ZIP Code that covers parts of San Gabriel and East San Gabriel.

    “It’s crazy,” said Pamela Rose, a San Gabriel Valley real estate agent. “We are experiencing a lot of overseas money.”

    On the Westside, the arrival of hip cafes and other amenities catering to tech industry workers has, in turn, attracted others to these areas. In rapidly gentrifying Venice, the median price in the fourth quarter of 2013 was $1.34 million. That’s nearly 3% higher than during the bubble and 84.4% more than the bottom during the crash.

    “There is a tremendous amount of demand from the tech industry,” said real estate agent Tami Pardee. “It’s really driven up the prices in Venice, which has driven up the prices in Mar Vista.”
    That spillover is welcome news for current owners looking to build home equity. Some have cashed in, selling to developers who have built larger, new houses with affluent buyers in mind.

    • Fuck them.

      • Which ones? Or, do you mean all of them?

      • Fuck them all. LA Times, the writer, the buyers, the sellers, the mortgage brokers, the escrow companies, the realtors/agents, the neighbors too.

    • “buyers from China looking to move to the U.S. or invest here”

      Would love to know the true breakdown between those actually moving to settle here and those who are simply spec- oops I mean, investing here.

      • Virtually to a family, the Chinese are buying a homestead for their kin.

        With thirty-years of market ‘experience’ in Vancouver and Australia — the persistent habit is persistent: they buy to own and occupy.

        Barron’s — long ago — noted how that the Hong Kong crowd were consistently buying up the single most expensive, exclusive residential properties in that city — only to promptly RAZE THEM TO THE GROUND. There were apparently no exceptions.

        Not uncommonly, the Hong Kong buyers paid beyond top dollar to snap up the adjacent property.(ies) It was, of course, razed and combined with purchase number one.

        Then a new super-home was erected — totally in the Chinese style: with the walls oriented towards the dawn for the master bedroom, etc. etc.

        Then the extended clan moved in — on the strength of their British passports.

        I’ve never read of a SINGLE Chinese immigrant/ alien buyer who held their purchases out for rent. As a practical matter the issue is resolved: the Red Chinese are not investors. They buy and hold forever, and ever. Flipping, rents and selling never enter into their calculus.

        But, that’s tradition for you.

        This is not to say that Red Chinese don’t speculate in real estate. They certainly do. It’s just that they only speculate where they’ve got a shot: back home in China.

        Flying in on a jet, making a pit stop, they know they don’t have a handle on California real estate. These aren’t dummies. Their typical IQ is way up there.

        (Fools and money are soon parted — everywhere.)

        What the Red Chinese won’t usually do is buy property based upon price.

        For them it’s location times infinity.

        If you’re in the wrong part of town you won’t even see them drive by. And for the Chinese, the ‘wrong part of town’ is anywhere that doesn’t already have a Chinese footprint.

        You’ll see something like this when Americans buy retirement homes in Costa Rica. By their standards, Americans are paying two to five times as much as a local would — per square foot — and a tremendous premium for design and materials.

        The American retirees look upon Costa Ricans as ‘giving it away’ — even at such prices.

        In both cases, the buyers represent the upper end of their native income and asset distributions.

        A variation of this occurs when mainland Americans vacation in the Hawaiian Islands, (Could be Virgin Islands) To the Islanders, it looks like everyone is loaded. What they don’t see is that years of savings are being blown in a two-week binge.

        Islanders have a cost of living so high that there is no prospect of them saving a dime. So it never enters their heads that such a thing is going on.

        Since Americans are not, and never have been, subject to Capital Controls, they can’t wrap their minds around how difficult it can be to get wealth out from under Big Government. This means that posters on this blog still can’t tumble to the frantic nature of this Fright Capital.

        Red Chinese real estate purchase monies have to be set ENTIRELY aside from the rest of the market. They truly stand alone.

      • While those are interesting anecdotes, I’m still waiting to see the quantitative data measured at the source. As far as I know, it doesn’t exist.

      • http://www.zerohedge.com/news/2014-03-15/how-smuggle-money-out-china

        Since you’re asking for a metric that can never be obtained…

        Here is a blurb that is timely.^^^^

        “Many card users follow their money abroad. Since the mid-1990s, an estimated 16,000 to 18,000 Communist party officials, businessmen, CEOs and other individuals have “disappeared” from China, according to a separate PBOC report prepared in 2008 – taking with them some 800 billion yuan ($133 billion).”

        Since, practically by definition, this is all Fright Capital, no-one reports nothing.

        %%%

        The better query: Does anyone, anywhere and at any time know of any Mainland Chinese real estate buyer of residential properties that has bought them as passive investments?

        The obvious answer is: No.

        It’s impossible to run a real estate investment portfolio from Red China.

        If someone of that character were to do so, it would never show up on the ledgers as being Chinese money in the first place. They’d have to route it through some tax haven. You, me and the next guy wouldn’t even make the connection. Such fundings must be entirely outside the scope of the matter at issue: Chinese super-bidding at retail.

      • If there are 1.3 billion Chinese then they have 13 million 1%ers. If only 10% of their one percent desire a place in SoCal then there would be 1.3 million buyers. What about their 2%’s and 3%’s etc?

        As you can see the boomers aren’t stupid. By moving all our of manufacturing to China they were ensuring that they would have a wealthy elite to way over pay for their stucco shacks when they were ready to flee the mess they’ve made.

      • Blert, you’ve missed the point entirely, which is that the question is rhetorical. Obviously we won’t know exactly what the breakdown is, so all of the claims made about the reasons behind Chinese purchasing of RE is simply guessing.

    • son of a landlord

      >> On the Westside, the arrival of hip cafes and other amenities catering to tech industry workers has, in turn, attracted others to these areas. <<

      I hear this so often. That "hip cafes" and "trendy restaurants" are magnets for young people with money. Is that so? Are the young and upwardly mobile so obsessed with "hip and trendy" eateries?

      I like Starbucks and a good 27/7 diner. Denny's is fine. Those are "hip" enough for me, a Boomer.

      • @son of a landlord,

        Totally agree. It seems that someone–whoever it is–is forgetting that the west side has *always* been a magnet for people with money and has always been “hip.” Tech, entertainment, law, medicine, whatever. Nothing new there. It was like that when I was a kid 60+ years ago. The fact that it’s still so is not news.

      • “Are the young and upwardly mobile so obsessed with “hip and trendy” eateries?”

        Yes, they are!

      • there’s nothing more irritating than a food snob

      • @Paula – what is your definition of “the west side”? I was born and raised in Santa Monica and I can tell you Santa Monica was a dump when I was a kid except for north of Montana. The city was mainly filled with labor for aerospace Hughes, Mac Donnell Douglas (which was on Ocean Park), Lockheed Martin, etc. Venice was a ghetto where no one in their right mind would go through day or night. Mar Vista was not as bad as Venice but not far off. Palms, Culver City, West Chester, most of MDR, West LA, where lover middle class at best. Back when I was young the rich lived in hills of Beverly Hills, Bel Air, parts of Pacific Palisades and the rich recluses\oddballs lived in Laurel Canyon. Malibu was middle class, Topanga was old hippies. So, no the West Side was not “always” hip/rich.

        @shellz – then you would hate me. Wife owned a restaurant at 23 and now is a food blogger. We hang out with the old manager of the Fish Market in Santa Monica and a organic farmer or two as well as a couple of chefs trained in Spain. So we are big time food snobs. Feel free to hate because I love good food and the wife make everything from scratch for the blog and I get to eat it. I consider myself very lucky. No MD’s for me…

  • 36. Came into my prime earning years right when Housing Bubble 1.0 began. Rode it out made an auction offer on an East SGV place in 2012 that made sense for me and missed by 15K. Since then it’s been nothing but insanity.

    Unlike many I want a house not for starting a biological family, but for roommate rental streams. Have always lived with family and friends and I enjoy the camaraderie. Love being able to stick it to the high cost of living as a group. Share space chores an cooking. Everyone has more disposable income for weekend entertainment an savings. If anybody has a downturn working part time is still enough to cover their share. 4or 5 people in a 2500 SqFt house gives you MORE room than cramming into 3 small apartments. Only one set of bills to pay. Sure there’s the human dynamic, but we all deal with that in some way every day. It’s the best family environment I’ve ever had. I’ve got about 80K backed by an available private equity loan to make me a “cash” buyer, waiting to get into the right property. Plan to look at North Upland, CA starting next year. With mortgage rates likely above 5% and many more foreclosures coming through the pipe, I’ll be anyone here dimes to donuts that we overshoot the 2011 trough by a good 10%. It may somehow be followed by yet another echo bubble but for now 2015-16 is my window.

    • Expendable income is so nice. I’d rather rent where I want to live than own where I don’t. Maybe I’ll die of exposure at the age of 68 for lack of a house, but I’ll shake my fist at the housing gods. “You never got me, you bastards!” I’m not saying I wouldn’t buy a house if the right thing came along at the right price. But, otherwise, who cares? I just think that America’s lemming-like approach to home buying is fascinating to watch. If it works out for them, great. If the entire economy collapses…well, that will be interesting, too.

    • bler_not_blert

      More or less same for me. The first point I was in a position to buy was 2003-04 and by then the fundamentals already didn’t make sense to me. Should I have rushed to be in 2003 anyway? Maybe.

      Arguably could have bought in 2011 at a price I could have lived with (though I was pretty sure the bubble hadn’t fully deflated, I could have swallowed it), but I ended up being between jobs for a few months. By the time that was square, prices had already surged back to the danger zone.

      Lots of family/friend pressure to buy. Many of my peers either moved into higher paying careers, or were 2-3 years ahead of me on the curve and bought in just before the price surge.

      Many of them do now tell me I’m a fool if I don’t buy now, because hey, “our market can only go up! It’s so awesome here!” Oddly, I hear it most from spouses who married wealthy and have less pressure on them to work/earn.

      At some level I think the reality is that really engaging with the real estate market takes a lot of effort and some sophistication. Much easier to let the media (via whatever NAR spokesperson is their expert of the month) tell you that “Rates are going up! You should buy now!.” Except when they’re telling you “Rates are going down, you should buy now!”

      And if you have bought and you’re heavily leveraged, it’s too scary to think about losing your equity (often the most significant asset young families have) – much better to reassure yourself that the media is right, and the market can only go one way. Because population growth and demand and stuff!

    • 47 and selling my condo in downtown long beach which i bought in nov 96 for less than 40,000. looking to get at least 170,000. moving in with my 73 year old mom to help take care of her. no wife no kids. happy and content to have deposable fun coupons to enjoy life which is easy

      • disposable …. i work for the state of calif and i will be paying off my mom’s mortgage with my windfall

      • Doc you did not post the first part of my entry. I said I was selling my condo in downtown long beach which I bought in nov 96 for less than 40.000. Happy and content with my easy job and easy life. I have disposable fun coupons to enjoy life because I have no kids and no wife. I am 47

  • Nativecalifornian

    My husband and I are both 27 and looking to buy. We have more than enough in the bank for 20% down on 600k house.

    Having a healthy DP is great, but it’s our incomes that hurt us. Realistically we qualify for about a 290k loan on one income. My parents (baby boomers) made their fortunes in real estate..buying and selling rental properties and they advocate to buy. We don’t want to use every penny of savings we have on a house..especially since it feels like buying a house is speculative right now.

    We are looking in the nicer neighborhoods in Santa Ana, my husband works in newport and he doesn’t want to commute too far. We’re also set on a SFR, which makes our options limited. If we had been looking 2 years ago we could’ve bought something in Costa Mesa, but that ship has long sailed.

    We hope we’re making the right descsion in buying a house. It’s just so hard to tell anymore!

    • “Nicer neighborhoods in Santa Ana”?!? There are nice neighborhoods in Santa Ana?!? And $600K, I’d imagine you could buy swaths of Santa Ana for $600K

      • they must be referring to “North Tustin” as some call it….it’s still Santa Ana city and zip but they feel better calling it north Tustin

        you are right, you can find a 4 bedroom 1400 SF in hood Santa Ana for like $375K, but I don’t know Spanish so that wouldn’t work for me

      • I live in Orange Co near the Santa Ana border. There are some really WOW neighborhoods with Santa Ana addresses. Some are actually in unincorporated North Tustin (92705). Other parts of 92705 are in Santa Ana limits but not too shabby, like the neighborhood west of Tustin Ave near the Jewish Temple. Then there is French Park ( http://www.frenchpark.org ), which seems to be going to a “hipster” neighborhood, but a little too close to the lumpen for my taste.
        Then there is Floral Park… http://www.floralpark.com/
        Houses on Heliotrope or Victoria have to be seen to be believed. This is the “old money” area of Santa Ana. Interestingly, there aren’t any houses for sale on Zillow on those two streets today. Nearby parallel streets have less pricy homes, and a few are for sale.

        We went into one of the houses there about 25 years ago when it went up for sale. It had been built in the 1930s by a Maharajah we were told, and frankly, you couldn’t get a house with all of the high quality workmanship in that house for the kind of money they get for houses in Floral Park anywhere else in Orange Co.

        Some houses on the north edge of Santa Ana are in the Orange school district, like the neighborhood where that man had a house full of starving snakes that made the news a couple of weeks ago. That’s nice for families with kids who can’t afford private schools.

        Rent or buy, Santa Ana may have something for you, but as I like to say, caveat emptor!

    • You’re 27 years old. Do you guys want kids any time soon? Factor in either staying at home with your child and making mortgage payments with just one income, or factor in working but having a chunk of your paycheck going to child care expenses.

      Can you still comfortably afford it?

      Kids aren’t cheap.

  • I bought in 2009 and ready to move up the Ladder but I cant cos house prices spiked %20 to %30 percent in between 2012-13 and my income has not!!
    I am still making close to what I was making in 2011,12,13. I am in no rush till prices drop to 2010-11 level.
    I am waiting for drop to buy again. Realistically, %20-25 drop would be good for the housing market.

    “Taco Tuesday For Life (TTFL).” :))))))))))

  • Millennial Lurker

    Nice post DHB.

    Long time lurker on your blog but given your last paragraph I thought I’d chime in. This isn’t meant to be a brag post but just to add another perspective.

    My wife and I are in our late twenties, no kids, both with stable, professional jobs. Our income is decent but not great (low six figures between the two of us). No student loans or consumer debt. Financially speaking I’d guess we’re in the top 10% of our peers.

    In 2011 we bought a house not too far off in terms of size/condition than the one in the article, but in the bay area. This was accomplished through a down payment gift from family, a 30 year mortgage borrowing the maximum the bank would loan us, and a second mortgage from family to cover the balance. The monthly nut between the two mortgages, plus property tax/insurance, is about half of our combined take home. Since 2011, the value of our home has gone up by about 50%. Buying was obviously very risky but it worked out for us. I’d like to think my superior timing was responsible for this but in reality it was just pure dumb luck and familial generosity.

    Buying our house today would require a six figure down payment and a payment equal to a full professional-level salary (pre-tax!). Of those in my age group that I’ve talked to, virtually none of them could swing that. This includes many couples earning close to 200k with substantial savings. Many are getting visibly desperate in the face of the trend of house prices rising 5-10k per month but only being able to save 1-2k, tops.

    The housing market is starting to feel a bit like 2005 to me, minus most of the hinky lending games, and I simply don’t see prices rising at their current rate for more than another year or two. When DINK couples with healthy incomes and no debt can’t even afford a crummy starter home, there simply won’t be anybody for the boomers to sell to. These properties can’t even come close to earning positive cash flow if rented. My guess is we see values come down a lot, and soon. My wife and I are now looking to sell and rent for the time being until the market regains some sense of normalcy. In hindsight I’m very glad we bought when we did but the buying proposition just doesn’t make sense anymore.

  • We actually bought in our 20’s back in 2005. By 2011, we were way underwater in a townhouse with the worst neighbor in the world, and we had to get out. We had to fork over a bunch of cash, but we got out and started renting. We had one kid with another on the way…and there was no way we were staying there.

    So for the last 2.5 years we’ve been renting in a really nice area, saving up, and waiting for the other shoe to drop. In the meantime, our son is going to an awesome school, we have awesome (and quiet!) neighbors. We’ve been signing a new one-year lease every summer (I like the peace of mind knowing we won’t get a random phone call during the year). How long will we stay and rent? I’m thinking when the kids are out of daycare, this current bubble to burst, and when we have a big fat chunk of money saved up.

  • I am in 31 years old and I’m no bull here. I have 100K down-payment cash, + only about 10K in brokerage acct with stocks… no credit card debt, no student loans. I do have a car note for 15K left.

    in 2010 I saw acquaintances get into homes with the 3.5% which they borrow from mom and dad… now they act like they’re economic geniuses, with the house going up in value and refinancing…now they’re buying benzos and such..

    back in 2010 I did not have the money. I’ve saved most of my money in the last 2 1/2 years working hard 50-60 hrs per week, + consulting. Go to work and gym to workout to get energy to work more and harder. No going out to $80 sushi or steaks or $50 and up bar tabs… NFL or NBA games damn tix are like $100 and up a pop, + where ever you eat…it’s insanely expensive… I brown bag it to work, except fridays.

    my point is that On could save money, if you don’t fall for the consumerism that Is suffered in college and mid-20s. now I have girlfriend and we might get married in late 2015… so if housing in CAL does not have a correction by 2016… I can take my 150K(projected savings) and move out or I don’t know… it takes 80K down-pay for a 400K house that is shiite… anyway I just want a starter home, I could care less abour granite counters… in fact… fuck the granite counters.

    simple home 3bd 1 1/2 bath with garage…nothing fancy…

    • “…so if housing in CAL does not have a correction by 2016…”

      Don’t worry my friend, it will. We’re over 2 years into the mania, the last mania was 2004-6 with 2007 being the flat year before the collapse. 2014=2007. I’m seeing THE EXACT same comments coming from the Housing Bulls as last time. The debt loads are WORSE than 2007. The FED has no tools left stay a decline in prices. Besides, with the big banks saved from nationalization they don’t really want to. Residential RE prices NEED to drop to preserve what can be of commercial RE. The only way commercial RE can remain solvent is to get the shopping centers full of consumers so the tenants can pay rent. The FED knows lower rents and mortgages help the commercial RE still on the big 4 banks books. They’ll throw residential RE under the bus in a minute to save the paper backing commercial RE loans.

      • Between the new monster mortgage payments, cost of everyday living and crazy inflated rents (up at least 15-20% in Long beach and Lakewood area in the last 18 months, what was $1750 is now $2300+ for a 3+1 1100 Sq Ft stucco box) the consumer is cash strapped, there’s nothing left over for themselves…….you are 100% right that the banks will throw residential RE under the bus to save big dollar commercial paper…., besides the banks will make money on REO’s just like they just did the last time around, PMI insurance will pay out the full hit if they default and they then sell the asset on to an investor/hedge fund buddie and the whole circle starts all over again….

  • 34, wife is 30 with 2 kids. $150K total income with both of us working. Not from the area, so our Boomer parents own in the Southeast. We rent in South Bay (not close to the beach) for $2200, would like to buy for school district stability. I pay attention to the neighborhood prices, but haven’t seriously looked because we are priced out.

    Like that house in Culver, prices here are no where near rental parity. Houses that were $550K in 2012 are now going for $700K. If I stretched my family that far we would be living on Ramen. We could start shopping in rougher areas I guess, but then we would have to pay for private school. If prices ever become affordable again we’ll consider it but in the meantime I’ll take the cheaper rent.

  • I’m 35, and wish I could be bullish about buying, but as is commonly proven, it’s cheaper to rent. At least anywhere nice. Plus one can always rent, save, leave CA, and a buy a place for cash else where in the USA. Which has many wonderful places to live.

    I moved to the Bay Area from Michigan in May 2001, signed a 1 bed rental contact for $1100 in Walnut Creek and when I got her my rent was dropped to $1000 without my even asking. It was only last year that my rent for another one bedroom finally reached $1000 again, in nearby Pleasant Hill. This is despite the increase in rents one can read about. I think it only went up because property taxes and utility fees went up and everyone knows, the renters pay for any increases in those expenses.

    I’ve remained in the area much longer than I ever imagined. Perhaps might have been slightly better off now, buying a home for $300,000 when I first got here. I doubt it though. Plus they’re effort and an expense. Finally I’m barely home at all with work and my fun filled life, I don’t know what I’d use a house for as I am.

    On a side topic. My gf lives in her parents basement despite making $55k/yr and her older sibling wisely refrained from buying a place in the south bay for $1MM and opted to continue to rent. I see the trends discussed on this blog played out in real life everyday.

  • Nice article but I think you are missing one perspective from some Gen X/Y folks. A couple years back I was talking to a recent MBA graduate and he stated that house ownership isn’t compatible with modern life. He went on to relay how important moving was to get a good job, and how people only stay at their jobs a short time. If you bought every couple years you loose transaction costs. If you rent you are more flexible in getting that better job somewhere. Considering the current job market how many 20-40 year olds want to be locked into a geographic region. Also, since many of these higher earning professionals aren’t eager to form traditional families they aren’t under the same pressures to buy that the boomers had before their first divorce.

    • bler_not_blert

      That’s generally true in my profession. The truth is I make well above median compared to state/national/city medians, but compared to most of the other posters on this board (130k, 150k etc.) I’m a veritable pauper.

      There are a few 6 figure jobs in my field, but by and large getting one requires some luck on timing and mobility. It’s only worth buying if I could really make it work on my current salary. And the jobs that do pay at that top tier don’t usually come with any long-term security.

      The jobs that pay 40-60k do tend to have security, but in this market, buying on that even with 15 years of savings just isn’t viable, or at least would require financing up the nose.

  • My wife and I are considering buying now… I am 31, she is 28. We are expecting our 3rd child in a few months. I have an MBA and make a bit over six figures… but we just can’t find anything that we can afford (we are in OC), so I feel like we will rent forever. Like you said, saving 20% is a big stretch for us, shoot so it 10%. I don’t know how anyone our age is buying.

  • The older generation is merely taking advantage of the consequences of irresponsible actions of the fed and government on all levels. You can’t blame them for accepting the deals that are presented to them, whether it’s at the cost of the our generation or not. A lot of people here talk about the real reason behind the bubble but what is troubling is that you rarely hear it from mainstream media.

    • The older generation created the advantages. The Baby Boomers and Me Generation (think Yuppies) are in power at all levels of gov’t and have been for years. They can’t blame their parents anymore. Clinton (boomer), Bush #2 (boomer), Obama (Me Generation) and their cohorts have held the reigns since the early 90’s and have made deal after deal to short me (Gen X, born in Feb. 1970) and everyone else at every turn. Newt Gingrich (boomer), Hillary (boomer)….. all of the longterm media hacks and political pundits are Boomer or Me Generation. They have all, regardless of party, had one agenda: spend and don’t pay.

      And now another entire generation of idiots has been raised buying into ‘diversity regardless of ability’, ‘perpetual dependency on gov’t and family’ and whatever other cause of the week they are told to support by the Huffington Post or Jon Stewart….. other than the 2 wars their parents got us into of course….. some other kid can fight those.

      I’ve owned 3 homes since age 29. They are a succubus, but I do all of the work on them myself, like my grandparents did. My parent’s couldn’t swing a hammer but by God they ‘needed’ a new kitchen every 10 years and that convertible as a 3rd car because “I deserve it!” Go on Google Books and look at old issues of Popular Mechanics from the 40’s-60’s and you’ll see the spirit of real do-it-yourselfers. Of course now you can’t legally do stuff yourself because the nanny’s of the Boomer Generation have made it illegal. As the Doc said, they ARE the Man now, but in reality they are still children.

      • son of a landlord

        You differentiate between Boomers and Me Generation?

        I’m the same age as Obama. I thought we were Boomers.

      • I do. Boomers cling to the wanna-be hippie ideology of the 60’s and the Communist inspired do as I say, not as I do ideals it brings to the table. They are the ones that mandate crap like ‘Green at any cost’ and ‘One world’ idiocy that is shown to be falling apart all over the planet.
        The kids of the Wonder Years (Me generation) didn’t grow up as hippies, they turned into Yuppies, the Gordon Gecko generation that is more than willing to sell souls for cash so long as “I got mine”.
        The ‘Greatest Generation” as dolts like Brokaw call them, weren’t all 18-25 when they came home from war, that is an idea the Boomer’s assume because the ‘Nam vet’s all left home at 18-21 and were back 2 years later. The draft in WW2 started at a higher age bracket and worked it’s way down as the war progressed plus men of all eligible ages volunteered so you ended up with ‘older’ men returning form the war and having kids.
        My parent’s generation (and every kid I grew up with’s parents) was married and popping them out at 18-20 and was done with kids by age 28-30. You can regularly find large numbers of Boomers who were born to parents in their 40’s and even early 50’s. Many Boomer’s like my mom were born to people who suffered terribly through the Depression. My grandmother lost 3 kids before my aunt and mom were born in the 40’s because medicine wasn’t as advanced and the nation overall was much poorer. Loosing kids pre-birth or in the first couple of years was commonplace before WW2. Many of my grandparent’s friends delayed having kids because of the Depression.
        While the 20 year timeline is seen as the norm for marking Generations that is just taking the easy way out. I have much more in common today with someone born in 1964 (the last year for Boomers they say. I was born in 70) than someone supposedly also of Gen X who was born in 78-80. A world with out cable tv, microwaves, answering machines, dual income parents, etc. Even my sister who is 3 years younger than me has little in common with me or my older sister who is 3 years older than I am.
        In my view the Boomers=wanna be hippies, Me Gen=cocaine and disco. Both have done everything they can to steal from the next generations via tax policies, regulations, profit over all else labor/business practices, foreign policy based on desire not threat…… and as I said to Mike the cab driver guy on the last post: the chickens are coming home to roost. Every single person my age (mid-40’s) down to the mid-30’s I know is already telling mom and pop ‘tough shit’. Sell the house, the toys, move to Florida because I’m not spending my entire life making up for your lousy planning. You took, you gamed the system to always favor you and now you want more…… but you never saved one red cent…. and that is somehow everyone else’s fault. Um, nope.

      • I see that you haven’t shot yourself yet.

  • Beware the Ides of March……………

    • Still waiting for the Ides of March to correct/pop the bubble that is the Arcadia/SGV area.

    • So tomorrow everything falls apart. Can’t wait…

      • son of a landlord

        It’s today. Nearly 8 hours into the Ides. Sun still shining here in Santa Monica.

        I have noticed an increase in listed houses in some desirable areas — Culver City, Pasadena — these past two weeks. But that could be a typical start of the Spring buying season. Listing always go up in Spring.

        I’ve also noticed some price drops in those areas over these past few months. But that could just be a leveling off — prices having reached a ceiling — rather than a tanking.

        And I’ve noticed quite a few listed houses that were last purchased only a few months ago. Flippers who came late to the party. A lot of those houses aren’t moving. Again, it could just be that home prices have reached a ceiling, and are leveling off rather than tanking.

    • This time is different…

  • 32, wife 31, with a 10 month old son. We are both professionals working in the bay area, I am an engineer and she is in the medical device industry. $155K income with only some student loan debts and about $25K in savings. We found a cheap in-law unit to rent in a very exclusive town between both our jobs. We lucked out with that since we have a large dog and rents are out of control. We are able to save $3-4K a month.

    We really want to buy but I am not willing to sacrifice our financial stability by stretching ourselves to the max for a 2 br 1 bath bungalow or some crappy home 1-2 hours away from our jobs. Many of my engineering coworkers, most in their 30’s, are in the same boat constantly talking about the madness of the market and prices our generation face in CA. It really is discouraging and we don’t plan to stay long term. Why be relatively well paid (not doctor, lawyer, finance salary) and be house broke or wasting hours of your time commuting each day when we don’t have anything tying us down here. I feel that eventually the market will come back down to fundamentals but currently the majority of the voting populace and the government are Boomers and Late Generation X which are most likely to be home owners and thus will do all that’s in their power to keep this house appreciation madness going. Until the bubble bursts we have happily (most of the time) decided to wait and keep saving.

    • Also as with the cost of housing everything else is going up in price faster than inflation and wages. I mean my wife and I are fortunate and in a good financial situation but I’m the last 15 years:
      -gas 4x expensive
      -state tuition 3x more expensive
      -healthcare ~10%+ a year increase
      -easily spend $80 on two bags full of groceries
      -Disneyland now $99 a ticket
      -sking $85+ a lift ticket
      -Utility bills more expensive
      -companies not contributing to 401k

      Where is the leftover money gonna come from to pay for that $800,000 60’s home?!?

      It doesn’t make much sense and I start to feel like we are all taking crazy pills!

      Ok. End of rant, it’s Friday night!

  • Married for a couple of years, no kids (yet?), husband and I are both mid-30s. Approx $350K HH income, mostly from me. By the time I finished grad school and started making money, in 2006, L.A. was near the peak. I felt uneasy at the time with housing prices, and stayed out of the market. Instead I paid off student loans, invested, bought a moderately fancy car with cash. We’re approved to buy well in excess of 1M and have more than enough cash to cover the down payment, but… I still feel uneasy. Basically for the same reasons that you describe above – if we buy a place like that, who will buy it *from us?*

    Currently we’re renting an approx 1000 sq ft condo in Palms for $2K including utilities. We don’t want to be there anymore. We want to be in Culver (esp. if we have a kid), we want a proper dining room to host our family for the holidays, and a damn backyard! But when the choice is between buying a house that very well may get us stuck, and keeping a nice sum of “F-you” cash in the bank in case we ever have enough of our jobs, it’s hard to justify the former.

    It’s incredibly frustrating for logic and emotion to be so at odds. Not to mention, we’re paying an insane amount of taxes, since we can’t deduct hardly anything. I’ve never been so pissed at the boomer generation, they’re downright robbing from my generation. It’s really fun, too, when you see these places in Culver that are on the market for “the first time in 50 years” – old people and their families cashing out on nearly a million bucks in equity, paying $1K a year in property taxes due to Prop 13. Then the next buyer pays $12K/year for the same place, except now they have a crazy mortgage on it as well.

    It’s easy to say, “well, just move out of CA.” But… his family is here. I have a very lucrative job and am licensed in a profession where the barrier to entry in other states can be significant. And we do truly love it here. We’re just at a loss at what to do.

    • son of a landlord

      >> I’ve never been so pissed at the boomer generation, they’re downright robbing from my generation. <<

      I'm a Boomer and I never took a dime from you. Really, when have you ever put money in my pocket?

      If you want to blame someone in California, blame the public service employees unions and their lucrative pensions and free medical care. That's where mush of the taxes are going.

      And it makes sense for young families to pay higher property taxes than for seniors to do so. Property taxes pay for schools. Seniors don't have kids, young families do.

      • Wrong targets, guys. How about the NAR, Wall Street, the FED, the banks?

      • SoaL how much do you write-off on your Federal and State taxes? Any kind of credit you get on your taxes is a form of government funded welfare and is the kind of thing CAperson is talking about.

      • Are you kidding me? Your generation voted for Prop 13, which gutted the CA public education system – after you all benefited from it, of course. Have you been paying attention to how much more expensive public university tuition has become? It has vastly outpaced inflation. BTW my dad is a boomer, and completely agrees with me. He worked to pay for college in the 70s – because it was actually possible to do that.

        Young couples should pay 12x more tax than old people for property that’s worth *exactly the same,* because young couples are more likely to have kids? That’s ridiculous. Also, I’ve been maxing out on social security since my mid-20s, so actually I am paying for your retirement. You’re welcome.

        It’s not an either/or thing here though. I agree that certain aspects of the public sector in CA should be reformed, but that’s a bit of a red herring. My generation is starting off in the hole because of the choices that your generation made to subvert the public good in favor of private gains.

      • ^^^^^ AMEN CAperson!

      • Prop 13 was voted in by the SILENT GENERATION.

        Most of the Liberal policies that everyone loves to hate were put in place by the SILENT GENERATION.

        The legislature writes the laws. They — all of them — are governed by seniority — and massively so.

        Even at this late hour, most of the critical positions are held by the SILENT GENERATION.

        Ted Kennedy (1932), Harry Reid (1939), Nancy Pelosi (1940), — Silent Generation — every last one.

        Gingrich (1943), Hastert (1942), — Silent Generation.

        Boehner (1949) is the very beginning of the Baby Boomer Generation as Speaker of the House.

        Similar results are obtained for Sacramento, with Edmund Gerald (Jerry) Brown (1938) being the ultimate re-tread Silent Generation politician. (8 years 1975-1983 plus 2011 and currently Governor, plus Gray Davis (1942) 1999 – 2003 — his former chief of staff and acolyte.) Most of the current ills of Sacramento were made patent by Gray Davis — who was Brown on steroids.

        AT NO TIME has the Baby Boomer Generation been in charge until Arnold came along. By that time Sacramento had become a One Party (D) town.

        Virtually all of the policies that are now being complained about stem from Liberal Democrats. The days of Edmund (Ed) Brown (Sr.) are long, long, long dead.

        Prop 13 was universally popular because it held the purse strings tighter against Sacramento.

        And because, it resolved the disparities in school funding between the wealthy Anglos in the ‘burbs and the Latinos in the sticks and the Blacks in the big city. This latter aspect is completely overlooked by the ‘modern kids.’

        It was mandated by the Courts.

        Capping the property tax rates stopped inner city rates from driving businesses and residents away.

        Detroit is THE case study showing what happens when property taxes are not limited — and the ‘system’ is allowed to spend what it deems proper on education… scratch that… spends on unionized, politicalized, civil servants… ultimately absolved of accountability.

        At the end, it’s a war zone.

        Gray Davis started a ramp in pensions and payroll that the State of California can’t afford. He crafted legislation that proffered Silicon Valley style compensation for the unionized civil servants. At the end of that road, every ‘burb must become Vallejo: bankrupt!

        Anyone who is blaming these evils on the Boomers is lost, lost, lost.

        Liberal Democrat Party politics has driven all of these events.

        You get what you pay for. Consequently, California is getting more indigent immigrants — legal and illegal.

        Taxation drives off that which is taxed. Consequently, California is losing enterprises and talent to the rest of the nation.

        One goes bankrupt slowly, and then, all at once. (cf Greece)

      • Blert,

        Agree with you about Gray Davis really screwing up the pension system. Two things,though:

        1). The biggest beneficiaries have been cops and firefighters. Some civilian government employees benefitted but if you want to find the largest pension increases look no further than public safety, including prison guards. CAs prison industrial complex is insanely expensive. And it was not all liberal Democrats who did this. Do you remember 3 strikes? The war on drugs? Both dubious experiments. These were conservative Republican policies that swelled the prison population and started the ball rolling. Once more prison guards were hired the unions got stronger and then the deals with Democrats started. Please don’t try to let Republicans off scot-free.

        2) And what about conservative Republican businessmen jumping on the Prop. 13 bandwagon and including commercial property (as opposed to strictly residential property to keep seniors from losing their homes) for tax breaks? This has taken billions (and I mean lots of billions) from the State over the years that could have been used to pay for schools and to make sure the pension system had a brighter future. Don’t blame it all on liberals.

    • Why not rent a house and see how things go? You get the formal dining room and backyard, all the while hanging on to your savings.

      • We are thinking about it, actually. Need to crunch the numbers and account for the intangibles (e.g. annoyance of having a landlord, rental housing tends to be crummier). There’s still a macro problem of being high income people in our age demographic and relegated to renting.

    • it's not me, it's you

      Oh pleeeze. Your father & mother (those miserable boomers) gave you life, you whiny, misguided, entitled child! But somehow the hypocrisy of blaming your parents’ and “me” generation for ruining your generation’s chances of having the lives your parents had – which they got by voting for their own interests which is what everyone does, isn’t it??? — completely escapes your overpaid and under-wise pea brain. Let me spell it out for you: try voting instead of spending all your time twittering and F-booking and Pinteresting and playing Candy Crush and use the internet instead to mobilize the vote for your own interests. The last time I checked, the handful of people in your generation who bothered to vote voted for Obama, and those who stayed home complaining on Tweeter & F-book instead of voting have no grounds to complain.

      Truth is, the hugely successful of your generation (e.g., Zuckerman et al) don’t have your generation’s interests in mind any more than the generations you excoriate but instead act only in their own self-interests. You spew your hypocritical hatred and venom at entire generations but guess what? It didn’t work out so well for any generation anyway as the vast majority of ALL generations is in the 99% that have been screwed royally by TPTB, TBTF, Wall Street, ZIRP, QE, etc. etc., etc. If you don’t like the way things are, quit whining and mobilize your vote. Or move where you can afford to live like the entitled whiny self you come off as.

      • Wow, guess I hit a nerve! You know, you might want to try practicing what you preach. Read my post, then read your post. Which one sounds more hateful, eh? You know absolutely nothing about me, and surprise – you got a ton of it wrong. I’m not even a millenial, I’m Gen X; and I’m very politically active. Take a few deep breaths and calm down before you hit “submit comment” next time. Others might take you more seriously if you tone it down and cut out the ad hominem attacks. But thanks for being entertaining, I guess.

        I recommend that you watch Inequality for All, Robert Reich’s new film (a boomer, natch!) You can keep making excuses all you want, but the facts don’t lie. Policies enacted in the 70s, 80s and onward have done remarkable things to concentrate wealth and decimate the middle class, who used to be able to live pretty nice lives even when just one parent worked outside the home. You’re on the losing side of this argument, buddy. Of course not *every* boomer agreed with those policies – but apparently, the majority did.

        BTW, let’s talk a little about Mark Zuckerberg. He and his wife were first among large donors to charity last year. That’s some cause for optimism at least.

      • “Oh pleeeze. Your father & mother (those miserable boomers) gave you life, you whiny, misguided, entitled child!”
        Exactly what the parents of the Boomer’s said to their lazy, stoned hippy kids. Except those people actually worked for the improvement of the nation, suffered through depression, war and rationing, built everything from corporations to unions to cities. The Boomer’s imagine none of us X and Y folks care about politics but they are wrong….. and they are scared. A generation of cowards, they pat themselves on the back for doing nothing. “I deserve it!” That will be on your tombstones. Wait, you can’t have tombstones because graveyards aren’t ‘green’. And we can’t cremate you because the air quality board forbids it. Maybe we can have you stuffed and mounted. Which tie dyed shirt do you want to wear for eternity?

        Here is to a future of dodgeball, firecrackers, no helmet laws, drilling for gas everywhere we can and guns for everyone that you didn’t raise to be batshit crazy.
        We deserve it.

      • it's not me, it's you

        CAperson & JustaGuy obviously you are not interested in the facts because you got them wrong. Read Blert’s post for a little history lesson. You act as if TBTF, the voracious military industrial complex, a series of very expensive & unnecessary wars, ZIRP, Wall Street, QE, public pensions, NSA & defense spending, income inequality and all the other political and economic forces at play were all the work of the evil boomers, those dastardly devils. The fact is, NONE of us had any power or control, no say over any of it. It was done to all of us, that is to the 99% of us, by the rampant greed of the 1% and the bought-and-sold folks in Congress & the WH, none of whom represent you or me. But who cares about the truth when it’s so much easier to believe your own fictions. I imagine you should get some smug satisfaction that the generations before and likely those after yours are just as screwed as we all are. So blame away and comfort yourself with uninformed revisionist theories about the big bad boomers who “did it” to you. That will surely make things better. Oh, and what about those 85 richest individuals in the world who own more wealth than over 30% of the world’s population combined. Must be all boomers! The last time I checked, there were more than 85 boomers still kicking, at least until your pal JustAGuy hunts us down. And then YOU take a deep breath and explain to me again how the boomers and “me” generation are the evil geniuses that orchestrated it all. You are barking up the wrong tree with your cockamamie misplaced blame.

      • In a different reply I discussed how the assignment of generations using the 20 year mark is foolish. But I enjoy seeing Boomers self segregating when it makes them look good. Claim Teddy when he was championing your causes, drop him when it’s time for the blame.
        Your generation has, on a national level, held power since 1992; what have they repealed to make the middle class stronger? What have they done to increase freedoms or move gov’t back to the States as our Constitution was designed to do? Did they come up with every bad policy? Maybe not. Have they fully embraced and even expanded them? As the idiot from Alaska says “you betcha!”

        I watched the Robert Riche movie tonight. Lots of charts but not one mention of immigration or trade policies. How convenient. How typical. It was them….. and you…. but never ‘me’. Oh, and he is short and needed to add a bit of boo hoo backstory in there too, about the bullies and his pal getting killed down in Rebel Yell territory and how that made him fight for the little guy, no pun intended (he does have a good sense of humor). He also claimed the Republican’s moved right but naturally doesn’t mention the Democrats moving left and always wanting to expand gov’t at the federal level. I guess presenting facts wasn’t enough for him Just seeing how overcrowded the ‘class’ he was teaching was should infuriate anyone who paid to take it. That wasn’t teaching, that was proselytizing to a captive audience. Or is he not a Boomer and doesn’t count against your team?

        Your generation wasn’t in power for the EPA (Nixon) so no more claiming that according to you. Your generation wasn’t in power for the women’s Rights movement so no more claiming that. Nam? Guess you had nothing to do with that ending.
        So if I have read you right, nothing is to blame on your generations (Boomer/Me). What are their accomplishments? Educate me.

        For the record, I view both parties as scum, the real 1%, who’s alligence is to their party and not to the Constitution. That is why I am for gov’t at the very lowest level possible and in accordance with the Constitutions of the USA and the Sovereign States that it consists of. The lower the level of gov’t the less power political parties can wield and the more contact the average citizen can have with politicians to seek redress. I am a lifelong registered Independent and vote in everything I am allowed to, from school board and budget votes to the cluster we suffer through every 4 years.

      • I’m sorry, were there no boomers of voting age when Prop 13 was passed in 1978? And have boomers had no power since then to enact new laws to deal with its highly negative side effects that took some time to come to the forefront? Or is it that you all are just fine as long as you’re riding the wave of home equity, thinking you’re entitled to pay 1/12 the amount of taxes as the young couple next door, just like son of a landlord?

        Anyway, watch the Robert Reich movie and get back me. Prop 13 is only one in a series of many policies that *began* in the 70s and continued through the 80s that got us to where we are right now.

        I do not “hate” people on the basis of the generation to which they belong. Certainly no more than you do. But you’re really one to talk about finger-pointing and Gen X and Y “whining” and apathy, when you absolutely avoid all responsibility for the negative effects of the policies that were enacted when you were of age to get engaged in politics yourself and make different choices. Truly rich that you blame some faceless “Wall Street” and “the 1%” for all of the world’s woes. One percent of people cannot win an election. So which is it, were you voting your self-interest with a full understanding of the issues, or was your “pea brain” being manipulated? You can’t have it both ways.

      • This is the last I’m going to post on this thread because I think we’ve now beat it to death, but i think it’s funny how “justaguy” and I obviously don’t share very much about our worldview (our posts must have been under moderation at the same time, b/c his wasn’t there when I responded) but still agree at some level about how we got here.

        So, what are we going to do, going forward? How are we going to change things? (Rhetorical questions, I’m not coming back to debate even more…) I want to be optimistic…

      • it's not me, it's you

        CAperson & Justaguy: You are “lost, lost, lost”. CAperson, your obsessive focus on Prop 13 as “proof” of how the boomers destroyed your generation’s chances is so off-base I don’t know if I have enough time or space here to explain it to you.

        Most boomers did not own homes in 1978. I was still in college with my head buried in books. The last thing on my mind was buying a home. When I finally bought my first home over a decade later, I was paying nearly 15% interest on the loan and interest on credit cards was over 20%. Inflation was on hyperdrive during the 1970’s & ’80’s and incomes were not keeping pace. The top income tax bracket was 70%, and everyone’s taxes were higher. This was the world I walked into as a young college grad. I remember thinking I would never in my lifetime be able to buy a house — just like you. Jerry Brown was Governor (aka “Governor Moonbeam”). There were gas crises and water crises.

        Prop 13 helped my parents get by and clearly helped all other homebuyers during those inflationary years when housing and all other prices were increasing exponentially, way out of pace with incomes. But Prop 13 also hurt universities, which faced draconian cuts (or had to raise tuition). For that reason I and large groups of undergrads and grads campaigned at university against Prop 13.

        But Prop 13 is not the source of the problems we face now, it is just one of the many symptoms. If Prop 13 were the problem, repealing it would solve the matter. Obviously, it won’t and you know that.

        You blame your parents’ generation (BBs) for systematically destroying your generation’s chances. You sound just like me in 1978. Unfortunately your generation doesn’t have the numerical base to change the way things are without cross-generational collaboration. So you really may want to rethink your strategy, if you even have one.

        And again, TBTF, the voracious military industrial complex, a series of very expensive & unnecessary wars, ZIRP, Wall Street excess, QE, public pensions, NSA & defense spending, income inequality and all the other political and economic forces currently at play were foisted on all of us without our vote, against our will, absent public approval. But you will probably never let go of your simplistic and childish “the boomers did it” fantasy. So there you have it.

        Now if you’ll excuse me, I have a cabal of evil genius boomers to meet with to map out our next assault on our children and grandchildren’s generations. There, I ended with a fairytale that matches your level of understanding.

      • You didn’t answer the questions. If I concede that the Boomer’s started with those born in 1945 and went to 1964, they are all 50 years old or older.

        What have they accomplished to make America a better place?
        What laws/regulations have they removed to make America a better place?

        You also failed to recognize that Gen X and Gen Y are in the same boat their numbers trump that of the Boomers. You can separate them by date, much like the ‘GI’ and ‘Silent’ generations, but those two groups also had similar life experiences, making the distinction pointless (same as with Boomers/Me Gen…. the Me Gen doesn’t even exist according to these made up definitions).

      • it's not me, it's you

        Justaguy: what did boomers contribute? Let’s see. How about the 56K modem which made the internet accessible to ordinary households via their PCs. Without that initial major shift you wouldn’t be spewing your nonsense on this or any other site. There’s also:
        -Apple Computer & their products (Jobs & Woz – hippie boomers)
        -Microsoft, Q-DOS followed by MS-DOS, windows etc. (Gates – college dropout boomer)
        -Yahoo – David & Jerry both borderline boomer/”me”gen
        -Google – Sergey & Larry are both “me” gen
        -Amazon- ever buy anything from that little site? Bezos is a boomer
        -Ever watch a Spielberg movie?
        -go search iTunes and check out the music boomers/”me” gen made
        -a long, long list of scientific and tech breakthroughs and “toys” which you benefit from every second of every day you miserable, whiny hypocrite
        -Jim Kent (hippie boomer) key player in mapping the human genome completed in Clinton’s admin (hmm, DNA testing any benefit to you or society?)
        -Space exploration expansion & discovery of black holes
        -Sexual harassment laws in workplace: yup we got those recognized as a Title V11 violation. (Before that, CA employers and their male employees had a heyday harassing female employees & co-workers — judging from your comments, you would probably count this as one of the bad things boomers did)
        -equal pay for equal work, breaking glass ceiling
        -universal health care (just wait until you need it…)
        -expansion and enforcement of civil rights and anti-discrimination laws, including outlawing discrimination against gays
        -AIDS research funding & treatment
        -gay marriage
        -anti-hate crime legislation
        -anti-bullying legislation
        -Oh, and what boomer couldn’t recount stories that would get their parents’ investigated by Child services today? Child abuse as we know it today was simply part of normal parenting.
        -wikipedia (yep, both guys borderline boomer/”me” gen which you claim is the same demo)
        -internet education (some for free, from top universities around the world – you could learn a lot by frequenting them instead of blogging nonsense)
        – CEQA enforcement and expansion (environmental quality) – when we were kids growing up in LA there were smog alerts sometimes daily that kept us indoors. We’d wheeze & hack from the thickness of pollutants in the air, similar to what Beijing is experiencing now on a bigger scale. Don’t believe me? Look it up. Which leads us to hybrid and electric cars, alternative energy, reduction of dependence on foreign oil.
        -the first major collaborative reduction of nuclear weapons arsenals since the build up began -end to Cold War

        This doesn’t even begin to scratch the surface, just like you’re probably now scratching your head in wonder. You spend so much time hating boomers (or at least your own parents for not being smarter) that you’ve convinced yourself of your own lies. Grow up. Go online to some of the educational sites that are there for free and learn a thing or two. It might just add a wrinkle or two to that short, smooth noodle between your ears.

      • it's not me, it's you

        no black holes discovery – that was inserted to see if you were paying attention

      • “Oh pleeeze. Your father & mother (those miserable boomers) gave you life, you whiny, misguided, entitled child!”

        HA HA HA HA! WHAT A TYPICAL RESPONSE FROM A PIECE OF SHIT BOOMER! THIS IS EXACTLY THEIR MINDSET. ALL BOOMERS HAVE AN ATTITUDE THAT JUST BECAUSE THEY “GAVE YOU LIFE” THEY SHOULD BE WORSHIPED–WRONG! AND THE SELF-ENTITLED ATTITUDE IS 100% BOOMER. NOT X-ER.

        “which they got by voting for their own interests which is what everyone does, isn’t it???”

        AND ANOTHER ONE: “IT’S WHAT EVERYONE REALLY DOES, ISN’T IT?” WRONG YOU GREEDY SELFISH POS BOOMER — IT’S WHAT BOOMERS DO!

        EVERYTHING YOU’VE SAID IS BOOMER-SPEAK TO THE “T”. “ME ME ME ME!”

        YOU MAKE ME CRINGE.

    • Palos verdes estates

      ***MOVE***
      Here’s why: Because life is SO MUCH BETTER away from California. Yes CA *used* to be a great place to buy a house, raise a family and retire, but not anymore.

      Do not let any of these old timers make you feel guilty for expressing the truth. Because who really will buy your house 20-30 years from now – and at a profit at that?
      NO ONE
      Because no one will be able to afford the price that are being asked for them already. Can you imagine what they will have to be priced to make it even worth your while to fix anything up???
      California (especially LA) is for very young kids in their 20’s who have aspirations of becoming the next Tom Cruise (and good luck with that because the studios are NOT here to stay. Just ask Pittsburgh or Atlanta, etc.), or for a Hispanic or Chinese person this will be a place to call home. Maybe if you are a tech person who has developed the next ‘big thing’ in apps, but good luck with that – the reality is not many people DO get super rich from that. (Don’t let the paid media fool you) But for anyone else? Forget about it.
      The only reason people on this forum try to say that it’s worth it to buy here is because THEY HAVE A HOUSE TO SELL. There is absolutely no other reason to be positive about this state.
      If you were to leave now and go to a state that will actually make it worth your while to work, you will have plenty of time to find the right location, have kids, live your life fully, have family visit and STILL have money left over to save. California? Not so much.
      As far a “the perfect weather.” *cough cough – bullshit – cough cough*
      When I read through these posts it seems like NO ONE has EVER lived anywhere else.
      I recently moved from Nashville (moving back soon – never sold my 1.5 million house that would EASILY fetch 5-6 MILLION here) and I am originally from NYC.
      Anyone who tells you that Texas sucks, or the South is full of racists are racists themselves. The truth is – unless you move to Alabama, Mississippi, or Louisiana, chances are you won’t run into rednecks. The South is now made up of people from all over the United States and guess where MANY of them are from??? CALIFORNIA. Why? Because they didn’t want to be the ones holding the bag.
      Who the hell wants to pay a million or more 2100 square foot house on a 5000 sq ft lot with zero lot lines that needs to be completely gutted??? In a neighborhood where there are 4-5 families living in the same house or don’t speak English and have absolutely NO INTENTION of EVER assimilating. Who wants to live in the largest Chinese enclave in the United States (IRVINE) so the entire population there can ignore you and shun you? Who wants to live next to janitors after going getting a masters degree?
      THAT is the reality that is California now.
      No thank you – I’d like to live where I’m not grossed out driving around because the state is so dirty and violent.
      At your age you will be able to build a wonderful life and you will never regret it.
      Good luck to you. His family will still love you guys – but you will hate your life if you stay. California does NOT pay more than other states. Maybe 20 years ago they did – but definitely not anymore.
      Get out while you can.

  • In my area (nicer outer Sacramento surburbia) housing prices have gone up over 20% in just 18 months. What is driving this I ask? Incomes are still the same.

    What I see in my area is: hardly any investor activity. Most houses are bought by people that live in it.

    Literally every new person/family who moves into my neighborhood is FROM THE BAY AREA. And they will pay anything. They don’t question inflated prices because its still a fraction of what they left in the Bay Area.

  • Lord Blankfein

    I don’t want to be the bad guy here, but it looks like 20% down puts you right around rental parity for the featured property. Here are the monthly numbers for the 20% down case (689,000 purchase with loan of 551,200 @ 4.75%):

    Principal: 693
    Interest: 2182
    Property Taxes: 689 (assumes 1.2% tax rate)
    Insurance: 100
    Maintenance: 200
    Total: 3864

    When factoring in the near $700 principal payment and the tax savings of several hundred dollars per month (totally situation specific). Paying $2820 for rent is likely a wash; thus, we are right at rental parity. As usual, this does not factor investing the hypothetical down payment in Apple stock or gold. And maybe this place will only be worth 500K next year if Jim Taylor is correct. This is the math people need to look at. I would personally never pay 700K for a 1000 sq ft. box in Culver City, but I guess there are some people who can and will.

    • @Lord Blankfein, I agree with you on Culver City. CC is adjacent to a ghetto (Crenshaw), it’s walking distance to Inglewood and it shares a border with the Los Angeles Del Rey neighborhood (almost like being in Tijuana/Mexicali with lots of Cholos).

      If it weren’t for the massive police presence, Culver City could turn ghetto very quickly. Then again the massive CC police presence is why Culver City has been running in the red ink. About 70% of the Culver City budget goes to public safety. When these police (average income $120K+) and fire firefighters (average income $100K+) start to retire, the pensions are going to kill Culver City.

      • son of a landlord

        >> CC is adjacent to a ghetto <<

        A realtor told me last year that Culver City is "on the way up!" That just as Venice "is rapidly gentrifying" into another Santa Monica, so too will Culver City. Culver City is a good buy at this time, because its home prices will very quickly go UP, UP, UP!

        So I drove through Culver City at night, around 3 a.m.

        I dunno. I know it's a "desirable" area with a "revitalized downtown" — lots of "hip art galleries" and "trendy bistros" — but I don't feel comfortable risking $800 to $1 Million in CC RE, which is what most decent (one-storey, World War 2 era) houses seem to go for.

      • Culver is actually rapidly becoming nicer, though some parts are still definitely better than others. It is a weird mix though. I believe the reason you’re seeing the spike in prices is that it’s one of the few places actually in the city/within a reasonable commute of many jobs with a good school district. That’s worth a LOT to people my age with kids. Probably $150K per kid, on average, and depending on whether you’re comparing it to a place with at least a passable elementary school (e.g. some areas of Mar Vista).

  • I’m 38 and live in an expensive city in the Pacific NW. I currently rent a one bedroom for cheap in a very nice neighborhood. If I wanted to buy a 2bd condo it would cost in excess of $500k at the very least. There are some deals around but I enjoy not being locked down and rents are rapidly falling. All in all I’d rather have money in my retirement account (federal thrift savings plan – it’s a heck of deal with annual fees of .027%) where I stash about 15% of my pay.

    The thing about rents is they have an artificial limit on how high rent can go because you can either afford it or not. Unlike a mortgage where the bank takes the risk. If I didn’t have student loans I might take the leap but that $700/mo makes it difficult to save up without neglecting the retirement account.

  • 35, wife 33, first baby on the way. We are the ones who are looking at Arcadia and keep getting out bid by 20%+ sometimes!!! Have 20% down easily, up to 30% down if needed so that’s not the issue. Make very good income and I still can’t find a house to buy because of presumably cash buyers paying outrageous over the top prices for a 1960s home.

    • I’d set your sights on another city, or look at renting in Arcadia. I don’t think it’s going to be easy to buy there for quite some time.

      • Yeah I know. Grew up in SGV. Back home after training and as working professional.
        Feel pressured to get a house soon also because baby is on the way.
        That plus we have the cash saved up.
        But it just doesn’t seem worth it in Arcadia.

    • I’m in the same boat you are in Ultbruin. I’m 35 wife is 30 with a kid on the way. We both work in tech and have a sizable HH income and savings. I feel pushed into buying a house because my wife wants a house for the baby. I want my kid(s) to grow up in a house too but I feel really uncomfortable with the current market.

      Jim Taylor I’m counting on your prognostication to come true.

  • DownSanDiegoWay

    I bought a place back in 1997 I still own it, and now I rent it out.

    As for myself, I rent! I live in a beautiful SFR on a canyon, my landlord pays my water and I have never had a rent increase.

    As a life long San Diegan, I can tell you prices are seriously out of whack. They will correct, eventually. Patience.

    I will look at buying once mortgage interest rates hit 7-8% again.

  • I’m 32, SF Bay Area native, and wife is 37. I work in Medical Device Industry and wife is in retail, combined income of $160k, we have about $100k saved up with little debt. I will absolutely not buy in this market. $600k for 3/2 60’s ranchers in Fremont, no way! These are realistically worth $350k at best.
    +++
    Bay Area has really deteriorated over the past 30 years. Huge immigration of Asian, Indian, Middle Eastern people that don’t assimilate to the American cultures. Poor Mexican-American groups scattered all over the bay. Poor young Gen X & Yers living at home with their golden handcuffed parents. Tech workers living 3-5 to a house with good incomes, but can’t even afford a condo. People don’t know their neighbors, just a bunch of strangers living together trying to make $$$$$ in this tech & social media goldrush.

    SF Bay Area is overrated!
    +++
    Where would I buy to live for an extended period of time? San Diego County or Colorado. Saving up, building my skills and experience to make the move. As others have pointed out though, having mobility in this job market is a huge plus, which makes renting even if you could buy a good decision.

    • I agree Joe, I’m with you too. We can afford this housing mania, but decided that it is way over priced. I’ll be waiting on the sidelines until the price correction. Just because you can afford it, don’t mean you should.

      I’m 31, fiance is 29. Both in the medical field 200K+ per year. Our tax bracket is up there, and we would benefit a great deal buying a house. My gut tells me to keep waiting.

    • Down But Not Out

      Hi Joe, Thanks for your personal stories. It gives me a glimpse of how crazy it’s up North.

      Both me and Wife make over 250k with 20% down for $600k house, but we refuse to drink this Kool Aid. The houses I see from my agents listing isn’t worth around the asking price. Some house have listing “Sold As Is”. Not only would they require fix to pass the city inspection, but they also require fixes to be comfortable.

      I see alot of young people at lower position than me at my job working late on Friday. And I left to think to myself, we have a lost generation that should be celebrating the weekend and meeting people. Yet they are here slaving away trying to pay the bill. This explain why people are pushing back marriage at a later date and having kids. For my friends that do have a good professional jobs, they have to work hard to pay back student loans. They then have to delay having kids because they just graduated, marry and need to travel before tackling on more responsibility. My generation is so F*ck!

      If us professional can’t afford to buy in this economy, I can’t imagine the despair they feel.

    • @joe – regarding the Bay Area – I’m a bit older (46) but get where you’re coming from. As someone whose lives on the peninsula I dis-agree life is so terrible in the SF Bay Area. From my perspective working with people (friends really) from India, China, Eastern Europe, South America and Cuba(!) has been rewarding. The world has come to the Bay Area – and as a result it’s way more competitive in every sense compared to when I grew up here in the 70’s and 80’s.

      After 4 yrs of renting we recently bought a 60’s rancher for over a million (there are no houses here for 700k). We had to put down roughly 800k. Yes – the place was a mess and we’ve had to spend time and money on fixes like replacing old, clogged, iron pipe – and I laugh at myself sometimes for paying so much money for a place my grandfather would have been able to buy for 25k or my father for 75k. But… we live near friends and know all our neighbors. My kids can walk to school (elementary, middle and HS). We are close to sports fields and downtown. My kids are happy. This is a place we’ll stay in for the next 20yrs. In my limited experience – life can be good here too.

  • Baby Boomer Screwed As Well

    OK, I’m a 57 yo female BB. I think the re-inflated bubble is God awful. We downsized into a one-story, remodeled, no debt. The shack we bought (and made livable) should have cost $275K, tops, The first thing we did is replace the roof, fix the EQ damage to the chimney, and then we gutted the inside, fixed plumbing, electrical, flooring, cabinets….the place was a dump. We had a long journey into this now “cottage”. 6+ yrs of renting w/ no options available. Every freeloader was living free in Ventura County, and even the auctions were fetching ridiculous prices. Cash meant nothing.

    I have empathy for those following us. This whole thing has sucked. Glaucoma changed our lives. We weren’t greedy, were frugal with our housing proceeds, and we got screwed royal as well.

    The economy is structurally broken. Bubbles are making it worse.

    • It’s broken for the the bottom 99%.

      For the top 1%–and in the areas in SoCal where I have been looking to buy a home, it seems that it is the top 1% . . . and those connected to them through employment/blood/marriage, who are the ones buying these properties and driving up prices–everything is working JUST FINE.

      (My hunch is that most people in the top 1% AREN’T the ones reading or commenting on this blog. Why would they feel any need to?)

      It’s been a decades-long war on the middle class in this country. You think things are bad here in California? Go the “heartland” towns and cities and see what those people have to put up with in terms of no economic opportunities because their jobs over the years have been moved to China (thereby creating that class of Chinese wealthy people that is now coming back to buy SoCal real estate and drive the prices up.) See what has happened to the small towns of America that are dying, or to the once-thriving and prosperous cities like Gary, Indiana or Detroit, Michigan that now resemble literal war zones.

      It’s interesting, however, when the sons and daughters of many of the people that supported and cheered for the politicians that, over the past 25 years, helped to bring about this mess (e.g., Reagan, Bush I, Clinton, Bush II, and Obama) are just now beginning to notice how much they have been screwed over in terms of the play-by-the-rules-and-I’ll-get-the-American-Dream beliefs they were been raised with.

      • PS–fuller disclosure: I have at least $120K to put down on a purchase, and I make well over six figures. Plus I have a stellar credit rating, and own RE in other parts of the country that is currently rented by tenants.

        My lender has told me I could easily qualify to buy a place worth $500K. (Which would only get me a nice condo in a desirable area.) But even I, looking at what is now happening with this SoCal real estate market, am sitting back, scratching my head with befuddlement and trepidation. Needless to say, I am cautious about, and have misgiving about buying now. Does it mean I won’t? I don’t know.

        The question is: Is it different this time? I understand that many of the same mantras uttered by the cheerleaders for the last bubble are identical to those now being uttered by the present RE cheerleaders. However, given the realities of who is out there buying properties right now, perhaps such buyers are so wealthy, and have so much access to wealth, that traditionally fundamental factors such as income, affordability indexes, etc., are not things that apply to them or that they need to be worried about.

      • Baby Boomer Screwed As Well

        Wondering
        Thanks. Oh yeah, it’s been a decade of this bubblicious, job lacking, housing/ finance joke fake economy, and we’re sick of it as well. There is no reason our home should appreciate $120K in 16 months. The last comparable listing fetched a ridiculous price above what we paid, and it was in mediocre condition. That’s insane. Some buyers should have their head examined. Hey, if you’re throwing $ away, we’ll take it.

        We need stable property taxes. Dual income days are gone, although sight saving surgery was success, hooray!

        I am job hunting in DTLA, which is two train rides from our home. This economy is hollow. Proof is the 97 building projects in DTLA, mostly So Korean and Chinese $. The residential lofts being sold are great if you’re an urbanite, but most of us prefer SFHs. The Adaptive Use Ordinance is going gangbusters. Some of the older building do deserve preservation, but loft prices are pricy.

        All you guys behind us got a horrible housing situation, and I have a sad heart for you. Irresponsible and greed driven decisions by the PTB got us here. It’s my opinion this is a Depression. Being an unemployed BB, our paid off cottage keeps us off the street.

      • Hey Boomer,

        Also as a homeowner, I share your concern for everyone who’s simply looking for a decent place to live without getting ripped off. Be careful though for calling out the bullshit as you see it, you might be labeled an “angry renter” by housing cheerleaders.

      • Sometimes i wish i was a “sheeple”. Having started research into Monetary policy a couple of years back has really changed my thinking. Sometimes i wish i was just ignorant, like most of the crowd. For those who are interested in learning about how money is created and how it benefits the 1% and bankers watch the video series by Mike Maloney at hiddensecretsofmoney.com . Be careful though, your not going to like it. Sometimes it is better to be ignorant and happy than being knowledgeable and pessimistic.

  • Great read Doc.
    My Wife and I are early 30’s professional in San Jose. Our household income is above the norm at 175k but we live below our means. Right now we rent a 1000sq condo for $1900 a month. To purchase the same unit with a 10% down payment our monthly nut would be $3100/month before maintenance cost. We would love buy but will not sacrifice our future to do so. We are going to give this wacky California market 4 more years to correct itself or we are considering taking the giant wade of cash we have saved by renting and buy a house cash in another state.

  • has anybody ever considered buying a nice size sfr (1200-1600 SF 3 or 4 bed) in rialto, colton, riverside, san Bernardino, etc for $150-$250K? rents pretty much cover your monthly nut especially with 20% down. you can buy 2 or 3 houses in the IE for the same price as this Culver city mini. buy the IE houses, rent them out, break even on rents, keep saving $ at your jobs, let the IE houses appreciate over 5 years while the renter pays off your mortgage, after 5 years (if you get 10% appreciation per year, which isn’t crazy, hemet was up almost 40% in the past 12 months) sell all the homes you could have almost $70-$90K+ profit on each house, combined with your continued savings of another $100K now you have close to $400,000 cash to put a nice size downpayment in a nicer area, it takes longer but at least you can sleep a little better at night knowing you aren’t 1 missed payment from being foreclosed on. I don’t think the higher end areas will go up at the same % as the cheaper areas, so you wont be totally priced out after 5 years, but yes prices in nicer areas will be higher Im sure. Just my 2 cents, I don’t really know if this is that great an idea, just seems more doable than saving $120,000+ for downpayment then carrying that $4-5,000 monthly nut. I agree with you, a nut that big can crush even the strongest squirrel…

    • If only it were so easy… There’s a reason many of the 909ers live in the 909. If you think you’re getting a solid revenue stream renting to the inland crowd you’re mistaken. Especially doing it on margin with a mortgage as opposed to owning outright.

      • Not to mention the fact that if one wants to be anywhere near the majority of the economic/job opportunities in the greater L.A. area and/or anything resembling culture, one will have to spend a substantial amount of time and money commuting to and fro.

      • Yep. I work downtown, long hours. Husband’s elderly parents in the westside and in South Bay. Buying that far to the east is not realistic.

    • This renting houses in blue collar areas for short term 5 years… is not a good idea for the person that is not an investor. So many things could go wrong.

      Just wait until one of your tennants can’t pay the rent… by the time you get a court date you’ve lost 6 months in rental income. Only to hear the judge say, he’ll grant another 3 months stay to them, cause they have nowhere to go !!!

      you my friend have no pull and connection like the big rental complexes and wall st to muscle out the people from rental..

      Notice how big investor firms can kick you on the street quick with their lawyers…. but
      A responsible citizen who happens to have a 2nd home as rental has to go to court and eat it up as the courts extend the tenants time to stay longer with out pay, because they can’t pay you and they have nowhere to go…;)

      it sucks… true story

  • 992 Wheaton Dr, Corona, CA 92880 for sale today in nice part of corona, asking price $379K, mortgage will be $1500/month market rent is $2000, it’s bank owned offer $370,000, put down $75000 and rent the sucker out, renter pays for your mortgage, wait a few years and sell it, take the profit and buy another or keep it as a rental

  • Just look at the demographics of our Government. Boomers looking out for Boomers.

    • son of a landlord

      Really? “Boomers looking out for boomers.”? By that logic, every Boomer should be fantastically well off, but it ain’t so.

      And there are Xer’s and Millennials who are doing just fine, believe it or not.

      • Yes, really. Not all boomers are financially well off. I’m not implying that. I’m focusing on policy that favors their demographic. For instance, why is infrastructure spending lagging in this Country? Because the majority demographic of the country won’t be able to use it.

    • son of a landlord

      >> For instance, why is infrastructure spending lagging in this Country? Because the majority demographic of the country won’t be able to use it. <<

      No, infrastructure spending is lagging because local and state taxes are diverted to public service employees' salaries, pensions, and health plans, and to entitlements (in California we even pay families to take care of their own family members — and don't even investigate to see if these "caregivers" actually are needed or do the work).

      Federal spending is likewise spent on employee salaries and benefits, entitlements, and the military (most of that going to salaries and benefits).

      The gas tax, which is supposed to go to roads, is diverted to the general revenue.

      Boomers want great roads just as much as younger folk. I still got 30+ years of driving left, if I live to drive as long as my father had.

      But public employees and entitlements drain much tax revenue, leaving little for infrastructure.

      • Which brings us back to my original post. Boomers dominate the demographic of elected officials in this country and base their decisions accordingly. Boomers looking out for Boomers…

      • Which brings us back to my original post. Boomers dominate the demographic of elected officials in this country and base their decisions accordingly.

  • My Daughter and her husband are both Ys, early 30s with a 2600 sq ft house in suburban North Orange Co and a $380K mortgage. Zillow has their house pegged at over $600K, even though most of the houses on the block (all very similar) are over $700K. I think it’s because they bought it a year ago for that price, and subsequent sales on the block were higher. Zillow prices are a form of “funny money” to me. Don’t place too much trust in them. But even if the price tanks to the lows of 2010, they are still above water, and they got out of the townhouse with high Mello Roos. Both have good jobs with government agencies that they are fairly secure in, and make good money from. Actually, my Daughter has been on leave for two school years to care for her baby, and will be going back to work in the Fall. They are paying their mortgage with his salary.

    Local government workers who aren’t in upper management and have enough tenure to be reasonably secure from layoffs are probably the least likely to need to move people in Socal. That’s how they are situated. Working their way up the ladder, but not high enough to be in the running for top jobs in other cities.

    They have other friends their age who own houses and condos. Some with parental involvement and some without. We helped them some, but we do not hold any interest in their home at this time.

    Of course I’m a boomer, but I figured I’d add a Gen Y to the list that you’re compiling. There are Ys all over the economic spectrum, and just discussing one segment (the “living with Mom & Dad” sector) doesn’t give a complete picture of the generation.

  • 31 here, wife is 30. We bought a 2 bdrm condo through a shortsale in a very central but slightly sketchy silicon valley neighborhood in late 2011. Paid under 250…would go for over 500 in today’s madness (no way I would ever pay that much).

    When we bought the condo I was in grad school so we weren’t making very much. Now our incomes have risen and we’d like to move up, but the houses that were 850 in 2011 are 1.4M. We could do it, but it would mean mortgaging ourselves to the hilt. Just doesn’t seem like a smart financial decision…meanwhile sales volume is plummeting. This momentum buying will eventually end badly.

  • Since you asked for stories, I’ll volunteer mine: 33 with a wife and kid, living in a very nice area near Pasadena. We’re currently renting a nicely-sized house for a very reasonable $2500/month (we got lucky; it’s about $1000 under market) and have a net worth of just under $300k and annual HHI of about $140k. We’d consider buying, but a house here that’s equivalent to our rental would be $800k or more, so given our situation, it’s a no-brainer. (And not to go too far off on a tangent, but given the water and climate situations we’re all looking at right now, I’m just not sure SoCal will even be livable in 15 years — is that risk worth hundreds of thousands of dollars?) I’m also well aware of the fact that I’m in a far better situation than many (most?) people — to say nothing of my peers — so if I can’t do it, how in the world will they?

    • As for climate change: Has anyone else noticed how humid it gets in CA now? We used to have completely dry desert heat. There is humidity now, esp near the coasts but also inland. This sucks.

      • Climate change is making it more humid near the coast? Oh please, I grew up in Huntington Beach and it’s always been humid near the beach! All that water in the Pacific Ocean might have something to do with the humidity?

  • 37, tried to buy a short-sale in 2011 (was under contract but of course, fine print favors the drafter), despite offering more than asking and waiting a little over a year, the bank re-opened the bidding and I lost out. Due to a temporary relocation the last couple of years, I was able to live with family and I saved plenty, I can comfortably swing a down payment of $200k (I’m also lucky to have a very nice salary). What makes it a hard pill to swallow is the thought that “I was progressing” by saving aggressively the last few years and yet it seems that I’ve been running on a treadmill and have barely kept pace with the increase in the market! I’m rethinking my whole plan about buying in the Bay Area, its just not worth it when there are so many other awesome options out there (thinking to go further North in California or maybe even Oregon/Washington). I’m single and very mobile, now that I’m back on my own/renting, I don’t like to rent but I despise the entire banking industry and I don’t want to become dependent on those leeches just to say I have a home in such-and-such a place (while I’ll likely have mortgage no matter where I choose to buy – I want it to be one that I can pay off as soon as possible and not be forever indebted to those a-holes.

    I never expected housing to rebound as strongly as it has and I see the panic it has created for first time buyers (I even feel the emotional struggle within myself). The one thing that no matter what the cause is (there are great arguments on both sides as to why housing will fall as well those saying why housing will continue to increase even if at a slower clip), I’m beginning to believe that the housing bulls are going to win (at least for a very long while until the house of cards financial system we have truly collapses – which I think it will SOMEDAY just not likely in my generation). The reason I say this is that the structural forces that have created the previous housing boom/bubbles are still very much intact and I don’t see these policies going away anytime soon. The world is run by bankers and increased housing/mortgages will always be important to them.

    While I firmly agree with most that what we’re living is nonsensical, it nevertheless, “is what it is” and therefore what will cause it to change when the structural forces driving it (bankers greed) remains? and yes, I put this squarely on the bankers for they are the dealers serving up the fix for the addicts. In fact, despite having zero debt, I used to buy everything on my credit card to get points/awards, etc – I’m now switching to cash as much as I can, I hate the thought of giving these crooks a cut every time I swipe my card.

    Sorry for the long post, just my 2 cents on some of the conflicts I have with our current state-of-affairs. To each his own I say (I just hope that the rest of “the crowd” doesn’t eventually cause me to become a junkie myself in, afterall they say that if you can’t beat ‘em, join ‘em; i’m still hopefully we can beat ‘em)

  • Forgot about the kids – hardly! We took loans to help with the college, weddings, etc. and down payments on homes we will never be repaid for. Investors have bought and buy the homes they should have had instead. So we have the cash in our home, we did not keep up income wise and have not been able to have the granite counters you speak of. We have done without many things the new generation wants for free and am proud to have sacrificed while trying to help our kids have a better life than we have.

  • Me 45 / Wife 43…we left Orange County in 2007 and moved to a small town in WA an hour north of Seattle. Combined income of $170k…which is about $90k less than we made when we lived in CA. We bought a nice 2400 sq ft house here for $300k. We live in a great neighborhood with great schools for our two teenage daughters. We have $500k in the bank, I drive a new Ford truck, wife has a Lexus SUV…both bought with cash. We take 2 or 3 really nice vacations each year with the kids….Hawaii, Disney World…even venture back to visit you crazies in CA occasionally…I go on a couple great hunting and fishing trips every year. Life is fantastic since we left CA….even though our gross income is lower…..taxes are lower, bank account/brokerage account is bigger, no more hours in traffic jams. Best decision we ever made was to leave. I am sorry, but people that stay in CA are fools IMHO. Good weather is overrated.

  • I’m 42, single with no babies (no thanks). I’ve been renting out a room in a home in Downey, waiting for this madness to end. I save my money in the meantime.

    Something very curious has happened in my neighborhood; I’ve seen “For Rent” signs like I’ve never seen before. I counted 4 consecutive signs on my way home from work yesterday. The adjacent apartment building had a sign for over a month. Typically, the “For Rent” banner comes down within days.

  • Nothing has done more to diminish the quality of life for the middle class through higher housing (land) costs, competition for jobs, greater poverty, mortgage fraud, medicare fraud, crime, cost of public schools, cost of college, depletion of resources, burden on the taxpayer and overall congestion than the increase of and change in population since 1965, driven almost entirely by immigration.

    Because we are overpopulated, millions of young people graduating this year will never be able to buy a home in the town where they were born. What sort of person wishes for that?

    The high price of housing is a major factor in poorer quality of life for the middle class and the poor. Population density is the main driver of the price of land, and thus the price (and quality) of housing. High immigration is the main driver of population density.

    See, for example, a report by the Americas Society/Council of the Americas and the Partnership for a New American Economy (Jacob L. Vigdor) in which he claims that more than 40 million immigrants currently in the united states have increased housing prices nationwide by $3.7 trillion.

    Or, get the population and housing price data for 1900 to 2010 from the Bureau of the Census and do your own analysis. Don’t forget that change in price lags change in population.

    • You can thank Teddy ‘the murderer’ Kennedy for that. He, like his ‘ideology instead of common sense’ driven Boomer generation, pushed for and changed the immigration laws which flooded the nation starting in the early 70’s. Our population skyrocketed as these same dolts came up with idiotic trade ideas that shipped jobs first to the lower paying South and then not 10 years later shipped them all offshore. All while coming up with regulation upon regulation meant to destroy America’s ability to use it’s own naturally resources so we can save a frog or titmouse. They will, like the guy above claiming he never took a dime from a younger person, pass the buck. “But look how clean our planet is”. Awesome. You kids can starve on a clean planet….. because you also banned them from using water to grow a garden if they want. But those golf courses you Boomers adore are as green as your money.
      Watch Falling Down again with Michael Douglas. I guarantee he would distance himself from that movie today, because he is a sanctimonious prick, but DeFens as his character is known as nails it and it has just gotten worse since the mid-90’s when that came out.
      For every person who thinks we should just accept illegals I say this (using Mexico as an example only as we have illegals from everywhere on Earth): 90% of Mexicans live IN Mexico. There is no wholesale population transfer like there was after WW1 or WW2. Things are good enough for 90% of the citizens of that country to stay there? Then send every last one home. If you were brought here illegally at 5 years old and are now 18, when you get off the bus in Chihuahua let a fire….. a hatred…. grow inside of you towards America and once you learn your new native language spend your life working to make your own nation better to stick it to us Gringo’s. Millions upon millions of people picked up and moved after the World War’s. They survived. We didn’t invite you, your relatives broke my laws by bringing you here, beat it. I not only would expect the same feeling if I snuck into Mexico (again, an example) but guess what? THAT is what happens if you do sneak into Mexico. They have immigration laws and policies much harsher than we do.
      And for anyone who tries the ‘we were here first’ crap; we fought a war, won it and have a treaty to prove it. Don’t like it, fire up the Mexican Army and roll over the border to try and take it back. As I saw recently on a PBS special about Arizona’s law (SB170 I think), a man walked up to a massive rally of illegals and their supporters and said “you might get a little more sympathy if you were waving American flags instead of Mexican ones”. Assimilate or die. It’s a melting pot, not an ice cube tray.

  • There is an awful lot of xenophobia stereotyping finger pointing and scapegoating going on lately i notice. When we label and blame and assign motives and hate “them” whomever “them” is, well then our dignity as human beings begins to erode and we become as bad as the ones we hate and blame and scapegoat.

    Chinese immigrants risked their lives to build the Pan Pacific Railroad which was made westward migration possible. Hundreds of thousands of Chinese died from accidents and dangerous conditions (e.g., dangling on ropes as they blasted through solid rock with TNT to make tunnels). As the railroads neared completion the anti-Coolie laws went into effect, codifying discrimination. We are all immigrants anyway. If it’s not the Chinese, it’s the Mexicans (who owned California and got screwed when their F’ed-up leader sold it for a dime to the US). Or wasn’t it before that the Jews or the Irish or the (insert whatever group you want to blame or hate). Meanwhile we have the proud distinction of being the only government that has used a nuclear bomb not once but twice.

    Full disclosure: I am a BB but do not fit any of the stereotypes I read about, but boy I must be some son-of-a-bitch because I was born in a stretch of time that makes me one of the bad guys who ruined the world for all future generations worldwide combined.

    Does it matter that I look at others in my generation and our leaders and I think “who are these people”. They do not represent me or anyone I choose to spend time with. If I didn’t have an elderly mom to take care of, I would have left CA and traveled the world with money I started saving when I began my work career — at age 12, doing odd jobs for neighbors. No kids of my own, no big house, no spouse to hold me here. I figure I can live in another state or another country and enjoy the rest of my life with my savings or maybe get a job doing anything. The only pride I have is knowing I’ve never taken a dime of welfare, never used a food stamp, never missed a rent payment and always had a decent place to live and a nice Chinese dinner to eat.

    It does no good to hate or scapegoat or blame one race or generation or another for the mess we’re in now. We are all here so we all must had some part, be it active or passive, in getting here.

    • Thanks DRed. I’m with you. I don’t think making people villains gets us anywhere. This bad housing situation crept up on everybody and mostly to blame I think are special interests paying for laws that benefit themselves and their businesses while the rest of us were just trying to make a living and pay attention to our own lives. Don’t like the monied people coming in from out of the country buying up with cash, but have to admit Americans have done, are doing the same around the world. We need to strengthen laws nationally to prevent this, but government has been bought and certainly President isn’t going to spearhead a fix. I’m a Dem, but Clinton and Obama have their hands all over this as well as Bushes.

    • there certainly are the micro isms that are California and New York City, but there sure is a whole lot of other America and they don’t like no Chi-nee.

      • Too bad for those who don’t like the Chinese. Their loss.

        I have worked in the large and historic Chinese community here in Chicago for 20 years, and I like and respect these people a great deal. They are smart, frugal, kindly people who have a great deal of social cohesion, an unstoppable work ethic, who have rescued quite a number of formerly blighted Chicago neighborhoods and turned them into vibrant, interesting, and desirable areas that are attractive destinations not only for tourists, but for people who would have fled to the suburbs otherwise.

        And, while some of the extremely rich might (but most likely are not) bringing “dirty” money, most of Chinese and other Asian groups are not. Listen, I know these people, as neighbors, clients, and friends. Why do they pay cash? Because they do everything in cash- these traditional Chinese were raised in an ethic of strict frugality and do not like to borrow money, that simple. I can introduce you to people who started out with tiny restaurants with 3 tables, ran them while living 4 to a room in a cheap boarding house, and shoveled every spare dime into savings, and into taking their businesses to the next level. 20 years later, the guy is opening a huge restaurant or wholesale distributorship, with cash, and buying a suburban house for $800K, also with cash… and makes sure he has plenty to spare. They do not spend their money on gadgets till they have the money to buy them. They spend next to nothing on clothes, for the most part- most of the “designer” bags the women carry are cheap knock-offs.

        And they still have far fewer social problems than almost any other ethnic group. I have met only ONE young Chinese person who had a drug addiction, while every white American family I know has at least one alcoholic or drug addict. Divorce is rare, and so is juvenile delinquency, while out-of-wedlock births are almost unknown among them. The only “vice” that seems common among them is gambling, which I’ll own they have a real issue with.. yet they manage to keep it from ripping their families and communities to shreds.

        Count me very grateful for the Asian community in Chicago.

      • son of a landlord

        Laura, I’ve a white friend who’s worked in New York’s Chinatown, for a Chinese company, for decades. He has many Chinese friends (mostly immigrants), and a longtime Chinese girlfriend (born in China). He knows the Chinese very well.

        He says one big reason the Chinese work in cash is to avoid paying taxes. They keep as much money “off the books” as possible. Some of these Chinese immigrants have tens of thousands of dollars in cash, in strongboxes. They don’t trust banks or the government. His girlfriend keeps much of her savings in a locked cashbox at home.

  • I’m 34, “real” working life started at 31. My wife bought a place in 2003 (before we met) and sold in October 2006 and cashed out $200,000. We sat on that until March 2012 when we bought a nice place in San Juan Cap for $746,000, put $300,000 down. That was the low of the the most recent downturn I think. We got lucky. Anyway, we hated living down there. Did allot of work to the house in a year and sold it for $1.2 mil in Sept 2013. Bought a smaller place in a prime location in October and are much happier. We got a deep “discount” because the old people hadn’t done anything to the place in 30 years, and we could make some money on this place too if we wanted. I’ve been trying to convince my wife to leave the state for years but she doesn’t want to move again and I don’t blame her. I was much happier renting our little apartment but alas I’m not the only one making the decisions and we have a baby. Take care.

  • At least young people from California can move to a pro-growth State with housing affordability guaranteed by genuinely free market competitive systems of development, such as the MUD system. The growth and the affordability are both part of the same paradigm. Strangle growth physically and you will get zero-sum gains in house prices but this is like a cancer on your real productive economy.

    I say the growth States of the USA own the future of western civilisation and there is nowhere else worth moving to or investing in. The rest of the western world, including Europe, the UK, Canada and Australasia are all committing economic hara-kiri and enserfing their young just as Coastal USA is. There is nowhere in the UK for a young person to escape to for affordable housing, employment and a future; nowhere in Australia, nowhere in New Zealand. There are actually still a few relatively affordable cities in Europe, but none of them are growth cities like Houston, Dallas, Austin, Atlanta, Raleigh and Charlotte.

    • son of a landlord

      >> but none of them are growth cities like Houston, Dallas, Austin, Atlanta, Raleigh and Charlotte.<<

      Texas? Some doom-and-gloomers predict severe water shortages for the American southwest in coming decades. Don't know if it's so, but if I escape California, I'd rather risk moving to the Pacific NW. Nice and wet.

  • whatdoyouthink

    I am 38. Married for 11 years. Have a 5 year old, 3 year old, and another one on the way. We have been on all stops of the real estate spectrum. When we got married in 2003, we bought an 850 s.f. condo in Anaheim for $180,000. We sold it (job change) 6 months later for $230,000. Crazy! At that time, we bought a slightly larger condo in Covina for $237,000. In January 2007, I “shrewdly” thought that the market was going to pop. We sold our condo for $349,500. Our plan was to rent, then buy after the bubble popped. Well, our monthly rent would have been higher than our mortgage on our condo. Sadly, we drank the Kool-Aid. We ended up buying a 3/2 in San Dimas for $489,000 in April 2007 instead of renting. You all know where this is going. There were complications with the 1st pregnancy, so my wife wasn’t able to work full-time, during or after our 1st child was born. We ended up trying to short sell our place in 2010, but the bank wouldn’t bite on offers in the $310,000 – $320,000 range, all cash. No, they foreclosed instead (and got $269,000 at the foreclosure sale…who said that bankers are always smart?).

    We’ve been renting for 3 years now. We currently rent a house with a big yard in Glendora for $1850 per month. We would like to buy again, but we do not want to increase our housing costs from $1850 to $3000 a month. And, for a move up to a $2400 or so monthly mortgage, we would have to live in a relatively unsafe area, locally.

    I currently make $110,000 in a stable job. And, it’s out near Riverside. Wife doesn’t work. We have kicked the tires on moving out there (i.e., I wouldn’t have the 1 1/2 – 2 hour commutes that the good Dr. talks about many people in the 909 having). But, let’s be real. It’s Riverside. Even if we move into a nice newer home in a good neighborhood, how far would my kids really grow up from a meth lab or a Westside Rivas hangout?

    Any thoughts for our situation?

    • This might interest you:

      “The concept of buying a foreclosure property at auction is mostly a myth. The bank has a reserve number, and if it is not met, they buy it themselves, then put it back on the market. Then they don’t really care about fair market value as their carrying costs are high, and they already got the insurance money. Essentially they end up “double dipping” by collecting the insurance and then getting the property sold. The bank recoups their losses for the most part, while the homeowner takes the hit.”

      http://mayareguru.com/2013/06/20/banks-double-dipping-when-they-pick-foreclosure-over-short-sale-mayas-short-sale-approval-theory/

    • Have you actually driven through neighborhoods in Riverside? There are REALLY gorgeous neighborhoods. I found a house in Poppy Hill that I was ga-ga over, but it was just too far away from work for me. It was an old custom built 1960s on over an acre with a giant redwood tree in the front yard. i loved it!! Lake Hills is very nice. I know a few people who live in that area and love it. “The Orchards”, south of Lake Hills and closer to Lake Matthews is really nice. I have a friend who bought a house there. Cute house, about 2400 square feet with a pool and on a 30,000 lot and the landscape was to die for. He moved on to other things and sold the house. Maybe you have already looked around and to you Riverside is gross, but if you haven’t….I suggest you look around. There are incredible areas that are South of the 91, kind of bordering Corona and Anaheim Hills. I would have no problem at all living there. Yes there are bad areas in Riverside, but there are bad areas in EVERY city. I see way too much snobbery here about “elite” cities.
      Here is a house that is active on the same street that my friends house was on.
      16562 orangewind ln, 92503
      also this one in Poppy Hill
      3035 Tyler St 92503. Needs some decluttering in the yards, but the house has great bones. I’ve been through this neighborhood and it is beautiful. Houses on big pieces of land with mature trees and lush landscape.

      • sniff sniff…smells like shill spirit. Thanks What? for teaching how to ID the scent.

      • Also, I’m not in real estate. I’m an accountant for an aerospace company and I too have been limited on where I can live. I found out when I started really looking around that there are a lot of nice areas to live in that are affordable. Riverside was only one of them but was too far away from work for me. Yes, most of what I found to be affordable was East of the 57 freeway. Some of it in the IE, some of it not in the IE. My point was that YES there are nice communities you could buy in closer to work that you would be happy with, even if its only temporary.

        I’m not sure if the “shill” comment was meant for me, but if so…it was really mean. I was just trying to offer encouragement to someone else who asked for opinions, because I was recently in a similar situation. That’s why I read but almost never post here, because there is too much blatant meanness.

  • Here is a different perspective, one that most Americans would probably have a hard time grasping, because it never happened here:

    Don’t forget the dollar. I say this because currency matters.

    I lived in former Yugoslavia when the currency crashed, and left shortly afterwards. Before the crash, Yugoslavia had a bigger Gross National Product than Spain. Before the crash, the average engineer salary was about 2000 Deutsch marks. Before the crash, middle class bought condos, vacation homes, cars.

    After the crash, those same people ate out of garbage cans. They couldn’t afford to buy new clothes. They lost everything.

    Certainly, USA is not former Yugoslavia. Far be it from me to suggest that.

    But consider that all of the housing waves we’ve witnessed in the past decade come from the ability to speculate with asset inflation without causing the CPI increase. This is called the seniorage. It’s the ability to print money but not get hit hard for it.

    We all currently live in a reality where everything, literally everything, is being propped up by the ability to inject massive amount of money without being hit for it. All of these discussions are just the trunk of the elephant, and nobody is even remotely thinking: where is the rest of the elephant, and what will happen when it gets mad and starts a stampede?

    For the record: the rest of the elephant is called the “confidence”. It is a collective breath being held in the hope that no one will notice we have turned democracy into a Ponzi scheme. People vote themselves politicians who will allow them to use their house as an ATM. And why not? Politicians and financiers get the cream of the crop. Everyone wins.

    Until the elephant gets mad. Which is to say, until this shaky, elusive, ephemeral thing called “confidence without a just cause” dies.

    I must say I am utterly impressed by the ability of the Fed and the US government to levitate our dollar. Because, we have gutted our industry. Most of our GNP comes from providing services to each other, not from making anything, and is propped by printing money. By that reason, the solution for former Yugoslavia should have been for everyone to give a massage to the next person. That’s how silly our economy has become.

    However, if you think that one day, hopefully when we’re all dead, dollar crashes, that house prices will come back down, then you are a fool.

    House prices will go up and up and even more up. Because when the dollar crashes, the economy will have to be rebooted from scratch. For that cycle to complete, it will take another 100 years. Most Americans think that we’re the greatest people on Earth. The truth is that our ancestors were the greatest people on Earth. We’re bunch of wide-eyed, gluttonous and unfortunately, sparsely educated people who are going to lose their shirt one day, and will dream about our glorious past for a long time to come.

    Because of that, a house will become a symbol of wealth. Building of houses will slow down to a crawl because we won’t be able to afford it. Generations of people will live in the same abode. Owning your own house outright will become an object of envy.

    Of course, again, USA is not former Yugoslavia. But consider that the rest of the world isn’t what it was when former Yugoslavia was being chewed up and burning in stupid nationalist wars. China makes everything, Russia controls natural resources, and the West controls paper money. USA has the biggest military stick by far. That’s the only thing keeping the peace at the moment. I hope it does until I die, because I am not eager to see what happens afterward. It won’t be pretty.

    So once the dollar weakens enough, and once America’s military might is challenged beyond the ability of our collective confidence to bear, housing prices will go so high, that even Fed would have never dreamed of inflating them that much.

    My advice is, if you can afford to buy a house now, do it. However, by “if you can afford”, I mean, if your salary can cover it comfortably, and you can afford to keep the house if your salary drops to 1/2 of it is now. Because, otherwise, you’re running a tight game in a volatile economy, and are nothing but a cannon fodder for the financiers.

    Bottom line, when the dollar crashes (or should I say “if”, because I hope I am not around when it happens), if you didn’t own your own house, you never will. Also, chances are that, at that point, your mortgage will become peanuts and you will pay off your house in a few years, instead of a few decades, due to high inflation that will ensue. But, if you bought the house hoping for the best, you will lose it, and will never own your own place again.

    • USD will not crash. USD is the reserve currency, and everything traded is measured by USD. USD is backed by US economy, the largest by far. Take a look around, US is the safest place to park money, and there is a capital flow around the globe. That’s why Chinese and Asian money buys SoCal, Russian and global money buys New York, and South America money buys Miami.

      • Our Reserve Currency status is being challenged by the yuan as China methodically pursues full convertibility of their currency. They’ve been purchasing gold for years and utilizing SDR’s with other countries.

        History teaches us that reserve status is fleeting. Just ask the British.

    • Interesting perspective on buy now or be priced out forever. If everything comes crashing down, I wouldn’t put it past whoever will be in charge to change the rules of the game so that whomever is holding onto certain assets are forced to part with them in ways that are unimaginable today.

    • We have here two seemingly irreconcilable views of the US dollar: The “blowing all your wealth on wasteful spending and winding up like Argentina” viewpoint of Marko, in which buying Real Estate is a wealth savior for Americans, or Pete’s “last best refuge for wealth” theory where real estate in the prime markets for foreign investment is sure to go up big time because they are in need of a good place to stash their “ill-gotten” gains. But both theories seem to lead to “Buy SoCal RE now!!”

      What about the “US as Japan all over again” theory, where an aging demographic and decreased dollar velocity leads to a deflationary environment where the dollar price of physical US assets continues to drift downward despite the best efforts of the Fed to goose the whole mess upward. RE to tank hard for the next 10 years!!

      I honestly don’t know which will happen. The US economy is not on a trajectory to grow all that much, except maybe for the financial services industry which is so loved by all of us that our government will do anything to get them out of their own messes. I can see all paper currencies being debased relative to physical assets, and I can also see de-leveraging based deflation causing assets to tank. Depends on which dysfunctional country from the past you think we’re most like.

      • The dollar will lose its reserve currency status. The question is how long will it take? Oh, we are not some third world country, is what people are thinking. Well, that is true, but our finances are. When we stomped on the constitution and allowed bankers to take over, that started the clock to the demise of our nation. Constitution says the Treasury has the authority to create currency, well congress in 1913 took that away and gave that power to the FED( a private bank). When monopoly money replaced real money this kinda things tend to happen. The FED is scared shiiitless of deflation. So if ever the world starts rejecting the petro dollar, we will be in a deflationary cycle and the FED will go full retard and print Federal Reserve NOtes into hyperdrive and we may have some type of hyper inflation. Hope it doesn’ t happen but seems more likely everyday. PS, btw Putin is threatening to take non dollar payment for all its oil/Gas that it sells to Europe. USD will always be the reserve currency???? THink again.

      • When Fed prints money, those money go to other countries, emerging markets to cause inflation there. Brazil, Vietnam, China, India, South Korea etc. see their inflation rates off the roof. Here in US, no inflation. Capital flows, they always do. US is the largest market for everything, especially financial assets. Chinese Yuan is not going anywhere. It’s not Yuan per se, it’s the political system there. Throughout history, have you seen a Chinese colony around globe?

        Real Estate crisis is really a banking crisis. It’s the banks. Market has its own dynamics. There is no crisis if there is no fire sale. Many comments here are angry, because they missed the low to buy. They just hope the market will tank. It’s hard to adjust their “view of reality” with the reality which is always the price tag.

        US is no Japan. Our way out is to inflate and grow. Either way the price of everything is not down.

  • Doc,

    My wife and I bought our first house in Anaheim in March of 2013. We’re in our late twenties, so I have to say that it is possible, but we’d be nowhere without that dual income. We carry student loans and a mortgage and have extra cash to do some upgrades to the house here and there. We have good jobs which are able to pay for it all, but this is solely because we knew that the degree you graduate with is everything. I’m actually really tired of hearing how everybody’s moving back home with mom and dad. If 75% of graduates didn’t take out a $50,000 loan for a degree in underwater basket weaving, we might be having a different conversation.

    • 100% agree with you. I work with 20 and 30 year old people who all got degrees in science, and are working for more than what you get flipping burgers. Some may live at home (so they can save money and eat Mom’s home cooking) but not all do and some already own their own places. Not a loser among them. Same with most of my Daughter’s friends (although to be fair she does know a few losers).

  • Gen Xer now in my late 30s. I live in SoCal and have no problem being a renter for life. I “own” 4 rental properties and working on my 5th one. None of the rentals in CA…the numbers just wouldnt workout. I choose to deploy my capital into rental properties rather than making the irrational decision of “investing” in my own home to live in. I come out ahead every time I do the math. Instead of purchasing say a $500k home to live in, I instead choose to purchase (5) $100k homes that rent out for $1000/month each. I can then rent and live in that 500k house for 2500 / month…do the math.

  • Captain Credit Crunch

    The Context

    Wife and I are making the rent vs. buy (or put in an offer, at the least) decision point this week due to my mid-April job change. Would LOVE some sanity check feedback. We’re both 36, no kids, no plans for any.

    Ironically, we currently rent in Mar Vista on the West Side but she had been reverse commuting to Ontario every day 110 miles. Short story, I found a job in Riverside that is a promotion, a raise, lower COL, and nearer our families and friends (we grew up there so know what we’re getting into). I think my new job could easily last 10 years or more, as it’s about as high as I can go in my profession, and wife likes her challenging job too. We are so ready to settle down and make a place our own without fear of landlord issues. But, I have been a housing bear since 2003 when I smelled a rat in the MBS market, and really don’t want to be on the hook for other peoples’ largess.

    Our Financial Picture

    We will gross $250k between salaries, modest investment income, and a tiny small-business income (which opens the door to write off some square footage). We diligently saved since our first post-grad school jobs in 2006, and amassed a $100k cash pot in which we both contributed equally. So, wife is completely entitled to her opinion about rent v. buy, as she also shares equally in all expenses. We also made some investments in direct lending (related to my small business) that throw off respectable cash monthly, but we won’t tap those for down payment.

    The Choices

    We’d stand a pretty good chance of getting our offer accepted at 400k, I think; we’re going unrepresented so it will be equivalent to 412k or so. I’ve made a spreadsheet that estimates every cost I can think of, including PITI, CA earthquake insurance, utilities, housekeeping, gardening, pool service the list goes on and on. The two homes are essentially equivalent in amenities and monthly cash outlay (we have another spreadsheet that lets us each independently rate every home we see and, with our individual priority weights, calculates a joint happiness score and value per monthly nut metric). Of course, buying would be less of a hit on net worth, as we’d pay down the mortgage some over time. The house to buy appears to cash flow should we need to rent it at 2k/month at 20% down, including the various insurances, pool service, and landscaping.

    The Conflict

    1) It just seems like we should be getting a lot more for our huge down payment and monthly nut. We’ve got to be in the top 10% of earners. The buy-house doesn’t feel like a top 10% house. It feels maybe in the top quartile.

    2) It would be a real shame to see our down payment evaporate when housing falls and then not be ready to buy. The whole market feels stagnant and everything appears going against housing lately. Dodd-Frank, FHA limits slashed, rates rising, QE tapering, bipartisan proposal to end mortgage interest deduction, lowest purchase apps in 20 years, foreclosures popping….

    3) Renting is a pain in the ass. We never feel like we can get the quality of furniture we want. Moving sucks. Asking a landlord for anything sucks. But it’s safe.

    I’ve honestly thought about buying CME housing future contracts to short my own purchase to protect against downside risks.

    • I have a feeling you’re going to hear for conflict #1 that basically you should buy now or be priced out forever. Get in while you can fit in. Problem is, it sounds like your instincts are warning you as before. Do you trust your instincts?

      For conflict #2, you’ll probably be told that the Fed and other entities have a strategic bind with homeowners, so these things can be safely ignored.

      As for renting vs owning, as someone who has done both, it equally sucks having to ask permission to do things to your house and property from the local municipality or the HOA. I’ve had both shitty landlords and great ones. As an owner I’ve had both shitty neighbors and great ones. You really don’t get to pick your neighbors and as an owner, you’re a bit more at their mercy. That’s one of the reasons I think it’s short sighted as an owner to ignore foreign hot money pouring into the ‘hood. Diversity on the block is a selling point until your next door neighbor has a completely different concept of reasonable and acceptable. What’s worse is being upside down on a mortgage and unable to move with a terrible neighbor. A renter can simply not renew the lease and move on. In many cases the renter screws the LL and just breaks the lease.

      I don’t even know where to begin on the quality of furniture thing and as an owner, I’ve had to move with my furniture. Life happens when you least expect it and renting is usually more flexible in that respect.

      “The house to buy appears to cash flow should we need to rent it at 2k/month at 20% down, including the various insurances, pool service, and landscaping.”

      Been a landlord for over a decade. It’s not a walk in the park and one horrible tenant can cause unimaginable grief. If you really want to include the “we’ll just rent it out” option, do yourself a favor and check the local ordinances and procedures for landlord/tenant where you’re looking. Better to know and compare that stuff up front.

      Based on everything I said, one might think I’m advising against owning. I actually believe owning a home can be great. On the other hand, I don’t think it’s worth it at _any_ price. That’s where I diverge from the housing cheerleaders.

  • I came down to SoCal in 2011 for my career, and after seeing a few of my colleagues buy – I thought it would be good idea to tighten the belt and save up as much as possible for a down payment, as quickly as possible. So – I moved into my colleagues’ backyard guest house (a 1940s garage extension with about 15k in it for livability). Costs, a little over 1k a month, which is basically as cheap as you can do it, given my proximity to work. So, great – I was able to save up 100k in 3 years. Fast forward to today, I’ve got 100+ banked, and a 550k pre-approval. Looking in Glendale/burbank/Pasadena for something decent to buy for 550k has thus far been a freakin joke. Got outbid by all cash on a decent house, and just laughed at the other properties on the market. Last weekend I ventured out to north hills for a ‘good deal’ – 535k asking price on a 3bd 2ba flipper, where the buyer bought for 300k in Nov 2013…. Ya there may have been 100k into it but the neighborhood zestimates were all in the 3s. So, went looking in other parts of that city hoping to find a 3 or 400k house, which I found – in a graffiti laced, run down neighborhood. My first thought was ‘$#!t…. These people living in this neighbor hood probably don’t make a third of what I make….’ Not to cut down, just saying. So after my 2 month attempt of acquiring a property – I’ve decided I’d much rather rent than risk throwing away my HARD earned and saved money. Things are just way too imbalanced right now. Hope this story helps others that could be in my same boat – hold on to your money and let’s pop this bubble together!!

  • I’m 39 and my wife is 29. We have a 2 year old and another baby on the way. Between the two of us we earn a combined 225K annually. We live in the Bay Area and after renting in San Francisco for 5 years, we moved to a nearby city and bought in early 2012. We are listing our house for sale soon and hope to make a 250-300K profit on our home. We were debating buying another home, but here is the dilemma. With the cost of our mortgage, our nanny (whose price is probably going up with all the demand), our car payments, expensive trips to Whole Foods, and then all the cost of having two kids we would be completely stretched out and saving nothing. Additionally, my wife would have to commute 2.5 hours roundtrip (accounting for traffic) to her job each day.

    Unfortunately the area where she works (Peninsula) is so expensive that 1.2 million will get us a 1500 sq ft 60’s rancher that looks like crap and probably needs about 150K to update it. And again, its only 1500 sq ft. Just can’t wrap my head around paying that kind of money for something so undesirable. When I grew up, I always imagined a million dollar home would look like a palace and the places for sale over a million look like something in a bad part of Detroit.

    Of course there is the societal pressure to buy a home and way to reflect your “success” where as renting transmits “not doing so well”. We are now coming to our senses and realizing having a better quality of life is so much more important to us then “owning” a home. If we rent a nice apartment near my wife’s work (still 5K a month to rent a 3 bedroom 1500 sq ft place), we’ll reduce our stress, pay off my wife’s student loans, save money, and be able to go to dinners, go on vacations, and pursue hobbies.

    We figure in 2 years when real estate prices come back down to Earth, we’ll have about 500K for a down payment on a home we actually want to live in. We’ve talked to many of my wife’s friends who are in their late 20’s and early 30’s who make good money (200K between both husband and wife) and they say they can’t afford to buy a home. If these people can’t afford to buy a home, then who will be buying homes to continue to the ridiculously crazy home price gains?

    • WeDontMakeThoseDrinksNoMore

      “If we rent a nice apartment near my wife’s work (still 5K a month to rent a 3 bedroom 1500 sq ft place), we’ll reduce our stress, pay off my wife’s student loans, save money, and be able to go to dinners, go on vacations, and pursue hobbies.”

      I’m wondering if the ability/desire to be able to spend more daily time with a newborn baby and two year old might be an nice addition to your list of benefits which include dinners and vacations? JMHO.

      • Thats obviously a given. I work from home and see my daughter all day (we have a nanny watching her), so I guess that didn’t even cross my mind.

      • WeDontMakeThoseDrinksNoMore

        That’s good to hear. Congrats for having a good working situation and making family a priority. I’ve personally seen too many kids raised by absentee cash/possessions/status/career obsessed parents develop all kinds of problems, some they never outgrow. Parents time and love are very important. Best of luck.

  • Born & lived in LA all of my 50 some years through the ’71 & ’94 earthquakes the droughts and around the block gas lines of the ’70s and watched multiple housing bubbles inflate pop and re-inflate over the years. Riots wildfires exodus you name it we had them all before and we’ll have them again. It’s not whether it’s when. I still live here but only to care for my elderly mom. I could care less about her big expensive “golden sarcophagus”. Maybe i’ll donate it to charity or sell it to some gen x, y, z millennial or investor from anywhere who’s drunk enuf Kool-Aid to buy it. LA is what i know and that’s why i’m okay walking away as soon as the ties that bind are unbound.

    • Baby Boomer Screwed As Well

      DRed
      I grew up on North Hollywood when it was wonderful, 1961 and beyond (memory). I remember when you could get lost on your bike all day, and be home for dinner. Moms never worried about us on long summer days. I remember a post WWII ranch was the American dream home. This state rocked. I remember when UCLA was affordable for the middle class. Things have changed. Back then, the govt and financial industries worked for the better good of the middle class, or at least we were under the illusion they did.

  • WeDontMakeThoseDrinksNoMore

    Reading the posts on this thread is surreal to me…California RE has truly has become a cult; an irrational and absurd obsession that people can’t quit, no matter how little it makes sense to believe, the ever increasing financial and personal sacrifices members choose to make in order to carry on in good standing, receive nods of approval from other members. Unreal. Don’t say out loud you might want to leave; you might be quickly surrounded by other members, murmuring “You sure you want to do that? How can you ever even consider leaving California? I’ve heard of people who dared leave California, now they are very sorry and they can never come back”. Hope everything sacrificed is worth it, folks. Good luck.

    • Drinks, couldn’t agree more with you. CA RE is like a highly addictive drug to many. Despite all the risks and downsides, people just can’t stay away from it. After skimming though all the posts…3 hour commutes, 5K rents, expensive crap boxes, family pressure to own, etc. People have the option to leave, but can’t or won’t for whatever reason. The takeaway from reading all these posts is that people STILL want to live here no matter what. They will either buy or rent and the cycle will continue. I personally would not bet against RE in desirable areas of CA. There are just too many factors at play that will keep prices above a certain threshold.

      • Ah yes, the good ol’ “everyone wants to live here” meme. Reminds me of 2006.

        Well folks, that’s all you need to know. It’s simple – forget about the details! Everyone wants to live here. Pay no attention to that man behind the curtain.

  • Real estate nearly always has some value. Like a gold coin and unlike some stocks or bonds, it will never go to zero (well there are a few circumstances where a poorly chosen piece of real estate CAN become less than worthless…a money pit). The questions are: what are your needs, and are you satisfied with your life with or without a particular piece of real estate? The largest house I ever lived in was 1900 square ft (and I only lived there for a month or two). I built it myself and my Parents moved into it and I moved out to go off to find a job. I still own it, and it is neither a money maker nor a money pit. It is located out in the sticks in the Northwest and can’t be rented for very much. I can’t sell it for very much in the current climate. I will never move back to it since my life is now in Southern California. A hermit like my Mother would be happy to live out their life there. She died in her 90s there. I have lived in two 800 square ft houses, one I sold to buy my current 1500 sq ft house, and one I still own (I inherited it with my Brother). We actually make a little money on that one as small rural houses don’t cost as much to maintain. I grew up in a 1200 sq ft house in LA City.

    But what about you? Do you really need 4000 sq ft of living space? Or will 2600 sq ft do? Do you want to keep a dog? Do you want to deal with a landlord about your dog? Do you follow real estate prices all the time or do you ignore them? Could you live in a place that goes up $200K then drops $200K over a couple of years? Or would that drive you to distraction? Are you a wanderer or a settler?

    If I were in another life and I needed to live in the expensive part of LA for a long term job or for a business that I owned, I’d probably try to find a well built and designed smaller house on a pretty lot in an older neighborhood that still is in a low crime area. I’d furnish it with a minimal number of beautiful art works and craft works. I would like one with a front porch where I could have a swing or rocker. And I’d rock myself and play a stringed instrument on a sunny day and be happy with my dog and my Wife.

  • I am 39, husband 42. 2 children, combined income $136K. Total debt: Student loan $10,600. Cars : $27,000. Living with Mom in Law. Waiting for the pop..until then, save , save , save.

  • Real Estate Brokers in the Burbank 91505 tell me that young couples are buying(e.g. $700k homes) . They work for the media companies in town. The elementary schools are great(recently passed another $200million plus school bond). I see a lot of thin young white mothers with their infants in the baby carriages.

    • Baby Boomer Screwed As well

      Bob,
      Youngins paying $700K for a home in Burbank, deserve the plate their heads will be served on. Oy vey!

      The Metro and developers have some mighty big plans for Burbank. IMHO, they will ruin it with too much high end development. I love the TOD idea (Transit Oriented Development-big fan of the subway and Metrolink), but Burbank is losing jobs big time, and I don’t see it as, let’s say, a Westlake Village.

      • Burbank has more jobs than people already. Already known for its massive stores, Ikea plans to supersize the local furniture-shopping experience even more by building a new site twice the size of its current Burbank location.
        At 470,000 square feet, the proposed Burbank store would be the Swedish retailer’s largest in the United States.
        “We need the big store now, quite frankly,” said Ikea spokesman Joseph Roth. “It’s not so much planning for the future as addressing our current situation. The store needs to be updated.”
        If approved, the new store will sprawl over 22 acres along the Golden State (5) Freeway, west of San Fernando Boulevard and south of Providencia Avenue.
        It will be just seven-tenths of a mile from the company’s current 242,000 square foot store, also on San Fernando Boulevard, which opened in 1990.
        The company submitted its development plans to the city earlier this month, Roth said.

        The approval process could take nine months to a year with construction starting sometime in 2015. The project will create between 500 to 1,000 construction jobs, Roth said.

      • Also, those big media companies pay shit. I know, I used to work in one, and they are downsizing because they can’t figure out digital fast enough. I think it’s either parents footing the bill or LA fakery again.

      • More people(125K) work in Burbank each day than live(103k) in the city. The combined payroll for all of Burbank’s private sector businesses totaled $6.7 billion in 2005, according to the San Fernando Valley Economic Research Center at California State University-Northridge. In 2005, Burbank employed 125,871 people in the private sector, while the neighboring city of Glendale, California employed 74,149 people, according to CSUN’s economic researchers. Burbank’s media, entertainment, telecommunications and Internet industries dominated the list in employment numbers and payroll, generating a combined $4.2 billion in payroll and accounting for 64,948 positions. Even if the payroll went down 20%, the people working in Burbank would equal the population(double the working age population). God would answer my prayers if 50% of the jobs would go away. The traffic is bad now. Can’t ride my horse during the commute hours in the Rancho District.
        Anon, I am sorry that you were not successful in Burbank. Not everybody can be a winner, no matter what your parents told you.

    • How do you know when a RE Broker/Agent is lying?

      Their lips are moving…

  • I am in my early 40s, and I own a number of small original cottage homes with large backyards in some of SoCal’s beach cities. How did I get them? I started buying them in the early 90s when I graduated from college. I took subprime loans on most of them. And, I rented them as soon as I could handle the negative cash flow … which always turned positive in a short time.

    I remember when I started my buying spree. So many people told me what a fool I was. It was unaffordable. It was going to bust. But, an old guy who owned 17 home set me straight. He told me the housing bears are always complaining … he told me to just ignore them and accumulate smart properties. So, I did. With my economics background, I knew the FED would always dial in some inflation, and I went for it.

    Now, I am a very wealthy guy with a wife and six kids. I could retire, but I would go crazy, so I continue to work. And, I see the same story playing out again. As the old guy told me, nothing ever changes. People are always waiting for the ultimate crash that never comes.

    As far as the 2008 – 2010 real estate price fall, that was not a big deal. Around the beach cities, prices fell a fraction of what they rose. Big deal. Fortunately, I ignored the doom and gloom crowd, and did not sell anything. I have been adding properties again … certainly, with all the central bank money printing, inflation is a strong possibility.

    I urge those with a good enough down payment to purchase a home. And if you have 1, get a second. And if you have 2, get a third. But, pick them smartly … either in or near a desirable zip code. Within a mile or two of the beach always helps. Will you make money in the long term? Absolutely. Will you make money in the short term? Possible. But, in the short term, you may be out. However, if you wait for a drop, mortgage money is much harder to get, and you will not be able to get in.

    Rule 1 … Buy Smart Properties
    Rule 2 … You will make lots of $$$ in the long term.
    Rule 3 … Short term, who knows, but in a drop, mortgage money is hard to get and that makes it hard to buy on a drop unless you are wealthy
    Rule 4 … Ignore the real estate bears. From time to time, they might be right in the short term, but they are always wrong in the long term.
    Rule 5 … While homes were much cheaper 20 years ago, so were the salaries.

    • Good for you and your family for making smart decisions about buying quality properties back when they were much cheaper. Properties in major cities and beach front cities are always going to hold their value even when the market falls because they are always desirable.

      In regards to “Rule 5″, when my dad bought his first home in 1981, he paid $161,000 (his friends thought he was crazy) and at the time he made $75,000 a year as a mechanical engineer. My mom didn’t work so it was just his income. This same house he bought for 161K in the early 80’s is worth about 1.5 million today. Today an average tech employee makes around 100K a year. I guess you can see where I am going with this. Salaries for technology employees/engineers have not even doubled, yet home prices have gone up 9-10 fold. It gets to a point where the upside is limited and I think we’re either at that point or very close to it.

      How many people can afford to buy a 2000 sq ft home for 1.5 million? With the tight credit lending, its near impossible unless the household is earning 300K a year and has a 20% downpayment.

      • In my opinion, high tech salaries are about 2.5 times what they were in the early 90s. And, houses are about 4 to 5 times … in desirable areas of Southern California. Some of that increase is due to a salary increase, and some is due to lower interest rates. However, you can locate great cities where values only rose about 3 or 4 times since the 90s … for example, south Orange County and Ventura County. Even South Redondo beach … I still see some small homes in South Redondo in the 850K range. They are very small and very old, but they exist. While many zip codes in Southern California start in the mid 1.5M to 3M for a fixer, like Santa Monica or Manhattan Beach, you can still get South Redondo Beach for 850K. For example, you can get 702 Avenue D in Redondo Beach for 800K … in between the 2M dollar teardowns in Manhattan Beach and the 2M dollar teardowns in PVE. That price will be much much higher 20 years from now, and 800K is affordable to someone with a decent down payment and 2 incomes.

      • One more comment … in the Bay Area, you can get a nice property in Walnut Creek in the 800K range. That is a great area to start out in. If you want to spend around 1M, you can get a home in Moraga, another great area. Bottom line is decent properties in the Bay Area and SoCal can be had in the 800K to 1M range. You do not need to spend 1.5M to 2M.

      • JT, gotta agree with you on Redondo. Far and away the bargain beach city of the South Bay. Funny that you mention Avenue D in 90277. Back in the summer of 2010 when nobody wanted anything to do with housing, I almost came very close to buying 602 Avenue D. Listing price was 699K and I think it sold for 710K. I lived in the area and took a stroll to the open house. The open house was a total bust according to the agent, nobody showed. She asked me if I had an agent, I told her no because I wasn’t “seriously” looking. She even mentioned I could use her as my agent and we go to her office later on that day and a full price offer would likely be accepted that night. I got cold feet and walked. In hindsight, I should have bought that place. Never say never, but getting an SFR on one of the Avenue streets for a 6 handle price may never happen again.

      • JT..Its all in how you define a “nice property”. In my opinion there are a bunch of crappy old tiny houses in Walnut Creek for 800K. For 800K in Walnut Creek you’ll get a 1960’s 1300 sq ft house with 2-3 bedrooms and 1-1.5 bath. The house will look terrible on the outside and the inside will look completely dated. It will take at least 100K to renovate (wood floors, new kitchen, bathrooms, etc) and after its all done, we’ll have very little money left to do anything else.

        Not only can I not imagine living in one of these old homes, but I don’t want to spend 900K on it. Maybe I’m screwed, but I would rather live in a newer rental than buy one of these tiny beat down homes and risk losing money on a downside drop.

    • “He told me the housing bears are always complaining … he told me to just ignore them”

      Rather ironic considering you’re on a housing bubble site.

      “People are always waiting for the ultimate crash that never comes.”

      Hyperbole. Most people simply don’t want to get financially screwed on a place to live.

      “I ignored the doom and gloom crowd”

      Again, here you are.

      “I urge those with a good enough down payment to purchase a home.”

      Of course you do, it would be to your benefit.

      “However, if you wait for a drop, mortgage money is much harder to get, and you will not be able to get in.”

      Agreed.

      “While homes were much cheaper 20 years ago, so were the salaries.”

      Nominal vs real terms.

    • Ignore JT and the bullshit he spews; he’s yet another RE agent shill troll trying to drum up business. No one who claims the nonsense he spews about being a successful buy and hold RE investor, buying more and more beach city bungalows would be advising anyone else to do the same – BECAUSE THAT WOULD CREATE COMPETITION FOR HIM AND DRIVE UP HIS BIDS AND OFFERS.

      Instead, they would be busy working on managing their properties and finding and buying new ones, not reading and chiming in on a housing bubble blog such as this one.

      The reason this clown RE shill has enough time to waste here with his bullshit is because he is yet another desperate RE agent, realtor, etc., and business is most definitely NOT booming right now. Dead open houses, offers to buy tanking, closed deals fewer and fewer. Get ready to go back to eating Purina cat and dog chow, JT!!!

      • You are wrong. I am an investor who adds approx. 2 properties every 5. I am not worried about competition. But, I am worried about those who fall for the doom and gloom on this as well as other blogs. A young person following this doom and gloom will make a mistake of a lifetime by not buying well located real estate young. In fact, I know of a person in his late 20s who fell for this doom and gloom, and did not buy several years ago, even though he had a large down payment. Now, he is kicking himself.

  • It’s probably the demographics of this website (homebuyers, people interested in RE) coupled with the fact that people who make more money are probably more willing to post their incomes, but tally the incomes people are listing.

    I’m just scanning, and nobody’s specifically written their HHI is under 100k, but I think there are a few in there based on the max loan they’ve said they can qualify for.

    There are 5 or so in the 100-150k range, 5 or so in the 150k – 200k range, and 5 or so in the 200k and up range.

    Just thought it was interesting considering the median HHI income for LA is around 50k

  • None of us has a crystal ball, but for those of us who are not buying because of fear of a drop it might make sense to hedge ourselves. Has anyone considered buying homebuilder option call LEAPS in case the market continues higher? It market goes up a 30K investment in LEAPS would more than make up for the difference lost by not buying a home and benefiting from its appreciation.

  • Unless we have a recession or interest rates go to the moon, hard to see housing falling hard.

    That said, I am 36 and bought my 1750 sf bev hills adjacent condo fixer upper for 550k in 2004- a year earlier would have best, but i still did ok. I was approved at 750k, so chose not to lever myself. While rents have doubled on the west side in 10 years, my mortgage has fallen by 40%. I put 85k into the place and have it listed for 729k right now- we had 25 couples at todays open house, so demand seems ok. We had a number of Persian and Russian buyers dying to see it before the open (to get a deal before hitting the market).

    Im looking at renting in MDR as Im tired of the “new” beverly hills crowd, feel its a sellers market stil, and really want a house some day. folks need to go see how rents are in much substandard places before saying we are in a bubble. 3500 gets you 1300 sf in a decent building- not cheap. And that has Pergo floors. As im single, I am downsizing to a 880sf 1BR for 2400 instead.

    I pay 1830 30 yr fixed mortgage with 10k in HELOC debt for various renovations + 366 HOAs, 600 annual condo insurance, and 7k in property taxes. Special assessments run 1k/yr on average over my 10 year ownership. So call it 3200/month. After tax deductions and principal, pretty close to my new rent for a much smaller unit.

  • It’s funny listening to all of the stories here.
    I haven’t read all of the posts, but they all seem to have a common thread. High income, young professionals, that are priced out.

    My income is crap, but I’m living quit well here in LA county.

    I pray to Jesus a lot, and for some reason he decided that my family and I were worth his grace.
    I think praying to Jesus is the answer for you’re real estate woes. It worked for me.

  • Wow, some of these stories are amazing. So glad I left Cali years ago. Too many greedheads. Guess you have to be one just to survive, but thats not me. I’d rather live life, not spend my time chasing wealth to impress people you dont even like – even if you win the rat race, youre still a rat!

    I’m X – a nomad as it were, but I will say this about the boomer hate – they’re getting theirs as well – paying for their kids insane college costs, and their homes, or just having them live with them into adult hood and it doesnt look like they enjoy it. So rest assured karma is at work. Not too many people have it “easy” unless they choose to simplify and not chase the consumption nightmare that this economy is based on.

  • I’m 34 and engaged, paying for my own wedding this summer. Both out families don’t have a lot of money, grew up lower middle class. I grew up in Cleveland and she grew up in Portland. We moved to Sacramento from Orange County a year ago and we both work for the State. With paying for the wedding we are not yet able to save for a downpayment. I put some extra cash away in a retirement account, invest a small amount in a brokerage account and have a whole life insurance plan.

    Moving from Orange County to Sacramento I thought we would be able to afford buying a house one day but boy was I wrong. To be close to the city and live in a decent area you’re looking at mid 300’s. some of you may say that’s not too bad. Let me tell you why it is for us.

    My fiancé and I have discussed at length what lifestyle we want to have and what is important to us. When we starting having kids she is going to stay home so we’ll be living off my income alone which is around 80,000 a year. We don’t want to leverage ourselves to the hilt so our top end price for a house is 200,000. I listen to people talk and read this blog and it amazes me how much people are willing to spend just to own. No thanks I’ll take the freedom and invest other ways. How my children grow up is the most important thing to me, not my zip code and not whether I own or not. If the market and numbers ever make sense again and pencil out for us we’ll buy.

    • We live in the Sacramento area and know that zip codes do matter. Sacramento has some really bad neighborhoods that have terrible schools, lots of crime, and gangs. Your safest bet is to look for homes in suburban cities just outside Sacramento such as in Folsom, Roseville, Rocklin, El Dorado Hills, Cameron Park, Auburn and portions of Elk Grove.

  • 24 married kid on the way…. Make roughly 75k a year… We looked at a few houses in 2011 and now again this year.. Pretty ridiculous how much they’ve gone.up. Originally from Oregon and she’s from okinawa… I’m military and I’m glad that that means we will move from here eventually. But the desire for a place in socal is quite strong the weather the diversity makes it a really nice spot.. Although my income.doesn’t put.us in the class that can buy a house luckily my job training puts me on a track to get into that class…growing.up I never thought I’d be making 75k a year at 24 y/o let alone imagine 75k would.leave me in the lower income bracket… Thankfully I decided to move to a good job field..I’m an air traffic controller and thanks to that hopefully my future is more.or.less secure… We want to buy a house but realize that we won’t ever be able to.afford.a decent area as long as I’m in the.military at least in socal…but thankfully that also means our debt is minimal about 3k in cc debt…own our cars and py 1800 a month in 92126 for a sfr… So renting is comfortable and risk free and not having to buy and having.job security is really all one.can ask for.especially.when starting a family… I would like to.think that my generation is.a bit.more.avoiding of financially risky commitments due to what we’ve seen over the last ten years. Possibly this experience has created a feeling of not making any moves for a house or large.investments unless they are sound moves that won’t bite us in the a$$. I know personally I save for retirement and contribute to my mutual fund account just hoping to create financial independence for us down the road… Maybe this will provide some insight as to what my age group feels like…or maybe not… But here’s my two.cents

  • 30, engaged. both work. no debt. over $300k of savings. Our income is very strong but based on commission. Variable compensation represents 3 – 4x our base salaries. Currently renting but considering buying as we prepare to start a family.

    I have a few questions on ARM versus fixed. Is ARM the right way to go in today’s interest rate environment? Are ARMs more appropriate in situations (like ours) where compensation can vary dramatically? We are currently living in a prime area in the south bay. In my experience, the only first-time buyers in $750k+ neighborhoods are using these products.

  • TheOnesThatBought

    30 and husband is 32, both professionals with 300K combined income, no kids and no debt. I guess I am one of the mysterious suckers that bought this year. We just purchased our first home – a Huntington Beach coastal at 850k with 400k down payment 30 yr fixed. Our monthly nut is just under $3000 which puts us at rental parity for the area.
    This was a pretty tough decision considering we both came from lower middle class families and basically worked hard through graduate school and our careers, living very simple lives to save up for our down payment. We came from the Midwest and never thought we would ever spend this kind of money on a house.
    The decision came down to the fact that we were both ready for the space, privacy and independence of a sfh. We rented a 700 sq ft apt close to this neighborhood and loved the area. Larger 3 bd rentals cost over $2800 in this area. We discussed this decision extensively and we realized that its really hard to predict whats going to happen with the real estate market and it was better to focus on what we can afford as a monthly payment. It doesn’t really matter if real estate goes up or down in the short term because we have no intention of selling and we know we can afford the payments on one of our incomes.
    I understand that we could get more for our money inland but this is the home that we would like to have a family in. I like to consider quality of life in addition to the (admittedly high) cost. I think that not having to commute to work, living by the beach and having good schools and parks close by are worth the premium. We work really hard at what we do and are usually very frugal, so we felt like spending this kind of money on the place we spend most of our daily life in (as long as we could afford it) is justified.
    BTW we used redfin and I really like their model. I do agree with some of the other posters about meeting some resistance from “regular” agents when we went to showings. We debated going with traditional agents before this home came up. It worked out and the money back from the commission helped tremendously with closing costs. I also agree that the availability of information makes us almost obsessive about checking up on the latest listings, comps, stats, etc.
    Most of the friends in our age group (30-35) are also professionals with high incomes (>250k combined) and almost all have purchased homes in the last 2 years with large down payments. Our situation is not as rare in the OC as people seem to think. Many purchased in Irvine and their neighbors are in similar situations too. These are all people who are want to raise their families in a nice home in a safe neighborhood with great schools – not a single flipper, investor, land lord among them. Just a different perspective on what going on….

    • Don’t worry about what everyone else says. My husband and I were almost the same as you guys – and we almost bought as well. I think where we diverge is that we can’t find a halfway decent house for that price that makes sense for us given our particular needs. Maybe if I worked in OC that would be different, but I’m in downtown L.A. – and the two people in my office who commute in from where you are in OC have horrendous drives (sometimes more than 2 hours).

    • With nearly 50% down, one would hope your monthly nut is similar to what you’d pay in rent.

      Frankly and sadly, I suspect your scenario is not the norm. Putting a lot of skin in the game is what a true “free” market demands.

      The real story is about those who are stretching to get in and relying on government backstops to do it.

  • I just turned 40 and was finally able to buy my first house. I wouldn’t have even qualified if my parents didn’t help me out and I make an income just short of 100k. Not huge, but it should be more than enough to qualify for a 200K mortgage with 50K down. Nope. Anyhow, I am in Western Canada. What shocked me beyond belief is that while investors are buying these houses, they aren’t renting them out at a fair and realistic rate. My mortgage PLUS all utilities and insurance costs me the same as a 1 bedroom apartment in a not overly nice area. I, on the other hand, live in a beautiful established area less than a block from golf courses and the river valley. These investors aren’t looking to increase their asset wealth, they are seeking rents and profits from their properties and the rent costs are far above a mortgage cost! They are simply taking advantage of those who aren’t able to qualify or can’t because of job instability (the only ones with stable jobs anymore are Boomers) and taking them for every cent they can. Of course that just redistributes the wealth of their children right back into their hands.

    I guess the situation is different here, but it is just as dire.

  • Have a look here:

    Baby Boomers Ruined America
    http://www.babyboomersruinedamerica.com/

  • Allison Webster

    Have you heard the “Baby Boomer” song?
    This really tells it like it is:
    http://youtu.be/-vMicdkKlBk

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