Real Homes of Genius: Los Angeles addition with the return of garbage can photography. 572 square feet and the power of gentrification-hipsterfication.

Who doesn’t love a great sequel?  The housing market is blistering hot and people are itching to get a taste of the hot porridge served right from an upgraded stainless steel stove.  You all know the story of Icarus and the perils of flying too close to the sun.  Well there is also a story about getting too deep into the crap shack Kool-Aid pool.  This is now a mania.  I have a fairly good sense of Southern California living in multiple parts and making it my job to understand various markets by actually visiting open houses in wealthy areas and gentrifying markets as realtors would like to say.  Most people like staying in their confined bubbles and really don’t venture out.  So once again, we see astronomical prices decoupled from actual value.  Today we take a trip into the heart of Los Angeles.

A market in gentrification mode?

L.A. County is massive with 10 million residents spread across wonderfully designed urban sprawl.  Things are so well planned that traffic can cause your eyes to bleed and road rage is nearly a guarantee once per day.  Prices have gotten so expensive that L.A. County is now the least affordable markets to rent in (this is based on income relative to local rents).

So now that people have conveniently forgotten about housing bubble 1.0 they are now ready to purchase any property that comes on the market.  In fact, we are seeing real estate garbage can photography making a comeback.  Today we salute you Los Angeles with our Real Homes of Genius Award.

When half a million dollars isn’t worth moving a trash bin:            

home 1

3525 Portola Ave, Los Angeles, CA 90032

2 beds 1 bath 572 sqft

This place is tiny.  572 square feet.  I actually like the trash can being left in the picture overfilled with crap to show you a better perspective on how small this place is.  The ad is written in beautiful prose that really makes your heart jump with joy:

“Why Rent when You Can Buy! This House Features 2 Bedrooms and 1 bathroom with lots of potential especially for a First Time Home Buyer. Great Location close to Downtown Los Angeles, centrally located near Schools, Parks and Shopping. This house has been nicely upgraded.”

Time to speed dial your real estate agent!  Why in the hell would you rent when you can buy this place?  This place sold for $9,000 back in 1972 and now it can be your home for the small sum of $470,000. Not a bad deal right?

So let us take a Google Street View here:

street view

More trash cans!  One trash can looks like it is crossing the road or gearing up to strike a pose for another realtor’s ad.  Now some might say “hey, this is a working class neighborhood!”  And to that I would say, of course it is!  That is why it is so mind numbing to see this tiny place listed at $470,000.  The adjusted gross income for this area is roughly $36,000.  Yeah, these current prices totally make sense.  So someone making $36,000 is going to save the $94,000 down payment for this place so they can get rental parity?  Any investors wanting to turn this into a cash flowing property?

Today we salute you Los Angeles with our Real Homes of Genius Award.

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189 Responses to “Real Homes of Genius: Los Angeles addition with the return of garbage can photography. 572 square feet and the power of gentrification-hipsterfication.”

  • Oh man, this is bad.

    We been looking to buy for 2 years now. I am still anti buying at current prices but a great opportunity just came up.

    We put an offer on a house in the SF Valley, 130k under FVM – house needs work, probably 20-30k, maybe more but we still get a discount. They accepted our offer, it’s a home that was inherited by family and put in a trust, now we go through process without realtors. I don’t love the house, I don’t love the area but it’s a great deal for us and we can make it a home for now and let’s face it, we weren’t going to get a better deal than this. Realtor said it could be listed in mid 400s, we paying under 300s.

    Market is crazy. My realtor friend has 11 deals in the works right now but he says only representing sellers gets busy. Some of his colleagues that only get buyers to represent have a tough time because everyone gets out bid. He has been lucky in this area.

    • Where in the SF Valley can someone buy a home for under $400k? Pacoima, Arleta, Sylmar?

      • alex in San Jose

        Sylman – a town’s gotta be good if it had an earthquake named after it.

      • It’s in Shadow Hills, it’s a very clean and safe area. It’s hick town though and far from more development, grocery stores etc. It’s why I don’t love it.

        The crime that is listed happens in Sun Valley. Look it up, I can own horses there if I want. The schools suck because kids go to Sun Valley but we plan to put our son in private. Like I said we are getting a huge discount because it’s extended family that wants to be bought out and prefers the home stay in the family. It’s not a very big home, 3bd but lots of land. I’ll have to see the costs of adding to the property but that is later on.

      • Shadow Hills is not Pacoima lol, it’s actually a nice secluded area but far from DTLA. The home comes with enough land to own horses which is lawful in Shadow Hills. The crime might creep from Sun Valley. Anyways It’s a great deal but schools suck if kids go to public school.

    • For that price in the SF Valley I can assume it’s in a horrible neighborhood. IMO one can not put a price on safety and peace of mind. I have lived in some pretty crummy areas and I will be the first to say that the stress of worrying about your own safety and loved ones as well as damage to your property can be overwhelming. When living in a bad neighborhood just the act of coming home can be a nightmare. Good luck.

    • Interest rates are topping out in my opinion. As long as you are ok with the immediate area, if I were you, I’d take it. You can refi when 30 year rates go below 3percent in the next recession.

    • SHConservative

      I’ve been following this blog for nearly 10 years. A few years ago I pulled the trigger on a home in Shadow Hills. It’s a great little area close to Burbank. I love it. We’ve got .5 acres which is a great size for our family. It’s quite and feels pretty rural. For 300 in this area you should totally do it with no worries at all. Even if you have to put in some work on the property that’s an excellent deal.

  • When do you think we will have another slow down? How about more inventory?

    • Once the next recession hits, and it will happen, you will see dropping prices and more inventory. Based on historical patterns, I would think a recession should happen by the end of the decade ( 2020 ). If you have decided to wait for the recession before buying, that can work, but make sure you have a big big down payment … at least bigger than 25%. Lenders get more picky during a recession, and they look for a bigger down.

      • Again, completely untrue. It’s called a “conforming” loan for a reason. If one lender did happen to increase their required down payment above 20%, you find another lender. And you’ll still be able to get FHA loans.

        The difficult part of buying in a recession is competition with multiple offers. Recognize a good deal when you see one and offer 5%+ over asking.

      • John D, untrue. For the loan amounts needed to pull down a SoCal property, forget GNMA, FNMA, and FHLMC. It is about portfolio loans and you will need a big big down during a downturn. I know this. I was a mortgage trader.

      • Really? I have several friends who bought in the $500K-$600 range around 2010 with only a 3.5% FHA loan.

      • GH, you had better rethink about buying with a small down payment during a downturn. That will not work.

        If you are only able to scrape together a small down payment, you may want to buy now while the mortgage money is available. But, if you are able to pull off a large down payment, you can buy now or wait for the recession. If you wait for the recession, you are gambling prices will be lower than now. In my opinion, that is a tricky bet.

      • jt – I guess I and the half dozen people I know who put 20% down in 2008-2009 were imagining it.

      • Prince of Heck

        “If you wait for the recession, you are gambling prices will be lower than now. In my opinion, that is a tricky bet.”

        In other words, buy now or be priced out forever. Based on your logic, prices will be up another 30+% by the time the recession hits. And then they’ll be down by <=15% when the dust settles. The big RE investors sold too soon.

      • For everyone here: Max LOAN amount for conventional and FHA in OC and LA counties is 636k. So you can figure a purchase price from there; anything above that loan amount is considered “jumbo” (unless VA) and will go big bank.

        Jumbo needs 720+ credit with a minimum of 10% down.

    • As soon as listing agent start hiding trashcans

    • The sheet will really hit the fan a year or two after Fake Prez guts Frank Dodd. He’s already told his banker friends that they will be very happy. This is not going to end well with the foreign money from China drying up and rates going up.

  • Nothing wrong with living in a small house with a single bathroom. I have done that myself.

    What is important is that the small house is in a great area. That really matters.

    If the small house is in Redondo Beach, I am all in. If it is in east LA, I won’t even risk my life driving through the area.

    You are better off renting anything in Redondo Beach than buying anything in east LA. Nothing is more important than your life. Bottom line is if you can not afford a safe area, then rent and enjoy life.

    This might be a temporary situation. Trump has vowed to eliminate Dodd Frank. But, the details are sketchy. If he does that, most people will be able to get enough mortgage money to buy in a safe area. Trump is a godsend for the first time buyer. Stay tuned.

    • Yeah, because that’s what we need. More access to loans for people that can’t afford them. In the long run, killing Dodd Frank is going to have the exact opposite effect of what you’ve described. We need a return to the “normal” – pre-2000- environment. Sadly, this is not going to happen soon.

      • Laura Louzader

        Agree, Gibbler. Repealing Dodd-Frank will destroy another young generation of home buyers. It will open the flood gates to another tsunami of NINJA, IO, 125% DTI, and pic-a-pay loans, and that will be followed by millions of plummeting house values, foreclosures, ruined condo associations, and failing banks needing rescue.

        The net result will be a more deeply impoverished population, a still-richer financial oligarchy, and an even wider wealth divide.

      • @Laura

        I disagree simply because Dodd-Frank hasn’t stopped the flood of exotic loans. The government has been the primary backer of exotic loans for quite some time. Prices have already been stretched beyond those of the last downturn in many markets. Already, those subprime loans are beginning their predictable crash course.

      • Seen it all before Bob

        The Orange Leader and his Elephant Congress should be seeing this bubble just like Bush and his Elephant Congress should have seen this while they ruled for 6 years. They are our leaders. Obama put in regulations such as Dodd-Frank while there was a Donkey Congress to try and replace the protections of Glass Steagal to prevent this from happening again. Now The Orange Leader wants to remove these? The Elephant Congress agrees? Why is this different than 2008? How can this turn out any differently than 2008?

      • Prince,

        What “exotic loans” are you referring to?

        There are “bank statement” or “stated” loans these days, yes, however; they are highly scrutinized. Must have high down payment (20%+) and good credit. They do not have income verification via tax returns, but, the biz cash flow is evaluated based on bank statements and you definitely need to have skin in the game with a decent amount down.

      • Lol, like dodd frank has done sooo much to stop this bubble! Next time you stub your toe, you gonna blame trump for that too?

      • @dan

        “Riskier borrowers are making up a growing share of new mortgages, pushing up delinquencies modestly and raising concerns about an eventual spike in defaults that could slow or derail the housing recovery.

        The trend is centered around home loans guaranteed by the Federal Housing Administration that typically require down payments of just 3% to 5% and are often snapped up by first-time buyers. The FHA-backed loans are increasingly being offered by non-bank lenders with more lenient credit standards than banks.”

      • actually their is talk of re-instating glass steagall by Trump Finance advisor Cohn, the thinking is GS is already positioned to come out on top vs other Investment banks

      • Sorry guys, but Dodd-Frank was a nothing-burger. It was an appearance of doing something. If the DNC really wanted to prevent another financial catastrophe they would have re-instated Glass-Steagall type laws when they had super-majorities after Bush left the GOP and the US politically carpet bombed. They didn’t do it. They instead implemented a private health insurance cartel similar to the Federal Reserve. But then I have my own theories about Barack Obama actually planting the financial IED’s that paved the way for him to enter the White House while he was a lawyer with ACORN agitating for reduced lending standards.

    • manbearpig4lfe

      JT you sound like a real p***y. I work in East LA and it just reminds me of mexico. Would love to see your reaction to Milwaukee, Chicago or Saint Louie.

  • I’ve lived in a rental almost that size and can’t imagine 2 legitimate bedrooms fitting in. Maybe there is no living room? It was grad housing and it sucked. Buying something like that seems more like purgatory than the american dream.

    Yeah, not moving the garbage cans seems like a slap in the face to buyers and says that we don’t need to like it – just shut up and buy it and be quick about it already.

    I entered adulthood during the last housing bubble in SoCal and was priced out. Was going to relocate in 2013 out of NorCal for partner’s job but didn’t and also didn’t quite have the income to buy a SFH at that exact moment when prices began to rise steeply. Now we’re priced out of quality housing. I refuse to buy something I don’t want (like a crap condo) for fear of being saddled with a massive mortgage AND a property I don’t like if (when) prices go down or wages go down in tech. If my risky debt-load included a house I really wanted to live in long-term, that would be a different situation. Truthfully, it’s harder to find a condo/townhouse/crapshack significantly better than my current apartment. That’s a sad statement ’cause my apartment is awful in many ways. I’ve wanted to own and live in a nice house my whole life. Have saved my whole life. Have decided I will not turn 40 without owning the house I’ve worked for even if that means moving somewhere else to find it.

    My three housing wishes are:
    Fed raises rates regularly
    Foreign land purchases are restricted and taxed.
    Investor owned housing/speculation/second homes/vacant homes are restricted and taxed.

    Housing is a necessity. Speculation is not. We can make regulation work for our communities. I have a crush on Vancouver right now for having the balls to enact controls on their insane housing market. Smart and courageous. The people we elect don’t seem to want anything to work for anyone but the rich and super-rich as they themselves are often born into that class and know nothing else – the “orange one” for example. Getting more and more antsy for these asset bubbles to deflate…

    • Why do you blame the “orange one” for the current housing situation? He was barely “anointed” president and what you see with house prices today is the cumulative effect of Obama and FED policies for over 8 years. The FED was supposed to tighten long time ago and avoid ZIRP and QEs. Obama encourage the FED in the easy money policy to make himself look good. Or according to you, increasing the money supply by 10 Trillions does not have anything to do with house prices? Money are created through debt. If the debt increases by 10 Trillion (in 8 years of Obama) that is more money supply chasing a relatively constant supply of housing (at least SFH).

      It is not that I am a fan of the “orange one” (I did not vote for him), but I like to be realist. The government never gives anything unless they tax or print (borrowing). When the middle class gets taxed they become poorer (less purchasing power). When money gets “printed” (borrowed), the middle class buys less (less purchasing power). That is the decrease in quality of life of the middle class in a nutshell. Oh, and I forgot – Obamacare is another tax on the middle class according to the Supreme Court – it transfer the wealth from the middle class to the insurance companies owned by Wall Street – that is less purchasing power for the middle class (at least for RE).

      The Democrats and republicans are not there to represent you and me – they are there to represent their own interests. The smaller the government (oligarch party), the more breathing room I have, and the better it is for the middle class. You want free markets not oligarchy (collusion of big corporations and government) – or at least as close to free markets as you can get. In the history of humankind that produced the biggest middle class. The TBTF baks should have been split in smaller banks not encouraged to become even bigger after the crisis. Now you have a government by the banks and for the banks and a constantly shrinking economy – adjusted for true inflation (not bogus CPI) in free fall.

      • If you read the words I typed – I never blame the orange one for anything related to housing. I simply use him as an example of someone who is out of touch with the average american’s life experience due to being raised with wealth and accustomed to extreme wealth. That’s all.

      • slynns, all puppets are out of touch with the population because the “elites” controlling them are out of touch. Obama was a puppet as much as Trump is. The “elites” always control – by carrot or blackmail. How do you explain that after elections they all turn 180 degrees from their campaign promises. You can go back as much as you want and all you find in the WH are puppets of CFR (council of foreign relations) as political arm or the FED (the financial arm). What is new? They have their horses in both camps.

        If Hilary would have been elected she would have followed the same foreign policy as CFR and FED would have deemed in their advantage. Or you do believe in the show of left vs. right paradigm? Left, right, left, right the middle class marches off the cliff.

      • (Flyover is real fun at parties.)

    • > My three housing wishes are:
      > Fed raises rates regularly
      > Foreign land purchases are restricted and taxed.
      > Investor owned housing/speculation/second homes/vacant homes are restricted and taxed.

      Well put. The responsible among us are being punished because none of the above has been happening. I’m not sure it will happen any time soon either.

      Rates are going up, but very slowly (1% per year is overly optimistic). If the economy tanks or slows, they will come back down with a thud. I will be shocked if we got even CLOSE to 3%.

      Foreign money and land purchases – the high end property developers are going to fight that one tooth and nail. They’ll win just by throwing billions of dollars at the lobbying. Don’t forget that Fake Prez is also a high end property developer. He will likely pass token legislation that makes it look like he is accomplishing something in this area, but it will be window dressing.

      Investors. If the rates go back down, the big investors will be back with a vengeance. Right now, it’s the just the small mom and pop investors or flippers. Most of the big boys have exited the market or are in the process of doing so.


    I guess the local Realtors are all basking in the wealth effect of the EB-5 foreign “investor” program. Just don’t ask too many questions about where the money came from.

  • How many trash cans come with the property?

  • House horny buyers can’t even afford a 1% hike in mortgage rates.

    Wells Fargo mortgage applications drop 23%; originations topple 39%.

  • Maybe it is time to replace the “crap shack” with “trash can”. After all it looks like you buy a trash can with the “house” a small addition behind the trash can. What better curb appeal than that???!!!!…..Spending half a million for that is a sure path to riches….according to JT. By the time the millennials will be in early 40s, they can retire from the best investment of their life…:-)))

    • Make the trashcan a bit bigger and it will be a nicer place to live in than the house!

      9K in 1972, I cant wrap my head around that. The US went off the gold standard a year earlier and thats when the currency lost its value. Before that my Dad was saying a house was just where you lived, you didnt make money on it as an investment. Now the cost of housing, health care and education has made life too difficult for all but the top quartile in a lot of markets.

  • Home demand and thus prices are driven in part by population growth. California’s population has grown exponentionally since the 1950s from 10 million to over 37 million. Most of this growth was from the baby boomer generation. However, recently millennials have surpassed the baby boomer population and they are prowling around for houses or giving up and living with their parents. Im assuming that most California home owners are baby boomers. So as the baby boomer population retires and dies, shouldn’t inventory begin to improve? if so, house prices will drop, and like vultures, home buyers will start to pick away at all the old decaying carcasses aka crap shacks. The other variable are the investors both foreign and domestic. Like lions they will sweep in with all cash scaring the vultures away. There will be weeping and gnashing of teeth, or bidding wars. My point is; as a first time millennial home buyer, I can’t win, right now prices are too high and when they do drop, it probably won’t drop enough, and I don’t have large teeth. So I am just going to weep and continue living with my parents. …until they die and I can inherit their house, hopefully no lion in the bushes at that time.

    • If you are a millenial without personal obligations in the area, you would be wise to move to another part of the United States where housing is more affordable. It’s not clear what the future of this region is. It does look like the coastal areas of California will mostly be ultra wealthy with special subsidized housing for essential workers like police, teachers, fire dept., restaurant servers, etc. There won’t be a middle class.

      • alex in San Jose

        Noted (two Pulitzers) political cartoonist Bill Mauldin, in his book Up Front, noted that in Europe when he was in the army working their way up Italy on their way to Germany, they saw the servants of the upper classes there living in literal caves and using old-fashioned ‘thundermugs” (chamber pots).

        Noted motorcycle racer Mike Hailwood, again in Italy where he was negotiating his contract with Count Agusta, owner of MV Agusta motorcycles, he walked out and was driving away when most of the MV Agusta motorcycle work force came out and started to chase him down, on bicycles. They worked there but apparently could not afford anything motorized themselves, even Vespas.

        In both cases, glimpses of society under a long-established class system and what we have coming unless something really drastic happens.

      • Even if something drastic happens, no doubt Alex will still be complaining that he wasn’t given his fair share?

      • alex in San Jose

        Samantha – projecting much?

        Where have I ever said I’m not getting my “fair share”?

        I consider it a hell of a life-hack that I’m making about $13k a year, paying my taxes, and able to save money too.

        I consider it a hell of a life-hack that I get to work with a friend rather than for a boss.

        I consider it a hell of a life-hack that even on my income, I can buy properties, sure out in Lake County or Elk Grove or Scotts Valley, for under 10 grand that may be a very good investment (I need to do a ton more research) and if I’m determined I can buy one a year.

        I consider it a hell of a life-hack that I can move, or at least retire, to what I consider the bitchin’est country in the world, the only price being some training in common sense and learning a language that actually make sense.

        I’d not be the least bit surprised if 90% of you out there in DiscussionBoardLand are flat-out broke in a decade, having over-extended yourselves on credit crack, assumed your jobs – whatever they are – are invincible, and having assumed that orange-painted, Wally George-haired, fascism is The One True Way.

      • Ok Alex… I have to know…

        How are you living on 13k? Which country are you moving to?

    • Millennial_Not buying your overpriced crapshack

      Dude, what are you talking about. You already won. Living with your parents….it does not get much better. Fridge is always full and you dont pay for an overpriced mortgage. At some point you inherit the parents house. Plus you dont have to deal with lying realtards, lenders and banksters. I dont know what you are complaining about.

    • Most of this growth in California’s population was from the baby boomer generation? No, most of the growth in the sanctuary state came decades of legal and illegal immigration. In 1950, LA was overwhelmingly Caucasian and by the 2000’s it was overwhelmingly Hispanic.

  • Millennial_Not buying your overpriced crapshack

    Great article. Thanks Doc. Reading about this dump made me laugh out loud. Who in their right mind would pay more than say 10k for this piece of garbage? The next crash will be so devastating for a lot of people. That’s life. You cant really feel sorry for these poor souls that are buying into this bubble. Stupidity needs to be punished sometimes.

    • Too bad the punishment is only for the little guy and not for TBTF banks. There is no moral hazard for the TBTF banks who own the FED.

  • Here is the illusion of liquidity making that trash can worth half a million dollars. It has lots of pictures (graphs) which speak more than a thousand words.

    It does not have anything to do with LA being like London or Singapore and it doesn’t have anything to do with being so special and the weather. It is all based on illusion of liquidity which can reverse and wipe out all the “wealth”. Debt is not wealth; it is bondage and slavery. You have one life; you can live it in bondage or in freedom. The choice is yours.

    • Great article. “They had too much capital and were overleveraged.” Ha! But their response to the graph in the article showing more leverage is that these are derivatives so risk is hedged.

  • El Segundo Bubble

    One point of clarification, the buyer only needs to save about $20k for their 3.5% FHA and closing costs.

  • Man I love reading this blog/site. I read these articles out loud to my wife for a giggle. Please never stop writing them. We grew up in SoCal and now live in Texas, but it’s nice to keep a finger on the pulse of home.

    • Katera same here life here in Texas is better than Los Angeles barrio imagine living in a nice house with pool than garbage and gang infested dtla hahaha life is good in Texas

      • alex in San Jose

        I’m convinced at least half of the people who post on here are not in California at all, but in some part of “Dumbfuckistan” AKA flyover country, and just love to bitch on here because it takes their minds away from their neighbor’s meth lab, the other neighbor’s Confederate flag, the moonshining operation up the street, and their kids being taught in school that the Earth was made 6000 years ago.

      • Alex, just like with the ridiculous salary assumptions, you so desperately want someone to be in worse shape than you are that you apply Alabama stereotypes to every non-coastal state in the union, but people like me who have actually been to those places know that it isn’t true. So who exactly are you trying to convince?

      • alex in San Jose – get a life dude.

  • It looks like the millennials are rushing to the banks to buy those trash cans:

    Each one has $100,000 in the banks and they can not wait to be below rental “parody” in their dream “trash can”….:-)))

    • Millennial_Not buying your overpriced crapshack

      This article makes me happy. I hope it gets worse for wells fargo and other banks. Exactly what these banksters deserve.

  • All the gang bangers your heart desires in that hood. LOL…

    • it is all fine and daddy, just do not go out at night, do not show anything of value inside. all that peaceful living for a mere 500k.

  • My friend, a real estate agent, wants to help investors sell their houses in this hot market. He wants to offer full-service cleaning, painting, staging, etc. for out-of-area investors and / or for owner-occupants who can’t handle themselves. But if the market is so hot that homes just fly off the shelves without being touched and with piles of garbage in the pictures, that suggests to me that his marketing strategy is flawed. Is that what others are seeing?

    • I believe you may have a point. It’s like sending a fit triathlete to weight watchers. Volume would be the name of the game now, buyers will pay for their own upgrades.

    • yup, why do all that when you can sell above list in sub 10 days.

    • @Emma: Yes. Here in San Diego, homes are selling like hot cakes “as-is”. Some we’ve seen needed a ton of work, yet go for over asking, multiple bids and many of those bids being “all cash”!

      It is that insane!

    • Seen it all before Bob

      Emma, I have a tale of 2 houses. Both were sold within 3 months and were comparable houses that were next door neighbors. They were sold November 2016 and Jan 2017.

      Both were inherited property. Meaning the owners were children of the deceased owner.

      For the first, the real estate agent convinced the owner to put in 50K worth of kitchen, bathroom, flooring, and landscaping upgrades.

      For the second, the children were all remote and preferred to sell as-is rather than manage 50K worth of upgrades to a house with 80’s decor.

      The first house sold for 979K after the 50K of upgrades.

      The second house sold 2 months later for 915K with stained and torn carpets unpainted, and 1980’s decor.

      The first made about 65K more but with 50K investment about 2 months time and effort from the owners.

      The second made 65K less without any effort or the 50K investment.

      I think it depends on how much time you have and whether 15K difference over 2 months is worth your time and effort.

      Keep in mind also that both children sellers had inheritance income that could cover the 50K for improvements.

      In my mind, this is a hard choice and depends on how much time the sellers have.

      • Seen it all before Bob

        Some additional facts.

        1) The RE agent managed many of the update contractors for house 1 so it is similar to what your friend wants to do. The RE agent took the full 6% commission. The sellers still had to spend time with the RE agent/contractor to pick tile, floors, sinks, colors, etc and they staged the house. The sellers also had travel to do the final inspections on the house.

        2) For the second house, the sellers negotiated a 4.5% commission for the RE agent.

        There was the extra cost of about 16K for the first house

        2 points

        1) This makes the difference between both almost a wash. However in the first house case, the buyers got a move-in ready house and for house 2 they needed cash to fix it. It is hard to get a loan to fix up a house if you just bought it so it is harder to sell if it is a wreck.
        2) Seller RE agents will agree to manage contractors for the full commission but the buyer still must be involved.

  • I’ve already put in my initial offer of 25K over asking on that shoebox. Once I move in and champion the gentrification movement in that barrio you will all be jealous. East LA is the new Silver Lake!

    • Just put up that stained wooden fence. It is a beacon that all hipsters are drawn to. The place will be worth a million by summer.

      • Already got the stain picked out. Goodbye barrio…hello Hipsterville. I heard Trader Joe’s is going to open a store down the street around the corner from where the cock-fighting takes place. Life is good.

      • PeakBuyer – I like your moxie.

  • Doctor, just think no bailouts needed, it is all backed by FHA, Fannie/Freddie high balance loans. i guess tell FHA goes bust, I say here and now FHA high balance will come home to roost for FHA. take a this crab shack, market slides 20% = 100,000 loss, 6% in agent fees = 30,000, say SPCC of 3% = 15,000, misc fees/repairs = up to 10,000. One unit/loan of 500k can drain FHA of roughly 150k. now times that by thousands of FHA high balance loans and toss in a market slide in excess of 20%. I was a loan reviewer in SFV area, I looked at roughly 10k-15k loan applications. sorry fans the people do not make enough to pay for these prices. something is out of wack.

    • They make enough to pay for these month to month; however, these FHA buyers are 1 job loss away from immediate default.

      99% of the time it’s 3.5% down and the UFMIP (up front mortgage insurance of 1.75%) is financed, so from day 1 they have almost no equity.

      The vast majority of these people have 0 savings after the transaction and are 1 lay off from default.

  • When Angelo Mozillo says he hasn’t seen a ‘soft landing’ in 30 years, which some poster on this blog always repeats, I have to disagree this time. I believe there are so many millions of people saving their cash and waiting on the sidelines for a meaningful correction, or ‘tank’, as it were,.. that when the percentage corrects to 20 or maybe 25%, those people on the sidelines will dive in once again and the prices will level off for some period of time. Too many house-horny, impatient and irrational buyers will dive headfirst … and thereby produce somewhat of a ‘soft landing.’ But I’ve been predicting this all along.

    • You are very wrong Jed. This time around is different in the wrong way. There are 600 Trillions in derivatives. This house of cards will crumble with the first domino falling. The leveraging in the system is unbelievable – like never before in the history of finance; more so than before the Great Depression. The FED will be a wimp in the face of this tsunami unless you will buy a slice of bread for 10 millions. The FED will choose the least damage for their gig when they have to chose – let a depression burn all the undergrowth.

    • “I believe there are so many millions of people saving their cash and waiting on the sidelines for a meaningful correction, or ‘tank’, as it were,..”

      Maybe only if prices tank 75% will you get those millions of eager buyers off of the fence. Did you by any chance read this headline: “63% Of Americans Don’t Have Enough Savings To Cover A $500 Emergency.”

      “that when the percentage corrects to 20 or maybe 25%, those people on the sidelines will dive in once again and the prices will level off for some period of time. Too many house-horny, impatient and irrational buyers will dive headfirst”

      Where were those house horny buyers when prices were 20-25% lower than they are today? Most likely either 1) they didn’t have enough cash or 2) they believed that prices would continue falling. As much as typical buyers give in to greed as prices rise, no one wants to catch a falling knife.

      “and thereby produce somewhat of a ‘soft landing.’ But I’ve been predicting this all along.”

      Just say it: this time is truly different. The only difference this time is that retail investors and flippers will be the ones rushing for the exits — well after the insiders started selling a few years ago. And such hot money rarely takes a wait and see approach.

  • IwishMyParentsWereWealthy

    I live in Oakland – I am 35 – no debt – make 100k – I have been saving and saving and saving. I wish I would have pulled the trigger on a condo for 410k that is now selling for 500k. Fair price would have been 350k and the HOA would have killed me. It was a 2bed 2bath marina condo near bart and now prices are out of reach for me. I am starting to wonder if this is the new norm. Who are the people that are able to afford these 500-750k homes/condos. They are actually more common than most people think. I am a recruiter for Healthcare and IT. I will tell you that Alex in San Jose is 100% wrong. IT pays extremely well…Healthcare pays even more. So who are these people that are buying these homes.

    1. They are people that come from wealthy upper class families where the parents can afford to help with a 100k + down payment. Often these people also make 75k plus a year and can afford the monthly payments but don’t have the down payment. These people also have no student or credit card debt.

    2. These people are a couple who both make 100-150k each. Household income over 200k. This is actually extremely easy for anyone with a decent career in healthcare and IT. 75k to 150k jobs are plentiful in The Bay Area. If these couple have any basic money management skills…a couple years of saving they could come up with a 100k down payment.

    3.People who inherit houses, inherit money, work(ed) for companies that had stock options. Use this money as down payment.

    Your average Joe making under 100k is going to have an extremely hard time coming up with a 100k down payment. This is going to take a person years. Which makes me wonder if I would be better off moving back to my home town…making 75k…where there are tons of homes with garages and swimming pools for 75 to 200k. To bad their are few jobs that even pay 75k in my home town.

    • Seen it all before Bob

      They are also the lucky geniuses who had the foresight to invest in stocks in the 1990’s (or after 2002). Last post I mentioned the parents who gifted their newborn child $20K and put it in stocks in 1995. It is now worth $500K. At least this week. That’s a nice downpayment and a return beyond their parent’s wildest imaginations. Much easier than buying a condo for your newborn which might have had a return close to this but required much more maintenance. What will a 22 year old do with a half mil is the question?

    • alex in San Jose

      Likewise “their” are very few people with the discipline to save 10% of what they make, and wait to buy RE when it’s on the low end of the boom-and-crash cycle.

    • $100,000/yr in SF is poverty. My brother was offered $300,000/yr by his former boss to move there. He was smart and refused it. I would not move there for less than $500,000/yr. It doesn’t mater how much you make. In Zimbabwe all are billionaires. What counts is your purchasing power after taxes. In SF a similar house, in a similar neighborhood is 10 times than in flyover country. The purchasing power determines the standard of living. I did not even consider the time spent in traffic instead of enjoying your children and your life.

      • That’s exactly right. It’s all about finding a balance. My dad turned down a promotion in the early 90s that would have moved us from Indiana to Orange County, because they were only paying him something like 20% more, and that was back when the cost of living was much closer between the two. I can’t imagine moving to LA or SF from another Midwest City these days, unless the salary options were higher in multiples.

      • I completely agree. The only thing that matters when it comes to income is local purchasing power. I make 150,000 a year and live in Barstow, CA. One of the poorest cities in CA. Almost any property is within my reach here and the rest of the high desert but it’s not booming enough to invest.

        That’s why all the time is a great time to buy real estate. Market too expensive in OC and LA? Shift your focus to Austin and Atlanta. Real estate bubble bursts? Bring that money right back to CA.

      • Lord Blankfein

        @ New Age:

        Austin is not cheap in any way, shape or form. It’s actually down right expensive for Texas. There have been yearly double digit appreciation gains there for most of this century. When adding the weather and high property taxes, there are much better options in other cities. There are still some deals to be had in socal, you just need to know where to look. Also plan on using some elbow grease to justify your purchase.

      • 300k per year in SF is actually not too bad… assume your rent is 7k/month… that’s 84k/year leaving you a very nice chunk left over for savings/entertainment/whatever. Don’t know what the salary was in the other city though.

    • The ones who have money to gain and nothing to lose, they are the ones pushing this market up.

      Just imagine, you have nothing and you are given the chance to enter the housing casino by coming up with 3.5 percent. What in Gods name do you have to lose? If prices rise, you are rolling in the dough. If prices fall, you walk away. There was a time that your credit history had great worth, even that has been taken away from the prudent individual. Credits histories are repaired in the blink of an eye.

      The payment can even be higher than rent because of the tax write off.

    • Don’t forget about overseas buyers dumping massive amounts of money in all cash offers.

  • Great write up Dr.HB! ROFL Trash cans everywhere. That’s a sign from Prudent Investment choices heaven. Not sure this Market is sustainable in long run. % of Income going for Rent and P&I is astronomical. 4 Generations living in same house pooling incomes to pay for Rent/Mortgage. 50%+ of Income going into Housing/Real Estate. No vacations. No Retirement Savings (except equity in crab shack) Not sure this will end well.

  • Here is another picture (graph) speaking more than a thousand words. It shows what pushed the house prices so high and what are the chances for the new buyers servicing this debt for the next 30 years. Just skip the sales pitch about gold. The point is the graph which is not complete – it stopped at 17 trillion and it is now over 20 Trillion = higher systemic risk.

    • I think one way to get even with banks is have civilians own at least some gold and then let the fiat collapse. That way everyone has something to back their assets against. If you could say these gold pieces represent someone’s assets including your house then all those collapsed loans could be washed away and I guess whatever currency comes out would be met with scrutiny since the new fiat would have very little power since everyone would demand fair value on their holdings. The government would probably be in a world of hurt now that the power has come back to the people again.

  • manbearpig4lfe

    I think the trash can is there in a bragging manner; “Comes with both trash and recycling cans, no, they have NOT been stolen yet….”

    BUY NOW or be priced out forever. They don’t make more land* and prices are ONLY going up**. If you aren’t considering killing yourself for a life insurance payment so the wife can pay off the home… you are doing it WRONG.

    *Unless you consider condos and other planets we colonize
    **Over the next 7 million years

  • Before you know it a dog house might be worth something to somebody. Might even come with it’s own plot of land and a deed to go with it too.

  • son of a landlord

    Sellers are becoming so arrogant, they’re not even showing interior pictures on some listings:

    Sometimes they’ll eventually upload photos — but often not.

    “Oh, you wanna see the inside? Then move your ass down here for Open House! I can’t be wasting my time staging and photographing this place for you.”

    • Listing agents do this in the hopes of the buyer coming to the open house without an agent representing them; so the listing agent can write up the offer and double end the deal.

    • soon that will change. After the crash sellers will beg you to buy for half the price they are asking today. Unless prices crash by 50% I am not visiting open houses. I like to be arrogant too.

      • This type of attitude ails our country. Time to get off your tail and work for what you want.

      • Dreamin, prices will not crash 50%.

        Maybe a small correction, 10-15% (hopefully) but no epic crash.

      • “Maybe a small correction, 10-15% (hopefully) but no epic crash.”

        Because Dan knows something that Angelo Mozilo doesn’t.

      • Dan, so you think prices will only drop down to where they were a year or two ago? I thinks we’re permanently in a world of big rises and falls, and 30% would be modest.

      • Dan, why not more than 50%? This bubble is bigger than the previous one. After the last bust, I bought an REO from the bank for $100,000. The previous SOLD price was $360,000 (just few year prior at the top of the bubble). The condo was 2 BR, 2 BA, in an excellent location, with only a golf course between the ocean and the condo. Yes, you have to look for deals, but there are more deals that you have money to buy. After the last bust, they lower the interest a lot to give a soft landing. This time around, they don’t have that luxury.

        I don’t believe in soft landings because they exist only in speeches; never in real life. When the knife is falling, everyone is waiting till it is on the floor. There are no falling knife catchers.

      • Prince of Heck

        I believe that Dan bought within a couple of years ago or so. Hence, he can’t see the RE “recovery” for what it is — a financially engineered mania that is can only last as long as cheap credit is abundant.

      • I saw plenty of 50%+ price drops in the Canyon Country area of Santa Clarita during the 2008-2009 crash. A friend bought a condo there for $150k pre-crash and sold it for $308k right before the bubble burst. After the crash, condos in the same complex were selling for between $90-125k. It is a huge complex, and dozens of them sold for that low. I think they’re back up to the $220-250k range. Anyone who bought at $300k+ is still under water.

    • Prince,

      Not even close. Renting in newport at under market rent. Been reading this blog for quite a while and have been a bear, hoping prices will come back down so that I can get in at a reasonable entry point. Maybe prices crash to the 50% you want/predict eventually, but, some are not willing to wait the 2? 5? 10? years to jump in the market.

      Me personally, I am in the industry (mortgage broker) and write all types of loans: 3.5% FHA to 20% down conventional with perfect credit; so i see it all. The one thing in common is that they are looking to get in the market and there is just not any available inventory. If more inventory comes to market and pushes prices down, these buyers that are constantly beat out week in and week out on their offers will be soaking up this inventory. Now, of course, that may not be the case if a major recession similar to 2008 hits and that remains to be seen.

      For me; if prices come down more of my buyers will be able to get into contract and obviously my income increases and also I would LOVE to jump in at a major discount to current price levels; I just don’t see it happening. Not sure how much longer I can delay the wife, as our family has outgrown this rental.

      I would LOVE to be wrong, but, the demand is just outweighing the supply by sooo much, hard to see how it could turn.

      • “Not even close. Renting in newport at under market rent. Been reading this blog for quite a while and have been a bear, hoping prices will come back down so that I can get in at a reasonable entry point. Maybe prices crash to the 50% you want/predict eventually, but, some are not willing to wait the 2? 5? 10? years to jump in the market.”

        I stand corrected in my claim. However, I believe that we are entering a credit tightening phase. Another decade of price appreciation is unlikely. Consider that we are due for a recession — most likely as bad as the last one. If prices rise exponentially for 20 years, real estate will be the least of our problems.

        “Me personally, I am in the industry (mortgage broker) and write all types of loans: 3.5% FHA to 20% down conventional with perfect credit; so i see it all. The one thing in common is that they are looking to get in the market and there is just not any available inventory. If more inventory comes to market and pushes prices down, these buyers that are constantly beat out week in and week out on their offers will be soaking up this inventory. Now, of course, that may not be the case if a major recession similar to 2008 hits and that remains to be seen.”

        See above. I believe that the demand, and therefore “lack of inventory”, is artificially induced by monetary policies that dwarves those of the early 2000s. 8+ years of easy credit has produced bubbles in major markets but little or no sustainable economic growth.

        “For me; if prices come down more of my buyers will be able to get into contract and obviously my income increases and also I would LOVE to jump in at a major discount to current price levels; I just don’t see it happening. Not sure how much longer I can delay the wife, as our family has outgrown this rental.”

        Skeptics didn’t see the flaws in prices growing exponentially while demand was high during the mid 2000s either.

        “I would LOVE to be wrong, but, the demand is just outweighing the supply by sooo much, hard to see how it could turn.”

        You have to see the demand for what it is. Investors and flippers bidding up prices while pricing out most organic buyers. Manias occur when buyers follow a market up. Do you want to be part of the herd?

      • Prince,

        I hear what you are saying and follow your reasoning/logic as it echoes a lot of the views espoused on zerohedge (which I read often); however, it’s hard to remain patient waiting for the market to finally throw the Fed’s policies back in its face. I would love to see real price discovery and benefit from a correction; I just cannot see it happening soon.

        I’m 20-25% down w/ 24 mos reserves after closing; and looking in the 750-800k range (pretty low Debt to income ratio) and will be doing my own loan so will get below market rates; but will jump off a bridge if the market drops 20-25% and I see my down evaporate.

        I’ve held the wife off for so long that I am getting close to capitulating for the simple fact that I need a yard and bigger house for the growing family.

  • Really! People have to be literally ‘out of their minds’ to buy a crap shack like this! I just completed a purchase of a low maintenance house in a west side suburb of Denver for less than this! The big difference, I have a view of the Continental Divide from my Bedroom and home office, am 1 block from a lake and open space trails, have 3,300 finished square feet, an open kitchen, and a huge master suite.

  • Seen it all before Bob
    • Not only the same trash can from 2007 but a bigger bubble than 2007. Some things never change and people with a gold fish memory repeat the same mistake all over again. Did they learn anything? It looks based on the current bubble that they didn’t.

      • Flyover, I like you estimate of housing prices falling more than 50% this time. It is also a worldwide mania this time so that may also contribute to a larger decline this time around. I am trying to convince my friends not to buy real estate now but sky high rents makes that a hard sell. Since I also own a home and don’t plan to sell it, I look like a hypocrite.

        “If buying make no sense,” they say, “then why don’t you sell you home and rent?” All I can say is that it costs a lot to sell a home and that I can live in my present home for half the cost of renting a similar home. Also, my property taxes are only half of what they would be without Proposition 13 protection and I like my neighbors. It would only make sense to sell if prices were going to drop 20% or more within 3 years and I can’t know that for sure.

        All i c

      • Seen this all before, Bob

        Agreed! To quote a famous person on this blog. “Housing to tank hard soon!”

      • Seen this all before, Bob

        The advice I will give now is that if you buy now, it better be a place you will love to live in for the next 10 years until the cycle repeats and you will get your money back. Don’t despair and foreclose because the cycle will repeat and you will be happy with the home of your dreams.

      • Seen this all before, Bob

        Let’s see. 1988, 1997 and 2007 were peak years before a tank. And 2017 will be???? My engineering degree sees patterns.

      • Lord Blankfein

        Bob, I think you have your numbers mixed up. 1997 was the bottom of the market in socal and was one of the best times to buy EVER. Buying a home in a desirable socal area in 1997 was equivalent to buying a winning lottery ticket. Those homes have appreciated my at least 4x and are locked into insanely low Prop 13 tax basis. Another reason there is no inventory.

      • Seen this all before, Bob

        I was off by a year or 2. My mistake. 1999 was really the year of the peak of the Tech Bubble in the Bay area. Admittedly in was a small peak and only a 10% drop in housing in that area. I still see a pattern. Roughly 10 years.

  • Lets face it. There are only a few cities where the action is. NYC, LA/OC, SF, SD, Boston, DC, and Seattle. Some would argue Seattle does not belong on this list of super cities, but I think it made the cut. Those 7 cities are where you want to be if you can pull it off. So, you graduate from college, then you move to one of those 7 cities and you go for it.

    At the age of 40, if your career is doing great and you own a great home in one of the 7 blessed cities, then you win. If you reach 40 and you are still struggling in one of the 7 super cities, then you throw your cards in and you move to somewhere like Denver or Austin where the game is easier while you still have time for a great life. That is how the game is played.

    However, a poor strategy is people with dead end careers in a super city decides their road to success is wait for a collapse then get in for a song. That is no way to run a life. You would be better off moving to Denver or Austin and restart your life.

    • Millennial_Not buying your overpriced crapshack

      “their road to success is wait for a collapse then get in for a song. That is no way to run a life. ”
      Waiting for a collapse is a great way to be successful. Successful people know that buying low and selling high is the key to financial success. Not so much the other way around, JT-Troll. LOL

    • Those 7 cities are blessed cities? More like 7 cursed sanctuary cities controlled by radical leftists where taxes and crime are high and income inequality is extreme. They are powder kegs waiting to explode.

    • I mostly agree with this assessment for now.


      These cities/areas are losing young people at a tremendous rate. Without young people, they will lose the dynamic atmosphere that made them so attractive in the first place.

  • son of a landlord

    Freeway adjacent! Crappy area! Only $1.2 million!

    I love how the listing says “Beverlywood adjacent.”

    When you buy a house, aren’t you concerned about the neighborhood that a house is ACTUALLY LOCATED IN rather than its ADJACENT neighborhood?

    Will they start listing Van Nuys houses as “Sherman Oaks adjacent”?

  • son of a landlord

    Actually, it says “Beverlywood vicinity,” which I guess is even more hazy. So a neighborhood doesn’t even have to be adjacent — just being in the vicinity is good enough.

  • Check out this beauty in Orange County:,condo,apartment_duplex,townhouse_type/25201940_zpid/33.815951,-117.936774,33.678211,-118.057623_rect/12_zm/?

    The builders started constructing this house then said “screw it, we’re not even going to finish” and are selling it for $600k.

    • son of a landlord

      Realtor always make negatives sound likes pluses. Every detriment is an “opportunity.”

      From that listing: “Great opportunity to build your brand new custom dream home … This is a once in a lifetime opportunity …”

  • Another beautiful day in the Bay Area…

    with 3-12+ offers and houses selling for $50K-$100K over asking

  • Dr., How will nuclear war with North Korea affect housing prices?

    • Son of Jim, what counts is the outcome of the war and nobody knows that. That is a very messy area with potential of other players getting involved, like China, Japan, S. Korea and Russia. If, how many of them and to what extent they get involved nobody knows.

      • apolitical scientist

        At least HRC isn’t president, since we all know she stated her desire to start a nuclear war – unlike peace loving, America first DJT. Or did I get that wrong? I still get my news from fake news sites like the WSJ and NYT so I don’t have access to the “truth”.

      • Apolitical, the real foreign policy is done by the CFR and trilateral commission. By now, that swap buried Trump alive – hard to tell if it was done by carrot or blackmail. Hilary was already part of the swamp. With Hilary there was zero hope and with Trump 10%. By now I can tell that the swamp creatures lead undisturbed. I don’t know if that gives you satisfaction. It might if you are part of the deep state. It doesn’t give me any satisfaction if that makes you feel good.

    • Millennial_Not buying your overpriced crapshack

      “Dr., How will nuclear war with North Korea affect housing prices?”
      I am not a doctor but my assumption is houses tend to lose value after you drop a nuclear bomb on them.

    • North Korea is only a threat to areas in the near vicinity. It will not affect US prices.

  • Paradigm Shift

    Some context on this property:

    Built in 1921. The square footage of the house is, as mentioned, 572 sq. feet, but the lot is only 2,454 sq. feet. You have no room to expand. The area, lot size and house condition are terrible value at that price.

    It was sold in November of 2005 for $180,000. If sold now at $470,000, that means the house appreciated in value $2,014/month for every month over a 12 year period. That is not sustainable at this price point. CoreLogic’s AMV model estimates this house should be worth $315,000.

    Over the past 6 months, the area has seen 66 violent crimes and 323 property crimes.

  • For all you whiners complaining that houses are too expensive in LA, look at this 4 bedroom, 2 bath beauty in the Willowbrook section of LA that was built in 1998 and is going for the bargain price of $339K!

    • Good find. I’m gonna put in my standard offer of 10% over asking. Can’t wait to move in. It’s like a real life Boyz N’ Da Hood but in a worse neighborhood.

    • Jenny_sweet Millennial

      Overpriced crap shack. Looks very ghetto. Sold for 76k a few years back. 1300 sq is not enough to live in satisfaction plus crappy backyard (not even a spa). I would not offer more than 76.5k for this dump. If realtor offers me a gift card I would visit an open house though and tell him all the things that I find wrong with this shack.

    • Is that car in the driveway included?

  • Crapshacks and street side garbage pickups are so passe. It’s all about house-boat living now.

    From here forward it’s a pirate’s life for me matey. Arrgh!

    • Laura Louzader

      I’ve always been curious about houseboat living. At first blush, it looks like it could be a fun way to live for singles or childless couple- I remember childless friends of my parents I once met, who lived in a very ample 2-story houseboat on the Mississippi River back in the early 60s. But I wonder how people handle the mundane things like water and electric hookups, and sewage disposal. Heard from people who lived on houseboats in the famous Sausalito houseboat community back when it was “the last free ride”, and it was said that local land dwellers were dismayed by the pollution and health hazards the boat community caused. I imagine that there is no more “free ride” for boat dwellers, and that the fees and permits for houseboats are probably pretty steep. There’s probably also a lot of resistance to them among nearby land dwellers who pay steep property taxes and want their waterfronts clear.

      • alex in San Jose

        As the crash was, well, crashing, in 2007 I looked into the houseboat scene. Go and walk the docks and you can find some amazingly cheap deals – basically a floating hull it’s up to you to make into what you want, but the price of entry is low.

        You also have to pass muster with the “association” that runs the marina, and be voted in. Don’t be black, non-Republican, etc. If you’re a vet remember your “military bearing” that’ll go miles with ’em. OK so you’re in. A houseboat is a house that’s a boat that can sink any time. Best to keep on good terms with the neighbors because when you’re at work and your house starts to sink, they’ll climb aboard and try to save it IF they care about you.

        It’s salty – you’re on the water. Anything that can rust will. Anything that can’t, will try its best anyway. For some reason, docks and wharves and seaside places with boats – in keeping with their reputation for as long as any history has been recorded – can be homes to disreputable characters. You’re like as not to look across water to see your new neighbors; homeless folks living on something half-sunk and getting around by bicycle, propelled by meth.

        It all sounds lovely, you say, where do I sign up? First, two words: Humming fish.

    • A wise man once told me that two of the worst investments you can make are horses and boats.

      I agree that the idea of living on a boat is romantic. But I have a feeling that the reality is much different. The cost of maintenance in time and money must be staggering. That’s not even including the time and money spent trying to find a place to dock your floating crapshack.

    • Laura Louzader

      Alex, I agree. Like I said, the houseboat lifestyle looks like a fun and interesting way to live for young people, but the difficulty of securing the things, and things succumb to rust, mold, and other deterioration much more quickly in water. Even a small motorboat is a PITA to store and maintain. Between the lack of security, the prevalence of low-life people and crime close to wharves and piers, the smallness and spartan conditions of most affordable houseboats, and the difficulty and expense of docking and maintaining the thing, you’re really better off in a studio condo.

  • buy houses now or priced out forever

  • invest in texas most manufaturing company will moved to texas

  • Tax quotations for tax day:

    I’m sure that Alex, as a faithful taxpayer (taxed to death) likes them.

    • alex in San Jose

      I dunno about taxed to death, but I didn’t quite make the $13k mark, made 12-thousand-odd, and my taxes were just under 2 grand so yep, just another case of the little guy holding up his end, meanwhile Orange Jesus won’t reveal his “sooper-seekrit” tax info.

      • Trump does not have to show his taxes to anyone. If other presidents want to do that (think it is to their advantage), it is their business.

  • Seen this all before, Bob

    Why would you buy this when you could buy a 2500 sq foot bunker for nearly the same price?

  • Could housing prices double in the next 3 years and then decline 50%? In such a case, buying now makes sense since prices will not be cheaper in the future. That is the problem with knowing that one is in a bubble. It still might make sense to buy anyways. No one knows when the bubble will end and the decline start.

    • If you like to gamble with your downpayment and your credit, it is your decision. Just don’t cry a river and divorce when the bank will take it from you.

      • I can imagine that prices could double in parts of California, where home prices are still well below 2007 highs, and even go up 60% in the most overpriced areas like LA. Don’t underestimate the Fed’s ability and desire to support real estate prices at all costs. The Fed could drive down long-term mortgage rates to 2% and the government could start offering nothing down loans.

        If such a scenario should occur, the DJIA would probably go to 30,000 or more since it is also in a mania bubble.

    • Gary, prices could double in the next three years? Sounds reasonable. Why wouldn’t they double? You should buy now….dont miss out!

    • I would only agree with that if the buyer in question can actually afford it. You can’t go into it thinking “with luck, I might be able to keep my head above water for a year, then I can cash out for a quick 5-figure payday.” Sometimes bubbles do continue far longer than the bears think they will, and after they drop, they don’t keep dropping to previous lows as some think they will. We bought in January, and the comps have been steadily rising, up 8% now. That’s $53k on paper in three months for doing nothing. Not that it matters – any more than it will matter when it’s down $200k. This is a 20-year stay.

  • The left descent to fascism will put most homes out of reach for the wage earners.

    This article is written by a Berkeley alumni who switched from left ideology to being a realist who is no longer looking for government solutions. The government is by the Kleptocracy and for the kleptocracy.

    • alex in San Jose

      I’ve been reading him for years and like him. I think he’s got a real point, but I’m sure he’d also tell you the Tangerine Toad is also part of the kleptocracy, or its willing servant.

      I don’t think he makes much more than I do. However he makes it writing and blogging and putting out books and that, in my book, beats slinging dusty old oscilloscopes around.

  • It would be a foolish bet to assume housing prices are going to double from here. By the way just stating the obvious here, when home prices outstrip local wages….its a bubble.

    • Seen this all before, Bob

      But, But, housing prices have out-stripped wages for over 2 years now. How are all of these buyers qualifying for a loan? Maybe huge down payments are all coming from the stock market bubble? I can confirm this for 2 friends. Anyone else have any confirmation?

      • Seen this all before, Bob

        When Apple stock goes from $1 equivalent per share in 2003 to $145 today, there are a lot of Mac loving people who have money for houses. Let’s see, I love Macs so I’ll invest $10K in 2003. Now I have $1.4M for a down payment or just to pay for a crap shack in cash. So many bubbles blowing each other up.

      • Seen this all before, Bob

        One other thing. as the Baby Boomers get older, the government is much more concerned with propping up the stock market which ARE the pensions and 401K’s of the boomers than they are with propping up the housing market. Whether a Taco Tuesday Boomer majority’s house is worth 100K or 1M is of minor concern to the Boomer compared to whether the pension check buying the tacos keeps coming.

  • There is simply no sign of a real estate top. Saying that prices are in a bubble really means nothing until prices actually start declining. The top will be obvious when it occurs. Right now the bubble is still moving ahead at full speed.

    • The last suckers are buying before it all crashes down again…..i think thats a much better description of this bubble.

  • Hey, in all fairness, it’s a recycling bin rather than a garbage can….

    In any case, for those panicking and thinking home prices will never come back down in SoCal, check out the price history on this home in La Mesa, adjacent to San Diego. A quick perusal of the numbers reveals that it sold for 779k in 06 during the last bubble, and the owners turned around and listed it for 865k a year later….they continually dropped the price and finally sold it for 515k in 09….losing a cool quarter million plus. The next buyer was foreclosed on in 2011, and the bank ultimately sold it in 2012 for 495k. Now its back on the market for 639k. And this is actually a pretty nice house, not the typical crap shack crammed next to a neighbor. Perfect microcosm for SoCal real estate…the roller coaster continues, but we have short memories.

    • That is a nice crapshack. I’m not familiar with that area, but I like the house. It has a lot of character. I don’t like that it was built in 1940’s and doesn’t appear to have central AC. Summers are a scorcher in inland San Diego.

  • I love the “homes of genius.” hilarious. thanks for the laugh. 😀
    these prices are nuts.

  • Not sure if anyone will see this, but you can provide any information, maybe in a future article, about deconversions? President of our association brought this to our attention yesterday and said they got an offer to buy our building and turn it into 100% rentals. I understand 75% of owners need to sign off on this, but I do not want to sell my place. As a result, there is a slight chance that I might get kicked out of my condo for no other reason than because other unit owners want a quick cash out.

    Honesty, this is kind of scary. Houses are being flipped into rentals and now condos seem to be going the same route. Pretty soon owning any kind of property could be very difficult. Our condo is currently valued well below what we paid for it, but we are not ready to buy again, and we certainly do not want to start renting again. We have been living in our condo for 15 years! Our building financials are pretty solid, so there is nothing screaming for our building to be sold. Our association is very lazy and I do not think they see the downside of this. Any info you can provide would be great.


    • Laura Louzader

      Condo Owner, I am a recent “deconversion” victim here in Chicago, and I greatly sympathize with your plight. The recent de-conversion and sale of my beautiful vintage building here in Chicago left me scrambling for an inferior replacement in an overheated and rapidly inflated market with almost nothing for sale, so I’m renting for much more than I was paying in HOA and low taxes- I paid cash for my unit at a bargain price in 2013. But there are sure as hell no bargains left these days, and you can’t sit out this lunacy in a cheap rental as you could during the Rampage of the 00s because rents are inflating rapidly, too. Another unit, steeply inferior to what I owned here, but was willing to grab just as rent hedge, went contingent today before I could submit an offer. My bad- I should have done it when I viewed the unit last Thursday, but I’m not used to deciding to buy a house with less time and thought than buying a pair of shoes.

      Trust me, I will never, ever again buy into a building that is heavily investor-owned, and am looking for a place with tight rental restrictions.

      Here in IL, only 75% of owners must agree by formal vote to the conversion to rental, and all will be forced to sell. States vary- in Florida, for example, if one entity owns 50% of a complex, the entity can force a conversion to rental. Investors looking for buildings to buy prefer 100% owner approval- a dissenting owner can slow the process down a lot. But keep in mind that if your fellow owners vote overwhelmingly to convert and you obstruct the sale, you can be held liable if it fails, while your obstruction will cost the association, including you, much more in legal expense than if the transaction went smoothly. That’s why I stopped fighting when I saw that a favorable vote for the sale of my building was a done deal- as it is, the other opposed owner decided to cause a lot of trouble, which cost us many thousands more in legal expense, cutting into everyone’s proceeds.

      Your fellow owners will discover it’s not as simple as they thought, for you all will have to pay the legal expense of conversion, which is not cheap. How easy it will be win the approval of enough owners depends on a number of things. Complexes with heavy owner occupancy, and where owners have mortgages and/ or are underwater, are usually pretty resistant to conversion. However, if there are few or no mortgages (owners own the units outright), owners have a low cost basis, and most owners are investors who rent the apartments out, you can consider yourself as good as de-converted.

      You need to talk to other owners, one on one, and see which way the wind is blowing. If you can get 30% of the owners on your side, you can defeat the proposal, and the best way to do that is to show these owners how much it will cost to replace their units with anything as good, let alone any better, with the proceeds of the sale. Point out that they will have to pay their proportionate share of legal expenses pursuant to the conversion, sales commissions, and normal closing costs out of their proceeds, and THEN they will have to scramble for another place to buy and hope they can get a place that’s half as good as what they have, or remain in place and pay escalating rents, while now they have minimal mortgage payments since they have owned their places for a long time. Tell them to take a look at the rental rates for comparable units, and take a look at what is available to buy. Be grateful you don’t have a building full of greedy, parasitical amateur investors for whom it’s just another profit opportunity because they live elsewhere and will not lose their homes.

      Have private meetings and get-togethers at your own unit. Call people. If the potential buyers sense enough resistance, they will go away. And remember, one vote can make all the difference- one 500 unit building here in Chicago was prevented from converting by ONE vote. Sure, everyone hates the old woman, but she has her home of decades and the haters can just sell.

      I believe that no one who has bought and paid for his unit, pays his HOA and taxes, and meets the other obligations of a condo owner should have to suffer being forced to sell if he does not want to, and I’m writing my state legislators to change Illinois law to require 100% approval.

      Good luck to you. Please keep us posted on how things go.

    • Laura Louzader

      Oh, and if your fellow owners are “lazy” and just want a “quick cash” out, tell them it would be simpler and faster to just put their places on the market and SELL, dammit, because the deconversion-to-rental process takes more time than simply selling one unit. Ours took 8 months, which was plenty of time for prices for comparable units in the same area to inflate to the price we’d been offered.

      Here in Illinois, the process goes something like this, and it is largely the same in other states- check and see what is required in your state:

      1. The proposal is put forward at a meeting of the Board of Directors, and they vote to offer the building for sale.
      2. If offers are forthcoming, they then convene a general owner’s meeting and election, which requires, usually, 20 days notice of the meeting in writing to be delivered to all owners along with the formal ballot. You must make sure the ballot is in good legal form- your financial management company or counsel has to advise you.
      3. If 75% of the owners approve the offer, the sales contract is signed, and the conversion-to-rental is done at the association’s expense, which can be considerable, and which also takes time. During this time, various things have to be worked out- will current owners stay on as renters and how much will they pay; the buyer’s inspection will be done and the buyer and sellers will negotiate any needed remediation, and some of the owners will of course obstruct things and create problems that slow things down.

      4. The buyer, with signed contract, seeks financing. If he is paying all cash, which is rare, things will move along briskly to the close of the sale. But the buyer usually needs financing, and financing a large multi-unit property is very difficult and tricky unless you are a really huge concern. Getting financed could take the buyer many months even with a large downpayment- ours put down 60% and the financing still took a couple of months to be approved.

      5. When the sale finally closes, selling owners are given their proceeds, less their share of legal, closing, and commission costs. However, they are not remitted their share of reserve funds at this time, for the association’s final bills must be settled up. Relationships with service providers and utilities must be terminated and final bills paid- water, sewer, common gas and electricity, trash haulers, pool service and other such expenses. There likely wont be a large amount of reserves to distribute once this is all complete.

  • With so much “diversity”, CA house prices can go only up. Who needs the “haters” in flyover country? Alex likes his “diverse” neighborhood.

    • alex in San Jose

      For every one of those, there are several crazy meth-addled neo-nazis.

      This is why I think people in the US, and I’m looking at you, LEFT, should lay the hell off of Israel for doing what needs to be done. We need to learn from them, because the extremists are coming here, too.

      • son of a landlord

        You hate white nationalists, but love Israel?

        Israel wants a Jewish ethnostate.

        White nationalists want a white ethnostate.

        How are they different?

  • Another proof this is a bubble like nothing else before.

    It is a western bubble because the work force of the West can no longer compete with cheap labor world wide. For that, the western governments print money (borrow) like there is not tomorrow (see Canada, UK, AUS, US, etc). Can the millennials pay all this debt with the small wages (adjusted for inflation) if they are lucky to find work? It is a western phenomena where debt is at catastrophic levels for national governments, businesses and individuals; consider credit card debt at over 1 Trillion, student debt at 1.4 Trillion, housing at over 10 Trillion, auto loans at over 1 Trillion. What economic engine can provide the fuel to service this debt? Is 60% FIRE economy going to service it? It’s like being in a bucket and trying to lift yourself up by the handle.

    If the governments continue to paper over these debts, would a slice of bread reach 1 million? There is only an illusion of recovery. How will the hangover look like when people actually have to service these debts in a tax increasing environment? Taxes have to increase just to service the increasing interest and higher cost to operate an inflationary economy; at all levels: federal, state and cities.

    • Laura Louzader

      Good post. This is truth underlying all our current economic problems. We seem headed for much darker times, because those who are positioned to skim every transaction we make and who profit from asset inflation and debt creation, will happily murder three quarters of the population and reduce the remainder to dirt-floor poverty to make their profits and maintain their positions.

  • CAR report for March 2017 CA Highlights:

    * Existing home sales up 4% from prior month to 416,580
    * Median home price up 8% from prior month to $517,020
    * Active listings down 12% from a year ago
    * Median number of days to sell is 26.7, down from 33.5 in Feb. “17
    * Inventory is lowest point for current year and third lowest point in over three years
    * The average price per square foot $252, up from $241 in Feb ’17
    * Sales-to-list price ratio was 99.3% of listing prices, up from 98.6% in Feb. ’17

    “The spring homebuying season is off to a good start, as the economic and market fundamentals remain solid for the most part,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “However, higher interest rates, a dearth of housing inventory, and slow wage growth will continue to have an adverse effect on housing affordability that is putting upward pressure on home prices, and is sure to hamper the market throughout the year.”

    • Lord Blankfein

      That’s all fake news, look at the source. We all know home prices and rents are going down.

      • Putting yourself under the bondage of debt is easy. The bankers need slaves. Lets see how the millennials are going to service these mountains of debts year after year. That is the hard part – paying it down. I know the federal government will not pay a dime, but the rest of businesses and individuals will attempt against all odds to do it. Against all odds because the interest is never created, only the money (debt). The interest is what is transfer from the producers to the money creators. Now they want to accelerate the transfer by raising the rates.

        It’s like me going to the dealer getting a car with zero down. It’s easy; anybody can do it. Paying that back, as the recent statistics show, it is a different matter.

        I am still trying to build up a “war chest”, to get ready, but I have the feel that the house of cards will collapse before I am ready with my goals.

      • I am neither a bear nor a bull on the housing market. I own numerous properties throughout S. Cali, but I have not bought anything in about 2 years and am considering selling one. That being said, I don’t see list prices or rents decreasing when taking a wide look at the market. Maybe there are pockets or neighborhoods where rents are lower and prices have come down. But making sweeping generalizations like “Home prices are falling.”, or “Rents are coming down.” is just hyperbole. One thing that is true and plain as day is that there is a overall lack of inventory, especially in the starter and mid-range properties. The pickings are slim and that’s why any halfway decent reasonably priced property (“reasonable” is up for interpretation), gets multiple offers and sells quickly. I do think that prices will start to taper off soon. I believe we are quickly approaching maximum affordability in Los Angeles, San Diego, & Orange County but have already passed that point in SF. I think prices can continue to rise steadily in the IE where they are still well below the previous peaks. That’s my 2 cents.

      • manbearpig4lfe

        Flyover, it appears there will actually be an auto bubble (believe it or not). It makes sense especially in SoCal, a huge majority of the pop can’t buy a house or even condo. So they instead over leverage debt with a new car. There will be a ton of people losing their cars soon and the car market will plummet. It will be interesting to see how it affects home prices. I mean… if you lose your car and can’t qualify to get a new one will it make people move to more urban areas?

        My 2.5 year old VW Passat (non diesel) is worth less than half its value. If i did not lease I’m sure i would have taken a hosing on that car.

      • Prince of Heck

        Prices and rents have been falling in pricier San Francisco already. But don’t worry, So Cal’s bubble is impermeable.

    • You forgot to mention that the tax rate in that part of Cleveland is more then 2x what we pay in CA and get reassessed at market value each year. So on the house shown at the list price you would be paying somewhere around 14K per year in property taxes. Nothing to sneeze at.

  • I wonder when I read this, how can people even pay a mortgage, or afford a down payment. Thats’a the problem in Los Angles, even two high income earners have a difficulty time, making ends meet. That’s what happened on 2008, the market reached the point where two wage earners could no longer afford to buy a home. Its worse now. Living here is living on the edge more than anywhere else…It only takes a little nudge to push you over. There are no jobs anymore, retail is gone to online, etc., its a rootless anonymous existence, fused by drugs and rehabs, and hook ups, thats the future, until the economy evaporates.

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