Comments on: What Should a Home Really Cost? Using Real Estate Valuation Methods to Arrive at a Sustainable Market Price for Homes. Three City Examples: Compton, Culver City, and Rancho Palos Verdes. http://www.doctorhousingbubble.com/what-should-a-home-really-cost-using-real-estate-valuation-methods-to-arrive-at-a-sustainable-market-price-for-homes-three-city-examples-compton-culver-city-and-rancho-palos-verdes/ How I Learned to Love Southern California and Forget the Housing Bubble Tue, 16 Mar 2010 20:25:09 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Lyle http://www.doctorhousingbubble.com/what-should-a-home-really-cost-using-real-estate-valuation-methods-to-arrive-at-a-sustainable-market-price-for-homes-three-city-examples-compton-culver-city-and-rancho-palos-verdes/comment-page-1/#comment-42752 Lyle Sun, 29 Nov 2009 06:43:06 +0000 http://www.doctorhousingbubble.com/?p=2717#comment-42752 A couple of comments about where the money is coming from. First smaller families which reduce food, medical clothing and education costs. Second smaller spending on food, possibly leading to the obesity epidemic as fast food substitutes for home cooked food. Third many other goods like appliances are no more expensive than they were 30 years ago in terms of hours worked to buy. Given that a child costs 250k or more to raise to 18 and likley now another 100-200k to get thru college, its clear that fewer kids mean more money to spend elsewhere. This is taking an economic point of view where a child is not viewed as a good investment anymore which changes the push with biology over children. A couple of comments about where the money is coming from. First smaller families which reduce food, medical clothing and education costs. Second smaller spending on food, possibly leading to the obesity epidemic as fast food substitutes for home cooked food. Third many other goods like appliances are no more expensive than they were 30 years ago in terms of hours worked to buy. Given that a child costs 250k or more to raise to 18 and likley now another 100-200k to get thru college, its clear that fewer kids mean more money to spend elsewhere. This is taking an economic point of view where a child is not viewed as a good investment anymore which changes the push with biology over children.

]]> By: GeekGirl http://www.doctorhousingbubble.com/what-should-a-home-really-cost-using-real-estate-valuation-methods-to-arrive-at-a-sustainable-market-price-for-homes-three-city-examples-compton-culver-city-and-rancho-palos-verdes/comment-page-1/#comment-42746 GeekGirl Sat, 28 Nov 2009 23:36:22 +0000 http://www.doctorhousingbubble.com/?p=2717#comment-42746 Well maybe the people who are running the show are paying attention to some things we don't know much about - and maybe Martin Armstrong is one of the people who knows something about what they know - which is why he is being detained - and now moved to a very dangerous high security prison ... read his story on Nathan's blog - and see if you don't agree - something's clearly on - http://economicedge.blogspot.com/2009/11/martin-armstong-forced-to-move-to-high.html Any assistance to help keep Armstrong alive is greatly appreciated. and no we aren't kidding about that, either. Well maybe the people who are running the show are paying attention to some things we don’t know much about – and maybe Martin Armstrong is one of the people who knows something about what they know – which is why he is being detained – and now moved to a very dangerous high security prison … read his story on Nathan’s blog – and see if you don’t agree – something’s clearly on – http://economicedge.blogspot.com/2009/11/martin-armstong-forced-to-move-to-high.html

Any assistance to help keep Armstrong alive is greatly appreciated. and no we aren’t kidding about that, either.

]]> By: Jackman http://www.doctorhousingbubble.com/what-should-a-home-really-cost-using-real-estate-valuation-methods-to-arrive-at-a-sustainable-market-price-for-homes-three-city-examples-compton-culver-city-and-rancho-palos-verdes/comment-page-1/#comment-42745 Jackman Sat, 28 Nov 2009 22:03:10 +0000 http://www.doctorhousingbubble.com/?p=2717#comment-42745 Quick commenter is right that today's reality does not reflect median price to income ratios. That said, the history of LA's housing market, including places like Beverly Hills, reflects a steady median price to income relationship for the vast majority of the twentieth century. There were apartments, renters, desirable areas, and wealthy people during those times too. The current median price to income ratios for most of LA are completely out-of-whack. If there were no means to secure a loan outside of traditional (20% down, 1/3 take home payment max) right now, I think there'd be a considerable return to the historical norm. If a bank won't let you pay more than a third of your take home pay, and you have no other options, then prices will have to fall. Currently, the condo market is perhaps the most absurd. $500,000 for a 2 bedroom apartment clone in West Hollywood with a $300-500 HOA payment. Rents for $1500-$1800. Quick commenter is right that today’s reality does not reflect median price to income ratios. That said, the history of LA’s housing market, including places like Beverly Hills, reflects a steady median price to income relationship for the vast majority of the twentieth century. There were apartments, renters, desirable areas, and wealthy people during those times too.

The current median price to income ratios for most of LA are completely out-of-whack. If there were no means to secure a loan outside of traditional (20% down, 1/3 take home payment max) right now, I think there’d be a considerable return to the historical norm. If a bank won’t let you pay more than a third of your take home pay, and you have no other options, then prices will have to fall.

Currently, the condo market is perhaps the most absurd. $500,000 for a 2 bedroom apartment clone in West Hollywood with a $300-500 HOA payment. Rents for $1500-$1800.

]]> By: Quick Commentor http://www.doctorhousingbubble.com/what-should-a-home-really-cost-using-real-estate-valuation-methods-to-arrive-at-a-sustainable-market-price-for-homes-three-city-examples-compton-culver-city-and-rancho-palos-verdes/comment-page-1/#comment-42744 Quick Commentor Sat, 28 Nov 2009 21:12:09 +0000 http://www.doctorhousingbubble.com/?p=2717#comment-42744 AnnS: I'm just trying to explain reality as of today whereas you're trying to explain what reality SHOULD be. You can't get overblown appraisals and for most people, it's not easy to get a loan... yet, prices are where they are... still. OK, so I get that there is certainly good odds that prices will drop further. But saying that prices have to be 3 to 3.5x income for ALL areas seems pretty unlikely. Did you know that there are tours where foreigners drive around SoCal neighborhoods to buy up prime and cheap SoCal real estate? Did you know that given today's rates, affordability is actually pretty good? Outside of government incentives, there is no pressure for prices to increase but I think a very slow crawl down or sideways movement for years and years is more likely than another major downward leg. AnnS:

I’m just trying to explain reality as of today whereas you’re trying to explain what reality SHOULD be. You can’t get overblown appraisals and for most people, it’s not easy to get a loan… yet, prices are where they are… still.

OK, so I get that there is certainly good odds that prices will drop further. But saying that prices have to be 3 to 3.5x income for ALL areas seems pretty unlikely.

Did you know that there are tours where foreigners drive around SoCal neighborhoods to buy up prime and cheap SoCal real estate? Did you know that given today’s rates, affordability is actually pretty good?

Outside of government incentives, there is no pressure for prices to increase but I think a very slow crawl down or sideways movement for years and years is more likely than another major downward leg.

]]> By: compass rose http://www.doctorhousingbubble.com/what-should-a-home-really-cost-using-real-estate-valuation-methods-to-arrive-at-a-sustainable-market-price-for-homes-three-city-examples-compton-culver-city-and-rancho-palos-verdes/comment-page-1/#comment-42742 compass rose Sat, 28 Nov 2009 19:54:18 +0000 http://www.doctorhousingbubble.com/?p=2717#comment-42742 With all due respect to Hugh P. in NZ, your model for California--"develop the margins!"--is precisely the one that has been followed since the 1950s, and it is NOT sustainable...for the same reasons Dubai is hitting the wall. Starting with the quasi-religious belief that oil will always be cheap and abundant. ~ See Gail the Actuary's thoughts on Dubai from today's The Oil Drum: http://www.theoildrum.com/node/6000 ~ I can't say how things cost out in New Zealand, but the fact is that California grew its "develop the margins!" based income over 50-60 years with a whole lot of externalized, deferred, or mounting but ignored costs. LA is the prime example of a city built on these sands. ~ But I'm open minded. Tell me how a broke state can build more highways, find and pipe more water, expect more people with no jobs to buy more houses (and the crap to fill them) in the frakkin SUBURBS.... And if you could add a bit about how to sustain this model in an era of peak oil, rising fossil energy prices, and even scarcer water, soil, and reliable hydrological cycles, that'd also be nice. ~ Suburbanization--with its vast hidden or externalized costs--is a large part of the problem. Not any solution. DHB's view is the only rational solution: housing prices within the MOST EFFICIENT core areas of concentrated settlement must be allowed to settle back to 2.5x income, rather than continuing to flog the dying camel of "fringe" development. ~ On the Black Friday topic, financial press is full of "buying opportunity!" type rhetoric (I think it was at CBS Marketwatch that suggests we all bulk up on JP Morgan Chase and Wells Fargo). ~ I am thankful for Doctor Housing Bubble! ~ rose With all due respect to Hugh P. in NZ, your model for California–”develop the margins!”–is precisely the one that has been followed since the 1950s, and it is NOT sustainable…for the same reasons Dubai is hitting the wall. Starting with the quasi-religious belief that oil will always be cheap and abundant.
~
See Gail the Actuary’s thoughts on Dubai from today’s The Oil Drum:
http://www.theoildrum.com/node/6000
~
I can’t say how things cost out in New Zealand, but the fact is that California grew its “develop the margins!” based income over 50-60 years with a whole lot of externalized, deferred, or mounting but ignored costs. LA is the prime example of a city built on these sands.
~
But I’m open minded. Tell me how a broke state can build more highways, find and pipe more water, expect more people with no jobs to buy more houses (and the crap to fill them) in the frakkin SUBURBS…. And if you could add a bit about how to sustain this model in an era of peak oil, rising fossil energy prices, and even scarcer water, soil, and reliable hydrological cycles, that’d also be nice.
~
Suburbanization–with its vast hidden or externalized costs–is a large part of the problem. Not any solution. DHB’s view is the only rational solution: housing prices within the MOST EFFICIENT core areas of concentrated settlement must be allowed to settle back to 2.5x income, rather than continuing to flog the dying camel of “fringe” development.
~
On the Black Friday topic, financial press is full of “buying opportunity!” type rhetoric (I think it was at CBS Marketwatch that suggests we all bulk up on JP Morgan Chase and Wells Fargo).
~
I am thankful for Doctor Housing Bubble!
~
rose

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