tag:blogger.com,1999:blog-35190061.post117139647689743408..comments2023-10-17T03:59:01.588-07:00Comments on Doctor Housing Bubble Blog: The Evolution of the Los Angeles Housing Bubble. 50 Years in Perspective.Dr Housing Bubblehttp://www.blogger.com/profile/12407700951720008626noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-35190061.post-10238959960114531342007-02-21T12:19:00.000-08:002007-02-21T12:19:00.000-08:00If so, why would anyone rent then? I always though...<I>If so, why would anyone rent then? I always thought that rent was approximately 30% less mortgage payments on a similar property? (Dr. Housing Bubble, please feel free to answer the same question if you like).<BR/></I><BR/><BR/>Renting is always a bit more than carrying a mortgage because you pay for the immense flexibility in renting. No maintainence issues, flexibility to move without a huge 30yr commitment. You trade flexibility for long term commitment that is why a mortgage is cheaper. Also landlords need to turn a profit on rentals after their overheads ;-) Otherwise having rentals makes no sense.<BR/><BR/>We are in a strange situation where carrying a mortgage is about double or more than renting an equivalent place but that will align with a 50% correction over the next 3-5 yrs :) What goes up MUST come down to align with fundamentals, there is no escaping that at all! So just have patience!!!!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35190061.post-81507096234544969002007-02-18T13:41:00.000-08:002007-02-18T13:41:00.000-08:00Hello IrvineRenter. You mentioned you were going ...Hello IrvineRenter. You mentioned you were going to hold off on purchasing a home until the payments on a 30 year mortgage were as much as rental payments on the same house. Has this ever been the case? If so, why would anyone rent then? I always thought that rent was approximately 30% less mortgage payments on a similar property? (Dr. Housing Bubble, please feel free to answer the same question if you like).<BR/><BR/>Dr. Housing Bubble, I am very interested in learning more about investing in real estate and creating passive income. I was in the local bookstore the other day looking for information on the topic and was surprised to see just how many books there are on the education of real estate investing, real estate market economics, etc. Could you, or anyone else for that matter, recommend the best books from which to learn?<BR/><BR/>A very appreciative, <BR/>JessicaAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-35190061.post-35052578731253594652007-02-15T08:26:00.000-08:002007-02-15T08:26:00.000-08:00gepetoh:I think your market observations are astut...gepetoh:<BR/><BR/>I think your market observations are astute. 20 to 30% nonimal drops seems more realistic. And yes, milk is a losing business unless you're on the organic side.Dr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-52953683618130019662007-02-15T08:25:00.000-08:002007-02-15T08:25:00.000-08:00Irvinerenter:DQ numbers are out. Big change in Or...Irvinerenter:<BR/><BR/>DQ numbers are out. Big change in Orange County:<BR/><BR/>Dec 2006 Median: $642,000<BR/>Jan 2007 Median: $600,000<BR/><BR/>A $42,000 drop in one month. Maybe 3x or 4x ratios isn't so realistic.<BR/><BR/>All I got to say is wow.<BR/><BR/>Dr. Housing BubbleDr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-61836236977182049992007-02-14T17:25:00.000-08:002007-02-14T17:25:00.000-08:00"First, looks like historically housing has apprec..."First, looks like historically housing has appreciated at quite a greater rate than income in SoCal."<BR/><BR/>How long can this go on? Can trees really grow to the sky?Larry Robertshttps://www.blogger.com/profile/07551274023310137270noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-22439402269667483412007-02-14T15:58:00.000-08:002007-02-14T15:58:00.000-08:00Stated more in terms of rates of increase, a 5% gr...Stated more in terms of rates of increase, a 5% growth rate seems to be a reasonable figure. This yields $24,700 car, $11 movie, $52,300 income, and… $145,600 house. Notice everything else is in line (except milk, which should be $11, not $4 as it is today) except for the house. Big whopping difference of $400K+. What is interesting is that housing instead has been growing at a 7.9% rate (using $560K median) in the last 50 years, which is not too far off from the 7.4% appreciation rate in L.A. in the past 25 years PRIOR to the run up. What is more interesting is that, had it grown at 7.4% for the 50 years, the median price would be $455K. Just a half percent makes a $100K difference. <BR/><BR/>What does this tell us? First, looks like historically housing has appreciated at quite a greater rate than income in SoCal. Second, I think the current price is about 20% overpriced compared to historical appreciation. This is surprising to me, I thought it was about 30%. And third, milk production is a money-losing business.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35190061.post-69314563941325083742007-02-14T13:19:00.000-08:002007-02-14T13:19:00.000-08:00Dr. Housing Bubble,Those would make for some breat...Dr. Housing Bubble,<BR/><BR/>Those would make for some breathtaking declines. Realistically, I don't see us getting that low either. I do still see incomes (rents) and prices aligning again, but there will be income growth in the meantime. Maybe we can hit a ratio in the 3's with a combination of income growth and severe price declines.<BR/><BR/>It really shows how strange the Southern California real estate market is when housing bears cannot envision prices declining to levels enjoyed by the rest of the country and for the most part taken for granted elsewhere.<BR/><BR/>Makes me wonder about what is a good time to buy? If I hold out for a 3:1, I may never buy. Personally, my criteria is when a conventional 30-year fixed rate mortgage payment plus escrow for taxes and insurance equals my rent on a comparable property, I will buy. Probably not before, and probably with some help from a downpayment. IMO, it will still be 3-5 years before that happens. What are your criteria?Larry Robertshttps://www.blogger.com/profile/07551274023310137270noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-19959063397775730692007-02-14T08:21:00.000-08:002007-02-14T08:21:00.000-08:00Irvinerenter:Not sure if we will ever 3x income in...Irvinerenter:<BR/><BR/>Not sure if we will ever 3x income in Southern California for these reasons:<BR/><BR/>Los Angeles Median Income: $53,108 x 3 = $159,324<BR/>Orange County Median Income: $76,834 x 3 = $230,502<BR/>San Diego Median Income: $63,125 x 3 = $189,375<BR/>Riverside-San Bern. Income: $52,685 x 3 = $158,055<BR/><BR/>Not sure how likely we will see these price ranges. However, I do think that 4x or 5x income is very likely. Isn’t it funny now that credit is getting tight how important income ratios are coming into play? Even Fremont, a mortgage company, issued a warning about approving 2nd mortgages on the very common 80/20. Less liquidity in credit, higher inventory, more REOs and short-sales, and you have what we have all been waiting for, a buyer’s market.<BR/><BR/>Dr. Housing BubbleDr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-17507583131870438682007-02-14T08:15:00.000-08:002007-02-14T08:15:00.000-08:00John Doe:Thanks for the link. From the page:“Sout...John Doe:<BR/><BR/>Thanks for the link. From the page:<BR/><BR/>“Southern California prices are so far out of line with incomes, and income growth so slow, that it would take a very long time for incomes to catch up in the usual manner.”<BR/><BR/>This is why I feel that we will see drastic cuts in prices as opposed to the view that slowly incomes will creep up and prices will remain stagnant. If this is the case, we are talking about waiting 15 years for CPI and income to catch up to housing prices. In addition, the glut of REOs and short-sales hitting the market will set the new current price; yes, some sellers still have pie in the sky nostalgia from 2005 peak prices but buyers are very cognizant of the current market and will purchase from “motivated” sellers. Nothing more motivated than a bank trying to unload a $500,000 burden.<BR/><BR/>Dr. Housing BubbleDr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-91514917771389879402007-02-13T20:59:00.000-08:002007-02-13T20:59:00.000-08:00Dr. Housing Bubble,Cost of single family home: $12...Dr. Housing Bubble,<BR/><BR/>Cost of single family home: $12,700<BR/>Average household income: $4,564<BR/><BR/>You don't think we will ever see a ratio like that again?<BR/><BR/>You might be right. If it doesn't get back down to 4, I may never buy. The coming crash will be our best chance to see just how low the ratio can go. I can't help but think this crash will go lower and last longer than even us bears envision.Larry Robertshttps://www.blogger.com/profile/07551274023310137270noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-4754674784391758192007-02-13T16:42:00.000-08:002007-02-13T16:42:00.000-08:00Remember, though that Rich uses "Per-capita Income...Remember, though that Rich uses "Per-capita Income", not "Household Income". I did one some time ago, but can't find it now.<BR/><BR/>By "household", it's very likely that it was indeed 3X at a point in time.Chuck Ponzihttps://www.blogger.com/profile/02563190232678709911noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-63080958869630105982007-02-13T16:40:00.000-08:002007-02-13T16:40:00.000-08:00Pigginton's Risks PageThis should show an oldie bu...<A HREF="http://piggington.com/risks" REL="nofollow"> Pigginton's Risks Page</A><BR/>This should show an oldie but goodie from Rich Toscano<BR/><BR/>John Doe<BR/><A HREF="http://socalbubble.blogspot.com" REL="nofollow">Socal Bubble</A>Chuck Ponzihttps://www.blogger.com/profile/02563190232678709911noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-14305017510765822362007-02-13T15:48:00.000-08:002007-02-13T15:48:00.000-08:00Irvinerenter:Not sure about 3 times but currently ...Irvinerenter:<BR/><BR/>Not sure about 3 times but currently we are hovering around 10 times earnings. Very possible to see 4 to 6 times earnings sometime in the next three years.Dr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-70114688154374684952007-02-13T15:11:00.000-08:002007-02-13T15:11:00.000-08:00There are people who believe houses going for 3 ti...There are people who believe houses going for 3 times earnings is impossible in California. Admittedly, it has been a long time (at least 10 years, but I don't know if it was quite that low in 1997). Nice to know previous generations weren't quite as stupid as we are.Larry Robertshttps://www.blogger.com/profile/07551274023310137270noreply@blogger.com