Future Home Buyer Reality Check!

Ryanmcd2 · 27 January 2007

Ski and Steve are the only 2 that have a clue. People that buy these houses and pay out the nose are retarded. A house is not a investment because it does not pay you. Invest in something smart and buy a house you can afford. I also like going through the 250-500k areas here and look at the 10 homes for sale on 1 street and some are over 1 year on the market. Can you say 5 year intrest only arm

Also don't be like a friend who makes 70k a year and has a 300k home and cant afford to turn on the heat lol

NimbleSexyXquisite · 27 January 2007

I think with the creation of Pay Option and IO ARM's is causing a new real estate and mortgage craze. High Deliquencies! We are headed into different waters and the thread is really getting to the nitty gritty.

What do you guys feel will ultimately happen in the real estate and mortgage market?

Massive flooding of foreclosures? If so how can we as buyers and investors take advantage of it? Will the Fed, Democrats or the gov't will step in to do something drastic, like change certain laws or restrictions, Like how they are trying to crack down on credit card companies.

I have never seen such a ambiguous real estate market like this. Probably the last time was 1982 and I was one years old.

What is your opinion on what the future is to become?

Have a great weekend!

steveny · 27 January 2007

Ryanmcd2 said:
Also don't be like a friend who makes 70k a year and has a 300k home and cant afford to turn on the heat lol

OMG for real! I have a friend who has a huge older home in the country. He makes lots of money but hates to spend it. He keeps his heat on 50 and wears a sweater or sometimes 2 sweaters all day/night long.

steveny · 27 January 2007

NimbleSexyXquisite said:
I think with the creation of Pay Option and IO ARM's is causing a new real estate and mortgage craze. High Deliquencies! We are headed into different waters and the thread is really getting to the nitty gritty.

What do you guys feel will ultimately happen in the real estate and mortgage market?

Massive flooding of foreclosures? If so how can we as buyers and investors take advantage of it? Will the Fed, Democrats or the gov't will step in to do something drastic, like change certain laws or restrictions, Like how they are trying to crack down on credit card companies.

I have never seen such a ambiguous real estate market like this. Probably the last time was 1982 and I was one years old.

What is your opinion on what the future is to become?

Have a great weekend!

Those truely odd happenings: stock market boom, housing boom, what may be coming next, only happen once per usable lifetime. It is really hard to fool the same person twice. Get your young children to invest some money in the stock market and be sure to tell them the signs they need to look for that will show them their exit before it crashes. Same for housing.

It's greed, that all it is. You will never be disappointed by the greed of mankind and what one will do to another to make a buck.

donwon · 27 January 2007

steveny said:
OMG for real! I have a friend who has a huge older home in the country. He makes lots of money but hates to spend it. He keeps his heat on 50 and wears a sweater or sometimes 2 sweaters all day/night long.

Steve, Why you talking about me? (except for the making lots of money part) :tongue:

zahntech · 28 January 2007

mickeylex said:
Housing prices in CA won't drop 30-40%. Sellers just won't sell at those prices.

In most areas where young techies are employed, salaries are higher than $100K/yr. Once they get married and/or move in together, they buy houses and $700K isn't an issue anymore.

And what happens when the "Techies" are not being offered 100k jobs anymore?.. Circa 1996 in Seattle you could make 80k right out of school in as a network Adm...today?..I know persons with years of experience that are happy to get a job paying 60k.

Website builders?..A dime a dozen

A good friend of mine was telling me a couple weeks back that his group at Microsoft was looking for developers..they interviewed a bunch of people with degrees from MIT and Harvard among other well revered schools..they decided to hold off on hiring because they "couldn't find anyone good enough".

30-40% drops in Cal home values?..probably not, but 10-20% wouldn't surprise me.

steveny · 28 January 2007

donwon said:
Steve, Why you talking about me? (except for the making lots of money part) :tongue:

My wife and I heard a big boom like a huge fire work went off right outside the house. She says what was that. I said donwon must have dropped his wallet again, man that thing is heavy.

Diablo360 · 28 January 2007

mickeylex said:
Housing prices in CA won't drop 30-40%. Sellers just won't sell at those prices.

In most areas where young techies are employed, salaries are higher than $100K/yr. Once they get married and/or move in together, they buy houses and $700K isn't an issue anymore.

It won't be a question of "if" they're "willing" to sell, it'll be a question of the sellers being FORCED to sell due to all those interest only, zero down, etc. etc..... loans that will eventually convert into higher payments. A MAJORITY of the people who bought in the last 2 years took on these big mortgages using "stretched" lending techniques with the hopes that the prices would go up so they could sell their house and pocket 6 figure gains, thus negating the negatives of having a higher payments for a short period of time. A lot of people who shouldn't have been buying homes did. Prices will come down, 30-50% is my guess depending on the area and whether or not the property is a house or condo.........

steveny · 28 January 2007

Diablo360 said:
It won't be a question of "if" they're "willing" to sell, it'll be a question of the sellers being FORCED to sell due to all those interest only, zero down, etc. etc..... loans that will eventually convert into higher payments. A MAJORITY of the people who bought in the last 2 years took on these big mortgages using "stretched" lending techniques with the hopes that the prices would go up so they could sell their house and pocket 6 figure gains, thus negating the negatives of having a higher payments for a short period of time. A lot of people who shouldn't have been buying homes did. Prices will come down, 30-50% is my guess depending on the area and whether or not the property is a house or condo.........

OR

Banks will be forced to refi the loan at a payment the borrower can handle. I can't imagine the banks being able to afford taking back 1000's of homes through foreclosure.

Onsoku · 28 January 2007

We bought, we sold, we made a huge chunk of change...now I'm ready to buy...when the market makes the 30-40% drop as it will have to do in order to find legit buyers with non suicide loans...

"Just trust us; just trust us," the man said he was told. "When my brother heard that, he said 'That word ---- trust ---- is a no-no in the real estate business, because you just don't know which way the market will go.'" http://www.nctimes.com/articles/2007/01/14/news/californian/23_08_351_13_07.txt

...and by the way...if someone tells you that the market is doing just great because the median price of a home continues to rise; don't believe it. The median price will continue to rise as "average" priced homes are pulled from market because of no buyers. It's the luxury home market "+1.5mil." that continues to sell...and even those sellers and buyers realize it's truly a buyers market.

California is the perfect recipe for housing crash destruction. Home prices totally detached from incomes or rental yields, and homes bought with no money down and interest only payments (70% of San Fran area buyers used interest only last year, 61% in San Jose, 78% in Vallejo!)

So what happens when values start to move south and REIC jobs disappear? It's pretty obvious - a sea of foreclosures. You ain't seen nothin' yet. Millions will now lose their homes. But don't worry, those Realtors and mortgage brokers got paid!

Ladera Ranch, Fraudera Ranch

Thank you, OC_fliptrack for the re-christening of Fraudera Ranch, formerly known as Ladera Ranch. Today, we'll focus on the Chambray condo's in the Bridgepark District of Fraudera Ranch. These condo's are all built back in 2001-2002. As with most Fraudera Ranch condo's, two HOA's are due each month, $160 + $162 for $322/month. Mello Roos information on these homes would be greatly appreciated.

The Chambray condo's are on either Chadron Circle or Garrison Loop. Currently there are 12 condo's for sale. From past sales, it appears the bulk of the appreciation occurred between 2002 to 2004. Look for examples of purchases in '02 and sold in '04, those sellers all got 100% tax free appreciation. Everything after are for the most part flat or at rate of inflation.

The question is is the appreciation going to stay flat for another year? Not if you are looking at the growing REO collection here. There are currently 6 units in various stages of foreclosure here at Chambray, a little better than those Sutter's Mills Condo's, but not by much. Graphrix, can you spot any fraud amongst these units?

On with the show:

25 Chadron Cir., Ladera Ranch, CA 92694
--08/2005: $525,000 (zero down/100% financing)
--01/2007: NOD by America's Wholesale Lender.

31 Chadron Cir., Ladera Ranch, CA 92694
1,251 sqft, 3 bed/2 bath
--01/2003: purchased for $310,000.
--01/2005: purchased for $460,000. (48% appreciation x 2 years)
--09/2006: listed on MLS for $479,900.
--11/2006: reduced to $469,900.
--01/2007: reduced to $459,900. (0% appreciation x 2 years)

54 Chadron Cir., Ladera Ranch, CA 92694
1,253 sqft, 3 bed/2 bath
--01/2004: purchased for $420,000.
--01/2007: listed on MLS for $475,000.

59 Chadron Cir., Ladera Ranch, CA 92694
1,500 sqft, 3 bed/2.5 bath
--06/2002: purchased for $272,000.
--05/2004: purchased for $550,000. (100% appreciation x 2 years)
--01/2006: purchased for $487,377.
--04/2006: purchased within 3 months for $542,500.
--06/2006: listed on MLS in just 2 months for $590,000.
--10/2006: reduced to $565,000.
--01/2007: reduced to $530,000. (flip'd twice in '06)

75 Chadron Cir., Ladera Ranch, CA 92694
1,417 sqft, 3 bed/2.5 bath
--06/2002: purchased for $261,000.
--10/2006: listed on the MLS for $509,900.

95 Chadron Cir., Ladera Ranch, CA 92694
1,500 sqft, 3 bed/2.5 bath
--04/2002: purchased for $279,000.
--11/2006: listed on the MLS for $564,000.

123 Chadron Cir., Ladera Ranch, CA 92694
1,250 sqft, 2 bed/2 bath
--07/2003: purchased for $321,000.
--08/2005: purchased for $475,000. (zero down/100% financing)
--10/2006: listed on MLS for $530,000.
--11/2006: NOD by WMC Mortgage.

125 Chadron Cir., Ladera Ranch, CA 92694
no sqft info, this appears to be an original owner
--05/2003: 30,000 GMAC Mortgage.
--11/2003: $336,000 New Century Mortgage.
--04/2004: $60,000 Chase Manhattan.
--01/2005: $400,000 First Source Funding.
--01/2005: $30,000 First Source Funding.
--05/2005: $40,000 Mirad Financial.
--09/2005: $500,000 New Century Mortgage.
--12/2005: $82,950 WMC Mortgage.
--12/2005: $442,400 WMC Mortgage.
--12/2006: REO to GMAC Mortgage.

127 Chadron Cir., Ladera Ranch, CA 92694
1,541 sqft, 3 bed/2 bath
--02/2005: purchased for $455,000.
--01/2007: listed on MLS for $535,000.

7 Garrison Loop, Ladera Ranch, CA 92694
1,251 sqft, 3 bed/2 bath
--08/2001: purchased for $214,000.
--03/2004: purchased for $430,000. (100% appreciation x 2.5 yrs)
--01/2007: listed on MLS for $459,888. (7% appreciation x 3 yrs)

11 Garrison Loop, Ladera Ranch, CA 92694
1,500 sqft, 3 bed/2.5 bath
--08/2001: purchased for $232,500.
--11/2004: purchased for $460,000. (98% appreciation x 3 yrs)
--12/2006: listed on MLS for $510,000. (11% appreciation x 2 yrs)

18 Garrison Loop, Ladera Ranch, CA 92694
1,417 sqft, 3 bed/2.5 bath
--09/2001: purchased for $241,000.
--11/2003: purchased for $371,000.
--10/2006: listed on MLS for $519,800. (103 days on market)

37 Garrison Loop, Ladera Ranch, CA 92694
--07/2001: purchased for $230,000.
--12/2002: purchased for $320,000.
--11/2006: NOD filed for $440,000, lender not available.

38 Garrison Loop, Ladera Ranch, CA 92694
--09/2001: purchased for $242,000.
--06/2006: REO to Ladera Ranch Maintenance Corporation.

40 Garrison Loop, Ladera Ranch, CA 92694
1,500 sqft, 3 bed/2.5 bath
--09/2001: purchased for $245,000.
--01/2007: listed on MLS for $549,700.

61 Garrison Loop, Ladera Ranch, CA 92694
1,250 sqft, 3 bed/2 bath
--05/2001: purchased for $206,500.
--03/2003: purchased for $318,000. (99% financing with Navy FCU)
--10/2003: refi for $322,000 with Navy FCU.
--12/2003: HELOC for $37,000 with Navy FCU.
--05/2004: refi for $400,500 with J & R Lending.
--11/2004: HELOC for $$55,000 with Navy FCU.
--09/2006: REO to Deutsche Bank.
--12/2006: listed on MLS for $463,900.

zahntech · 28 January 2007

Here it is right here...this is why Cal home prices and home prices in other areas are going to drop too.

61 Garrison Loop, Ladera Ranch, CA 92694
1,250 sqft, 3 bed/2 bath
--05/2001: purchased for $206,500.
--03/2003: purchased for $318,000. (99% financing with Navy FCU)
--10/2003: refi for $322,000 with Navy FCU.
--12/2003: HELOC for $37,000 with Navy FCU.
--05/2004: refi for $400,500 with J & R Lending.
--11/2004: HELOC for $$55,000 with Navy FCU.
--09/2006: REO to Deutsche Bank.
--12/2006: listed on MLS for $463,900.

People that can't afford a home buy them at 0$ down and 100-110% loans

then they decide "hey I will pay off my car loan by taking out a HELOC"..which would make some sense, paying off a 10% car loan with a 4% HELOC if you were not going totally upside down in your house to do it.

so then they decide "hey I want a trip to Europe and to pay off my credit cards"...one more trip to the bank for More HELOC madness.

now they are 100+k upside down in the house/condo and uh oh somebody gets laid off...can't make mortgage or HELOC payments anymore:frown:

so then they file bankruptcy and walk out of a 300k home they owe 450k on.

Now watch this happen 5000 times in Cal alone and soon these people that should have never bought a 300-700k homes will be back in appts and banks will be trying to find eligible buyers at far less than the previous prices.

steveny · 29 January 2007

zahntech said:
Here it is right here...this is why Cal home prices and home prices in other areas are going to drop too.

61 Garrison Loop, Ladera Ranch, CA 92694
1,250 sqft, 3 bed/2 bath
--05/2001: purchased for $206,500.
--03/2003: purchased for $318,000. (99% financing with Navy FCU)
--10/2003: refi for $322,000 with Navy FCU.
--12/2003: HELOC for $37,000 with Navy FCU.
--05/2004: refi for $400,500 with J & R Lending.
--11/2004: HELOC for $$55,000 with Navy FCU.
--09/2006: REO to Deutsche Bank.
--12/2006: listed on MLS for $463,900.

People that can't afford a home buy them at 0$ down and 100-110% loans

then they decide "hey I will pay off my car loan by taking out a HELOC"..which would make some sense, paying off a 10% car loan with a 4% HELOC if you were not going totally upside down in your house to do it.

so then they decide "hey I want a trip to Europe and to pay off my credit cards"...one more trip to the bank for More HELOC madness.

now they are 100+k upside down in the house/condo and uh oh somebody gets laid off...can't make mortgage or HELOC payments anymore:frown:

so then they file bankruptcy and walk out of a 300k home they owe 450k on.

Now watch this happen 5000 times in Cal alone and soon these people that should have never bought a 300-700k homes will be back in appts and banks will be trying to find eligible buyers at far less than the previous prices.

It is really a bad idea to secure unsecured debt.

edit...
59 Chadron Cir., Ladera Ranch, CA 92694
1,500 sqft, 3 bed/2.5 bath
--06/2002: purchased for $272,000.
--05/2004: purchased for $550,000. (100% appreciation x 2 years)

anyone care to do the math and tell us all at the above rate of appreciation what this house would be worth in 25 years? http://www.hsfcuonline.org/cw2.1/calcs/Appreciation/calc_appreciation.asp

Now why the hell would the banks, who make money by investing, why would they loan out their money at such a low rate only get back ~3 times what they loaned out when they could have bought the house themselves and made a kagillion dollars. Get out of the way the hammer is going to fall!

Ski_Banker · 29 January 2007

steveny said:
Those truely odd happenings: stock market boom, housing boom, what may be coming next, only happen once per usable lifetime. It is really hard to fool the same person twice. Get your young children to invest some money in the stock market and be sure to tell them the signs they need to look for that will show them their exit before it crashes. Same for housing.

I'm impressed. Booms and busts come and go, over long periods, but the telltale signs are always there. Like the fact that real estate investing keeps coming up, over and over and over again on Prime. And Steve, as you can see, this is ground zero for the real estate bust... I see it (and hear about it) every day in Miami Beach. So so so many fools.

I won't be a buyer until many people have lost their shirts, many others have broken even, and the rest of us have simply forgotten about real estate and have moved on to something else that seems interesting.

On the bright side, many of ya'll should be able to pick up some nice F360s on the cheap in the next few years. That's the ride of choice for thousands of "real estate moguls" on their way to bankruptcy. Seriously.

Onsoku · 29 January 2007

...

<TABLE width=980 align=center border=0><TBODY><TR><TD class=style1 vAlign=top align=middle width=700>
<TABLE cellSpacing=0 cellPadding=5 width=700 align=center border=0><TBODY><TR><TD>
<TABLE cellSpacing=20 cellPadding=0 width=700 align=center border=0><TBODY><TR><TD>The Los Angeles housing market has seen remarkable price increases over the past few years. However, recent sharp declines in sales activity have increased the number of homes on the market. Further sales and the beginning of pricing declines should be expected, particularly if mortgage rates move higher. The rapidly increasing mortgage debt servicing cost generates the greatest concern.


</TD></TR></TBODY></TABLE><HR><TABLE cellSpacing=0 cellPadding=0 width=690 align=center border=1><TBODY><TR><TD borderColor=#000000 bgColor=#ffff99 colSpan=2>Nominal Price Activity </TD><TD borderColor=#000000 width=107 bgColor=#ffff99>
[FONT=Georgia, Times New Roman, Times, serif]Los Angeles [/FONT]

</TD><TD borderColor=#000000 width=90 bgColor=#ffff99>
[FONT=Georgia, Times New Roman, Times, serif]National[/FONT]

</TD><TD width=113 bgColor=#ffff99>
[FONT=Georgia, Times New Roman, Times, serif]Comment[/FONT]

</TD></TR><TR><TD width=8>[FONT=Georgia, Times New Roman, Times, serif].[/FONT]</TD><TD width=360 bgColor=#ffffff>Quarterly Appreciation (Q2:2006 – Q3:2006)</TD><TD width=107 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]1.8%[/FONT]

</TD><TD width=90 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]0.9%[/FONT]

</TD><TD width=113>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD></TD><TD width=360 bgColor=#cccccc>Rolling Year Appreciation (Q3:2005 – Q3:2006) </TD><TD width=107 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]16.0%[/FONT]

</TD><TD width=90 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]7.7%[/FONT]

</TD><TD width=113 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD></TD><TD width=360 bgColor=#ffffff>Last Year Appreciation (2005)</TD><TD width=107 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]23.6%[/FONT]

</TD><TD width=90 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]13.4%[/FONT]

</TD><TD width=113>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD></TD><TD width=360 bgColor=#cccccc>Rolling 5 Year App. (Q3:2001 – Q3:2006)</TD><TD width=107 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]136.5%[/FONT]

</TD><TD width=90 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]55.5%[/FONT]

</TD><TD width=113 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD></TD><TD width=360 bgColor=#ffffff>Historical Average Annual Appreciation</TD><TD width=107 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]9.2%[/FONT]

</TD><TD width=90 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]6.1%[/FONT]

</TD><TD width=113>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD borderColor=#000000 bgColor=#ffff99 colSpan=2>Real Price Activity </TD><TD borderColor=#000000 width=107 bgColor=#ffff99>
[FONT=Georgia, Times New Roman, Times, serif]Los Angeles[/FONT]

</TD><TD borderColor=#000000 width=90 bgColor=#ffff99>
[FONT=Georgia, Times New Roman, Times, serif]National[/FONT]

</TD><TD width=113 bgColor=#ffff99>
[FONT=Georgia, Times New Roman, Times, serif]Comment[/FONT]

</TD></TR><TR><TD>[FONT=Georgia, Times New Roman, Times, serif].[/FONT]</TD><TD bgColor=#ffffff>Quarterly Appreciation (Q2:2006 – Q3:2006)</TD><TD width=107 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]0.9%[/FONT]

</TD><TD width=90 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]0.0%[/FONT]

</TD><TD width=113>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD></TD><TD bgColor=#cccccc>Rolling Year Appreciation (Q3:2005 – Q3:2006) </TD><TD width=107 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]12.1%[/FONT]

</TD><TD width=90 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]4.0%[/FONT]

</TD><TD width=113 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD></TD><TD bgColor=#ffffff>Last Year Appreciation (2005)</TD><TD width=107 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]19.7%[/FONT]

</TD><TD width=90 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]9.7%[/FONT]

</TD><TD width=113>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD></TD><TD bgColor=#cccccc>Rolling 5 Year App. (Q3:2001 – Q3:2006)</TD><TD width=107 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]108.2%[/FONT]

</TD><TD width=90 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]36.6%[/FONT]

</TD><TD width=113 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD></TD><TD bgColor=#ffffff>Historical Average Annual Appreciation</TD><TD width=107 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]4.6%[/FONT]

</TD><TD width=90 bgColor=#ffffff>
[FONT=Georgia, Times New Roman, Times, serif]1.6%[/FONT]

</TD><TD width=113>
[FONT=Georgia, Times New Roman, Times, serif]Strong[/FONT]

</TD></TR><TR><TD bgColor=#ffff99 colSpan=2>Affordability Activity</TD><TD width=107 bgColor=#ffff99>
[FONT=Georgia, Times New Roman, Times, serif]Los Angeles[/FONT]

</TD><TD width=90 bgColor=#ffff99>
[FONT=Georgia, Times New Roman, Times, serif]National[/FONT]

</TD><TD width=113 bgColor=#ffff99>
[FONT=Georgia, Times New Roman, Times, serif]Comment[/FONT]

</TD></TR><TR><TD></TD><TD width=360>Mortgage-Debt-to-Income Ratio* (Q3:2006)</TD><TD width=107>
[FONT=Georgia, Times New Roman, Times, serif]52.7%[/FONT]

</TD><TD width=90>
[FONT=Georgia, Times New Roman, Times, serif]23.7%[/FONT]

</TD><TD width=113>
[FONT=Georgia, Times New Roman, Times, serif]Extremely Unfavorable[/FONT]

</TD></TR><TR><TD></TD><TD width=360 bgColor=#cccccc>Historical Mortgage-Debt-to-Income Ratio*</TD><TD width=107 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]31.9%[/FONT]

</TD><TD width=90 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]21.7%[/FONT]

</TD><TD width=113 bgColor=#cccccc>
[FONT=Georgia, Times New Roman, Times, serif]High[/FONT]

</TD></TR><TR><TD bgColor=#84a2bd colSpan=5 height=12>spacer</TD></TR><TR><TD vAlign=top align=middle>*</TD><TD colSpan=4>This ratio compares the monthly mortgage payment (principal & interest only, which does not include hazard insurance, property taxes or any needed private mortgage insurance) for a median priced home financed at the prevailing 30 year mortgage rate to the local median 4-person family income.

</TD></TR><TR><TD bgColor=#84a2bd colSpan=5 height=12>spacer</TD></TR><TR><TD></TD><TD colSpan=4>Los Angeles historical data is for the time period of Q2:1975 – Q3:2006</TD></TR><TR><TD></TD><TD colSpan=4>National historical data is for the time period of Q1:1975 – Q3:2006</TD></TR></TBODY></TABLE><HR><TABLE cellSpacing=0 cellPadding=0 width=700 border=0><TBODY><TR><TD vAlign=center align=middle width=700>




</TD></TR></TBODY></TABLE>

</TD></TR></TBODY></TABLE>

</TD><TD class=style1 vAlign=top align=middle width=140><HR align=center><SCRIPT type=text/javascript></SCRIPT><SCRIPT src="http://pagead2.googlesyndication.com/pagead/show_ads.js" type=text/javascript></SCRIPT>

</TD></TR></TBODY></TABLE><TABLE width=980 align=center border=0><TBODY><TR><TD class=style1 vAlign=top align=middle width=700><TABLE cellSpacing=0 cellPadding=5 width=700 align=center border=0><TBODY><TR><TD>
<TABLE cellSpacing=20 cellPadding=0 width=700 align=center border=0><TBODY><TR><TD>The past five years have seen tremendous nominal and real price growth. However, despite robust job gains and historically low mortgage rates, price growth began generating concern at the end of 2003. This is due to local price affordability levels rapidly outpacing national price affordability levels as during the prior Los Angeles market bubble. Consequently, nominal and real prices should be expected to decline back to the historic level of mortgage debt servicing cost[FONT=Arial, Helvetica, sans-serif][SIZE=-1].[/SIZE][/FONT]

SEE PRIOR LOS ANGELES PEAKS & TROUGHS Next >


</TD></TR></TBODY></TABLE><HR><TABLE cellSpacing=0 cellPadding=0 width=690 border=1><TBODY><TR><TD width=49 bgColor=#ffff99>
[SIZE=-1]Year[/SIZE]

</TD><TD width=115 bgColor=#ffff99>
[SIZE=-1]Nominal[/SIZE]

[SIZE=-1]Price History[/SIZE]

</TD><TD width=100 bgColor=#ffff99>
[SIZE=-1]Nominal[/SIZE]

[SIZE=-1]Price Growth[/SIZE]

</TD><TD width=100 bgColor=#ffff99>
[SIZE=-1]Real[/SIZE]

[SIZE=-1]Price History[/SIZE]

</TD><TD width=80 bgColor=#ffff99>
[SIZE=-1]Real[/SIZE]

[SIZE=-1]Price Growth[/SIZE]

</TD><TD width=115 bgColor=#ffff99>
[SIZE=-1]Los Angeles Mortgage-Debt-to-Income Ratio[/SIZE]

</TD><TD width=115 bgColor=#ffff99>
[SIZE=-1]National Mortgage-Debt-to-Income Ratio[/SIZE]

</TD></TR><TR><TD bgColor=#ffffff>
2001

</TD><TD bgColor=#ffffff>
$251,800

</TD><TD bgColor=#ffffff>
10.0%

</TD><TD bgColor=#ffffff>
$284,000

</TD><TD bgColor=#ffffff>
7.0%

</TD><TD bgColor=#ffffff>
25.4%

</TD><TD bgColor=#ffffff>
17.5%

</TD></TR><TR bgColor=#cccccc><TD>
2002

</TD><TD>
$289,700

</TD><TD>
15.1%

</TD><TD>
$321,800

</TD><TD>
13.3%

</TD><TD>
27.7%

</TD><TD>
17.7%

</TD></TR><TR><TD bgColor=#ffffff>
2003

</TD><TD bgColor=#ffffff>
$341,200

</TD><TD bgColor=#ffffff>
17.8%

</TD><TD bgColor=#ffffff>
$370,900

</TD><TD bgColor=#ffffff>
15.3%

</TD><TD bgColor=#ffffff>
31.5%

</TD><TD bgColor=#ffffff>
18.4%

</TD></TR><TR bgColor=#cccccc><TD>
2004

</TD><TD>
$432,300

</TD><TD>
26.7%

</TD><TD>
$458,300

</TD><TD>
23.6%

</TD><TD>
38.1%

</TD><TD>
19.6%

</TD></TR><TR><TD bgColor=#ffffff>
2005

</TD><TD bgColor=#ffffff>
$534,300

</TD><TD bgColor=#ffffff>
23.6%

</TD><TD bgColor=#ffffff>
$548,700

</TD><TD bgColor=#ffffff>
19.7%

</TD><TD bgColor=#ffffff>
47.0%

</TD><TD bgColor=#ffffff>
22.1%

</TD></TR><TR bgColor=#cccccc><TD>
2006

</TD><TD>
$582,000

</TD><TD>
8.9%

</TD><TD>
$582,000

</TD><TD>
6.1%

</TD><TD>
52.7%

</TD><TD>
23.7%

</TD></TR></TBODY></TABLE><HR><TABLE cellSpacing=0 cellPadding=0 width=700 border=0><TBODY><TR><TD vAlign=center align=middle width=400 height=250>




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</TD></TR></TBODY></TABLE>In order to most accurately determine prior market price cycles one must remove the effects of inflation and look at real historical prices. The past thirty years have seen five real price cycles in Los Angeles. Including one cycle in which nominal growth was 16.1%, yet real growth was negative 11.0%. Market cycle time periods have varied from a market downturn of four years to the current market growth cycle of nine years.

<HR><TABLE cellSpacing=0 cellPadding=0 width=700 align=center border=1><TBODY><TR><TD bgColor=#ffff99>[SIZE=-1]Time[/SIZE]

[SIZE=-1]Period[/SIZE]

</TD><TD bgColor=#ffff99>[SIZE=-1]Real[/SIZE]

[SIZE=-1]Price History[/SIZE]

</TD><TD bgColor=#ffff99>[SIZE=-1]Real[/SIZE]

[SIZE=-1]Price Change[/SIZE]

</TD><TD bgColor=#ffff99>[SIZE=-1]Nominal[/SIZE]

[SIZE=-1]Price History[/SIZE]

</TD><TD bgColor=#ffff99>[SIZE=-1]Nominal[/SIZE]

[SIZE=-1]Price Change[/SIZE]

</TD></TR><TR><TD>1975:Q2 - 1980:Q3

</TD><TD>$140,800 - $234,400

</TD><TD>66.5%

</TD><TD>$36,600 - $93,600

</TD><TD>155.7%

</TD></TR><TR><TD bgColor=#cccccc>1980:Q3 - 1984:Q4

</TD><TD bgColor=#cccccc>$234,400 - $208,500

</TD><TD bgColor=#cccccc>-11.0%

</TD><TD bgColor=#cccccc>$93,600 - $208,700

</TD><TD bgColor=#cccccc>16.1%

</TD></TR><TR><TD>1984:Q4 - 1989:Q4

</TD><TD>$208,500 - $348,900

</TD><TD>67.3%

</TD><TD>$108,700 - $216,000

</TD><TD>98.7%

</TD></TR><TR><TD bgColor=#cccccc>1989:Q4 - 1997:Q2

</TD><TD bgColor=#cccccc>$348,900 - $217,200

</TD><TD bgColor=#cccccc>-37.7%

</TD><TD bgColor=#cccccc>$216,000 - $172,800

</TD><TD bgColor=#cccccc>-20.0%

</TD></TR><TR><TD>1997:Q2 - 2006:Q3

</TD><TD>$217,200 - $582,000

</TD><TD>168.0%

</TD><TD>$172,800 - $582,000

</TD><TD>236.8%

</TD></TR></TBODY></TABLE><TABLE cellSpacing=0 cellPadding=0 width=690 border=1><TBODY></TBODY></TABLE><HR><TABLE cellSpacing=20 cellPadding=0 width=700 align=center border=0><TBODY><TR><TD>The mortgage-debt-to-income ratio is commonly viewed as the most accurate method of determining market cycles. The past thirty years have seen five cycles, all of which included large changes in home affordability. Fortunately, due to historically low mortgage rates, the current cycle has not eclipsed the all time highs of the early 1980s. Unfortunately, this means today’s Los Angeles home prices are at an all time high for mortgage rate fluctuation risk.


</TD></TR></TBODY></TABLE><HR><TABLE cellSpacing=0 cellPadding=0 width=700 align=center border=1><TBODY><TR><TD width=159 bgColor=#ffff99>[SIZE=-1]Time[/SIZE]

[SIZE=-1]Period[/SIZE]

</TD><TD width=167 bgColor=#ffff99>[SIZE=-1]Los Angeles Mortgage-Debt-to-Income Ratio[/SIZE]

</TD><TD width=100 bgColor=#ffff99>[SIZE=-1]Los Angeles [/SIZE]

[SIZE=-1]Ratio Change[/SIZE]

</TD><TD width=167 bgColor=#ffff99>[SIZE=-1]National Mortgage-Debt-to-Income Ratio[/SIZE]

</TD><TD width=95 bgColor=#ffff99>[SIZE=-1]National[/SIZE][SIZE=-1]

[SIZE=-1]Ratio Change[/SIZE][/SIZE]

</TD></TR><TR><TD>1975:Q2 - 1981:Q4

</TD><TD>19.0% - 57.8%

</TD><TD>205.2%

</TD><TD>21.7% - 40.8%

</TD><TD>87.6%

</TD></TR><TR><TD bgColor=#cccccc>1981:Q4 - 1986:Q2

</TD><TD bgColor=#cccccc>57.8% - 30.5%

</TD><TD bgColor=#cccccc>-47.3%

</TD><TD bgColor=#cccccc>40.8% - 22.6%

</TD><TD bgColor=#cccccc>-44.7%

</TD></TR><TR><TD>1986:Q2 - 1989:Q2

</TD><TD>30.5% - 47.7%

</TD><TD>56.6%

</TD><TD>22.6% - 25.6%

</TD><TD>13.4%

</TD></TR><TR><TD bgColor=#cccccc>1989:Q2 - 1998:Q1

</TD><TD bgColor=#cccccc>47.7% - 22.3%

</TD><TD bgColor=#cccccc>-53.3%

</TD><TD bgColor=#cccccc>25.6% - 16.3%

</TD><TD bgColor=#cccccc>-36.3%

</TD></TR><TR><TD>1998:Q1 - 2006:Q3

</TD><TD>22.3% - 52.7%

</TD><TD>136.4%

</TD><TD>16.3% - 23.7%

</TD><TD>45.4%

</TD></TR></TBODY></TABLE><HR><TABLE cellSpacing=0 cellPadding=0 width=700 align=center border=1><TBODY></TBODY></TABLE><TABLE cellSpacing=0 cellPadding=0 width=700 border=0><TBODY><TR><TD vAlign=center align=middle width=400 height=250>



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</TD></TR></TBODY></TABLE>Accurately projecting local prices is a challenging task because so many factors play a part in home prices. Mortgage rates, inflation, job growth, median income, legislation, migration patterns and market psychology are just a few. Additionally, real estate markets rarely have periods in which they achieve average historical growth. Rather, real estate markets have periods of tremendous growth followed by market decline. Consequently, the tables and charts below present three likely scenarios, rather than one definite path.

<HR><TABLE cellSpacing=0 cellPadding=0 width=700 align=center border=1><TBODY><TR><TD bgColor=#ffff99 colSpan=5 height=21>Scenario 1:

Continued Low Mortgage Rates and Inflation with Strong Income Growth

</TD></TR><TR><TD width=158 bgColor=#cccccc>Time

Period

</TD><TD width=190 bgColor=#cccccc>Real

Prices

</TD><TD width=90 bgColor=#cccccc>Real

Price Change

</TD><TD width=190 bgColor=#cccccc>Nominal

Prices

</TD><TD width=90 bgColor=#cccccc>Nominal

Price Change

</TD></TR><TR><TD width=158>2006:Q3 - 2012:Q1

</TD><TD width=190>$582,000 - $405,000

</TD><TD width=90>-30.4%

</TD><TD width=190>$582,000 - $476,500

</TD><TD width=90>-18.1%

</TD></TR><TR><TD width=158 bgColor=#cccccc>Duration

</TD><TD width=190 bgColor=#cccccc>Real Home Equity Change

</TD><TD width=90 bgColor=#cccccc>Average Yearly Change

</TD><TD width=190 bgColor=#cccccc>Nominal Home Equity Change

</TD><TD width=90 bgColor=#cccccc>Average Yearly Change

</TD></TR><TR><TD width=158>5.5 Years

</TD><TD width=190>-$177,000

</TD><TD width=90>-6.4%

</TD><TD width=190>-$105,500

</TD><TD width=90>-3.6%

</TD></TR></TBODY></TABLE><TABLE cellSpacing=0 cellPadding=0 width=690 border=1><TBODY></TBODY></TABLE><HR><TABLE cellSpacing=0 cellPadding=0 width=700 align=center border=1><TBODY><TR><TD bgColor=#ffff99 colSpan=5 height=21>Scenario 2:

Average Historical Mortgage Rates, Inflation & Income Growth

</TD></TR><TR><TD width=158 bgColor=#cccccc>Time

Period

</TD><TD width=190 bgColor=#cccccc>Real

Prices

</TD><TD width=90 bgColor=#cccccc>Real

Price Change

</TD><TD width=190 bgColor=#cccccc>Nominal

Prices

</TD><TD width=90 bgColor=#cccccc>Nominal

Price Change

</TD></TR><TR><TD width=158>2006:Q3 - 2014:Q1

</TD><TD width=190>$582,000 - $320,000

</TD><TD width=90>-45.0%

</TD><TD width=190>$582,000 - $399,400

</TD><TD width=90>-31.4%

</TD></TR><TR><TD width=158 bgColor=#cccccc>Duration

</TD><TD width=190 bgColor=#cccccc>Real Home Equity Change

</TD><TD width=90 bgColor=#cccccc>Average Yearly Change

</TD><TD width=190 bgColor=#cccccc>Nominal Home Equity Change

</TD><TD width=90 bgColor=#cccccc>Average Yearly Change

</TD></TR><TR><TD width=158>7.5 Years

</TD><TD width=190>-$262,000

</TD><TD width=90>-7.7%

</TD><TD width=190>-$182,600

</TD><TD width=90>-4.9%

</TD></TR></TBODY></TABLE><HR><TABLE cellSpacing=0 cellPadding=0 width=700 align=center border=1><TBODY><TR><TD bgColor=#ffff99 colSpan=5 height=21>Scenario 3:

Deep National & Local Recession with Higher than Average Inflation (Stagflation)

</TD></TR><TR><TD width=158 bgColor=#cccccc>Time

Period

</TD><TD width=190 bgColor=#cccccc>Real

Prices

</TD><TD width=90 bgColor=#cccccc>Real

Price Change

</TD><TD width=190 bgColor=#cccccc>Nominal

Prices

</TD><TD width=90 bgColor=#cccccc>Nominal

Price Change

</TD></TR><TR><TD width=158>2006:Q3 - 2016:Q3

</TD><TD width=190>$582,000 - $230,000

</TD><TD width=90>-60.5%

</TD><TD width=190>$582,000 - $374,600

</TD><TD width=90>-35.6%

</TD></TR><TR><TD width=158 bgColor=#cccccc>Duration

</TD><TD width=190 bgColor=#cccccc>Real Home Equity Change

</TD><TD width=90 bgColor=#cccccc>Average Yearly Change

</TD><TD width=190 bgColor=#cccccc>Nominal Home Equity Change

</TD><TD width=90 bgColor=#cccccc>Average Yearly Change

</TD></TR><TR><TD width=158>10 Years

</TD><TD width=190>-$352,000

</TD><TD width=90>-8.9%

</TD><TD width=190>-$207,400

</TD><TD width=90>-4.3%

</TD></TR></TBODY></TABLE><HR><TABLE cellSpacing=0 cellPadding=0 width=700 align=center border=1><TBODY></TBODY></TABLE><TABLE cellSpacing=0 cellPadding=0 width=700 border=0><TBODY><TR><TD vAlign=center align=middle width=400 height=250>



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MCM · 29 January 2007

"I have never seen such a ambiguous real estate market like this. Probably the last time was 1982 and I was one years old."

I bought my 1st home in 82 and had to pay 3 points for a 12% loan.
Its never easy, but agree. Wait a while to buy. Its a cycle.

How did we get here?
Greenie raised rates for no reason to quench the Nasd.
Nothing happened? So he kept raising rates for no reason.
(Oh yea, I remember now " Fear of inflation")
Well, after multiple tries it finally worked.
So clever, controlling the market by raising interest rates.
Woaaaa, its really dropping! Better lower rates a bit
to avoid a Crash like we had many moons ago.
Hey, its still dropping? Better keep lowering rates
to keep us out of a Depression. Now rates are 4.25%?
What to do now?
Market went down, housing went up.
What's next? Maybe housing dips a bit and the Market goes up?
Time will tell.
But it is a cycle. History repeats it self, over and over.:tongue:

robr · 29 January 2007

steveny said:
The house is just under 3000 square feet so it is really not a shack just a little dated for my taste but I wanted to be on the water to do some boating and fishing.

I wasn't suggesting your place was a shack, I was saying that basically I'd think the land alone would be worth over a million, thus my 'shack' comment, alluding to a shack adding no value to the property.

steveny · 29 January 2007

robr said:
I wasn't suggesting your place was a shack, I was saying that basically I'd think the land alone would be worth over a million, thus my 'shack' comment, alluding to a shack adding no value to the property.

Compaired to the brand new houses on both sides I would say the place we are renting is a shack. :biggrin:

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