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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (1291)	1/1/2002 4:08:54 PM
From: Leland Charon	Read Replies (2) \| Respond to of 306849

Grace (and all), I was wondering if anyone here could point out some decent places to live and raise a family)? I currently live in Michigan (metro Detroit suburbs) and it is quite expensive here. I wouldn't mind being somewhere warm where the taxes are cheap too - no state income tax would be great!!! Maybe I'm asking too much? I am self employed and can work out of my house so location is open. Just thought this might be an interesting discussion to bring up!! Leland

To: GraceZ who wrote (1291)	1/1/2002 4:41:21 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 306849

Hello Grace.. Thank you for your detailed response... Noting in particular: So what you have is a bunch of people who can't afford the homes that they want and don't want the homes they can afford. This tends to stagnate the prices on the low end and raise the rate of appreciation in the more desirable areas. This is particularly true in the area of W. Los Angeles... And I also think it is a rather unsettling notion that real estate in N. Ca, (and most likely the "desirable" parts of S. CA) are being bought with "other assets". If the property is bought outright and not financed I don't see it as much of an issue except to the owner who decides to sell in the post-asset bubble economy. But the home was bought with "clown bux" to begin with....so as they say..."easy come, easy go".... If the "other assets" were simply used to produce a viable downpayment and the housing is financed, I think we have indeed the potential for at least some type of "correction" as unemployment continues to rise or even remains static at current levels.. I'll give you a case in point WRT to notion that "real estate always goes up" and what could conceivably happen once the realization sets in that a buyer may have "overpaid" to begin with... A close family member currently lives in W. LA, renting an apartment....He makes in excess of $120K per year, and he's like you, unwilling to pay more than 15% of his income for housing. So he is a financially stable, but "resistant" buyer. (Recently a 2 bedroom , 1 bath "bungalow" sold for over $420K 2 houses down from his apartment....he is currently paying $875/rent for a one bedroom apt, so do the math and you can see the kind of premium is being sought on a monthly "expense" basis for that extra bedroom, 2 doors down) Assuming he puts 20% down and finances $336K, as you can see, he'll be paying more close to 4x what he is currently paying for housing "expense" on the same street! (unfortunately, I'm not at my office so I don't have my mortgage calculator and I'm rounding off, but I'm sure you the idea) In his mind (and the underlying idea here is even if "real estate always goes up") there is something very wrong with this picture. I suppose my question is as real estate in certain markets like N. CA and LA encounters more and more "resistant" buyers as it is noted that some housing is selling now for less that what the current crop of 90's boom sellers paid (does real estate ALWAYS go up then?), when does there come a cascading effect of excessive 'supply'(at inflated prices) on market to an decreasing 'demand' (yes I want a house but not at THAT price) type of buyers...and what is the net result? I don't necessarily hold to the "crash" scenario, but it is obvious that there is a dismal real estate picture in these high "demand" areas for 'affordable' housing. The extremes on either side of the bell curve will always have their market, but it's the middle and upper middle classes that sustain housing valuations, imo. In the current economic environment, the question is are the valuations SUSTAINABLE? I realize btw, that affordable housing can be found a 90 minute to 2 hour commute away, but that is yet another tradeoff that is simply becoming more and more unacceptable.