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Non-Tech : Investing in Real Estate - Creative Opportunities -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (2172)	3/21/2014 7:47:54 PM
From: tejek	1 Recommendation Recommended By Jurgis Bekepuris Read Replies (1) \| Respond to of 2722

To interpret that chart, you have to know S. CA. First, based on that chart most of S CA....lower class, middle class and upper class............are a considerable distance from their peak. And that makes sense........job growth in S CA has been anemic. Last year, it did a mediocre 1.5% YOY.........that's the best its done since 2008. Secondly, there are demographic or geographical reasons for why the sub markets that have been highlighted diverge from the other markets on the chart. Compton, Santa Ana, Inglewood [highlighted] and E. LA [not highlighted] are minority majority cities. They tend to see their housing prices drop first and typically are the last to recover. Pasadena and Torrance are undervalued for differing reasons. Pasadena has great and historic housing stock [lots of Frank Lloyd Wright homes and FLW wannabees] but a lousy location right up against the foothills........meaning lots of smog and heat in the summer. Pasadena is mostly middle class but does have pockets of poor housing as well as larger areas of upper class housing. Torrance is almost to the beach [except for a small strip] but still a few miles inland. So it doesn't command the price points that the beach communities of Manhattan and Hermosa Beaches command. Housing stock is very middle class. Because Torrance and Pasadena are undervalued, their housing prices don't drop nearly as much as the more pricey areas of S. CA and consequently recover to their peaks much sooner. Irvine is a very special place. There is a huge research park that generates lots of high paying jobs and provides an incredibly stable anchor. So its housing prices don't depreciate as much as the surrounding communities and recover much sooner. Irvine is upper middle to upper class. I don't know Santa Clarita very well. A fairly large city growing mostly thru annexations. I would classify it as middle class to upper middle class. Don't know why its housing prices are not recovering very well. Source: Zillow This chart is very telling. First, you’ll notice that places like Irvine and Pasadena are only 4 percentage points away from reaching their previous peaks hit in 2006-07. These markets pull from local investors, global investors, flippers, Wall Street, and of course professional families. But take a look at areas like Compton (still off by 38 percent from the peak), Inglewood (off by 32 percent), Santa Ana (off by 36 percent), and Santa Clarita (off by 26 percent). Santa Ana is only a few minutes away from Irvine but this is like comparing two different worlds. Of course the majority of people by definition live somewhere in the middle and that is why looking at household incomes is important. Yet these are unlikely to be the current buyers. Over 30 percent of California buyers for close to half a decade are coming from big money investors. Many are stretching out with FHA insured loans but this is likely to be in more working and middle class neighborhoods. Talking with colleagues in the industry they mention that FHA in prime areas is virtually a no-go for buying with sellers.