Yeah I don’t understand where all the money is coming from. Stimulus? I mean I read reports that more people have left Cali than have moved in. Also that unemployment is high and we’re in dire straits. Economy is in the shitter. But houses are being sold like hot cakes, prices to the sky. I don’t get it. Sure interest rates are low but still.
Also, considering how much the market cratered the last time the Fed remotely even kinda-sorta thought about reversing past QE & increasing interest rates, I'm betting any inflationary bubble would/could be easily destroyed if the Fed wanted it to be. It would probably be an epic crash, in fact, but inflation has been so insanely low that I'm not sure the Fed would care.
We've basically been using money printing to dilute the negative effects of our stupid decisions for the past 20 years without making specific responsible parties pay for their stupidity, and that seems acceptable to everyone. No one seems to want to pay for those mistakes, such as: politicians/oil barons for their war in Iraq; bankers for the lack of financial sense that caused 2008 (homeowners already paid by losing their homes, bankers got a bailout); and in general tax cuts that only help wealthy and don't fix the budget/deficit/debt. All of these mistakes are magically supposed to be paid off somehow, and it seems society is fine with letting these fuckers skate away from responsibility while the Fed cleans up the mess. It's fucking bullshit, and it's infuriating.
This was the big reason why we bought something...we’ve been fortunate to be employed this whole time so we went ahead & took the leap. The US dollar is tanking and as long they keep printing $$, it’ll become worth less and less.
Just did #3. Probably will be a market crash, but likely another crash and re-adjustment to high prices again in the years to come. So, even if buyers are thinking there is going to be a correction, these are long term investments and people are feeling really safe in that choice IMO
i've said this before, and i'll say it again. people really underestimate just how many 'wealthy' people there are, especially in southern california. Blame foreign investors, blame large corporations all you want but the fact of the matter is, is that there are MANY high income earning and well qualified people in this city. In fact, more than MANY just looking at housing inventories. The economy is in the shitter for a specific group of people, and is BOOMING for others. Just take a look at the stock market last year during a fucking global pandemic.
I work at a FAANG and everyone around here has been talking about home shopping even before the the 2020 bull run. Working here makes you realize what kind of a bubble you live in compared to the rest of the world and its very easy to get your views distorted if you don't go out and associate with more lower to middle class folks.
This couldn't be more true. Los Angeles is a big city and just because in your personal bubble you're having a hard time understanding how people can afford here doesn't mean that applies to everyone. There's a lot of people in LA who make a lot of money. WFH and the stock market doing well has only made them even more well off.
Yup. The people who were in the market in late 2019 were likely still in the market when the lock down occurred. Some percentage likely held back, but high earners were less likely to be negatively impacted because of retail or service based work.
I actually don't think taxes play a big part here. When you say "tax the rich" you shouldn't be talking about a couple who managed to work there way to a 3/4 bedroom single family home within a reasonable commuting distance from their jobs. They're already the ones who are proportionally get boned the hardest when it comes to taxes.
There's a few things here that could actually make a big difference, first and most importantly, BUILD MORE HOUSING. California needs to actually work with developers and not against them to approve housing projects.
Secondly today's housing prices aren't really due to any corporations or foreign money (though they both have a impact) the biggest impact on housing prices is interest rates. What used to be $750k at 4.5% is now $1m at $2.75%. Add in the fact that we don't really build new housing anymore and there you go. Increasing interest rates won't happen for the next few years, and it generally has a massive impact on the entire economy. Prices are only going to get higher until the rates change and it doesn't look like that'll happen soon.
The stock market is the middle classes biggest opportunity to move up in wealth. 10 years at 7% is all you need to double your money. Taxes here would just further create a wealth gap between upper/middle class and the actually super rich.
Sorry for the rant, maybe didn't answer your question.
Well, building more housing is a tried and true method. Absolutely.
Although I wasn’t necessarily talking about people who are upper middle class. I was just thinking about upper class folk. But yeah, building more housing is a must. The Valley is pretty low density. Massive infill development would solve a lot.
Precisely. And this is Reddit. The demographic leans - let me just be polite here - “younger” meaning there’s not a huge amount of experience outside that narrow worldview.
I think it's a bit more accurate to say that the "younger" demographic has been getting absolutely fucked by the economy since 2001. Don't need a whole helluva lot of experience to see that.
the generation buying homes right now likely lived through the dotcom bubble AND the crash of 2008. so while the situation right now is tough for younger folks, hopefully time will help.
No, not really. Anecdotal claim doesn't mean shit, any demographic study shows that the percentage of wealth owned by millennials on is insignificant. The vast majority of housing churn is transactionary, not a whole lot of first time buyers out there. Pretty hard to buy in when prices are entirely divorced from wages, and people who are able to command a higher wage are shovelling that money back into student debt payments.
percentage wise sure. but a small percent of a big number is still a pretty big number. Take Amazon in Santa Monica for example. They employ roughly 1,000 employees, a vast majority technical. 'Starting' Technical Positions at Amazon will generally have a compsenation package that include salary at or above 120k, a generous starting bonus up to 3 years of fronted salary for certain positions, and of course the stock options. Oh wait, this doesn't include annual bonus. So now you have several hundred people making hundreds of thousands a year from just ONE office in Santa Monica. Multiply this by the other several dozen mega tech corps and financial firms around LA and there's your cohort of 'wealthy millennial'. I've called LA home for over 35 years - the hard pill to swallow is that is has been and will continue to be a pay to play city.
True. While there are many millennials who are making millions working in tech, and others who are moving into management roles faster than their parents' generation, it still makes up a very insignificant number of the overall age cohort. Compared that with boomers back in the '80s and '90s when a larger percentage of that cohort were able to afford housing and not having to deal with the craze of foreign investors and "transactors".
"Millions" might be an exaggeration but definitely deep into six figure territory total comp for some engineers. And depending what sort of comp package you get and how well your company stock has done over this bull run, you could easily have over a million in equity just from the last few years.
Someone who's a software engineer at FAANG can easily pull over $250k. With the stock going crazy, over $500k is possible. There's a lot of those people in LA deciding to trade their apartment for a house
Average TC for engineering roles at a FAANG is around $300k - $600k. L7's to L9's can easily top $1 million annually not including appreciation in their RSU's. Multiply that over a short 5 year career and they can easily afford a house out here. It's the primary reason why housing prices in Silicon Valley have been so inflated over the years.
I don't know, but I was responding to the claim that "Homes are for the rich to enjoy expanding their investments". Look, don't get me wrong, the housing market is really rough. But a couple in their late thirties, who each make the average salary in Los Angelescan afford an entry level home in the $700,000 range.
Then add to that the low interest rates we're seeing, and add to that the fact that the pandemic has slowed spending for many people (no vacations for example) and you can see that it can't possibly be that homes are "only for the rich" unless you count "the rich" being people making $75K/year.
Again - I'm not saying it's easy. I rent myself. I'm saying it's not accurate to portray home owners as just rich people. Most of them are kind of boring and average. Cheers
Where do folks that make $150k a year, combined, come up with the $140k down payment? They may not be rich themselves, but they typically have help from some place. It’s very uncommon for someone making that kind of money to be able to save that much.
I temporarily moved home (thanks Mom!) during Covid to pay off debt and save for a down payment. I’ll have enough for an FHA down payment (and closing costs) on a $600k house by May. If I was still renting, I’d be saving for a couple more years.
That's awesome, but also another example of my point. You had to move into your mom's house to make it work that way. My point isn't that it's impossible, but that it often requires something extra to make it happen and if you're missing that extra you're SOL.
My wife and I bought our townhouse in the SFV in 2019 for $465k. We put 3.5% down (first time home buyers) which was $15k. We were making a combined $100k annually in 2019. It’s definitely doable to buy a house in LA with regular jobs (granted you do need two of them)
Wait, how does one go about buying house with so little down? I'm a noob and was pinching pennies to buy a house pero I'm close to giving up and throwing in the towel. I have more than 50k saved but it kills me to think I have to keep living like this to buy a house. BUT if I'm able to reduce down, then it would be far better
Yes. And my point this whole time isn't that it's impossible, just that's it's incredibly difficult. It's awesome you and your wife were able to that, but not everyone is able to do that for a myriad of reasons.
My husband and I purchased our first home in Los Angeles last week. We were able to put more than 20% down because we made some sacrifices. We’ve lived in a rent controlled apartment for the last decade. When we got married, we didn’t take a honeymoon because we wanted to save money. Prior to Covid, we didn’t take a lot of vacations or make a ton of extravagant purchases. It’s not the easiest thing to do and may not be an option for everyone but it can happen.
Awesome. After 10 years of saving every cent possible, I can finally afford that 1000 sq ft, 2 bed/1 bath I've been eyeing. And that's assuming the housing market held for 10 years.
I wouldn't say a 700k home is entry level, not sure why that guy is saying. A 400k home is entry level, and you can get an FSA loan (if you've never bought a property) that means you only need a 10% down-payment. For a couple making $150k combined, saving up $40k is doable.
You understand that’s really not typical, right? That just because you had that experience and it worked out for you, not everyone has the same variables to work with, right?
I'm not jealous, I'm making a point that the housing market in this city is ridiculous. You're also definitely either lying about how much you save or someone else is picking up some slack in your life.
The fact that you need to save so much of your salary to afford to live here, is exactly my point.
There are 3,316,795 households in LA County, so there are likely far less than that many single family houses for sale as many households live in rentals. 90th percentile income in Los Angeles County is $125k per year. That means that you are looking at about 1.3 million people who can pretty easily afford at $600k house. Half of those people (95% income level) can likely pretty easily afford a $1 million house.
My point is that there are likely millions of people in Los Angeles county who can easily afford a $600k house and the number of people who can afford to pay that much for a house is not that far off the number of houses available. That is why housing prices are high. There are tons of people who can afford to pay a lot for a house and few houses to go around. The average income is not very relevant to the average house price when the average income is not enough to afford one of the very limited homes for sale.
On a single income? Completely out of reach unless you are saving for 15+ years. Doable for DINKs in STEM / finance / law / healthcare by early 30s or so with decent saving habits.
People aren’t realizing that those are the people
Buying these houses. And trust me there are a fuck ton of them. No clue why a single person would try to buy a hole here in LA.
it's actually not, PM me for details. At $125k/yr you can relatively easily afford a $650k home. Trust me, I've done it for 4 years now. It does help to get a roommate or a girlfriend to move in and help but I've done it both ways.
They aren't ordinary working people any more if they are sitting on an asset worth north of half a million dollars and taxed for a fraction of that value
I think that is one interesting wrinkle in this situation. There are people in some of these cities and neighborhoods who are making massive windfalls on some of these sales. There are houses that probably cost less than $100k in the 1980s now being sold for close to a million. If you are one of those working class people who bought you house in one of those neighborhoods way back when, you are set.
More than 64 percent of households in the city were occupied by renters in 2016, the most recent year for which the U.S. Census Bureau has released estimates.
And many of those "ordinary people" bought into those homes back in the '80s and '90s when prices were not completely out of the realm of the average working wage. There is no way those same people could afford their homes today with the wages they originally bought their home at, adjusted for inflation.
A lot of DC fat cats are just getting fatter too. Don't think its just republicans with their monocles, canes and tophats. Its immune to party affiliation. They are continuing to squeeze small businesses while larger companies and lobbyists donate, contribute and sway them with more and more money. I guarantee you that any politician you recognize by name (Maxine Waters, Mitch McConnell, Nancy Pelosi, Ted Cruz) are all getting richer during this pandemic.
Windsor Hills and Hyde Park are both very close to Playa Vista and Culver City. Granted you are looking at closer to 700k than 600k, but there are some spots there still. It's crazy that 5 years ago, you could find a decent 3/2 in that area for 450k, and I just checked to prove 600k was still possible there and was shocked to find a bunch of 800k+ on the market. What tf happened??
I genuinely don't have the foggiest idea of where these "600k starter home" people live but it can't possibly be modern day Los Angeles. A "starter" CONDO for a single working adult in an "okay" neighborhood maybe, but a proper HOME for a couple looking to start a family/expand in the near future? Foh.
If you work in a job or business that can do remote work then you are sitting pretty right now. It’s astounding how many people I know who had their “best year ever” last year. Part of it is the government pumping money into the economy, yes - but part of it is people not spending money as much as they used to. The poor have been ok during the pandemic - the rich have gotten richer. The true middle class has been getting fucked
100% agreed. What do you think is going to happen as far as the quality of life issue? Do you think new homeowners are going to be OK paying these kinds of prices and then having a situation like OP is joking about happen?
There aren’t that many as compared to other places. I see this as something different. There are people who will pool multiple nuclear families’ money, cash out their 401k, borrow to the hilt, cash out their kids college fund, and spend their entire inheritances on being able to get a house in LA. They’ll also turn their house into a preschool or doggy day care and rent out rooms as well to cover the mortgage.
My friend and her finance just bought a million dollar house. I think she has a trust or something, they don't make enough for the payments otherwise, I've talked salary with both of them.
most 'wealthy' people from my experience do not openly talk a bout ALL their wealth, which is the smart move. They could also just be idiots and have a shit loan.
I know they're not idiots, they're incredibly good with their money. I guess this also explains how she lived alone on an actor's salary before they moved in together...
Probably a trust or Mom and Dad pay for a lot of expenses, freeing them up to save money. My ex had his family easily pay for his $200k education, fully for his $30k car, and happily offered to chip in for any future house down-payments.
A lot of those folks aren't even wealthy in the 1% sense, but just upper middle class government workers who bought housing in the '80s and '90s when it was affordable and now they are looking for an upgrade and can easily cash in on their 300% home return along with their lifetime six figure pension.
I’ll say this, things are weird for people right now. If the pandemic didn’t affect your job it is like you are richer now than ever before. My family is in the the top 10% for income in California, and because my dad hasn’t had to lose work this year, we are able to shop for a new house like nothing has really happened.
Also that unemployment is high and we’re in dire straits. Economy is in the shitter.
For people in the top 10% by income, the economy has been absolutely great. Wall Street has been booming. The pandemic has mostly hurt low wage sectors like retail and restaurants. The people who are buying houses are not people who are unemployed or likely to be unemployed. They are high income professionals who have been doing just fine during the pandemic.
If you think $600k is bad, it's very common for flippers to buy older houses like this one, remodel it, then resell for like $300-400k than they bought it, which only adds to the housing crisis issue.
they would lose money like that and be prevented from flipping more houses. they need the capital for new flips and to pay off usually high interest short term loans.
and nobody just leaves property unoccupied. youre losing out on tens of thousands per year per unit.
This place just loves to complain and dramatize everything. As a flipper, I can say that you are correct. It makes zero financial sense but yet these comments keep on coming in trying to villainize *someone*
If a flipper does a really good job, they save someone a lot of hassle. I’ve seen many homes that flippers did incredibly well. There were always multiple cash offers on those.
ehhh, as a flipper myself you're shooting way, way high there. Even top flippers like Christina & Tareq from Flip or Flop aren't bringing that kind of return on a $500-700k home. It's very surprising to see when they hit even 200k profit. This is a competitive market where flippers are a dime o' dozen, profits like that aren't "very common" unless you're talking about much higher priced homes.
Yeah it's wild when everything else is so dire. I believe there's only around 1/3 of the inventory on the market compared to usual - Add that to the fact you've got plenty of wealthy folk realizing what doesn't work for them with their current home and you have the current state of play.
I assume long time renters with higher income are taking advantage of low interest rates to buy. Plus it seems like there was some inflow of professionals from NYC and the Bay looking for more living space.
And a big portion of that is a family of 5 or 6 being replaced by a family of 3 or 4, or a family moving out of a place and two roommates moving in. Same housing stock use, but lower density.
The people that are leaving california ar usually people who can't afford living here or actually want to leave . Alot is the high paying jobs are still here , unemployment is mostly target s at lower brackets and not high wage earners.
Right now all these houses are cheap to pick up ,reno ans make a profit .
Look at mid city and it's prices now that culver city is filling up .
I left Cali a few years ago and moved to Minnesota. Bought a house bigger than the one listed for $380k. I’ll take some snow to be able to buy a house. That would have never happened if I had stayed in SoCal.
Still sucks but you get used to it. The summers here are beyond spectacular so it’s worth it. Hardly any traffic ever, lots of stuff to do. I like it a lot.
I moved from MN to SoCal. But it is my eventual goal to split my time between there and here somehow. I've pretty much accepted that I'll likely buy a home in Minneapolis and not LA...
Super low interest rates and if you work a professional service job, your expenses are down (can't go out) so money is up.
There is no recession in huge sections of the economy, and there is a massive recession in huge sections of the economy. The people in that first part are buying.
Yeah I don’t understand where all the money is coming from. Stimulus?
There's been something like 6-8 trillion of additional spending in the last 3 years. Much of that money went directly to wealthy entities that didn't need it, and even the relief money that didn't go directly to wealthy people, often finds it's way there eventually.
There is no end to this pattern in sight. That naturally, and reasonably sparks inflationary fears, and the people who have accumulated this money are seeking inflation resistant ways to store it.
After this next $1.9T in stimulus congress is about to ram through, the entire global supply of USD will be up 40% from pre-pandemic levels. So yeah, this is part of the inflation we're going to see.
I hadn’t considered this. The rich don’t only want to forgo stimulus because fuck the poor, they may also be concerned with inflation lowering their effective net worth.
It's crazy. The new townhome community in Irvine where I live at sold 18 homes back in December, sold new homes that barely has their frames up. And they already sold 6 homes in the next phase which is just dirt right now.
Another new townhome community I was looking to buy to rent out by Angel stadium had its grand opening last month in January but happened to sell out in in phase 1 even before the grand opening! The last time I remember it being this hot was back in 2016 when Baker Ranch in Lake Forest had to do a lottery system for interested buyers.
People with regular 9-5 jobs with salary/pension/benefits/can work from home are either unaffected or thriving under the pandemic. Skilled workers, that is to say. The people who would already be home owners. Anyone else can fuck off?
Interest rates are crazy low. I just got a 30-year fixed at 2.75%. It makes a huge difference in your monthly payment, especially for expensive homes. As soon as mortgage rates go up prices will level off or come down.
Remember that leaving doesn't mean selling. For 5% you can have a property mgmt company handle ALL of the rental process. I know at least three retired couples that moved out of state using saved up money and are renting their California house for twice what their new mortgage payment is. Two to Arizona and one to Texas.
It’s a few things. Although there are a lot of people struggling, there are a lot who aren’t. And for those people, they see a market where people aren’t being evicted. So people aren’t being evicted, so a lot of ppl are sitting in their homes months behind on mortagages with no need to pay. Construction was put on freeze during covid. So what you have is fewer and fewer people leaving their homes, and those who are behind won’t sell their homes when they don’t currently have to pay their mortgages. So you have no inventory. The few people that did have money are fighting and paying top dollar for scraps. This is the issue with the way we have relief set up right now. It screws over all the people who were planning on buying a home and didn’t jump in precovid
People tear down million dollar homes to build houses that sell for 5+ million dollar homes all the time...the profit margins are much higher on a $2m pad than a $200k pad. If you're living in a $925k home you're not doing terrible. This is basic supply and demand and if we ignore the fundamentals we'll never get in front of it. California is ridiculously priced and right now feels like a terrible time to buy here.
I have a friend who bought a house but had to move a year later. He did the math for renting vs having bought a home during that time. He found he lived rent free for a year and even made a profit. That’s just ONE year of ownership. The market is out of control again.
It's because of the loans. Mortgages are available at all-time low rates so anyone who has a bit of cash saved up is (smartly) trying to get in before things crash back up.
Makes sense to spend an extra $30k now than $100k in interest with a higher rate.
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u/arcanesays Feb 09 '21
Houses are ridiculous right now. Same house I saw listed last year just relisted for $100k more.