Friday, June 22, 2007

Peter Viles comments

LA Times LA Land blogger Peter Viles had a guest spot on Diana Olick's CNBC blog. (Now that the MSM has discovered the housing bubble, they have some good people covering it.)

This also addresses Anon's 6/22 comment, "I'm not seeing the weakening in Northern Santa Monica [...] do you still think it's just a matter of time, or that the area is subject to different price pressures than other areas, and different price pressures than condos in the same zips (ie might not collapse)?" Peter Viles concludes,

Realtors describe three markets within the high end:

1. $800,000 to $1.1 million, which on the Westside is a first-time buyer, and is generally holding steady, though buyers are definitely more picky than in the recent past.

2. $1.1 million to $3 million--the "move-up" market, where inventory is mounting in many areas, and prices are softening, because prospective buyers are also sellers first--they have to sell their old homes before they can move up and buy another. Case in point: there is a glut of $2 million to $3 million McMansions in Manhattan Beach, where lots are small and houses are big; homes in that price range are sitting on the market for months, and often selling only after price reductions. Local blogger Manhattan Beach Confidential tallies four houses in this range that sold only after price reductions of $149,000 to $299,000.

3. $3 million and above, which is a market unto itself fueled by global wealth -- buyers often pay cash -- and continues to raise eyebrows. Case in point: "Spider-man 3" star Toby Maguire recently sold his 5,000-square foot Hollywood Hills home for $11.5 million -- he had bought it five years ago for $3.7 million.

This matches what I'm seeing. I wonder if a falling stock market (now beginning?) will be what changes the psychology? High-end buyers are more about assets and income, not mortgage rates. Low-end north-of-Montana prices fell around 1/3 from 1989-1994, from over $900K to below $600K.


MBWatcher said...

hey I don't want to be snitty but you cut the link out of the Viles piece to my blog...

anyway you're on my very short list... please consider:

Anonymous said...

The early 90's were definitely the time to get into la real estate, if you were in it for the long haul. Prices were good and there was lots to choose from. I know someone who bought a lovely home north of Montana in 93(ish) for $600K. I believe it is now worth well over $2 million.

I don't know if the price drop of then is a fair comparison to now, considering the implosion of the local aerospace industry. There was a glut of inventory and a lot of upside down owners who bought in the mid-late 80's. The pressure on prices was intense.

The Northridge earthquake helped change things greatly. At the risk of sounding crass, it depleted inventory and gave the real estate market a jump start.

It also helped educate many that, over the long haul, real estate, despite fluctuations, does still build value. With so much money chasing real estate today, I'm not concerned about long term fallout. The only people at risk are the flippers, who are in it for the short term buck. And, truth be told, I think they are playing with fire anyway. While there is huge upside potential, the risk of short term fluctuations, I think, is too much to bear. (So I'm a little conservative.)

The bottom line is that there is only so much land, and only so much land in desirable areas. But, how one approaches the market (flipping versus long term) will, of course, jade that view.

Lionel said...

anon, real estate, over the long haul, does build value. BUT... with the largest credit bubble in the history of mankind inflating housing prices beyond reason, you'd have to be a complete imbecile to buy a house right now, flipper or not.

Anonymous said...

lionel, don't worry about the imbeciles and be a "smart" guy, don't buy just continue to rent. i am a landlord and i love "smart" guys like you that help me pay off my apartment buildings (I have 2):-) oh-oh, i think i just started a hate blog against landlords, oops.

Westside Bubble said...

Sorry 'bout that, MBWatcher. Blame it on text-only cut-and-paste in the Blogger editor.

Good to meet you and your blog! I have a fondness for what Manhattan Beach used to be, before mansionization took over.

Anonymous said...

people around here don't - or at least shouldn't - hate their landlords. that's because landlords currently subsidize their tenants cost of shelter relative to what it would cost them to buy - and on a scale that is difficult to justify (consider average cap rates around here to highlight the disparity).

i don't think those entering the housing market today have to be a COMPLETE imbecile to buy, but they better have deep pockets and a LONG time horizon.

otherwise they SHOULD be "smart" and rent from generous landlords for a fraction of the alternative price.

dwr said...

"I don't know if the price drop of then is a fair comparison to now"

agreed, this time will be much, much worse.

Anonymous said...

That they will do, rent, for the rest of their lives and will complain continouesly about how they can't afford to be imbeciles no matter what the price is. They've experienced the drop in early 90's and what have they done with it, nothing.

afterthepeak said...

So you own these building outright with no debt? If so, why wouldn't a genius like you put that equity to work in more investments? Why have all that money sitting on the sideline when it can be in real estate? Might I suggest condo-hotels in vegas? Remember, it ALWAYS goes up and I hear from many real estate geniuses that you can't miss in vegas!

And if you have debt on your 'buidlings', are the cashflow positive? When did you buy them?

All sorts of smug douches come around saying the "own" things only to have the bank really own them very quickly.

MBWatcher said...

w-bub: we're straight, thanks

I have a fondness for a vision of what MB might have been like once, but I kinda like this version, too, what can I say?

Anonymous said...

afterthepeak, don't you worry about me, I am just fine and very happy. Most importantly, I am not counting your money (their isn't anything to count anyway), so the moral of the story is that you should be concerned about yourself and not the owners of the real estate. Live your own life and don't be bitter about the ones that have at least something.
The best of luck to and jelousy never helped anyone.

Lionel said...

"lionel, don't worry about the imbeciles and be a "smart" guy, don't buy just continue to rent. i am a landlord and i love "smart" guys like you that help me pay off my apartment buildings (I have 2):-) oh-oh, i think i just started a hate blog against landlords, oops."

How is that I use the word imbecile, and I manage to conjure one up? I said NOW is a stupid time to buy. If you bought in the early 90's, great, my family bought in the mid-sixties, also great. But anyone getting into real estate at the moment is clearly not reading the tea leaves very carefully. They're carefully aligned, saying STAY THE HELL OUT!

BTW, anon, have you been drinking, or are you always so difficult to decipher?

afterthepeak said...

Exactly... Anon, thanks for not answering one question, troll. You're perfect and make no mistakes, everyone else has the problems.

Another mini-trump wannabe who's full of crap.

Lionel said...

afterthepeak, what bugs me most about these people is that they don't acknowledge that there is a large component of luck involved in purchasing real esate. My parents arrived from the sticks in Canada and lucked into buying a house in Rustic Canyon (for 40K). They were hardly economically sophisticated, they simply bought a place they liked. Likewise, in the early seventies they ended up buying an apartment building in Culver City - not because they were particularly savvy, it was just that their neighbors were leaving town and had to unload it. Culver City was pretty rundown back then - I'm certain my Dad didn't buy it thinking it would be worth millions later. This is not to say that some people aren't sharper about real esate than others, it's just that only imbeciles take great pride in their "brilliant" purchases. My parents are smart enough to know they were fortunate.

dwr said...

"afterthepeak, what bugs me most about these people is that they don't acknowledge that there is a large component of luck involved in purchasing real esate."

I was just telling my wife the same thing over the weekend. It's just like tech stocks in the 90s, I know people who bought JDSU and had absolutely no clue what they made, but when the stock went up 50% they were clearly "savvy investors" and let everyone know how smart they were.

afterthepeak said...

Totally agree, I would much rather be lucky. And what bothers me even more is the people who don't do all the math when talking about their great "investments", don't answer any questions they should know the answers to, and then usually throw in a lot of realtor-speak... Like "I'm not paying rent for someone else!"

It's all timing and time-- being able to pay your nut when things aren't appreciating or you can't find renters, etc... Yes, it always goes up over time, but that can be a VERY long horizon.