Bubble over for one

[c1ue]

My mother just paid $200K cash for a 700 sq. ft house on 12000 sq. feet of land in a middle/middle upper town in LA.

REO, previous owner had piled up to $400K debt on this (1950s) era McMansion.

I still think it is early, but I guess half off isn't bad.

[The Outback Oracle]

Re: Bubble over for one

C1ue..if she had the money and she likes the place...good on her! Just a small Q about attitude. Is this something she wants to live in or is she investing?

[jimmygu3]

Re: Bubble over for one

My mother just paid $200K cash for a 700 sq. ft house on 12000 sq. feet of land in a middle/middle upper town in LA.

REO, previous owner had piled up to $400K debt on this (1950s) era McMansion.

I still think it is early, but I guess half off isn't bad.

I'm no expert on LA RE, but from a cursory Zillow search, that sounds like a decent deal. Most LA 'burbs have gone from ~$120/sf ten years ago, peaked around $360/sf and have free fallen to around $270 and counting, still way above the national average.

Your mom's house is no bargain at $285/sf, but the real value is in the land. The low price tells me that the tear-down market must have really collapsed there. If and when the market eventually turns and builders are again tearing down little houses to build bigger ones, homes like this will be in demand.

Hopefully she wants to live in this little house for a few years while things shake out.

[c1ue]

Re: Bubble over for one

C1ue..if she had the money and she likes the place...good on her! Just a small Q about attitude. Is this something she wants to live in or is she investing?

She's got the cash - she specialized into selling foreclosed FHA homes to 1st time home buyers in the mid 80s and racked up quite a count.

As for why - we've got family in LA; now that she's alone I've been encouraging her to move out of where she's at to be near family.

I'm in the Bay Area, but she refuses to buy $1M properties.

So she's been looking at LA homes for quite some time; I talked her out of buying the neighbor's pool house across from one of her sister's home in 2005 - they were asking $550K for 1100 sq. feet of (literal) former pool house.

I haven't seen the place, but it is on the edge of inner LA. Price isn't terrible but with 100% cash I think there will be even better opportunities.

Your mom's house is no bargain at $285/sf, but the real value is in the land. The low price tells me that the tear-down market must have really collapsed there. If and when the market eventually turns and builders are again tearing down little houses to build bigger ones, homes like this will be in demand.

Hopefully she wants to live in this little house for a few years while things shake out.

Yes, I agree that the land is good, but the corollary of falling home prices is that land prices are what get hit the hardest.

I still think there are plenty of better choices to come, but mom's always been a 'bargain hunter'.

[c1ue]

Re: Bubble over for one

Update: Mortgage company finally came back to the table.

Counteroffer: put in $30K more in cash.

My mother walked - it appears she may finally be agreeing with my projections.

Also: Palmdale/Lancaster median prices now under $100,000

www.doctorhousingbubble.com

[GRG55]

Re: Bubble over for one

Update: Mortgage company finally came back to the table.

Counteroffer: put in $30K more in cash.

My mother walked - it appears she may finally be agreeing with my projections.

Also: Palmdale/Lancaster median prices now under $100,000

www.doctorhousingbubble.com

You mean the mortgage company forfeited a sale in this market for a measly $30k? In US Dollars...:eek:. Wow.

As someone who's been through Palmdale, Lancaster and Mojave a few times, at $100k the houses are still overpriced.

[swgprop]

Re: Bubble over for one

Update: Mortgage company finally came back to the table.

Counteroffer: put in $30K more in cash.

My mother walked - it appears she may finally be agreeing with my projections.

Also: Palmdale/Lancaster median prices now under $100,000

www.doctorhousingbubble.com

Fascinating. Did it really take 3 full months for the servicer/mtg. co. to come back with a +30K counter? Undoubtedly they are swamped but that is ridiculous.

She's the clear winner here, she'll be able to buy the same place or equivalent for 150 or less in another year.

[c1ue]

Re: Bubble over for one

GRG - Yes. And dragged their feet for 2 1/2 months doing so. All cash offer for which they wanted $30K more cash!

SWGPROP - Yes.

Clearly the mortgage company (B of A, formerly known as Countrywide) doesn't REALLY want to get rid of this house. Or they are smoking crack. Or both. Or because of the bailout, they don't NEED to sell no STEENKIN' houses.

I've introduced my mother to Zillow and suggested she implement my housing bottom plan: choose the area you want, then Zillow every single house to find those with positive equity. Then send a letter with a cash offer based on prevailing per square foot metrics to each of these positive equity owners.

Full circle since it was via her business that I learned how to use the county recorder's office in the '80s.

[jimmygu3]

Re: Bubble over for one

Fascinating. Did it really take 3 full months for the servicer/mtg. co. to come back with a +30K counter? Undoubtedly they are swamped but that is ridiculous.

She's the clear winner here, she'll be able to buy the same place or equivalent for 150 or less in another year.

I hope so. My family and I are planning to move to LA in '09 if I can get a job there. We're in the entertainment biz and we like the town. We still own our Atlanta house, but prices in our intown neighborhood have held up well so far. Plan is to net $200k on the sale of our ATL home, sit on the money while we rent in LA, then buy a bargain for mostly cash in '10 or '11.

Hopefully we can sell now while Hank and Ben hold rates down, then buy when rates are high and prices are low. I believe the absolute bottom in housing will coincide with a peak in rates, as the Monthly Payment Consumer qualifies for loans based on payment, not price. As you can see, if rates go from 5% up to 10%, the same payment buys 35% less mortgage. Cash buyers will be in the catbird seat.

I'll keep iTulip posted on how my LA plan works out....

Jimmy

[jimmygu3]

Re: Bubble over for one

I've introduced my mother to Zillow and suggested she implement my housing bottom plan: choose the area you want, then Zillow every single house to find those with positive equity. Then send a letter with a cash offer based on prevailing per square foot metrics to each of these positive equity owners.

c1ue,

When you use Zillow to find "positive equity", are you just referring to homes with 'Zestimates' higher than the owner's original purchase price? If so, I'm sure you're aware of the limitations of this, as many have refi'd themselves right out of their positive equity. Otherwise, I'm curious how you're using Zillow to obtain mortgage balance info.

BTW, Zillow is great, but I wish they had an advanced search to find properties with positive equity, or houses for sale with asking prices X% below Zestimate, or to search by school district.

Jimmy

[Andreuccio]

Re: Bubble over for one

I hope so. My family and I are planning to move to LA in '09 if I can get a job there. We're in the entertainment biz and we like the town. We still own our Atlanta house, but prices in our intown neighborhood have held up well so far. Plan is to net $200k on the sale of our ATL home, sit on the money while we rent in LA, then buy a bargain for mostly cash in '10 or '11.

Hopefully we can sell now while Hank and Ben hold rates down, then buy when rates are high and prices are low. I believe the absolute bottom in housing will coincide with a peak in rates, as the Monthly Payment Consumer qualifies for loans based on payment, not price. As you can see, if rates go from 5% up to 10%, the same payment buys 35% less mortgage. Cash buyers will be in the catbird seat.

I'll keep iTulip posted on how my LA plan works out....

Jimmy

Clue, are you talking about LA Louisiana, or LA Los Angeles? Prices in Los Angeles have dropped a lot since the bubble popped, but I'd still be shocked if you could get a house anywhere here for 200K, even in the worst parts of town. Prices in the nicer parts are still much higher than that.

Re Palmdale and Lancaster, GRG55 is right. I'll consider moving there when the average home price is a negative number, and even then it'll be a hard sell. Some of my in-laws bought a house there a couple of years ago, against my advice. I think they managed to time the peak of the market perfectly. They've recently moved back to LA (Los Angeles). They disliked Palmdale so much they'd rather let the house sit vacant than live there.

[c1ue]

Re: Bubble over for one

When you use Zillow to find "positive equity", are you just referring to homes with 'Zestimates' higher than the owner's original purchase price? If so, I'm sure you're aware of the limitations of this, as many have refi'd themselves right out of their positive equity. Otherwise, I'm curious how you're using Zillow to obtain mortgage balance info.

Jimmy,

You're thinking too hard. Zillow lists the last sale on the property.

If the last sale was in 1982 for $90K, well, you're likely at least warm.

Zestimate - last sale amount = possible outstanding equity.

Sure, there are those who cashed out refis. But then again, there are many more who just don't want to sell. Hence the many many letters.

Clue, are you talking about LA Louisiana, or LA Los Angeles? Prices in Los Angeles have dropped a lot since the bubble popped, but I'd still be shocked if you could get a house anywhere here for 200K, even in the worst parts of town. Prices in the nicer parts are still much higher than that.

I'm speaking of LA as in Hollywood and the Pacific Ocean. As much as prices in LA - West have dropped, there is plenty more to go.

Sure, prices are going to be sticky on the way down due to Proposition 13, but on the other hand check out this link:

http://www.laalmanac.com/economy/ec37.htm

Note the year 2000 price, and the year 2008 price.

While of course it is possible that LA has hit bottom, on the other hand I use the year 2000 as my gauge as to when credit in the US really went asymptotic.

A return to a median price of 2000 would mean lots of under $200K properties in LA. Maybe not the best parts of town, but my mother likes driving tiny 4 door station wagons. She'll feel right at home in one of those.