Los Angeles has gone housing market crazy.

Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes

I have been renting a house for the past 7 years in LA and now sadly the family wants to move back in. I figured it's time to buy my own place, especially with rents so high, but timing couldn't be worse. Every home has 15 offers and I have gone $30 to $40k over asking yet still have lost 6 so far.

Bubble?

Buying isn't happening right now.

Anyone else experiencing this?

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Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes

Originally posted by @Mike R.:

So Matt, you are saying you save in mortgage taxes so mat as well buy.

Mike,

Quick and dirty calculations. $36k/yr in PITI (Principal, Interest, Tax and Insurance) on a $600k purchase w/ 20% down. Less $8k in principal pay down, your allowable deduction is $28k. Plus you claim yourself and some other stuff. Your total deductions are closer to $34k.

At a conservative 25% tax bracket for Fed & State combined, you're getting $8,500 in refunds each year. The refunds should cover your annual property tax and insurance.

$36k gross annual PITI less $8k/yr in principal pay down (aka forced savings) less $8,500 in Fed & State refunds, your net carrying cost is $1,625/mo. Buying is cheaper than renting $2,500/mo.

The delta between renting and owning is $875/mo, or $10,500/yr. So your $120k down payment is earning you about about 8% annually. Not all is lost with the down payment. I would buy if I were you.

As you have witnessed, you're exposed to the ravages of inflation when you rent. Once you bought, you have essentially fixed your living cost. It's a short-term pain for long-term gain.

Good luck.

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Rich Weese
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
9y
I believe it is most certainly a bubble,, but no one can predict how big it needs to get before it explodes. It will, unfortunately explode.
6 Reply
Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Rich Weese:

I believe it is most certainly a bubble,, but no one can predict how big it needs to get before it explodes. It will, unfortunately explode.
UCLA says it is not in bubble but expects a return to normal levels sooner than later.
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Mike R.
OP
Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
Yeah not sure it's a bubble so much as - this month everything suddenly jumped up and very low inventory so people are in a panic.
After 6 lost bids, I'm now trying to find a townhome to rent for a year or 2.
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Mike R.:
I have been renting a house for the past 7 years in LA and now sadly the family wants to move back in. I figured it's time to buy my own place, especially with rents so high, but timing couldn't be worse. Every home has 15 offers and I have gone $30 to $40k over asking yet still have lost 6 so far.
Bubble?
If anyone has property in LA (NoHo, Sherman Oaks, Valley Village) Or areas nearby- I'm looking to rent apparently- as buying isn't happening right now.
Anyone else experiencing this?
It might take a few more trys if you are purchasing sub 600kish. I will keep an eye out for pads in Sherman Oaks. You looking for one or two bedroom? Good luck!
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Mike R.
OP
Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
Looking for 2 bedrooms. Yeah was looking sub $550k
It's tough out there! Seeing townhomes at $50k above comps from 3 months ago
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Mike R.:

Looking for 2 bedrooms. Yeah was looking sub $550k
It's tough out there! Seeing townhomes at $50k above comps from 3 months ago
Perhaps widen your search area..maybe Van Nuys, Lake Balboa, Tarzana , Encino or others like Granada Hills etc...you will find something and if your realtor is extra sharp that helps. Good luck!
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Mike R.
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Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
Oh I've looked in every area you can imagine- ha. Almost had a house in Van Nuys - Sepulveda and above Van Owen (So not the best area) list was $499- I lost out and was at $530k
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Mike R.:

Oh I've looked in every area you can imagine- ha. Almost had a house in Van Nuys - Sepulveda and above Van Owen (So not the best area) list was $499- I lost out and was at $530k
http://www.realtor.com/realestateandhomes-detail/1...
Much better area above
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Mike R.
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Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
Little too far up the 405 - gotta be closer to Hollywood. I'm now probably going to rent a townhome in Vally Village for around $2400
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Mike R.:
Sweet, although you might consider a rent controlled building just in case rents double....
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
this shortage of inventory @Matt R. is simply not good for the market place. you have qualified buyers like your self giving up.. realtors have a hard time making a living as so many of their offers get bumped...
I don't like this current cycle.. in these markets..
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Jay Hinrichs:
this shortage of inventory @Matt R. is simply not good for the market place. you have qualified buyers like your self giving up.. realtors have a hard time making a living as so many of their offers get bumped...
I don't like this current cycle.. in these markets..
A good portion of these prices are still sub peaks. I would not advise giving up but open up locations is likely if you want one this spring. My last purchase I went through the same out bids Mike R. has gone through. These are entry level prices and they have not built entry level stuff for decades. But I think it will normalize appreciation levels soon as UCLA predicts. Chuck in an EQ and a little recession might help too.
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Jay Hinrichs:
this shortage of inventory @Matt R. is simply not good for the market place. you have qualified buyers like your self giving up.. realtors have a hard time making a living as so many of their offers get bumped...
After looking at some local numbers on single families, condos, townies etc...there are approx 8 fully qualified buyers for every sub 600k property for sale. Sometimes 16 other times 2 to 3 and depends on location. They are mostly building just A/B+ multis or mcmansions in LA now. There is basically an affordable (sub 600k) housing shortage crisis. Now tear downs still are off the charts in certain hoods but those are mostly higher end. I am not sure or I can't see any end currently insight. That's the reality. Value add city is possible and is the good news. At the sametime Eliis Act evictions tripled. It is crazy but understandable. No land combined with very expensive to build...almost game over for affordable/starter housing. Keep in mind this is still a 50% discount in many cases compared to SF and with 10 times the overall population.
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Mike R.
OP
Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
And your recommendation?
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Mike R.:

And your recommendation?
Add square footage and or consider the new additional dwelling unit allowed per lot...plus future tear down entirely are possible factors to account for.
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Mike R.
OP
Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
No I meant rush buy or rent and hope to find when there is better inventory?
1 Reply
Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Mike R.:

No I meant rush buy or rent and hope to find when there is better inventory?
I wish there was some light at the end of the tunnel, like 2006 with bogus financing or something like that. There is not. The only thing that I can see is an earthquake or some radical interest rate changes or major league recession otherwise when looking back these might be considered bargains I am afraid. Look for value add almost only now. Many of these are still sub peaks from 10 years ago....even if they were even that is still 20% less today when inflation is factored.
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Mike R.
OP
Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
Yep and then add to that interest rates are going up. I'm still searching and now moving north of victory in van nuys. This is so stressful.
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Mike R.
OP
Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
What is the new added dwelling allowed? Certain lot size?
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Originally posted by @Mike R.:
What is the new added dwelling allowed? Certain lot size?
Granada my friend, so much better area, schools etc... and you can take the 118 to the 5 to the 170 to the 101 or surface to 170. I used to work at Sunset and Gower Studios. Totally doable. For the additional dwelling units...check google, Gov Brown signed into law and I really don't know much more about it or the additional the sq ft limits. I understand it is pretty much good to go though and no additional parking required in most cases.
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Mike R.
OP
Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
Sure, but it's so boring suburban. Ha. Too many chain restaurants for me.
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
It is not that suburban anymore. It is right on the edge of urban.
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Mike R.
OP
Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
I'll take a look.
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Rams owner just spent 250 mil down the street and massive multi use going in retail tear downs.
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Mike R.
OP
Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
9y
Grenada Hills is near Inglewood? Am I looking at the wrong maps?
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