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Sentiment In Los Angeles - Its Turning

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"... in the L.A. market there is no bubble. "

I would also like to deny the existence of gravity, the Earth's moon and the Sun.

Posted by: jemarqu | September 09, 2007 at 09:21 AM

Guess Ms. Realtor Susan Stone is loathe to give up her leased Mercedes, designer clothes, and new tract home in Agoura Hills..And, after they read Viles post, she be giving up her clients who have half a brain. A-Mazing!

Posted by: LA Expat in Arkansas | September 09, 2007 at 09:31 AM

I can only say that the realtor on this piece is in denial. When you lose 100k of equity in less than a year, the bubble is bursting or slowly deflating. Yes there is a bubble and the bubble is deflating rapidly. Then again is just an opinion and you know how Dirty Harry felt about opinions.

Posted by: Willie | September 09, 2007 at 09:32 AM

Six months ago, many people would have agreed with this realtor; right now she's quite hilarious.

Floods, riots and Rodney King happened after the bubble popped which was in 1989. People have a tendency to create their own cause and effect scenarios based on their thesis. If prices had fallen in 2001 people would have remembered it as a result of 9/11 and maybe years from now people will say prices fell because of the war in Iraq.The truth is the Southland has a long history of booms and busts and each time people say: this time it's different!

When real estate prices become unrealistic they drop. Right now, using realistic loans, most buyers can't buy houses and apartments. Nor do investors rush in. For smart money to invest in California the prices need to show high rates of return of at least 7-8% on rents. Prices need to drop 50% to becomes attractive to both these groups.

Since Real Estate is slow to buy and sell and inquires major transactional costs, including moving costs, the market moves slowly. If this was like the stock market where one can sell an asset in less than a minute and the prices on assets are updated by the second, we would have already seen a Nasdaq-like crash of 60% in prices and major panic selling. But since this is RE it will take several years.

The Realtor is in denial.

Posted by: amir | September 09, 2007 at 09:37 AM

Realtors are like leaf blowers.......their simply annoying!!!!!!

Posted by: Matt | September 09, 2007 at 10:07 AM

Ex: I bought a 9 unit bldg in santa monica at a retail price with a 'normal' 8% loan and income at 9.5 X gross with a 'low' 6% return 10 years ago. The rent is up 16% and the property value up about 100%. Banks will only make a 50% loan if I sold the property at the current value. A newer owner would have to buy at cash to get maybe a 3% return. With the emerging lack of liquidity from tightening credit, especially in home equity, noone will buy bldgs such as mine at such inflated prices with uber-low income. We may not burst and drop like a rock, but we certainly can sink like a bag of bones at the La Brea tar pits a long way until we revert to the historical norm in values.

Posted by: al | September 09, 2007 at 10:11 AM

The real problem that caused the current credit crisis and subsequent real estate bubble was that interest rates were too low for way too long for way too many people. Let's not forget that mortgage lenders were giving out 5% ARMs, no documentation jumbo loans with zero down payment. That is a recipe for disaster.

What responsible lenders did prior to the current bubble:

No documentation or substandard credit: +100 to +300 basis points

Zero down payment: +200 basis points

10% down payment: +100 basis points

Jumbo loan: +100 to +200 basis points

When the ARMs, 2/28's, interest only loans reset, the interest rates on those should be in the 9% to 12% range. The only borrowers who should receive the lowest interest rates are the ones with good credit, 20% down payment/equity and are not carrying a jumbo (+417,000) loan.

Posted by: Dwayne | September 09, 2007 at 10:31 AM

There is no bubble? What is this person smoking?

Posted by: Jason Hoppe | September 09, 2007 at 10:42 AM


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