You can smell the end of the summer real estate season as some drunk sellers are pulling properties off the market since they are unable to obtain their ridiculous prices. Funny how expectations work. Some sellers drink the Kool-Aid and suddenly think their home is worth some optimistic appraisal or what a manic market will pay. You even see this in the real estate ads where sellers try to throw in their best curveball on what otherwise is a glorified closet. But hey, prices will only go up so buy with all the confidence in the world and never mind the carrying costs, opportunity costs, or other factors that make buying a more intricate process. The fall housing market always slows down. Now, with foreclosures making a smaller portion of sales, we should expect to see a bit more seasonal changes. However, I just love seeing some of the old neighborhoods where old properties are being sold as if they were newly built quality homes. We are seeing this in places like Pasadena for example. Let us go shopping in Santa Monica and see what we can get with $900,000.
The Republic of Santa Monica and L. A. County
L. A. County is the most populated county in the state of California. More than 10,000,000 people call this area home. The majority of households rent. Yes, that other four letter word. And this trend has only grown since the housing bubble popped. If you want to buy in today’s market, expect to find tight inventory and sellers high on believing that real estate is somehow some golden ticket to prosperity. Even with inventory rising and prices stalling out, people are still on the real estate meth of 2013. The 1,000,000 foreclosures since the crisis hit in the state seem to now be a distant memory. Flippers are out in fashion and cable producers are trying each and every way to figure out how they can repackage the idea of selling a piece of shelter. These aren’t people creating ground breaking companies, scientific breakthroughs, or reshaping our economy. No, basically handing over a home which is essentially shelter to another person and skimming cash off in the process. That is probably why the allure remains for real estate. Everyone can understand it. Everyone can understand the process of prices going up. It doesn’t take a genius to understand a house has a roof, bathrooms, rooms, kitchen, and living room. With a few cable shows under your belt, you suddenly are an expert on recessed lighting, hardwood floors, granite countertops, and stainless steel appliances. You learn about staging, the plastic surgery of home sales. In other words, real estate is the bread and circus for the public. Good luck trying to get the public to understand derivatives, options, high frequency trading, or how the bond market works. For a public that doesn’t know Ben Bernanke from Ben Hur, it is understandable how people can get swept up in the winds of mania. Real estate is tangible and not complicated. Yet to make it seem like a no brainer (which it was for a couple of generations) is now out the window especially in high priced markets.
L. A. County continues to grow but at a much slower pace:
This post was published at Doctor Housing Bubble on August 30, 2014.