California Housing Bubble a Worrisome Trend for First Time Loft Buyers

Don’t turn your back on the affordability gap between California and the rest of the U.S.

Housing Price Bubble? How big is it?

On a scale of 0 bubbles to 5 bubbles, five being the most severe danger of a burst bubble, one Southland writer sees this as a difficult time for the California housing market.  Adding all of the numbers, the current real estate bubble is at least a 3 out of 5. Inflation is the key ingredient mitigating this bubble.

Market watchers caution that the lack of affordability is worrisome for California’s housing market. The state is consistently 20% to 30% less affordable than elsewhere in the United States. Here in Los Angeles, the Loft Market is locked in a price and demand deadlock. As a result, sellers are reluctant to reduce prices while demand remains strong.

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Yes, this past summer produced a slight narrowing of this California-vs.-U.S. homebuying affordability gap from earlier in the year. That’s when this spread was at its widest since the end of 2007 a decade ago. However, it sharply lowered the chance a typical Californian can become an owner even with historically cheap money. As a result, banks and Investors are cannibalizing the market buying up homes and, in turn, pushing up prices. 

… today’s overheated pricing is all about “simple supply and demand.” Well, demand means having buyers who can afford to buy.

This shrinking affordability is even more troubling when mortgage rates have nowhere to go but up. One big reason is that inflation — an essential factor in setting interest rates — is heating up.  The safer, newer, cleaner suburban single-family neighborhoods have shot up the most over the last 18 months. Much inner-city and urban real estate has held steady or dropped in price during the virus hysteria. Affordability is historically quite good in high-crime, high-homeless areas of inner cities, such as Little Tokyo Lofts in Downtown Los Angeles.

According to the Consumer Price Index since 2000, U.S. inflation has averaged 2.2%, while rates on 30-year mortgages averaged 5%, according to Freddie Mac. So historically speaking, loans are usually priced 2.8 percentage points above these cost-of-living increases. Yet this fall, inflation was around 6% while this benchmark for mortgage rates — kept artificially low with Federal Reserve help — averaged 3.1%. That’s 3.1 points BELOW the inflation rate.

Unfortunately, real inflation is higher than that. In fact, Thanksgiving dinner costs 14% more this year. Because the Federal Reserve and federal government have indicated that there’s no limit to radical monetary policy and government spending, and there’s no serious capitulation about inflation by the current administration, we can assume that inflation shall continue to grow. Real inflation with insufficient real growth, or stagflation, is likely to mitigate and obfuscate real estate bubbles for years. #realestate #bubble #marketupdate #entarispowerful

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Industry cheerleaders will shout that today’s overheated pricing is all about “simple supply and demand.” Well, demand means having buyers who can actually afford to buy.

LOFT & CONDO LISTINGS DOWNTOWN LA [MAP]

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Copyright © This free information provided courtesy L.A. Loft Blog with the information provided by Corey Chambers, Realty Source Inc, DRE 01889449; MPR Funding Inc NMLS 2000513. We are not associated with the seller, homeowner’s association, or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com, Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties are subject to prior sale or rental. This is not a solicitation if the buyer or seller is already under contract with another broker.

Downtown Los Angeles Real Estate Market Report August 2021: DTLA Property Prices Crash Up with Stagflation

DTLA Property Crash – Downtown L.A. Housing Market Aug 2021

DTLA Feels Full Force of Stagflation as World Economy Sentiment Drops

Up and Down! Average and better L.A. urban home prices increased while the bottom of the barrel decreased. The rich get richer and the poor get poorer. The home price increases occurred even while the Downtown Los Angeles housing market slowed. The number of sellers increased, as the number of buyers decreased. Most urban home prices are today affected by the upward force of inflation, even while the bottom tier and overall market feel the downward pressure of economic stagnation. The well-to-do are able to take advantage of most any situation.

Last August, 32 properties for sale grew to 55 for sale this August; Days On Market increased from 39 Avg / 31 Med to 55 Avg / 30 Med; Most prices shot up in August compared to the same month a year ago: $580,000 Med / $704,000 Avg. As the bottom half bear the brunt, lowest price decreased from $309,000 down to $100,000 while the high price increased from $1,700,000 in 2020 to $3,000,000 in 2021. These numbers are based on real estate agents Multiple Listing Service for Downtown and nearby MLS areas 23, 42 and 1375.

As for the global economy, Americans and Europeans have lost faith in their financial futures recently. US consumer sentiment fell to a near decade low in August, according to Al Jazeera. Europe is feeling no better. While inflation can help boost or prop up the value of real estate, stagflation is not what the doctor ordered. Citibank expects a negative stock market event soon.

Find out what the home down the street sold for

FIND OUT HOW MUCH YOUR CONDO IS WORTH — Get a free list of recently sold nearby properties, along with prices, and a list of current active properties for sale. Fill out the online form:

LOFT & CONDO LISTINGS DOWNTOWN LA [MAP]

  Lofts For Sale     Map Homes For Sale Los Angeles

SEARCH LOFTS FOR SALE Affordable | PopularLuxury
Browse by   Building   |   Neighborhood   |   Size   |   Bedrooms   |   Pets   |   Parking

Copyright © This free information provided courtesy L.A. Loft Blog with information provided by Corey Chambers, Realty Source Inc, DRE 01889449; MPR Funding Inc NMLS 2000513. We are not associated with the seller, homeowner’s association or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.

2020 August

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