Who Mourns for the Million-Dollar Starter Home?

You know what you almost never hear amid all the tsouris about the real estate collapse? That five years after the decline started, houses are still way overpriced, and that they continued to go up in price even while the so-called Great Recession was in full swing. 

Here’s a little piece of paradise listed in an undistinguished part of Los Angeles that one Realtor® hopefully describes as “Beverlywood Vicinity.” Asking $599,000, 3BR, 2BA, and as you can see, all you need to do is pry the boards off the windows to start making it your own TLC-enhanced home: 

Now I just did a drive-by of this property, which has since been encased in a security fence and is located two doors down from another obviously vacant property. (There are a total of three properties for sale on this one-block stretch of Hi Point Street.) It has some attractive qualities – among them that it’s one of a handful of single-family homes on a street of multi-unit eyesores. And I would not even have singled it out for fun-making but for this wonderful notation in the listing: 

“Bank owned. Sold for $1,265,000 in 2009.” 

Do the math: 2009 was three years into the real estate decline. It was a full two years after former Treasury Secretary Henry Paulson expressed his panic at the possibility that house prices might be “distorted down” by lack of demand. It was at least one year into the “liquidity trap” that Nobel laureate Paul Krugman says the government needs to save us from. 

And yet at that time, some knucklehead was able to get about a million dollars in financing for a starter home. In due time this piece of shit loan to a piece of shit borrower for a piece of shit house in a piece of shit neighborhood turned to be, amazingly, a piece of shit. The knucklehead bailed on the numbskulls at the bank (who, we can only pray, were able to bail on the taxpayers). Now it’s back on the market at a price that is still three times what it’s worth. 

By now you’re saying, “Blimey, Mr. Scrooge! Three times what it’s worth? Where do you get that from?” 

Here’s how: Through most of the postwar period, until the hyperinflation of real estate really got underway in the late 1980s, the median house price in the U.S.A. hovered between three and three and a half times the median household income. Then home prices began their long ascent to the mesosphere while incomes – though they were a mite less “stagnant” than the media would have you believe – did not come close to keeping up. So I say that 3X or 3.5X multiplier remains a handy yardstick. 

The median income in Los Angeles County, according to the U.S. Census Bureau, is $54,375. And that makes this a $190,312.50 house.

I am not claiming that this place will ultimately sell for $190,000, nor am I offering anybody house-hunting advice. I expect the closing price will be in the same ballpark with the price the bank is seeking.

But I’ve got my eye on a couple of baronial palaces less than a mile and half from this place, and those are asking $225,000 and below. Even L.A.’s religious belief in the power of a single north-south cross street to add $100,000 to your property value can’t hold back the reality that the $200,000 starter home is on the rise and the million-dollar starter home is on the decline. 

To understand how far real estate prices still need to fall, you need to understand how they got distorted up in the first place. That means you should head down to your local newsstand, pick up the November issue of Reason (still a bargain at $3.95), and read Dean Stansel and Anthony Randazzo’s indictment of the mortgage interest deduction “The Upper-Class Entitlement.” In the meantime, here’s a little peak at Federal Reserve Bank's Flow of Funds report [pdf] which nicely shows how crappy lending swept the real estate market before the correction (or at least the first stage of the correction) began. Note the highlighted home mortgage borrowing figures from 1998 through 2007: 

And keep in mind that these are the figures Fed Chairman Ben Bernanke was looking at when he declared, a year after the real estate peak, that "fundamental factors...support the demand for housing." As noted here last month, Bernanke’s “twist” tactic for Quantitative Easing 3 is intended to bring down the rate on the 30-year mortgage and make this kind of stupid borrowing happen all over again. And right on cue, a major big-city newspaper is reporting that now’s the time to buy.

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  • Fist of Etiquette||

    In due time this piece of shit loan to a piece of shit borrower for a piece of shit house in a piece of shit neighborhood turned to be, amazingly, a piece of shit.

    Seems a tad harsh.

    For all you know, this "piece of shit borrower" was, in fact, a fine and upstanding citizen and the property value was elevated because of something as innocuous as a fully functional dog fighting pit in the basement, and the buyer expected to recoup the cost of the home by selling tickets to bouts, and couldn't have foreseen that the neighborhood wasn't zoned for dog fights. You should consider these possibilities before you toss labels around.

  • Almanian||

    FIST! "The first rule of Dogfight Club IS..."???

    *glares*

  • ||

    *GGGRRRRRRRRRRR* (drool)

  • ||

    There are no basements in LA, Fist. Your theory sucks. And no, cockfights in the crawlspace is not an option.

  • BakedPenguin||

    cockfights in the crawlspace is not an option...

    That's why the high-priced houses in LA have 2-car garages.

  • Almanian||

    That's why the high-priced houses in LA have 2-car garages are doublewides.

    Fixed!

  • Fist of Etiquette||

    No basements? Then I submit to you that it is not my theory but, in fact, Los Angeles which sucks!

  • Colonel_Angus||

    A basement is like a free equivalent of a whole extra floor. Otherwise you're sitting on a slab of concrete or a shitty crawlspace, which both have all the same potential problems of a normal foundation while being much more difficult to access. So with that in mind, with the amount of space you're getting by buying a shitty "starter home" you might as well get the same amount of space by renting.

  • ||

    The only benefit of putting in a basement in LA is that it removes the need to purchase a burial plot in case of a major earthquake.

    That, and it would inevitably be a bitch to get a permit to dig more than 36 inches into the ground. I've heard the horror stories from friends trying to put a pool in.

  • Nicholas D. Rosen||

    Well said, but why would anyone who is not clinically insane ever have paid that kind of money for an undistinguished house that size? And how could anyone have charged over a million dollars for such a house, when you could a similar house much more cheaply? It's not primarily the house; it's the land. As Will Rogers said, they aren't making any more of it. Prosperity raised land rents; that plus easy money and assistance from Fannie Mae drove the selling price of land through the roof. (NIMBY Regulations that make it hard to construct more housing in some places also contributed.)

    So there was a bubble in land prices, somewhat misleadingly described as a boom in "real estate." Prices couldn't rise by double digits every year until the end of the universe, so the bubble finally burst. That's the basic cause of the boom and bust cycle.

    An economist named Henry George explained the basics in the 19th century, and modern Georgist such as Professor Mason Gaffney have refined his analysis. You can look it up.

  • ||

    And how could anyone have charged over a million dollars for such a house, when you could a similar house much more cheaply? It's not primarily the house; it's the land.

    It's not the land, it's the zoning and permitting. Thanks to zoning and permitting, they're effectively making less usable land.

    An economist named Henry George explained the basics in the 19th century, and modern Georgist such as Professor Mason Gaffney have refined his analysis. You can look it up.

    Such analysis works well when there's not tons of regulation as well affecting what can be built on land. See the research of Ed Glaeser, reported by Virginia Postrel here and here for example.

    Land itself is not nearly as expensive in LA as the price of housing ever indicated. You could move to a larger lot with more land, enough land to put another house on, for much less money than that of buying a house. That's because a single family home on a half acre lot doesn't give you the right to subdivide that land into two quarter acre lots and build another house.

  • Nicholas D. Rosen||

    Tons of regulations? Well, yes, but I said that NIMBY regulations were part of the problem. I believe that the basic analysis still applies.

  • Apostate Jew||

    Don't harsh on John's narrative that everything is somehow related to taxes and regulation and that everything would be just peachy if it weren't for liberals.

  • Some Guy||

    Who Mourns for the Million-Dollar Starter Home?

    Rent-seeking real estate agents and bankers.

    Any other questions.

  • Joe M||

    Wow. When we bought our house four years ago, it was priced at about 1.5 times our combined annual income.

  • Almanian||

    This. We've never bought a house that was more than 1 1/2 times my income (forget Mrs. Almanian's - we don't even count it).

    So, we've lost some value, but I could unload it if I had to. HEaring from headhunters of people who can't relocate cause they're underwater by $400K/1/2 a mil or more. Unreal.

  • Joe M||

    We've got it about halfway paid off now, which is great because we refinanced when my wife got pregnant and (mostly) quit her job. Buying stuff really isn't hard if you, you know, live within you means.

  • ||

    Why bother living within your means when the odds are so goo that your losses will be socialized?

    I recall looking at the houses for sale around me in 2005-06 and thinking, I'm pretty successful and I can't afford ANY houses around here. Where is everyone getting this kind of money? Silly me, judging affordability by a 20% downpayment and 30 year fixed rate mortgage. So I waited, kept living below mt means while everyone else was in a McMansion, and then finally bought late last year with more than 20% down. Now everyone says I am "lucky" to have avoided the bubble.

  • ||

    Just bought one for 87k. Three bedrooms, 2 baths, pool in a nice neighborhood. My mortgage payment with taxes and insurance is less than my previous rent for a two bedroom apartment.

  • shut the fuck up||

    "Just bought one for 87k. Three bedrooms, 2 baths, pool in a nice neighborhood."

    I guarantee your "nice neighborhood" is not an actual "nice neighborhood" it's a "scummy shithole" that you're trying to pretend is a "nice neighborhood".

  • Doktor Kapitalism||

    Sounds like the US.

  • A European||

    Yeah, everything except the ""scummy shithole" part which is clearly referencing continental Europe.

  • Doktor Kapitalism||

    ...and the rest of the globe isn't even pretending anymore.

  • A European||

    ...and the rest of the globe isn't even pretending anymore.

    Yes, you're right of course, the rest of the globe has essentially stopped pretending Europe isn't a festering dungheap.

    Glad we agree on this.

  • Doktor Kapitalism||

    No, I meant the rest of the globe has essentially stopped pretending the rest of the globe isn't a festering dungheap.

  • Coherence||

    from skin cancer of course!

    What? That doesn't make any sense here either?

  • A European||

    Ah, so you're an imbecile.

  • Doktor Kapitalism||

    At whom was that directed? If towards me, elucidate.

  • Mr. FIFY||

    It's pulling a White Indian... changing handles to post the same fucking pointless treacle.

  • ||

    Ooh tough words from anon pussy. No, fuck face, it is in Phoenix where housing prices are dropping faster than your mom's skirt after being solicited with oxycontin.

  • shut the fuck up||

    "Ooh tough words from anon pussy"

    Were you referencing your post here, since you're also an anon? And clearly a pussy?

    "it is in Phoenix"
    And THAT is supposed to prove it's not a shithole?

    Fuck guy, just pick Detroit next time, holy shit...

  • shut the fuck up||

    OH SORRY, clearly your REAL NAME is "KaraDeAwesome", lol.

    Have fun in your shithole, crying about it and calling people names won't change the fact that it's Phoenix.

  • ||

    Sweet Jebus on a pogo stick, at least anon pussy is taking his rage out on the internet instead of mutilating cats.

  • shut the fuck up||

    "at least anon pussy"

    why do you keep using the third person?

  • shut the fuck up||

    OH SORRY, clearly your REAL NAME is "KaraDeAwesome", lol.

    Have fun in your shithole, crying about it and calling people names won't change the fact that it's Phoenix.

  • JOhnny MAckson||

    Wow! The "Fuck You" Troll has arrived! Nice post, "Fuck You" Troll. I mean really. LOL

    Jess
    www.anymouse.com

  • R||

    You know your shit stinks when even the anon bot calls you out...

  • Mr. FIFY||

    Wow... six hundred grand for that??

    In order to afford that cozy li'l bungalow, one would need to make... oh, let's see.. about two hundred grand a year.

    Which, incidentally, is the Magic Income Level needed to enter the Club of Evil Capitalist Pig-Dogs.

    Just ask any average Democrat.

  • mad libertarian guy||

    And it's the ability to live in a house like that which is supposed to designate one as rich?

    Team BLUE REALLY needs to fuck the fuck off.

  • Mr. FIFY||

    So does shut the fuck up guy.

  • Cowboy||

    And that's why Im glad the house prices down here never got insane. Here younever get toyroff moneys worth. A 1 million dollar home is a veritable mansion. I was able to buy a 3/2/2 custom brick house built in 2004 for about 160k which I think is perfectly reasonable and sane.

    I showed my friend in NJ and he was amazed. Apparently what I paid is barely enough for a condo in his area. The fact that people still want these prices artificially inflated blows my mind. Wouldn't everyone be better off if house prices deflated?

  • ||

    Not bubble-bought homeowners, not local governments dependent on property taxes, and not organized realty. Each of whom has more of an ear open to them than prospective homebuyers do.

  • ||

    In all candor, if a person has a job and is that much under water they should just file bankruptcy. The fact is the US has some of the most forgiving bankruptcy laws in the world and thought it might be painful, it is possible to shaft the bank and most of ones creditors on an underwater mortgage.

  • yogi||

    'Cavanaugh' doesn't sound Jewish to me.

  • Esteban||

    The word you're looking for is "anyway..."

  • ||

    Oy vey, what a goyishe meshug

  • Robert||

    "all you need to do is pry the boards off the windows to start making it your own TLC-enhanced home"

    ...and convert the garage back into a garage so the government will allow you to live there.

  • Eminent Domain||

    Not if I don't fuck 'em out of "their" property For The Common Good!

  • Colin||

    So, Tim, did you make an offer?

  • Tim Cavanaugh||

    Did not, though there is one thing that intrigues me about that property: It's zoned R3, which I think means you could tear it down and build a 10-unit place on the lot (which is fairly large). If I were an investor with $600k in hand, and if I were about 15% more confident in the near-future growth of L.A., I would be tempted.

  • Sudden||

    I'm in the field of commercial real estate, although I haven't done a feasibility analysis on this one, my gut tells me its a wash on if that would really be a bargain vs. buying an already constructed apartment. Although the allure is that building new helps you dodge rent control.

  • R||

    Here’s how: Through most of the postwar period, until the hyperinflation of real estate really got underway in the late 1980s, the median house price in the U.S.A. hovered between three and three and a half times the median household income.

    That's because that is all that the bank would give you a loan for, back when banks used to be conservative with their lending to prevent people from being unable to pay them back.

    Then, the .gov got involved and started dicking with the system, encouraging riskier and riskier behavior. And we all know what happened next.

  • dicking.gov||

    That's what we do best!

  • Warty||

    That piece of shit house would cost $80k anywhere in the Midwest. Why do people still live in California?

  • ||

    Why do people still live in California?

    On the coast? The weather.

    In the interior? GOD KNOWS WHY!?!

  • Vake||

    Once middle America develops the culture available on each coast, they will cease to be "flyover country." Coming from a Floridian, beaches are overrated.

  • shut the fuck up||

    "Once middle America develops the culture available on each coast,"

    AHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAAAHAHAHAHAHAHAHAHHAAHAHAAAAHAHAHAHAHAHAHAHHAAHAHAAAA.

  • Cultural||

    If there's anything that people from the major cities in the US overrate, it's the level of culture available.

    Just to be clear, seeing a bum shit in the street isn't culture.

  • Mr. FIFY||

    Hell, I live in Missouri, and I've seen bums shit in the street.

  • Cultural||

    Sadly, in MO that's just a bum shitting in the street, in NY, that's a 35 dollar show that your taxes partially funded.

  • Mr. FIFY||

    Fortunately, OUR bums do it for free.

  • mad libertarian guy||

    The ONLY advantage of big cities is the availability of lots of food.

  • Mr. FIFY||

    Just wait 'til we get to Soylent Green times... or is that Skynet times?

  • ||

    70 degree sunny weather 300 days out of the year is hard to overrate though.

    The midwest will never have that.

  • A meteorologist||

    "The midwest will never have that."

    Neither does anywhere else. Please lie and claim otherwise.

  • ||

    umm, look at the averages for los angeles, which highs never get above 90 and lows never below 45 and mostly sunny most of the time. I don't think there's any exaggeration that its got weather to die for.

  • A meteorologist||

    "I don't think there's any exaggeration that its got weather to die for."

    You said "70 degree sunny weather 300 days out of the year", not "weather to die for".

    Why do you assholes just casually lie for no good reason, then act like it's nothing?

  • ||

    Dear god you're a pedantic ass. Its fucking obvious I was talking about LA as that's what the fucking article was about.

  • A meteorologist||

    "Dear god you're a pedantic ass."

    Says the liar, the opinion of which I don't give a fuck about.

  • ||

    One would assume you would stop responding if you didn't care, but you apparently have some sort of axe to grind about being pedantic about fucking specific figures surrounding LA's weather.

  • A meteorologist||

    "One would assume you would stop responding if you didn't care"

    Why? That line was always moronic, the fact that I don't give a fuck what you THINK doesn't mean I don't give a fuck about demonstrating you're a lair.

    Jesus, how fucking stupid are you liar?

  • Doktor Kapitalism||

    from skin cancer, of course!

  • Coherence||

    You and I have never met, huh?

  • A real estate agent||

    SHHHHHH he's trying to sell it jackass...

  • ||

    I don't fucking own anything in California and would never move to the fucked up state, but its fucking obvious to the rest of the nation that the weather there is really fucking nice.

  • Warty||

    It's rectal, dude. Either ignore her or make fun of her, but don't try to talk to her like she's people.

  • ||

    Damnit, i've been had. Need to pay more attention the troll "handle" of the day.

  • A meteorologist||

    No, you weren't had, you just got caught lying.

    Cry more.

    And if you think I give a shit about a liar trying to take the cheap way out and call the person who caught him lying a troll, well...

  • not rectal||

    i find your persecution complex sad, your life is really so empty and meaningless that you think one single person causes all this?

    get out more...

  • Mr. FIFY||

    Can't be rectal... where are all the blogwhoring links?

  • A meteoroligist||

    so nice you have to lie about it

  • ||

    ...but its fucking obvious to the rest of the nation that the weather there is really fucking nice.

    Yes it is … isn’t it? Haa haaa haa.

  • Doktor Kapitalism||

    If he can't sell it by telling the truth, the whole truth, and nothing but the truth, then it probably shouldn't sell. Sorry if the brutal honesty hurts, but not really.

  • Mr. FIFY||

    Is the pointless "how many nice days are there in California?" bullshit over, or is AnonoPussy #infinity still at it?

  • MNG||

    Where do you live that you're claiming it's 70 degrees and sunny 300 days a year?

  • R||

    It's sunny 300 days a year in Nevada, but it's sure as hell not 70 degrees...

  • ||

    Dude, I'm talking about LA.

    no, its not perfectly 70F, but its great weather 90% of the year. No where else can claim that. Its why it got so fucking popular.

  • A meteorologist||

    "no, its not perfectly 70F"

    SO you were lying, got it.

    It's ALSO not sunny 300 days a year, so you were lying about that too.

  • ||

    fine, 186 days of sunny days, which is on par with all the sunniest cities in the US

  • I, Kahn O'Clast||

    Hmmmm... On par with the sunniest? Albuquerque? Denver? I think you no not of "sunniest cities"

  • A Serious Man ||

    I'd say it ranges from the upper 60s to mid 80s most of the year.

    To give you the idea it'll be 64 on Tuesday/Wednesday and rainy as a winter storm rolls through, then 79-85 Thursday through the weekend.

  • ||

    Right, so I would have been more accurate to say that, but I think the point I was making didn't depend on being so specific. No one is arguing its not "great" weather in comparison to the rest of the nation (unless you like extreme heat or cold).

  • A meteorologist||

    "300 days of sunny weather" is like claiming you have a 36 inch dick.

    It's so out of line with reality that it deserves to be shot down.

    Sorry you got butthurt cause you shot off without thinking.

  • ||

    Have you cummed yet or do need more trolling to finally get off?

  • A meteorologist||

    Yeah, I need about 300 more days of sunny, 70 degree weather. Know where I can find some crybaby?

  • Fluffy||

    "no, its not perfectly 70F"

    SO you were lying, got it.

    Is it 70 degrees for any part of the day 300 days a year in LA? And is the sun out for any part of the day for a similar number of days?

    "Part of a day" defined as any measurable unit of time >= a millisecond.

    If so, then it wasn't a lie.

    I don't know the stats myself, being a California hater.

  • Fluffy||

    Wikipedia makes it appear that Los Angeles has no measurable precipitation for 330 days a year.

    And the temperature appears to meet or exceed 70 degrees for at least 300 days a year (Since those months with average highs of 68 or 69 degrees would have at least some number of their days with temps above 70.)

    So that means that we can out-pedant the pedant and assert that the OP was neither lying nor mistaken. Nowhere in the OP's statement does he claim that the high temperature is 70 degrees 300 days a year.

  • WHAT THE FUCK, ARE YOU DUMB||

    "cummed"

    What kind of fucking idiot thinks this is right?

  • ||

    Its the only explanation for trolling, a pathological need to get someone pissed off for no reason other than to satisfy so perverted sexual tension.

  • Troll Feeder||

    I've concluded that H&R has one, maybe two main trolls. They go until they get IP banned, then find some new proxies and begin the process again.

  • ||

    I get that it is nice weather, but isn't it boring to have it all the time? A good cloudy, cold or rainy week sets a couple of sunny days up for success!

  • ||

    The best weather would be to rain when I'm at work and sunny every weekend, but barring that fortuitous combination, I would think if it was sunny most of the time I would put up with the boredom somehow.

  • sevo||

    gaijin|10.2.11 @ 8:03PM|#
    "I get that it is nice weather, but isn't it boring to have it all the time?"

    Don't worry, coastal CA gets *RAIN* in the winter. And if you're concerned about boredom, well an occasional earth quake tends to liven things up.

  • johnl||

    The entire west coast, from Alaska down to Chile, stays pretty cool in summer and warm in winter. Sunny days vary.

  • Mr. FIFY||

    Shut the fuck up... hmm, good advice.

  • So listen||

    And yet you continue to run your dicksucker...

  • Mr. FIFY||

    Never tried it. Not my bag, so to speak.

    Then again, I'm not a bitter schmuck who posts bitter bullshit for no productive purpose. So... you have me beat on at least one character trait.

  • Tony||

    I'll run MY dicksucker any time I damn well please.

  • shut the fuck up||

    of course, i'm not really a meteorologist... i lied, but it was for the common good.

  • Colonel_Angus||

    Yes, near zero precipitation is absolutely optimal for 100% of the population. Deserts adequately accommodate every one of my biological needs and leisurely activities, times 300 million.

    What kind of boring life do you live where every day is the same?

  • Xenocles||

    California is great. It's Californians that suck.

  • Ice Cube||

    Even saw the lights of the Goodyear Blimp: And it read "Ice Cube's a pimp!"

  • ||

    That house in the beginning was recently sold for $7million.

  • ||

    Knowing our finances and the housing market in the northern suburbs of NYC, we knew we could afford a $400k-ish house back in 2004 (about a median house in our area). We got pre-approved for a mortgage (and because of our credit scores and solid 2 incomes), they approved us for $900k. We put down $150k and bought the $400k house and laughed about how unbelievably stretched we would be with the mortgage that mega-bailout-bank decided we could afford and were willing to loan us. Based on this experience, I was not at all suprised of the whole mortgage meltdown a few years later. meantime, we have the house 2/3 paid for, love our beighborhood, etc.

  • shut the fuck up||

    Congratulations, you saw the same thing everyone else who isn't a total fucking moron saw.

    Here's a cookie.

  • Doktor Kapitalism||

    I recommend you take your own advice.

  • Suicide||

    I recommend we meet

  • Coherence||

    from skin cancer of course!

    What? That doesn't make any sense here either?

  • Doktor Kapitalism||

    I was pointing out that sun has UV, and excessive exposure increases the likelihood of skin cancer. Pet peeve of mine.

    As for above, I was recommending that he leave the thread, by shutting up himself.

    And, manditory disclaimer, my snarkometer is a little uncalibrated.

  • Coherence||

    from skin cancer of course!

    What? That doesn't make any sense here either?

  • Mr. FIFY||

    For someone who calls himself "shut the fuck up"...

  • shut the fuck up||

    this stuff works great on DU... it should work here as well.

  • ||

    And if you'd really been all that smart, you'd have bought a $900K house in 2010-2011, when it's selling for $400K, it's now a short sale, and the sellers will throw in closing costs and a free orgy just to get someone to take it off their broke asses.

  • Doktor Kapitalism||

    If homes are overpriced, let the prices fall. Anyone who expected to make a whole ton of money off the house, bought it for the wrong reason, anyway.

    All of this wring of hands over lowering house prices shows how little these crypto-statist know about market forces.

  • Coherence||

    from skin cancer of course!

    What? That doesn't make any sense here either?

  • Doktor Kapitalism||

    And, now that I F5, I realize you're just a troll.

  • Coherence||

    from skin cancer of course!

    What? That doesn't make any sense here either?

  • Tony||

    The economy of the US, which is heavily influenced by finance, encouraged people to use appreciation as a form of savings. It was a bubble, but even very smart people in finance couldn't see it, so expecting regular people to predict that kind of market turn is unrealistic and punishing them for their sins harsh and unproductive.

    We should have stable sources of financial security for people. That is quite obviously not the market.

  • Jordan||

    Yeah, just ignore the Fed's interest rate manipulation and Congress's obsession with housing.

  • Doktor Kapitalism||

    Microeconomics 101: Markets gravitate towards EQUILIBRIUM. Where they stay, until something comes along to shake things up. Equilibrium is where nearly everyone is happy, and in a progressive (not socialist, but technologically advancing without negative restictions) that covers the vast majority of people, the rest of whom probably won't be satisfied in "the system" anyway.

    Governments often do their best to prevent equilibrium (by price controls and indecipherable regulations), reduce economic well being (by helping themselves to someone else's bought-and-paid for slice of the pie, that someone BAKED), and shake things up (by their whimsical enforcement of antitrust laws and Congress' being prone to passing ridiculous laws).

  • Tony||

    What you're saying makes no sense. Equilibrium meaning what? Do markets tend toward a living wage for all persons? Do they educate children universally?

    Whatever theoretical markets of the premodern age might have theoretically done, we now live in an age where the risky behavior of a few bankers can affect the livelihoods of millions of people. People need protection from the market.

  • sevo||

    Oh, and shithead offers an inane comment:

    "We should have stable sources of financial security for people. That is quite obviously not the market."

    Yes, and we all should have fluffy puppies and purple unicorns pooping gold, shithead.

  • DFPPU||

    We at the Department of Fluffy Puppies and Purple Unicorns are not amused.

  • Maxxx||

    We should have stable sources of financial security for people.

    Indeed,
    The only ways to accomplish that is by creating a money supply that is tied to a commodity (the easy way) or a fiat currency that only grows to an extent that maintains absolute prices as the quantity of goods and services offered for sale in the economy increases.

    A money supply that grows through the creation of debt instruments is inherently unstable.

    Managing that money supply growth with machinations that attempt to protect the debt creators magnifies the inherent instability.

    That is quite obviously not the market.

    Indeed it is not.

  • Mr. FIFY||

    Nice idea, Tony, but it's impossible in real life. Unless everyone got paid exactly the same, and lived in the same kind of dwellings, and had the same amount of creature comforts and essentials.

    Never gonna happen.

  • Tony||

    Seriously what is with you and your physical inability to see beyond black and white, all or nothing?

  • Almanian||

    You know who else didn't mourn for million-dollar starter homes....

  • Doktor Kapitalism||

    John Galt?

  • Coherence||

    from skin cancer of course!

    What? That doesn't make any sense here either?

  • ||

    This thing is obviously in a lot of pain and anguish. We should try to help it.

    WE'RE HERE TO HELP YOU MR. OR MRS. FUCK UP. MAYBE IF YOU TALK ABOUT IT WE CAN WORK THROUGH SOME OF THIS BITTERNESS. PLEASE, HELP ME HELP YOU!

  • Paulie Krugnuts||

    That treatment should be covered by Obamacare, along with everything else.

  • sevo||

    Dunno, cap-l. This may call for youth in Asia, if you know what mean....

  • shut the fuck up||

    i thought voting for obama would make me happy, but here i am trying to make your lives miserable.

    i should just go lie down on some railroad tracks and wait for death to ease my suffering.

  • shut the fuck up||

    ...from skin cancer, of course!

  • ||

    We can't kill it yet, sevo, I want to study its habits.

  • ||

    And you idiots don't think this place needs moderation. H&R is dead.

  • shut the fuck up||

    oh, i'll go away of my own accord, after i get tired of trying to make your lives miserable... just like most of the other trolls do.

  • johnl||

    Well reasonable sure helps.

  • BakedPenguin||

    What?

  • johnl||

    Well reasonable sure helps.

  • Mr. FIFY||

    Then again, Max and double-stOOpid and Orel Hazard come back now and then... but at least we haven't seen Chad for months, which is like not having a railroad spike in your forehead...

  • sevo||

    "And you idiots don't think this place needs moderation."
    Why, because one schmuck makes an ass of himself? I see worse on a city street corner at least once a week.

    "H&R is dead."
    Nope. Humor lives!

  • shut the fuck up||

    try and moderate me, bitches.

  • Doktor Kapitalism||

    They can delete your comments.

  • shut the fuck up||

    i'll call a lawyer and sue this fucking place if they do.

  • a lawyer named Arthur||

    I'll take that case!

  • Lionel Hutz||

    FUCK YOU ARTHUR! My fee!

  • Are You Fucking Serious?||

    Okay, what would your claim(s) be?

    Idiot.

  • Colonel_Angus||

    That house has the aesthetic of those in "Three Strikes" or "Boyz in the Hood". And I'm not talking about the boards, which are there to keep bricks from being chucked in to a vacant house. What retards are pissing out a half mil for a ghetto-assed shit shack California trash like that? Los Angeles looks positively depressing.

  • Mr. FIFY||

    Raaaaacist!!!

  • ||

    $600k is a steal man, that place went for $1,265,000 in 2009.

    Jesus.

  • Mr. FIFY||

    Seriously, though... it's not that it's a ghetto-assed shack - it's that the ghetto-assed shack has a current asking price of $600K, which is just fucking ridiculous.

  • ||

    Yeah, a similar house in Pittsburgh would be maybe $40k. But then again, this city has shitty weather and is filled with Pittsburghers.

  • ||

    What's wrong with the weather? I'd go crazy if I lived someplace where it was warm and sunny every day. Gimme seasons, dammit!

  • ||

    We have seasons in California. They're called San Diego (summer), central coast (spring), the Sierra's (winter) and fall (sequoia's or Tahoe).

    And we can have any one of them almost any day of the year. Shit, I've seen a foot of snow driving over the grapevine and surfed that afternoon in La Jolla.

  • ||

    I think you mean Pissburgers

  • Brett L||

    On the other hand, it does help that you won't be able to afford to furnish it with stuff nice enough your neighborhood crackheads would deign to steal.

  • sevo||

    "Seriously, though... it's not that it's a ghetto-assed shack - it's that the ghetto-assed shack has a current asking price of $600K, which is just fucking ridiculous."

    "Location, location,...."
    There are no houses like that available in SF; none have that size lot.
    If it were available, some rent-seeker with connections to Willy Brown would buy it, tear it down and rely on the connections to get approval for a 4-unit condo.
    The asking price may or may not be ridiculous, but in coastal CA, the RE market distortion is far less a result of the Fed and the mortgage write-off than it is just plain corruption, gov't meddling in zoning and rent control.
    You can make a ton of money, so long as you 'contribute' to the right folks. And don't choose to look in the mirror in the morning.

  • Colonel_Angus||

    Location is overrated. If I have to deal with constant misery just for a Kickass! location, I'm doing life wrong.

  • Mr. FIFY||

    Location is important, but it's still beyond ridiculous to have to shell out half a million for the Squidbillies shack.

  • sevo||

    "Location is overrated."
    Unless you're a rent seeker with connections.

  • ||

    I think the more relevant consideration is how much it's going to go for in 2017, not how much it went for in 2009.

  • OuterSunsetLocal||

    Well put sevo. My dad has been in construction for close to 40 years in SF and had to get out of it because of the huge risk of massive local government interference. He was almost ruined in a deal where they held up building three homes for almost a decade. The rich guy up the hill built a number of homes for family and a couple neighbors who were lawyers didn't like it. They couldn't stop him but ended up turning their wrath toward my dad. He ended up getting it built cause he's a stubborn fucker but lost over a million and almost his own home. All the bullshit involved in simply getting something built here adds huge value to the land which of course benefits those who matter.

  • NotSure||

    Off topic - but this article mentions that there has been hyperinflation in house prices, in the current "inflation versus deflation" debate the deflation camp likes to argue that inflation is not happening and use the falling house prices as the primary indicator. I frankly see the house prices simply as a big bubble that has now finally popped, which would mean that deflation is not happening, prices are still going up for most goods, the housing bubble burst which is not the same as deflation.

  • Xmas||

    NotSure,

    You could argue back that the Fed is actively courting inflation in order to soften the landing for those caught in the housing bubble. The housing bubble itself was driven by Greenspan's drive towards increasing inflation to soften the landing for those caught up in the Dot-Com crash and the affects of 9/11 on the economy. Aside from the horrible loss of life, the value of the properties destroyed, documents burned up and complete obliteration of several corporate divisions was gigantic.

  • Spoonman.||

    Shit, if I wanted to live in the ghetto I could buy two blocks of the Third Ward in Houston for $600k, and that's only five or ten minutes from downtown, which I'd guess this crap isn't.

  • Gift Rapper||

    this piece of shit loan to a piece of shit borrower for a piece of shit house in a piece of shit neighborhood turned to be, amazingly, a piece of shit.

    Walk your MFing ass out that MFing door, get on your MFing horse and don't come back no MFing more.

  • Michael||

    Man, am I ever regretful for missing this post last night. Say...

    “Bank owned. Sold for $1,265,000 in 2009.”

    I've never purchased a home, so I'm unfamiliar with all the intricacies of real estate marketing. Is a tacit admission to a house losing over half of it's value in three years typically considered a to be strong selling point?

  • CE||

    Lower home prices are good for the economy. They encourage household formation and consumption on durable goods, and help keep housing expenses low as a percentage of discretionary income. Funny we never hear that angle, only that existing homeowners need higher home values to feel wealthy.

  • CE||

    So I say that 3X or 3.5X multiplier remains a handy yardstick.

    The median income in Los Angeles County, according to the U.S. Census Bureau, is $54,375. And that makes this a $190,312.50 house.

    That's the sane way to approach it, but your assumptions don't match the SoCal real estate market. Median income families with one wage earner don't buy houses. Dual income families with above median incomes and investors with buckets o' cash buy houses now. Plus interest rates are far lower than typical, making the reasonable multiplier closer to 4x or 5x income.

  • 80sfan||

    Beverlywood/Fairfax is "the ghetto." We in "WilBev" (*not Beverwil) and "NoPi" look down on those trash

  • ||

    And right on cue, a major big-city newspaper is reporting that now’s the time to buy.


    The local papers here do the same thing. They run columns at least a couple of times a week in which the only "expert" consulted is a PR flunkie for a "nonprofit real estate advocacy organization," IOW a mouthpiece for realtors. "Now's the perfect time to buy! Don't get left behind! These great values won't last long! See, there was a bidding war over this one house in the middle of a desirable neighborhood, so we know that the market's heating up, by golly! Buy buy buy! Don't be concerned that it's a piece of shit, you can always remodel it and completely relandscape it!"

  • ChrisO||

    Here in Northern Virginia, thanks to Uncle Sugar, prices within 20 miles of DC are still pretty close to their 2006 highs. A bit like living in a bubble of unreality, funded by massive DoD and NSA salaries and contractor payments. So, that means a 1950s Cape Cod with window units is a "great bargain" at $600k.

  • ||

    "Bank owned. Sold for $1,265,000 in 2009. ... at that time, some knucklehead was able to get about a million dollars in financing for a starter home."

    Not very likely. If it's bank owned, that means the bank acquired it in foreclosure by bidding the entire amount owing on the loan. The loan was acquired prior to the financial meltdown, when banks were loaning big money on little security, then selling the loans (and the risk) at a profit to investors. Owner stopped paying, interest kept accruing, and pretty soon there's $1,265,000 owing on the loan. Bank forecloses, makes a credit bid, acquires the house, and markets it using its own inflated purchase price as a selling point.

  • db||

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