Housing Boom Turning Into Bust
In what can't be good news for Los Angeles landlords, the Census Bureau had numbers out Thursday that show an "exodus" occurring. "Fueled by soaring housing prices, traffic congestion, and new jobs in outlying areas, residents left L.A. at an average net rate of 9,621 per month between July 1, 2003, and last July 1, 2004."
The Daily News tells us it's not just LA. "County residents moved out of Southern California entirely, too, largely in search of cheaper real estate. It's affordability that's causing middle-class flights. People can't afford housing in Los Angeles, but want to stay in the Southwest and will commute long distances."
"'We're getting a little bit too expensive,' economist Jack Kyser said of the county, noting a similar trend in Orange County, where 27,590 residents left for other counties last year."
8 Comments:
The amazing thing about a free market economy is that it always adjusts to a point where it makes economic sense.
"In the short term markets are voting machines. In the long term they are capital allocation machines." - Graham Dodds ?
We've been allocating way, way too much capital to housing and real estate.
Jon Law said:
where the hell are they going to find cheap housing?
Here in San Diego there was an article in the UT several months ago about people moving to the imperial valley to find housing. That's a 2 hour commute each way assuming no traffic.
Free market economy with a private central bank (Federal Reserve)?
""'We're getting a little bit too expensive,' economist Jack Kyser said of the county"
A little bit too expensive. Aaaargh.
Whoever invented the economist oughta be shot!
This is of course just my first hand account, but my fiancee and I were walking around our neighborhood (Venice) this evening and noticed what has to be a record number of "for rent" signs. This includes 2 vacant units in our 5-unit complex, both of which are going to fetch lower rent than they did when we moved here in 2001.
Bring it on!
All the housing bulls kept saying the boom is due to supply and demand. Yet San Francisco is shrinking and homes double in price. LA isn't growing and homes triple in price. What few people are coming in are primarily very rich (small pct) or very poor (large pct).
This is not a supply-demand situation. There are plenty of places to live in Calif if you choose to rent...vacancy rates are at multi-decade highs for rentals in SF, for example. What we are seeing is a buyer's panic.
You can blame a great deal of this on the Fed and on the finance industry. They are making it way too easy to buy a home---no money down, interest-only, 40-year loans, etc, etc. Remember: they make their money on selling the loan. They don't keep the loan, they repackage most of them into MBS and sell them to China and Japan. So they don't care if the $600K loan is based on a home likely worth $400K at best. We'll leave that to the Japanese to sort out.
Of course, when the stuff hits the fan, there will be a lot of folks dramatically underwater on their home loans...as they are now with their car loans. They won't be able to sell without losing everything and likely facing bankruptcy. And if rates go up, they won't be able to stay either. Mr. Rock, meet Mr. Hard Place.
jim, sunny,
thanks for commenting.
downtowner,
(They are making it way too easy to buy a home)
Thanks for the first hand account. It makes this board more valuable to all off us.
There is a 04-14-2005 post on this site: http://housingbubble.blogspot.com/
It's very interesting.
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