This was the shortest holiday break in recent memory with Christmas falling on a Saturday. Traditionally Hollywood shuts down starting around the 17th of December. Pretty typically, there’s a full two weeks for out-of-town excursions but this year we all got gypped. In the long run, the shortened holiday was a good thing as many friends decided not to go too far away, which probably explains the low numbers of Americans who died from the powerful tsunami in the Far East.
The weather here has been unspeakable. Endless rain and low temperatures have put everyone in a completely foul mood. Almost everyone I know has been in some sort of fender bender. Roofs are leaking out of control and people who live at the top of the hill are nervously eyeing their neighbors on the hillsides below.
And in spite of all this gloom and doom, several of our friends have hunkered down and are determined to buy real estate now. This minute. As soon as they can. There haven’t even been any Open Houses for them to go to between the horrible weather and the holidays.
“Everyone wants to live here,” they say with great optimism. “Especially now that the dollar is so weak.” And sure enough, they are probably right.
Early in July, as inventories crept to record highs, speculation abounded about the future of a real estate boom in Los Angeles. Now, there’re wondering why more homes haven’t been listed as the inventory is pitifully low.
This brings on the possibility of another phenomena that will keep the market charging along: the idea that old listings that were dreadfully overpriced might actually sell due to lack of available product. Ouch! It’s one thing to pay top dollar for a beautiful home that you love and another to pay top dollar for a dog.
Now I’m an optimist when it comes to buying real estate here in LA. After all, there’s only a fixed amount of land and a whole world of people who are begging to live here but the strangest comment this week about the market came from a friend who hasn’t yet found anything in his price range that meets her requirements (pool, view, room for a home office, romantic) in her price range.
“Is it true that homes hold their value better if they are more expensive?” she asks over dinner the other night.
“Better?” I ask, wondering where this conversation is going.
“As in better than homes that are under a million,” she replies.
I don’t know what to say. I’ve seen fire sales on multimillion-dollar houses and price reductions in the hundreds of thousands in my many years here in the basin.
“Well,” I slowly begin, looking to choose my words carefully. “It might be hard to find a tenant to carry the costs of a million-dollar mortgage and taxes on a 1,500-square-foot house when rents are still relatively cheap,” I respond, relieved that this seems to satisfy the situation for the moment.
With a deep breath continuing, “You should always keep in mind that in the worst-case scenario, you should be able to rent the house out to at least cover your monthly expenses…and a bit more.”
This logic seems to work and we change topics to something even more esoteric – social security reform – and I wonder whether I really believe that “buying big” is the way to go – versus entering the market on the best street for the lowest price – which used to be the rule that I would share with those in a similar predicament.
So it remains to be seen. Will those with the largest mortgage payment “win” this year as thousands of foreigners flock to Los Angeles to spend those monopoly Euros at bargain prices? We should know in a few weeks…or a few months…or a few years.
Julie Brosterman is a consultant to the real estate technology, mortgage and servicing industries. She lives in Los Angeles and can be contacted at firstname.lastname@example.org.
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