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L.A.'s Impending Real Estate Crash? Bubble, Needle, POP
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As I watched L.A.'s real estate values balloon to cartoonishly high levels over the past few years, Mark Twain's line about "lies, damn lies, and statistics" kept coming back to me.
Now a new UCLA study says the bottom could drop out soon, and I want to add a fourth item to Twain's list: "real estate prices." It was only a matter of time before the homebuying frenzy in Los Angeles that outlived the dot-com bubble finally burned itself out and sent the market into freefall ...
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The Daily News article says, Christopher Thornberg, a senior UCLA economist who wrote the Southern California forecast, said if mortgage rates climb into the 7.5 percent to 8 percent range, prices could fall by 20 percent to 25 percent.
"The recent surge in price creates a clear bubble ... despite tight supply. Eventually there needs to be some return to sustainable price levels -- likely when interest rates continue to rise through 2004." With the Fed muttering about raising interest rates, it shouldn't take long for the UCLA Anderson forecast to come true. The effect on L.A.'s economy could prove to be dramatically scary - maybe even returning us to the glum early 90s, when homeowners were upside-down on their mortgages - owing more than their homes were worth - and businesses were closing and languishing.
Thornberg seems to think that California's slowly improving economy could soften the blow to help us avoid that, but I'm not holding my breath.
Near where I live (around WestSide Pavilion), people are paying stupid money for new houses: 3-bed, 1-bath extreme fixers going for more than $700,000, and a decked-out 3-and-2 with a new kitchen and a little left-over 1920s architectural charm just sold for more than a million.
Last year, speculators jumped on a 1,300-square foot crackerbox down the block with faded paint and bad gingerbread trim that was going for $545K, put probably $100K worth of cosmetics and fixtures into it, and sold it five months later for $889,000. We have friends who bought a house on traffic-heavy Overland - only after they went more than $25k over the asking price and beat out 27 other bidders.
Get a grip, people. I have one word for you, if you're in it for the money or the short haul: SELL and then rent.
(First spotted at BoifromTroy
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| Posted by: mack_reed on Tuesday, June 22, 2004 - 09:05 AM
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