Add to stock market bulls’ wall of worry a drop in West Coast home prices for the first time in seven years. This is part of a larger trend that saw U.S. home sales down 2.2% compared to a year ago. That’s the 16th straight month of annual sales declines, even as mortgage rates have fallen since last October from 4.95% to 3.75%. Some observers profess to be mystified, since the economy appears to be going great guns. Unemployment is near 50-year lows, wages are rising and GDP growth has been solid.
The trouble is, home prices are so inflated that first-time buyers, even those with good jobs, have been priced out of the market. The fortunate few employed by Google, Facebook, Amazon et al. who can theoretically afford to buy a home in the Silicon Valley, Seattle or L.A. are understandably skittish about paying top dollar in a bull market so mature as this one. They can see what the rest of us see — i.e., a pronounced economic slowdown in China and Europe that is certain to spread to the U.S. As long as they believe there’s no great rush to buy, home prices will continue to weaken. If the bull market in stocks were going to boost home sales, it would have happened already, since the broad averages are trading at or near record highs. If shares move higher nevertheless, it will only heighten fears of a bubble ready to pop.
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California house prices have a long way to fall to undo the last 43 years of real estate inflation.
Case in point?
Priscilla Presley just sold a house in Brentwood she purchased in 1976 for 170k for 3.8 million.
“The home covers a considerable 2,499 square feet, with four bedrooms and three bathrooms. It was built in the late 1940s and billed as a “major fixer” in the listing because it is considerably outdated.”
Priscilla had her mom living in that shack, “while Presley lives in a gated Mediterranean-style home in Beverly Hills”
It’s all relative!
LOL!
Don’t know if you’ve heard, but the large number of homeless in LA — and San Franpsycho, too, probably — combined with all the filth in the streets has seen a return of typhus. Dr. Drew Pinsky also says that conditions in LA are ripe for an outbreak of bubonic plague.
I wouldn’t buy a house there, either. Even at 0% of that 1.35 million asking price. In fact, for nearly the past two years, I’ve avoided buying anything that comes from or conceivably would make its way through urban CA. I’ve got enough problems. Don’t need plague and typhus on that list!