Ask Pete, Chapter 3: Your questions, answered
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You asked some good questions, as always. I’ll answer the easy ones.
Jackie at 2:38 asks, ‘Is it possible that even though foreclosures are skyrocketing and prices are plummetting, some neighborhoods (I guess you could call them the better ones) are still competitive when it comes to buying?’
Yes, definitely. What I sense in ‘better’ (more expensive) neighborhoods is that even though prices have softened, it’s still common to see multiple offers for good houses in move-in condition.
EG at 2:38 asks, ‘What are the chances of an ‘overcorrection’ downward?
Very good in the hardest-hit areas. That said, it’s hard to define an overcorrection. Is that when prices fall below market values? No, because the market value and the price are pretty much the same thing. But I think I know what you mean -- in the downturn, prices will fall to a point below what buyers will later decide is a fair price. I think that will happen in some areas.
IToldu2CashOut at 2:49 asks,‘What do you see happening with downtown real estate in the next few years? Where you aware of the how the Chapman Flats condos (now rentals) had been misrepresenting square footage? I feel downtown apartments are nice but grossly overpriced for the state of redevelopment, do you agree?’
I’d put downtown somewhere in the middle of the market -- it won’t suffer as much as foreclosure hot spots, but will lose more value, on a percentage basis, than established neighborhoods. I was not aware of a controversy over Chapman Flats. I agree that prices downtown are on the high side -- but then I feel that way about L.A. in general.
Candice at 2:57 asks, ‘What do you think will happen to Countrywide? Relatedly, Greginthevalley at 3:35 asks, Do you think BofA will complete the Countrywide merger given the enormous downside?’ (click below for the answer to this, and more questions)
My gut tells me BofA will acquire most of Countrywide’s businesses, but not at the original merger terms. It’s an ugly merger, the kind that sometimes collapses, but I don’t see Countrywide surviving on its own, and I don’t see another buyer out there.
Will at 3:09 asks, ‘Do you think these props to remove rent control will actually pass?’ ... and ‘Based on your estimate of prices leveling off by next year ... do you expect to buy next year or perhaps sometimes later in the future?’
My guess is that Prop. 98 will fail. There seems to be a lot of institutional opposition to it, from the governor on down. We expect to buy a house, we’re always looking, but who knows when the financial planets will come into alignment. Right now they’re not very close.
dclogang at 3:25 asks, ‘Considering what is happening to the world’s finances, recession, loss of jobs, price of gas and food, do you still feel like the housing market in LA will continue to fall through the end of 09 to 10’ OR do you think it will linger on until 2011 or 2012 and later now?
I still think we’ll bottom out sometime next year, but you could be right. There are a lot of head winds out there. I’m not a big believer in predictions, but I’m guessing the government will throw everything but the kitchen sink at the economy to get it moving. If I had to bet today I’d say we’ll have a really slow recovery, both in the economy overall and in housing.
doubledogdare at 3:32 asks, ‘How much time do you have to devote to creating so much content? It seems like it would almost be a full-time job.’
I probably spend about six hours a day or so at it, maybe more. I have a full-time job at the newspaper, and writing the blog is only part of the job. But it has a way of eating up time. In a good way. I’m amazed at how thorough some of the other blogs are -- blogs like patrick.net, Dr. Housing Bubble, Ben Jones’ Housing Bubble blog -- those guys are putting in some major time and effort, and it shows.
Pasadena91106 at 3:45 pm asks, ‘What’s the buzz on online appraisal services. Our house is listed for $606K on Zillow and $1.3M on Cyberhomes. Makes me think Cyberhomes is being run by the real estate industry...’
I’m not very familiar with Cyberhomes, but I’ve spent a lot of time with the Zillow folks, and I think they try very hard to have accurate estimates, and to be as honest as possible about how accurate they are. But you can do your own estimate by going on Zillow, or Redfin, and looking at the recent sales near you, the price trends, what’s for sale in your neighborhood and how many days those homes have been on the market.
Laker at 3:50 asks, ‘Do you think this week’s median listing price will be lower, same or higher than last week $450,000?’
Trust me, I have not looked, and I don’t know if it’s published yet. My guess: slightly lower, one of those nearly meaningless drops, like $100 over the past week.
That’s all I’ve got time for. Sorry I didn’t get to all of the questions. Thanks for taking the time to submit questions.
Photo Credit: L.A. Times