Sunday, February 15, 2009

Beach Cities - a repeated warning

First of all, I hope you are a regular reader of Mr. Mortgage. I consider him one of the top reliable authorities on the state of the real estate market here in California. He is in the process of relocating his website so make sure you are on his email list if you aren't already. When his new website is up I will update the link I maintain in the sidebar.

Second, I have added a new link to the sidebar Mike Morgan: Behind Enemy Lines. I strongly suggest that you bookmark it and check it frequently. Mike Morgan is a Florida realtor. I consider the information he publishes as high quality as that of Mr. Mortgage or that of Karl Denninger of Market Ticker.

Change in how homebuyers perceive value

One opinion I have stated on this blog repeatedly (I am a bit of a nag about it) is that psychologically, what a homebuyer perceives as being valuable and worthwhile in a property changes between housing boom and housing bust. The amenities and features of a property that a homebuyer thought nothing of paying for in 2005 or 2006 can turn into liabilities during a downturn. Few upscale condo buyers were put off paying $200 a month or more in HOA fees while condo values were zooming up 20% or more a year. Maybe living in the McMansion with the running-water fountain in the front yard, the new kitchen granite countertops, and the energy wasted with all those tiny incandescent bulbs lighting the fortress was no big deal - the home was appreciating 20% a year, the 401k was doing OK, and the owner "felt" rich, so why not!?! In a downturn a market participant's idea of what constitutes good value will change. This change in perception can and will add further pressure to prices. Price levels are ultimately driven by psychology.

Social Unrest and the potential impact on property values

Read Mike Morgan's recent post on Turbo Tax Cheat Timmy in which he states that the United States "could see riots" this summer, and his post Obama Deal with Family A, B, and C in which he opines that what is going down in Washington right this minute is a "recipe for violence."

Another opinion I have stated a number of times in this blog is that an incredible backlash could accrue against those living ostentatious, consumptive, affluent lifestyles and now there are industry experts out there saying the same thing. IF such a backlash does erupt and manifest itself as violence in the area, then by logical extension that backlash will eventually reach out and adversely impact the beach cities. I cannot reach any other conclusion.

My September 10, 2007 post Stage being set for social unrest may be worth reviewing. If we are truly headed on this path toward civil unrest, then I sure as heck don't want to snap up a bubbleminium at 40% off the peak price this spring thinking I got a "bargain." Ideally I would want to be as far away as possible from such properties and continue looking like just another poor slob sitting on the bus on my way to work.

On a lighter note, today I took these photos of the Foundry in Torrance. I moved the camera from west to east. On the far left of the second picture you can see the Parkview Court project, and in the background of the last photo you can see the back of the Village on Oak project. I am glad I periodically rant and rave about social armageddon coming our way, because it continually forces me to reconsider what these sparkling new construction projects are really worth.


Blogger bearmaster said...

Here's an article I wrote in the summer of 2007 illustrating how social mood could potentially lead the way down in the beach cities.

Mischa Barton and L.A. County's beach cities housing market

10:11 AM, February 17, 2009  

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