I have a question for my fellow forum dwellers. Putting aside the bull/bear arguments for a moment I wonder if there is any data or understanding of the number of renters in this area relative to the number of houses out there (on sale or being foreclosed).

As an out of stater myself, this part of the world has a relatively transient population with a good number of people relocating here from other parts of the country/world. In many cases these people will rent initially and if they see a future here, will look to buy.

Others renting may have been here more long term already and are waiting for a dip in prices/rates and will stick in a smaller apartment while they can save up for a downpayment.

And of course still more are perfectly happy renting and have no intention of buying. 

So does anyone have a feel for how much this current market is being influenced by some of the first two groups now starting to enter a market they have never been a part of. How sustainable is this impact and is it possible there is a large shadow inventory of buyers to meet some of the shadow inventory of properties so as to mitigate what is widely expected to be a downturn in prices?

I have no dog in this fight per se, just interested to see what all of your takes are on this as I haven't seen it being addressed previously (most discussion is on the supply side rather than the demand side).

Cheers.

Not sure my last one posted so here goes again...

   So does anyone have a feel for how much this current market is being influenced by some of the first two groups now starting to enter a market they have never been a part of. How sustainable is this impact and is it possible there is a large shadow inventory of buyers to meet some of the shadow inventory of properties so as to mitigate what is widely expected to be a downturn in prices?

Great question..I remember reading recently where there is a negative migration into the stateof CA compared to places like Texas where the population is increasing. Why do you think that is?

 Two reasons: High unemployment (which will probably still rise) and high taxes. The state is in a big mess and it's only going to get worse before it gets better.

 I do think there is a shadow inventory of buyers (myself included) but we are content to wait a long time and see what happens.

I hate to qualify my answer but it depends on what areas of Los Angeles you are talking about.  I've only lived in Pasadena and West LA/Santa Monica areas, both of which are very different.

Pasadena, is predominantly homes, of which I suspect (but don't know) are mostly owner occupied.

West LA/Santa Monica is predominantly apartments.  I do think that the market is currently being sustained by former renters moving into buying homes, based on two issues.  #1 - the first time homeowners credit.  #2 approximately 60% of people selling their home are not buying another one, therefore only 40% of the market is move up buyers. 

In West LA/Santa Monica, I just don't see a lot of renters making the switch to owners.  When average rents are $2000 or less and falling, and the average condo is $400-500k plus, I just don't think the average renter can afford to buy.  Lets also remember that rent control does play a big factor, why move out of your <$1000 rent controlled apartment to move into a $4000 a month condo you can 'own'?  Maybe they move out of the area, but I can't comment on that.

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Bruin99 wrote:

In West LA/Santa Monica, I just don't see a lot of renters making the switch to owners.  When average rents are $2000 or less and falling, and the average condo is $400-500k plus, I just don't think the average renter can afford to buy.  Lets also remember that rent control does play a big factor, why move out of your <$1000 rent controlled apartment to move into a $4000 a month condo you can 'own'?  Maybe they move out of the area, but I can't comment on that.

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msdmoney wrote:

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Bruin99 wrote:

In West LA/Santa Monica, I just don't see a lot of renters making the switch to owners.  When average rents are $2000 or less and falling, and the average condo is $400-500k plus, I just don't think the average renter can afford to buy.  Lets also remember that rent control does play a big factor, why move out of your <$1000 rent controlled apartment to move into a $4000 a month condo you can 'own'?  Maybe they move out of the area, but I can't comment on that.

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That describes us perfectly.  We're renting in West LA, interested in buying in the future, but it just doesn't make sense right now.  We just moved a couple months ago and we were able to move into a bigger apartment for nearly the same amount that we were paying for our previous apartment.  Rents dropped about 15% in my complex, and I don't think that is the end of it.  I wouldn't be surprised to see more drops next year.  Given that, it just doesn't make sense to buy a $400-$500k condo in the area.

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Oh and I forgot to add, those $400-$500k condos are pretty undewhelming (to say the least) in West LA.

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msdmoney wrote:

Oh and I forgot to add, those $400-$500k condos are pretty undewhelming (to say the least) in West LA.

Completely agreed. You gotta step up into the $600k plus range for the nice condo's, and that's a whole different ballgame.

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msdmoney wrote:

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That describes us perfectly.  We're renting in West LA, interested in buying in the future, but it just doesn't make sense right now.  We just moved a couple months ago and we were able to move into a bigger apartment for nearly the same amount that we were paying for our previous apartment.  Rents dropped about 15% in my complex, and I don't think that is the end of it.  I wouldn't be surprised to see more drops next year.  Given that, it just doesn't make sense to buy a $400-$500k condo in the area.

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It shouldn't surprise you then to hear that when our apt building actually had the gall to INCREASE our rent by the max allowed (6%), it was the final tipping point for us to tell them where to stick it so we moved away from WLA and bought a house in the valley. Personally I love it because the weather on the coast would really piss me off at times with all the fog and cold but I can see that someone who hates the heat would not want to live in the valley. It's also much quieter where we are now (previously was on Wilshire) and I much prefer the shopping and restaurants around here with very few things that I miss over there. Westwood is dying, half the movie theatres have gone and the rest are soon to follow so the only thing I come over there for now is Palomino.