Adam-la wrote:
I wonder how this will impact your opinions shared on this board about the real estate market...
I would suspect his purchase is not out of line with opinions he has expressed on this site.
I've finally started to look myself.
Theres a number of areas in Los Angeles where prices have dropped to levels that buying MIGHT make sense. The issue at the moment of course is that prices could continue to fall and leave one underwater if one needed to sell sooner rather than later. This does not mean buy or not buy, but rather its a personal decision. In many areas of Los Angeles, prices are no longer historically overpriced on an inflation adjusted basis. Using $80K as a middle class income, theres several places where a home can be purchased in a safe area with high schools rated 6, 7, or even 8, within an hour rush hour drive of job centers, at 3.5-4.5x income(I believe LA has historically been at 2.8-4.5x income).
For me, rental parity has been passed by quite a bit. I pay $1640/mo rent. A $400K home with 20% down is quite a bit smaller monthly payment than that.
OTOH, buying 2 years ago would have been truly disasterous. A co-worker bought in a subpar area in 2010 to take advantage of the tax credit. Now he is over $50K underwater...around 15% of the purchase price. He is stuck with a home that won't rent with a positive cash flow, in a neighborhood thats not very good.
Doing things like bidding against yourself, buying into still bubble inflated areas, etc are still bad ideas. But the overall concept of purchasing...there may be some things that make sense.
