Update: Meet today's homebuyers. Seriously.

(Updates to include a third buyer. They are coming out of the woodwork, folks.)

No, this is not an April Fool's item. A reader asked who, exactly, is buying houses in today's market? According to DataQuick, 3,468 homes changed hands in L.A. County last month -- that's roughly 120 buyers a day. Meet three of them:

Milla writes, "I just closed on a house in Highland Park, high up in the hills in a safe neighborhood, a foreclosed property that I got an amazing deal on..."

She continues, "I've gotten so tired of people (criticizing) the housing market, which, in my estimation as someone who was just out there, is not that bad. I mean, it's bad and all, but it's not THAT bad, certainly not as bad as people make it seem. And the idea of two markets -- high and low -- is very real. I went in as a first-time homebuyer, low-income, under the Cal-HFA and Los Angeles Housing Department programs for people like me. These programs are real, very good and allow people the opportunity to buy in L.A. proper, so the idea that housing is so out of reach unless you make six figures is total b.s. I did it with a modest income, a small down payment and very good credit. And I bought a detached, single-family home, a 3/1, on a big lot with a great view for well under half a mill."

Another buyer speaks -- this from Mommy, in the comment section: "Just wanted to say that my husband and I finally made the leap -- we are in escrow on a repo in Long Beach, 90808.  Sales price is $429,900 -- others in that neighborhood (Lakewood Village) are from mid-500s to $900k (though much larger and better updated).  We're putting down 10%, and will be financing at 6%.  We're buying because we took a giant hit on our taxes this year not owning a home, and the mortgage payment will be pretty close to what we pay for rent."

From a third buyer, Perks: "My wife and I closed at the end of February on our new house in the San Fernando Valley.  We purchased our bank-owned fixer for $375k, a comfy $225k less than the house sold for 18 months earlier and after many months sitting on the market.  After a month of sweat, equity and an extra $20k in cosmetics work, the house looks spectacular and we're almost ready to move in.  With six-figure incomes and excellent FICO scores, we could have easily qualified for a bigger house and a bigger mortgage, but I know better than to be strapped to a house I have to scrape to afford while it continues to lose value.  In our case, our house payment is less than our current rent, and we're in a bigger place with a bigger yard in a nicer neighborhood than where we have been renting."

So there you have it -- real buyers. Yes, Virginia, there is a housing market.

Your thoughts? Comments? Do me one favor: don't write in demanding more details on the above transactions. These people have opened themselves up to all manner of criticism and second-guessing, which it seems to me is above and beyond the call of duty. E-mail story tips to peter.viles@latimes.com.
Photo Credit: The view from Milla's new deck, from millatimes.com.

Comments

[Fred]

These two new homeowners have made a very, very dangerous bet. The risk is a couple more years of double digit losses (as most have predicted). The potential reward? A year or two of static prices. That's the best case scenario, and few economists would argue it's likely.

[Tim K.]

Peter, I know you said not to jump on the two people here, but I just finished reading Milla's blog and the details about her home, and I have to say, I hope you enjoy your new home.

However, she did get taken. "Well under half a mil" is probably codeword for $450K. Well, I hate to say this, but since she says she doesn't make six figures, and has to beg money off her parents, that really is too much money for her to handle. What's worse, despite what she says about it being a "good" area of Highland Park, it still is Highland Park, and at 1000 sq ft, she paid probably $450 per square foot which is way more expensive than even the homes in North Pasadena, which I know is a MUCH better neighborhood than Highland Park, and places there are going for closer to $350 per square foot and DROPPING.

Seriously, that is too much money even in THIS market.

But it does explain who the people are who are buying these homes - people who still believe, one way or another, that they MUST get into a home at all costs. We all know a few people like that, and they are helping to drive the market down.

[Just Call Me Maria]

Welcome to the homeowners club, ladies. We are still looking for our perfect place- almost a year now- but I'm sure that it will come around soon.

[puckhead]

Milla & Mommy

You are about to be deluged with many posts calling you stupid for buying a house in this market. Ignore them and enjoy your new home.

[perks]

Interesting to see that I'm not the only sucker--er, buyer--out there!

I agree to some extent with Milla--the market isn't that bad for buyers, as long as you aren't the type of buyer who can actually qualify (i.le., not like many of the people who bought in the past several years!). I think the people who are out there seriously looking right now are better informed than in the past few years. At least, hopefully I fit into that category.

My wife and I closed at the end of February on our new house in the San Fernando Valley. We purchased our bank-owned fixer for $375k, a comfy $225k less than the house sold for 18 months earlier and after many months sitting on the market. After a month of sweat equity and an extra $20k in cosmetics work, the house looks spectacular and we're almost ready to move in.

With six-figure incomes and excellent FICO scores, we could have easily qualified for a bigger house and a bigger mortgage, but I know better than to be strapped to a house I have to scrape to afford while it continues to lose value. In our case, our house payment is less than our current rent, and we're in a bigger place with a bigger yard in a nicer neighborhood than where we have been renting.

Will we lose money in the short-term? Of course. But we can easily afford the payments, and we needed the extra room. If we lose equity, so be it--I know we are going to be in that house for at least the next 15-20 years.

[mike]

now THAT is a true l.a. land blog...

good job viles!!!!

[Uncle Billy]

I can only think that these people have been convinced by someone that we're near bottom and that they are not making the mistake of overpaying by a couple of hundred thousand dollars. Even if they are buying as a permanent home to live in forever and ever and hand down to their children... why do they want to pay far more than they would if they waited?

It's fear that the deal won't be there next year... that prices will surge up again and they'll be priced out again. Right? They shot themselves in the feet and the rest of the straightforward buyers as well who will have to suffer through the painfull slide and market bounces on the way down.

People are still letting themselves get bamboozled. If Mommy did 6% fixed rate, 30 year loan, her payments are about $2,320 for principal and interest. Add another $570 or so for taxes and insurance and she's at $2,890 per month housing payment. That would rent a pretty nice place in Long Beach.

Let's say they had waited a year to buy a similar house for a conservative $100k less. Assuming rates about the same, their housing payment would be about $2,217 Plus they're paying over $100,000 in additional interest over the life of the loan.

If people stuck to their guns and waited until socal homes came down 50% like I want them to, we could very well have a big economic problem (bigger than now). Maybe it's ok that there are a few out there that are willing to "grossly overpay"... it makes the crash go slower. On 2nd thought... stick to your guns. Don't buy. Let's get it over with.

[Inland Empire]

Congrats and enjoy your new home. You will be laughing in few years when your home has appreciated and most of these nay sayers are still renting and waiting for prices to drop.

[MyLessThanPrimeBeef]

I thought there was a proposal for some government agency to advise people about the danger of buying homes?

On the other hand, this just proves that the market is working. It's working NOW! Government should stay away from it.

[Tim K.]

By the way, I strongly recommend anyone who wants to know more about Milla's situation read her blog entries on the link that Peter posted. She gives good insight into her thinking. I found this quote particularly telling, which was posted just before she found her current place:

"what’s that you say? i should wait to buy until prices fall more? yeah, i’ve heard that one, too, and i wouldn’t disagree. but certain financial and logistical circumstances are pushing me to buy sooner rather than later"

Unfortunately she doesn't go into details about why, specifically. It's clear from her writings that she does not have a steady job, and is working on a contract basis, so that's a particularly dangerous combination - getting a house for "under half a mil" and yet not having steady income "under six figures".

It's also clear that she does think the area she is looking into is going to improve - she describes her area as the "up and coming north east Los Angeles" area.

Furthermore, just a few months prior in December, she describes not wanting a foreclosure in a bad neighborhood. Well, I think her own psychology played tricks on her, because not only did she get a foreclosure in a bad neighborhood, she also did it with the standard If it is Meant To Be, logic, which is often the way people set themselves to rationalize any action that comes their way even if it is inconsistent with principles they setup for themselves.

Quite an interesting read, really. It's a warning about what could happen to you if you let your obsession of finding a house take over your rational mind.

[Milla]

thanks, puckhead! i will enjoy my new home. it's more than just an investment to me. it's a place i plan to live for many years.

and Tim K., i paid $410K, house appraised for $440K, was listed for $450K, lot size is 5,300 feet. so if prices depreciate another 10-15%, i won't worry too much about the short-term losses, especially as i appreciate the view from my deck.

[Mary Ellen]

Mila's very lucky to have been able to take advantage of the LA Affordable Housing Program, but it is no longer available to moderate income buyers like myself. Another consequence of the sub-prime fallout is 1st time homebuyer programs are less generous. Mila, question for you: does the city of LA participate in any appreciation of your home? My understanding is they do.

[Tim K.]

Milla, glad to hear you're reading this. I do hope you're going to stay put, because I think that your time horizon is going to need to be long. I read another comment you posted on your blog last year, where you wrote: "i'm hoping Highland Park will be that neighborhood for me here on the eastside. and it better turn into something cool very soon because i don't plan on sitting in my starter home for 20 years, maybe just five."

I know it's probably moot for me to tell you this now, but maybe if you find a way out of your escrow, you might want to consider taking it. 5 years is not enough time to weather a downturn of 10-15%. I hope your idea of short term has elongated to at least 10 years since you posted this.

[Fred]

Milla, prices fell 25% in 2007. And keep in mind that most of that happened in a 6 month period (the bubble didn't really go pop until the summer). The sizable majority of crystal-ball gazers out there predict 2008 will be worse than 2007. So at the minimum we are talking about another 25% drop. Will things be all sunny on Jan. 1, 2009? Most likely not. House prices peaked in 1991. Do you know when they reached those same prices again? 2000. That's a nine year cycle.

[Moe Green]

Milla:

Congratulations, and do NOT listen to the naysayers about Highland Park... it's centrally located and scenic, has a metro lightrail station, and is getting better all the time with new restaurants and bars. Just in the past 5 or 6 years the area has improved drastically. You'll also find a lot of community activists and just a tight community around Northeast LA in general, with a very diverse range of people.

There are rough pockets, to be sure, but the same can be said about most parts of LA.

[Giacomo]

Hmmm, buyers not worried about "short-term losses."

Turn it around, could you have waited another year to save 80-100K? Was having a view, or pride of ownership, or a place for the dog run around-- for this next YEAR -- worth that price?

[TakeFive]

I used to own a rental house in Highland Park - at the bottom of that hill Milla bought on. Yeah, the neighborhoods up topside are a bit nicer, but I think you still need to come down below for groceries and gas. Just do it before dark.

Looking over Milla's blog we read "...i had three underwriters all disagreeing on how to calculate my earnings, which consist of an unpredictable blend of my base salary at work, two work bonuses and some freelance.

and:

"inspections came and unearthed a multitude of problems"

and:

" i even went begging at the bank of mom and dad..."

Milla - I hate to piss on you Wheaties, but you probably cannot afford this house, and you may risk taking mom and dad down with you by requesting funds to keep this thing going. You didn't get them to co-sign, did you?

Is it too late to get out of the deal?

[Tim K.]

Peter, I do understand your concern for the 3 example buyers privacy. It does however, make it a very difficult discussion to have because the very details that these individuals are not disclosing make all the difference in whether or not this was a wise decision.

The 3rd couple, "Perks", paid $400K for a house with "six figure incomes", again a very vague notion. The problem is the San Fernando Valley is a HUGE place, and a $400K house, no matter how lovingly restored, if it's on a busy street, a tiny lot, or in a crappy neighborhood, is not fairly valued by any stretch of the imagination.

A lot of this vague "happy talk" is supposed to make these people feel better, but it's about as worthless as the cocktail chatter we used to hear in the 90's about how we bought Yahoo at $20 and saw it soar to $80, while completely ignoring all the other terribly losers which completely decimated our portfolio. It's so much fun to brag and feel good about ourselves, but it does nothing to actual *illuminate* the situation.

[Milla]

mary ellen: yes, you are correct in that the city will share in the appreciation of my house once i sell it. the amount will be somewhere around 12% of the profits, but given the "silent second" of $50K that they provided me, i think it's an okay exchange. (though of course i'd rather keep all the profits myself!)

and i also heard the rumors that the city was discontinuing the moderate-income program, which is what i qualified under. i can't say this with any authority, but i asked a city official about this rumor when i was signing my paperwork and they assured me that the mod program was still active. they did say that all available funds were reserved currently but there would be more in the future.

[TakeFive]

"i'm hoping Highland Park will be that neighborhood for me here on the eastside. and it better turn into something cool very soon..."

I bought HP property in 1986 and sold in 2002. It was a barrio in '86 and still one in '02. But maybe it's about to turn...

See if you can get out of the deal (or at least re-negoitate it) before the city of LA comes after you to clean up their budget mess.

[Cal]

Congratulations to the new homeowners.

A follow up in a year would be good, I don't think anything would change but I think their perspectives and what they learned over the previous 12 months would be interesting to read.

For Mommy, I have found that people have both underestimated the total cost of ownership (taxes, maintenance, insurance, interest, opportunity cost on principal) and overestimated both the mortgage tax deduction (mortgage interest and property taxes, I have found people overestimate the deduction by about 20-25%) and ignored available tax deductions (401k / IRA).

[victor knopp]

some times you guys seem so confused,some people need houses to live and raise a family,not an investment,not an atm,not constantly obbsesed with price, but life,its just about time to except the market the way it is ,not the way the greedy speculators have tried to convince everybody it should be,theres plenty of other broken markets to talk about

[puckhead]

I grew up in Mount Washington, which borders Highland Park. Parts of it are scruffy but the parts in the hills are nice. Overall, not a bad place for first home and it’s centrally located. My first home was in a neighborhood that was not much better. Why do people think that just because they held off buying a house the last few years that they are “entitled” to buy a house in the South Bay or some other neighborhood of their choice?

[Tex]

I am also actively looking for a home. Currently I have an offer submitted on a 3 bed 1.5 bath 1600 square foot home on a 6500 square foot lot in Leimert Park. This is a relatively nice neighborhood where homes were selling in the $600K range 2 years ago, and are now down into the high $400K's to mid- $500K's. Nice community, reasonable driving distance to downtown & the westside. This house was originally listed for $610K and list price is now down to $420K. It's a short sale, so we are waiting for the bank to approve the transaction.

Here's my logic in making an offer on this property. First of all, this is a pretty good price for the neighborhood based on prices during the past 3 years or so. Although it's possible that the price will decline further and next year this won't look like such a good price, nobody really knows for sure how low it will go. I can afford the payment, and I will enjoy the house. Second, I expect the PITI in this house to be reasonably close to the amount it would cost to rent the same thing. Third, I feel like a financial chump anyway -- I get no tax break as a renter, my savings earns no interest, and my mutual funds are going down. So why not just buy a house if the right one comes along?

[Milla]

TakeFive: admittedly Highland Park has its sketchy areas, but there are many good pockets, and i know i picked a very good block where the comps are well into the fives.

and of course my starter home needs work, but i don't know many middle-class people whose starter home is also their dream home. most people i know do have to stretch their budgets and ask their parents for help when buying a first home. it's not so unusual. i bet you would find it in any type of market and in every city across the country.