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

[Anonymous]

Areas like Highland Park are going to get killed in the upcoming (or current) recession. Crime will spike, and home prices will fall. And these claims of mortgage payments cheaper than rents are almost certainly wrong or at best very special cases. These people should have spent the same time searching for a rental as they did for a purchase. Home prices still far outpace fair rental values almost everywhere in Southern California. I highly doubt any of these buyers will be "laughing" in a few years. Anyone who would have to put down any sizable down payment should rent and investigate other investment options for the cash that would have served as the down payment.

[perks]

Tim K., I'm posting on a public forum, so yes...why tthe heck would I want to post the intimate details of my personal finances for the world to see? I will state that we qualified for a good old full-documented, fixed-rate mortgage more than twice the one we got. Again, a vague notion, and one that will scarcely elucidate the reason behind my ability to qualify for a house. Frankly, it's irrelevant, other than its potential utility as an example that we probably had an easier time securing financing than many other current buyers. For that I suppose I should feel fortunate, and I do.

Suffice to say...My house is not on a busy street, a tiny lot, or in a crappy neighborhood. I know better than to buy any of those places, since as you very correctly note $400k is way overpriced for anything in even the most slightly questionable area.

I have no delusions that I paid more than the house will be worth for the next 5+ years, maybe 10 years. I don't think it's really possible to put into words every factor that led to my decision to buy. There were definite reasons for doing so, and definite reasons against doing so. Our major reason for purchasing was not financial: We needed space and more permanence, and I'm just flat-out tired of moving, dealing with idiot landlords (don't get me started!), etc. I want to be settled before the kid is born.

Was it a foolish decision for me to buy? Financially, quite possibly. But there are reasons beyond money, and (barring any horrible career catastrophes) we'll still have the house paid off in 10-15 years and I'll still be retiring comfortably when I intend to. If the market doesn't completely crash, then no harm done. If the market tumbles completely, then cool: I'll still have a house I can quite comfortably afford, plus I'll be able to pick up a cheap income property or two.

[Jonah1979]

You can't say "Highland Park" and "Safe Neighborhood" in the same sentence.

[mapletree]

If these people who are buying aren't speculators and intend to live in these homes for several years then good for them.

I found a good deal a few weeks back, but I didn't get to it fast enough. It was on the market for one day and now it's in escrow--I think it was an inside deal. R.E. agent probably had a friend or something. Not a short sale, not a foreclosure. Asking price $700K. Which is interesting b/c that is the price most likely that the homes in that neighborhood should go for next year or at the end of this year, but I don't think they will, the old supply and demand...it was east of la brea-eh still not that crazy about that area. I'm going to end up in the ocean....

I see condos in my area that sold for 1.3 million, 3 million not 3 weeks ago. Not that I would buy a condo ever again. No thank you.

I'm in the category where it doesn't matter if prices fall further, in the neighborhoods that I want to live in I still have to make "real" money to buy and prices aren't going to fall-maybe $200K or $300K, so what doesn't make a dent.

The three people that bought, I don't care for those neighborhoods, boring and not safe. I should be able to afford a house in a safe, city environment, but that isn't going to happen ever again, those days are gone.

Oh well.....

I don't know why that woman didn't buy in Silver Lake. I believe that's a better area than Highland Park and I think you can get a better deal in SL these days. There was a lot of speculation in that neighborhood circa 2004-5-6-

[TakeFive]

Milla wrote:

"I went in as a first-time homebuyer, low-income, under the Cal-HFA and Los Angeles Housing Department programs for people like me. "

and:

"i paid $410K, ..."

How does this pencil out? The program Milla mentions states:

"The CalHFA Housing Assistance Program (CHAP) is designed to provide up to 2% of the down payment"

and the Low Income limits for this program in Los Angeles county are 54,576 to 62,762.

So how do you afford a 400k home with that kind of income when you need assistance with the down payment? Please expain.

Income requirements:

http://www.calhfa.ca.gov/homeownership/
limits/income/income-main.pdf

Assistance program:

http://www.calhfa.ca.gov/homeownership/
programs/chap.htm

[RealtorDaveE]

This spring we're seeing an increase in people who are more interested in owning a home they both like and can afford and less interested in market timing.

They may well be right--check out what's rumored to be happening in Washington today in an amazing post on SoCalRealEstateNews.wordpress.com

Amazing!

[Moe Green]

@Take Five: Yes, parts of Highland Park could definitely be considered "barrio". The same can be said for Downtown LA, Echo Park, Silver Lake, Mount Washington, etc. I would also argue that all of these areas are improving, but at the same time I hope they maintain the cultural diversity that they enjoy today.

The Eastside might not have the beach, but it has good public transit, proximity to more cultural events (shows, theatre,etc), a more diverse selection of restaurants and bars, and MUCH less traffic congestion than our friends west of the 405.

[JohnnyB]

Greater fools die hard... even in the initial phases of a declining market… even on April Fools.

What can one say. To each his/her OWN. Or, more appropriately... To each his/her DEBT.

The pressure to spin this around and shill the debt is enormous. Absolutely enormous.

Then again, never underestimate the pull of a nice home. They can at times make even the most sophisticated financial guru an emotional puppet.

Especially when a significant other is softening up the hard earned brain matter. The nesting instinct is nature's trump card... and the RE industry knows this too well.

But as an investment decision it's ranking right up there on the stupid scale. Sorry... it is. Why? Because the house WILL continue to lose value for AT LEAST 2 more years. And, after AT LEAST 2 relatively flat years, when the gradual price increases may start to work their way back, it'll take AT LEAST 2 more years just to bring it back to today’s purchase price. That's the absolute best case scenario… a 6 year turnaround. More likely longer. That’s OUCH on the finances!

And there's no way the mortgage payments are as low as renting a similar home at this time. NO WAY. NOT EVEN CLOSE.

[JW]

Victor: You are the one who is confused. People buying lower end houses that cost $450k+ is sheer lunacy in the majority of the USA. Those same houses go for $120k in most places outside of La La Land. You can raise your family in a rental home just as well as you can in an over priced SoCal home. I would love to re-visit these buyers in about 2-3 years and hear their reactions to their houses losing $200k or more in value. There are none so blind than those who refuse to see.

[Ace]

Milla,

Thanks for being brave enough and sharing your story. I wish you well... but you should have listened to yourself before buying this house.

From your blog:

'i called my mortgage broker about increasing my budget, but was told i was stretched too tightly already and couldn’t go a penny over.'

'he came back with a plan that had me paying off my car loan to reduce my monthly debts and increase the amount i could borrow. this killed me as it cut into the remodeling budget substantially.'

'i even went begging at the bank of mom and dad, who kindly granted me a small loan for repairs, with a reminder that they are getting ready for retirement'

I don't know your financial picture but you bought a house that you were 'stretched' to buy... in a declining market... when you have other debt... and needed a loan from your parents....

Good luck. I hope that it all works out for you.

[Cal]

I'd be interested in hearing details of Millas loan (s), is it interest only? 30 or 40 year amortization? Which program did the 50k down come through?

She must be making pretty good coin to be able to afford 400k on a single persons salary.

Of all the stories, and this is probably only because of the level of detail provided in her blog posts.. her purchase seems the most.. tenuous.

[JK]

"...I just closed on a house in Highland Park, high up in the hills in a safe neighborhood"

Highland Park and safe neighborhood should not even be in the same sentence.

[areles]

":These two new homeowners have made a very, very dangerous bet."

I am loathe to play devil's advocate, but it's only a "dangerous bet" if they a) can't afford the house and b) intend to flip it.

If they like the homes, can afford them, and intend to stay awhile, it's not a bet. It's a home.

[johnny1290]

To the woman that bought in HP, my boss that made around 150k a year back in 2001 bought a house in the hollywood hills north of ventura blvd for 450,000, and it's a fabulous neighborhood and a beautiful house and private yard.

You paid that much to live in a ghetto and you don't make over 100k and have unstable employment and the market is headed down.

You'll be sending in the keys within 18 months I bet.

[areles]

(After reading the comments, and Milla's story in particular, I have to exclude her from my devil's advocate stance. Looks like hers was a bad move all around. Shame.)

[eprobert]

Yes, I'd like more details as well. I'm also a potential buyer in the same program. Last summer, before the big price drops, we had offers out on 6 or 7 houses with no luck.

My wife & I combined JUST squeak under the LAHD limits at 96k per year, and have only one car payment and no CC debt between us, but the $410 was simply too much.

I don't see how a single person with a typical job (say under $70,000 per year) could possibly afford $410,000 for a house. That's almost $3000 per month including taxes!

Unless, of course "mom and dad" loaned a lot more than $10,000 or so that I'm assuming.

Maybe we're doing something wrong - seriously please enlighten me about your situation. How much of your income are you paying each month, for example, and how much did you put down out of your own (and your parents') money?

I'm not looking to hate on you, I just want to know what I should be doing.

[Roxy]

Perks,

You and I are in a very similar situation. I also am buying. I was able to get what I think is a good deal (paid <70% of appraised value), locked in a 5.7% interest rate, and have payments that give me a very, very good pymnt/income ratio. I too was getting killed on taxes and am sick of dealing with landlords.

Will the house go down in value for a while? Probably. But I'm not interested in flipping it this year or next and I'm looking forward to painting it whatever color I want, playing in the backyard with the dog and not stressing about timing the bottom.

As you said, if prices continue to drop significantly I plan to pick up an investment property or two along the way.

[perks]

JohnnyB: "And there's no way the mortgage payments are as low as renting a similar home at this time. NO WAY. NOT EVEN CLOSE."

The next tenant in the house I'm renting is shelling out $2500 a month for the place (Lord only knows why). Not only my mortgage payments, but my entire combined PITI payments are less than that. Ironically, guess who the new tenant is? Yep...a foreclosure "victim"!

[Milla]

it's called a "soft second," people, meaning a 0% interest, deferred junior loan of $50K that the city of Los Angeles provided me, meaning the monthly mortgage i pay is only on the first loan. i also had a down payment, so my first loan is smaller than you might think. the second loan will need to be repaid in full upon sale of the house. this happened via a little-known but very beneficial program available to low- and moderate-income homebuyers in the city of Los Angeles.

and because this is a government program, i assure you there were no shifty ARMs available to me, nor could i go into the loan with shady documentation. i'm set at a fixed rate for the duration of the loan, and yes, i can afford my mortgage.

[tom borland]

Uncle Billy says
"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)."
I like that he said what I have thought for a long time - that how much the market will really fall is kind of irrelevant - it's all about how much the bitter renters want the market to fall that shapes the majority of the comments on this forum. I too am waiting for prices to fall to more affordable levels so that I can buy, but I have no delusions that there will be $250k houses in safe desirable places in LA. I just don't see it happening. And if they do fall that low, I figure most of us will be out of work or the country will be facing so many bigger economic problems that buying a house will be out of the question anyways. Check the median incomes for Mexico City, London, or NYC, and you will see that they really have no major bearing on real estate prices. World class cities are increasing the domain of the elite.

[sfvrealestate]

Congrats, buyers. As i've said many times on this blog, a house should be a place to live, first and foremost. The idea that a home purchase should be a great and always-lucrative financial investment is a fairly recent one. It has lead to the bubble mentality so despised by many of the posters here. Enjoy your home and remember that NOBODY knows what your future will hold.

[IToldu2CashOut]

Congratulations on your new homes. I think however in a few years you will regret that you were not more patient. Living in an apartment and saving money is the right move right now.

On the bright side, maybe stories like this will kill the bailout.

[Milla]

p.s., the $50K provided by the city is seen by the first lender as part of the down payment, and with the down payment i provided, both combined were able to cover 20% of the sale price of the house, so i don't have to pay a monthly mortgage insurance.

without going into the nuts of bolts of my own earnings, i will be the first to admit that i could never afford a $410K mortgage on my current salary as a single person, and the good news is that i don't. but i can afford a monthly payment on my first mortgage, which is in the low $300Ks.

the point is that there are great programs out there that help middle-class people like me get into a first home, so i think it's silly when people talk about the impossibility of buying in los angeles unless one makes boatloads of money. that simply isn't true.

[Cal]

With 5% down, 50k gifted by the program I come up with 340k owed.

Assumptions
5.75% interest
$75 a month for insurance

I get $2486 as monthly payment for PITI (assuming 30 yr amortization). With the most aggressive program I can think of allowing 45% DTI with no front end ratio and assuming zero debt. That would require a salary of 66k. 10% down would be 2369 a month. Interest only or 40 yr fixed, and a half percent lower rate could knock off another couple hundred.

[the problemwithcaring]

Thanks Mila for sharing your story.

I was going to purchase my home through the same program in which you refer LA American DREAM Down Payment Initiative purchase assistant program, leveraged with other eligible loan programs like CALHFA First Loan, and brokered by a loan officer at my credit union. I thought the programs were great - you all can read about them here (http://tinyurl.com/25hz7e ) - not least of all because it required an 8 hour homeownership class that saved me from becoming a knifecatcher.

With those combined programs, I was supposed to receive about 50K in down payment funds, and of course a decent, fixed rate. (I only qualified for the High-moderate Income Help as a single person - the Low-moderate income standard was capped at $58K income per year in 2007.)

The only catch was the Shared Appreciation requirement, which is a part of all of the city's NON-rehab loans. It a city-calculated percentage based off the LAHD purchase assistance loan to the total home purchase price. So for most folks, basically that meant about 50%. The cleaning, maintaining and other wise making an unlivable pre-war, freeway close shack, habitable -- well that was all up to me.

Regardless, I quickly realized that like most homeowners, To sell any time within the near future, my potential property would need to appreciate in value or decrease, only at the rate of inflation. Anything else meant I was stuck, and would still be UNABLE to sell for any reason. I thought - this made more sense than renting - how?

So I passed.

Now how some one in the LOW-INCOME bracket could be patting themselves on the back for taking on a $400,000 mortgage is beyond me. Truly.

So best of luck!