Buying above bubble prices!

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This two-bedroom/one-bath, 1,092-square-foot house in Los Feliz sold in July for $864,000. It had sold for $845,000 in 2005. So while Los Angeles area home prices fell 34% in those four years (based on the Case-Shiller index of repeat home sales), this house just sold for 2% above its 2005 price.

I’ve come across a few examples lately of houses in the $700,000 to $800,000 price range selling at prices above their bubble-era sale prices. What’s going on? Are micro-bubbles forming in some areas? Or are some neighborhoods really so special that they never see price declines, as real estate agents often insist?

The latter is doubtful. Even in the neighborhoods where these high-priced sales occur, there are plenty of examples of homes languishing unsold or selling far below their previous sale prices. But for some reason, buyers have pulled the trigger on some properties at seemingly head-scratching prices.

There may be pent-up demand among buyers who have tired of waiting. Financing should also be easier for homes priced around $700,000 than for those in the seven figures, since buyers should be able to stay below the $729,000 jumbo mortgage level. But are these buyers just a small, finite group with peculiar demands, or do they mark the start of a purchasing wave? We’ll learn soon enough.

-- Peter Y. Hong

Video: Peter Y. Hong