Dr. Housing Bubble 09/13/08

[Crewleader]

Real Homes of Genius:
Today we Salute you Santa Monica. Examining 5 Adjacent Homes for Peak Prices and Foreclosures.

Today we are going to have a special Real Homes of Genius where we are going to examine five adjacent homes on a tiny block in Santa Monica. For readers outside of Southern California Santa Monica is one of the few prime cities located in the large county of Los Angeles. 88 cities and 10,000,000 people and we probably have 1 million or so trying to squeeze themselves into these few tiny locations. Why is that? Prestige and the belief that you can make insane profits because you live in an area that is immune to bubble prices. This is the type of logic that ran rampant through the bubble days. In fact, in one report we stated that out of 270 zip codes only 8 have seen a year over year increase. Santa Monica had one of these zip codes. But this little block in Santa Monica isn’t the prime 90402. This is the 90405.

You need to remember that Southern California was the epicenter of this housing and credit bubble that is now rippling throughout the world. Many folks think that areas like this are immune to the housing bubble. They are not. When bubbles pop like this one in California there is a slow progression of which properties drop first. I’ve put together a chart breaking down 5 steps of how prices correct during a massive housing bubble:



As you can see from the chart, the first area to be impacted is non-prime lower income areas. We have already seen weakness here since last year. The next area is semi-prime area where the bulk of the population live. Nicer starter homes are in these areas. The third phase is upper middle class areas which seemed immune but are now correcting as well as good jobs are being lost. The prime areas of course are the last to be hit and this little area we will be looking at falls under category 4. These are good areas simply by the fact they fall within close proximity to category 5 areas. These areas are the crème de la crème and are the last to see challenges. You can think of Ed McMahon’s home in Beverly Hills as one of these properties.

http://www.doctorhousingbubble.com/real-homes-of-genius-today-we-salute-you-santa-monica-examining-5-adjacent-homes-for-peak-prices-and-foreclosures/

[upi402]

1. In bad times, it was the high end homes

that were cruising right along in the residential construction sector. But now every security guard and Starbucks barista owns a McMansion -or feels they deserve one somehow.