Homeless in Los Angeles get $600k units, are they nice enough?

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The city of Los Angeles could not find enough housing for the homeless, so they built 278 units at a cost of $600k per unit. Aren't there other oroperties available that may be cheaper than that?

Before we get into that, however, let's review where the market is to take their comments in context.

I maintain there are 2 most critical statistics to understand the real estate market. On the buyer demand side, the interest rates. And on the seller or supply side, the months of homes available for sale, or inventory.

So, on the buyer demand side, at the end of the week mortgage rates closed slightly lower and slightly above 7% at 7.02%, and while its slightly above 7% it is not significant to have any noticeable change in demand. The rates have stayed in the range near 7% for about 6 months, and is currently at rates that will continue to encourage buyers to enter the market.

Inventory of homes for sale has continued to be at levels about 15% higher than last year's record low for a non-pandemic year, but this year's inventory is slowly dropping and a year ago it was slightly rising. At these levels, housing for sale inventory is still about 40% less than any other non-pandemic year, and does not seem to be increasing but merely staying at a slightly higher level. As I have repeatedly said, as long as inventory is low, prices cannot go down much.

Locally, in Los Angeles, the market continues its status as a seller's market with a rating of 41 for the 3rd week in a row. It has been in this range for the last year, and this data does trail the most recent jump in rates, so it is not clear how important the direction of this is.

So, in this week's survey of real estate news headlines, lots of fun stuff!

One listing got national attention for getting multiple offers despite being "unfit for human occupancy."

This particular property was in the hot market of Silicon Valley, but this demonstrates a basic fact of economics in real estate. I have had attorneys and families tell me that a property was in such difficult condition that it could not be sold, but in fact almost any property can be sold, its about pricing it right and marketing it correctly. As an experiment, think of the worst piece of property you can imagine, would you buy it for $1? $100? $100k? So, its not about whether it will sell, its ALWAYS about the price, and fixers or uninhabitable properties are no different.

Under our category of exaggerated news headlines, Realtor.com enters its offering for worst headline of the week with "The Fed’s Latest Interest Rate Decision Could Affect a Housing Market Near ‘Breaking Point."

The BREAKING POINT!!!!!!!!!! How ominous. And you have photo of Jerome Powell, one of the architects of economic destruction of the American economy who at 71 years old will not step aside and let anyone else do the job he should be doing. But we are at a breaking point?

One of the regulars with disgracefully overstated headlines is Yahoo! Finance, with its entry this week "US home sales crumble in May on higher rates and record prices, says Redfin."

Sales CRUMBLE. OK, so how much of a decline is crumble? Well, if you read the article, you discover its down 2.9%, yet this while prices went up 5.1%, so net sales totals are UP! I love that Yahoo! quotes Redfin, but who is the one that exaggerated the data and mislead with the term crumbled?

In our local government watch section, WalletHub, a website focused on personal finance, released its list of best and worst run cities in the US for 2024.

Guess what, California is not the best. In fact, only 2 cities in California made the top half, Huntington Beach at 65 and San Diego at 70. Near the bottom are Long Beach at 135, Sacramento at 136, Los Angeles at 139, and the winner/loser is San Francisco at 148.

In the Homelessness is not a problem but a government subsidized industry, Newsweek shares how "People in Homeless Housing Trained on How to Be Squatters."

This article is about a program in Florida, but you can imagine its a natural progression of such programs. They reported they "literally have had a small group, an effective group, training each other, if you will, and coaching each other on how to squat." Just like criminals training each other in jail and prison.

And if you don't hate Zillow enough, here is their chief economist telling you not to pursue your income and wealth goals, quoted on America Online with "Zillow's chief economist says short-term tactics like house flipping won't work anymore as prices continue to rise."

No doubt flipping homes is hard, but all real estate investing is hard. Here is Zillow's talking head telling people not to use the tool that is most available to small investors, and instead recommends "buy and hold," commercial real estate, and passive investing online. Of course, all 3 of these are hard to find success, I personally have done all 3, but I have made more money and seen more investors both start investing and build wealth with flipping than any of these gimmick investments. My question, is what basis does this Zillow "chief economist" have to make such a statement. There is NOT data in the article showing these alternatives are better than flipping. And this is from what appears to be a career desktop riding economist with no apparent experience in real estate investing in her resume.

One of the most outrageous stories this week is the opening of the 278 unit homeless high rise in Los Angeles Weingart Tower with an average cost of $600k per unit.

This building not only looks beautiful from the outside, but as a list of impressive amenities: a gym, art room, music room, computer room and library. Of course it has a full floor for city employees to be on the premises. These units would be higher end units in the market, with an average cost of $600k, not to mention the inevitable maintenance costs and programming for all the amenities.

So, as a taxpayer, how do you feel about giving a $600k unit to homeless persons who may or not even be US residents, may or not be here legally. Of course, if these units appeared out of thin air, why not give it to people in need, but we know that these units are paid for by somebody, that that somebody number is shrinking as taxpayers exit California to other low tax states.

The other problem I have is why can't the city buy cheaper homes and just give them away. Are there similar units for sale? Well, in the city of Los Angeles, I found a similar number for sale at or below $600k, and all seem pretty nice to me. Let's take a look at them.

Link to condos for sale in LA for $600k and below

None of these are good enough? Would it not just be cheaper to buy these and give them away? At least the seller would get paid. I am not suggesting this as a policy but to show how ridiculous it is to build units for $600k and give them away. It cannot be sustained.

So, what should YOU do about buying or selling real estate in today's market?

If you are looking to buy a home and live there for a while, real estate has always been a great long-term builder of wealth and there is nothing to suggest that is changing if you can afford the home.

If you want to move or downsize, it's still a great market to sell, but a bit more challenging than in the last few years.

Finally, if you can find a property that will give you cash flow, this is a great time to get solid cash flow and enjoy the tax benefits of real estate.

How can I help you? Call, text, or email me.

Bill

Bill Gross

Broker Associate, BRE 01022275

Certified Probate Expert

Direct: 310-210-0008 , [email protected]