The following is an email in reference to the previous post "Lessons from my Fantasy Baseball Draft".  I asked for perspective on the article to clarify the details and to ensure our continued friendship.

I found it to be excellent, informative, instructive and insightful.  Hopefully he will become a regular contributor!


No problem posting the blog.  I didn't realize that was yours.  Very nice and informative. 

I would like to clear up a couple things in the story, but I really have no problem writing and posting it as is.  It is a story that is in the headlines every day.  However, the one thing for me was and still is the "knowledge of risk".  My jubilation and fear of the risk hasn't changed over the past year.  When I purchased the house, I knew where the market was heading.  "Catching a falling knife" is the phrase in California.  However I knew it, I worried about it then, and I still worry about it now. 

I knew my 15-20% discount would be erased in a year or two, and I was still willing to risk 10-15% on top of that and still feel comfortable.  As of now, the pre-owned homes in my particular tract are still listed at a higher price.  However, they are a little bigger, and the ones that have sold in the last few months probably did not go for the listed price.  In other areas of the neighborhood, and different tracts, smaller pre-owned homes match or list for more also.  These people will not get that price of course. 

However, my motivation and excitement was in getting the smallest home on my block, in the middle of the least traveled street, in an area with good schools, parks, and families that share the same values.  It is a highly desirable area, and I had to feel comfortable that the "quality of life" investment outweighed the monetary risk.  My fear of the risk has not changed, and at the very least I've enjoyed a great year in a great neighborhood.  I'm glad that I can send my daughter to the brand new public school that I trust, rather than the money that I was paying and would have continued to pay to keep her out of the public schools in the previous city 10 miles away. 

Anyway, enough of that, you get my point.  However, it brings up the biggest part of the housing market in California and the city of Los Angeles in general.  There are very desirable areas, and very undesirable areas right next to one another.  There are places only 10 miles away or less that you could not pay me to live in or give me a free house to. 

I lived in and on the fringe of that for 7 years.  In fact, I just heard through a friend, that prices and short sales are being made at over 50% discount of peak prices in that city, whereas in my city, maybe 25%.  I have ideas about this but I'll spare you more boredom. 

The cities that are hardest hit are also the outer areas.  The places where people reached out to buy because they couldn't afford to live near the city or bought as an investment because of the frenzy.  These places are getting smashed. 

Look up Riverside, San Bernadino counties, and cities like Corona and Temecula.  Down 50-60% at least.  Nice, but they overbuilt, and people over-reached with subprime mortgages and questionable income. 

BTW, that was one thing I asked a lot of people about in my neighborhood before I actually bought.  Spy questions like "what do you do?" and "where did you move from?".  I didn't want to move into an area with a bunch of yahoos from the housing bubble.  As an analogy up north, San Francisco is desirable, but places out like Stockton are destroyed.  In fact, 50-60% sounds good in neighborhoods that are desolate, and could have a market value of almost nothing.