Posted 8/22/2004 03:00:00 PM by Douglas

Interesting, if not frightening article about the current state of home values in the People's Republic of California.

"We're headed into a society where we have housing haves and housing have-nots, where we have a rental class and a homeowner class," according to John Landis, chairman of the Department of City and Regional Planning at the University of California, Berkeley.

Leave it to the leavel-headed Ph.Ds at Berkeley to set the record straight. I wonder if he rents?

Before landing their Santa Monica condominium in April, Mary Becker and her husband lost out on two other condos - one priced at $384,000, the other at $390,000 - despite offering between $5,000 to $10,000 over the asking price. Both ultimately went to buyers who offered between $30,000 and $50,000 more.

"It was a big reality check," said Becker, a 26-year-old yoga instructor.

With a combined annual income of around $140,000, the couple eventually landed a two-bedroom condominium for $465,000 - nearly double what they set out to spend. Their total monthly housing bill: $2,200.

"We did extend to our max just about," she said. "So we're kind of dealing with how to make that all work."

First off, I know it's a beach community, but $400K for a Condo? Also, how does a yoga instructor pull down $140K a year? It doesn't say what her husband does, but dang, what am I doin' getting up every morning.

Another story of overbidding getting out of control.

Hollywood attorney Ingrid Auyon swore she wouldn't enter a bidding war, but ended up offering $35,000 over the $575,000 asking price for the 1,000-square-foot home she bought in the spring.

"All the things I didn't want to do, I had to do," said Auyon, 29. "I feel a little embittered."

$575 per square foot! I'd feel a bit more than embittered. But how are these granola eatin' bean sprouts paying to live in paradise?

To afford the prices, some first-time buyers opt for interest-only loans, which help lower monthly mortgage payments because buyers initially pay off only interest - but don't let them build any equity. Unable to meet the standard 20 percent downpayment requirement, many first-time buyers are financing more and more of the total cost, according to Marshall Friedman, branch manager for America One Finance in Agoura Hills.

So, they're paying out the nose for a condo, and they're only paying interest on the note without building equity. Sounds an awful lot like renting an apartment, to me. What would happen if the property didn't appreciate? Then they've borrowed more than it's worth, without paying down the loan by a single cent?

"I can't afford this property to decline in value," Auyon said. "I'm banking on appreciation."

I imagine it's something they don't like to think about.

Say what you will about Texas, but at least I don't have to turn a bedroom into a meth lab to help pay the mortgage.