Phoenix-based Realtor Gregg Swann is a respected voice of authority on technology, economics and philosophy.  Swann's column in the Arizona Sun discusses the Phoenix real estate market, but many of his points are applicable to Los Angeles as well. (Used with permission)

This from my Arizona Republic real estate column (permanent link):

When I was a kid, my Uncle Jack, my mother’s oldest brother, told me a story I’ve never forgotten. He was at a little county fair way out in corn country. Nothing special, just beauty contests for hogs, cheesy little rides and sticky, sugared confections.

Late in the day, the ice cream vendor decided to pack it in, announcing that he was giving away what was left of his inventory. People elbowed their way to the front of the crowd, so eager were they to get something for nothing. They walked away with the ice cream piled into their bare hands, rushing off to their cars, leaving a trail of melted drips behind them.

The lesson I took from my uncle’s story was that those folks didn’t really want ice cream. They were willing to get themselves dirty, and to get their vehicles dirty, just to have something for free. Most of them probably didn’t even eat the ice cream, and they certainly couldn’t have enjoyed it. Imagine trying to inhale a glutton’s quantity of chocolate-fudge-swirl before it melts all over your clothes.

Could that be what’s going on right now with the $8,000 first-time home-buyer’s tax credit? I happen to be carrying three listings that are undeniably “investor’s specials” — which means they’re a good buy, but they need a lot of work. Even so, my phone is ringing off the hook with agents trying to sell those houses to owner-occupants — folks with very little cash trying to get an FHA loan so they can buy a house, thus to get $8,000 in “free” money.

Do those buyers really want homes, or do they just want that free money? What will happen to the properties when the $8,000 is spent? Should we dial the clock back to 2006 to see if anything looks familiar?

Meanwhile, the National Association of Realtors is campaigning for even more “free” money to bribe even more otherwise-unmotivated buyers. The only thing that could make the deal sweeter would be a double hand-full of “free” ice cream.

Phoenix-based Realtor Gregg Swann is a respected voice of authority on technology, economics and philosophy.  Swann's column in the Arizona Sun discusses the Phoenix real estate market, but many of his points are applicable to Los Angeles as well. (Used with permission)

Get a load of all that great housing news! Median prices are up! Sales volumes are up! The prognosis for the future? Up, up, up!

Here’s a different take: If it looks, walks and talks like hype, it’s probably hype.

Are houses selling well, compared to a year ago? They are — but the federal government is giving first-time home-buyers $8,000 in free money to buy houses right now. If that tax credit is not extended or replaced with something even more generous, the music will stop on November 30th.

And while median home prices may be up, prices for homes that normal working people actually buy are flat at best — and they have been trending downward since December of 2005.

But what about the shortage of available homes you have read about? What about the multiple offer scenarios, with homes selling for thousands of dollars over list price?

What would you expect to happen when you artificially stimulate demand at the same time that you artificially limit supply? We should be doing what your grandpa used to call “a land-office business.” Instead, even with $8,000 in free money, prices are still trending downward.

And that artificially-limited supply — all of the foreclosed homes that banks are withholding from the marketplace — will flood the market sooner or later.

If you’re in the real estate market right now, what you should do depends on your circumstances.

If you’re a seller, make a deal. Your carrying costs will almost certainly exceed any gain you can hope to realize by waiting out the market.

If you’re a first-time home-buyer, jump. If you’re not under contract by October 15th, you’ll probably miss out on the tax credit — and houses are not easy to get, taking account of the artificially-limited supply.

Buying with a loan? Interest rates are low for now, but they may not stay that way.

Buying all cash? Sit tight. As sweet as prices look right now, it seems likely they’ll get a lot sweeter when the banks finally release all the homes they’ve been hoarding.

Los Angeles Neighborhood Housing Services and the Los Angeles County Department of consumer Affairs are presenting a free foreclosure workshop tonight.

Wednesday April 29, at 6:30 PM

At The River Center, 570 West Avenue 26, Los Angeles, CA 90065

The workshop is sponsored by the Foreclosure Action Network, the Lincoln Heights Neighborhood Council and the Glassell Park Neighborhood Council.  For information please call:  323-600-3737

The Los Angeles condo market experienced a significant decline before
the mortgage credit crunch started.  In fact, Los Angeles was one of the
markets that promulgated the credit crunch with its higher than normal
foreclosure rate.  On August 2, 2007, American Home Mortgage went belly-up, sparking a chain reaction of A paper lenders to close their doors, permanently.  262 lending institutions have "imploded"
since the sub-prime mortgage decline in late 2006. The mortgage
industry contraction has exacerbated the Los Angeles housing market
decline, especially the condominium market.

It doesn’t have to stay like this.

Condominium management associations are dealing with stressed out
homeowner associations, who are responding to angry homeowners. 

"Where
are all the qualified buyers?", they demand.  "Why is the Los Angeles
condominium market in a free fall?"

I have the answer.  Nobody can get financed.  Well, nobody is a
strong word; very few can get financing for Los Angeles condominiums.  On
June 2, 2008, Fannie Mae severely limited its approvals for condominium financing. Now, you need at least 10% down payment to get a
loan for a condominium….UNLESS…

…you read carefully.  I know how to stop these prices from dropping like a ball off a table;   government financing.

That’s right, FHA or VA loans can save the Los Angeles condo market.
They don’t have "declining market" adjustments, aren’t relying on PMI
companies to insure loans with a down payment of less than 10%, and
offer competitive loan terms to borrowers.  The problem for FHA/VA home
loans in Southern California?  Most condominium complexes are NOT
approved for government loans.  If you’re a condo owner, or a HOA board
member, or an association management company employee, you can check to
see if the complex is approved for:

FHA financing here or

VA financing here.

If your complex isn’t approved for government loan financing, you
have effectively cut the pool of potential buyers by two thirds.  Many Los Angeles condominium buyers are first-time home buyers and don’t have
20% down payment.  When you limit the pool of potential buyers, you
work against the already stabilizing housing market in Southern
California.

While houses may rise, later this year, Los Angeles condominiums can
still decline in value because of poor management.  Can you afford to
have your property investment go sour because of laziness or lack of
information?  It doesn’t have to be that way.

Call me and I’ll help assist you with the government loan approval process.
It may take 4-6 weeks and will probably cost the association about
$2,000 to get the complex approved.  While that may sound costly, I
assure you that your homeowners will be ecstatic that you’ve stabilized
their property value.

Brian Brady is a San Diego-based mortgage banker and can be reached at 858-777-9751.

Reprinted from "How to Buy and Sell Real Estate at a Profit" by W. A. Carney, published in 1905, and now in Public Domain.

Observers who have made a study of the matter claim that booms and panics occur in cycles.  Professor Levi says:  "The most confident advocates of the theory of periodicity assign to these cycles a definate or nearly equal curation of ten to twelve years.  According to John Stewart Mills, this sycle is divided as follows:  After each panic or crisis the first three years will witness diminishing trade, lack of employment, falling prices, a lowering rate of interest and very considerable distress.  Then there will be three years of active trade, slightly rising prices, fair employment, improved credit.  Then will come three years of unduly excited trade, in which speculation will be rife, prices will rise rapdily, and an unusual number of new enterprises will be begun.  The tenth year will be one of crisis, followed by three years of depression." — (Burton’s Financial Crises.)

So, to paraphrase this wisdom from 1905:

Year 1:  Crisis

Year 2, 3, 4:  Depression

Year 5, 6, 7:  Recovery

Year 8, 9, 10:  Boom   (then the cycle repeats)