To Live and Diefault in L.A.

From today's L.A. Times:

Home values in Los Angeles County posted the biggest year-over-year increase in at least 15 years in March as frenetic buying activity pushed the median sale price up 29%, to a record $375,000, according to data released Monday. Confounding predictions by the experts, sales were surprisingly strong, jumping 12% from a year ago to 10,875 new and resold houses and condos. Analysts and brokers said the heavy demand was driven by anxious consumers, many of whom are paying more than the asking price to get in the housing market before interest rates rise and supplies thin further. The inventory of houses available for sale has been at historical lows, and the latest flurry of purchases suggests that the market will only heat up as the busy home-buying season nears. .... The median price in Los Angeles County has nearly doubled since March of 2000, when it was $192,000. The county's rate of appreciation in recent months has outpaced other areas in the region, such as Orange and San Diego counties, as well as nearly everywhere else in the country. In San Diego County, the median price rose 16.8% in March from a year earlier, to a record $424,000. (March figures for other Southland counties will be out later this week.) In Chicago, the median rose 7.3% to $213,500. Miami's median climbed 11.1% to $200,000, and Seattle saw a 7.3% increase to $236,000. Among the country's less expensive big cities is Phoenix, where the median price rose 8.6% to $158,000. The spectacular gains in Southern California have fueled concerns of a possible housing "bubble." But most analysts believe the real estate market is on much firmer footing compared with a decade ago, when sales and prices tumbled. ....There also are risks to some buyers, who may be overextending themselves. DataQuick said 58% of the purchasers in L.A. County last month took out adjustable-rate mortgages, which initially offer lower interest rates than traditional fixed mortgages but could subject borrowers to higher payments if interest rates rise. A year ago, 29% of buyers used adjustable mortgages.....

We sold our home in the L.A. area 20 months ago at a price we thought was ridiculously high then and which has increased yet another 25%, and have rented since then because of the irrationally high prices. The only thing fueling the buying boom is the historically low mortgage rate. Thanks to Bush's shrewd tax cuts over the past three years and the resulting increases in the federal deficit, significant rises in interest rates are destined to kick into high gear within 9-12 months. This of course will put thousands of homeowners, who bought with variable rate loans, out to pasture as they default on their mortgages. The rising mortage rates will also wipe out the sellers' market and prices will consequently drop, like a lead ball from the sky.

That or another good earthquake. I can wait....