One problem: people who make a quarter million and have saved a down payment are not stupid.
If you make a quarter of a million dollars a year, does it make economic sense to buy a house in L.A. right now? Back-to-back commenters on L.A. Land answered that question on the blog earlier today with a resounding "no."
Common Sense wrote:"My wife and I earn around $250K per year, are in our mid 30's and have a newborn child. In any other planet, we should be able to own a very nice house. However, in Los Angeles, the only thing we can properly afford would be a starter home at $750K, maybe that gets you a 2 bed, 1/2 bath crack house, and our combined salary puts us in the top 3% in annual wages in the US.
This just doesn't make sense and will be a big reason why Los Angeles will experience a BLOODBATH in housing prices falling for the next several years, that is unless the entire city is inhabited by multi-millionaires.
In the meantime, we'll keep renting our excellent 2000 square foot apartment, paying nothing, taking awesome vacations, going to excellent restaurants, etc. and saving, saving and saving (A LOT).
We'll enter the market when home prices fall to planet earth (2-4 years).
A few minutes later JayC wrote:"... wife and I make ~$250K/year, live in apartment on westside, and child is on the way. The problem isn't that we don't make enough or that our expectations are too high (as realtors might say). I've been living in LA my whole life and I DO know what people who make $250K/yr SHOULD be living in. It may not be Beverly HIlls, but it sure is more than a 1500sq-ft fixer in Sherman Oaks. Sucks not to have any tax breaks, but I'd rather pay $1800/mo to rent a townhouse than pay $5000K/mo to rent money from the bank that owns the house I 'bought.''
This doesn't apply only to L.A. Look up your area's median household income here. If you're asking more than 3 to 4 times median income for your house, it better be something special. And if you're asking 8 to 10 times median income, it better be amazing.