Term Paper on "Prediction of the Housing Value in Beverly Hills Los Angeles"

Term Paper 4 pages (1161 words) Sources: 4

[EXCERPT] . . . .

Bev Hill Real Estate

Beverly Hills Real Estate: Reasons to Delay Investment in 90210

The recent global recession was felt especially severely in the United States, where the bursting of the real estate bubble not only served as a partial reason for the collapse of banking and financial companies and structures but also eroded much of the wealth of the middle class. Not all areas were as significantly impacted by the drop in housing prices as others, and many upscale areas especially did not take the value hit that much of the rest of the nation experienced. While the housing market turmoil and the suddenly low prices and glutted market of 2008 created investment opportunities in some areas, then, in many higher-value areas the wisdom of investing in real estate at the current time -- or at any time in the past five years -- is more questionable. The following pages present an analysis of the Beverly Hills real estate market, and specifically the market within the highly-desirable 90210 zip code, demonstrating that while real estate investment in the area would not be disastrous it is also not accurate to view such an investment decision as particularly strong.

The 2008 Housing Crisis

Crisis, bubble burst, correction -- call it what you will, in 2008 housing/real estate prices around the nation dropped, and indeed plummeted in some areas (PARSONS, 2012). Mortgage deals were becoming increasingly complex and allowing for the purchase of ever-larger and more expensive homes by increasingly less qualified buyers, which combined with already substantial real estate speculation drove the market on an increasingly steep upward trend beginning in about 1998-1999 and actually peaking in 2006, though the downward trend in that year and even in 2007 was not as precipitous as the near free-fall in prices through 2008 and 2009 (PARSONS, 2012). The downward trend in prices has actually continued on a national basis to the present year, though prices now match the pre-bubble trend of both inflation-adjusted and nominal home prices that can be established stretching back thirty years prior to the bubble's formation (PARSONS, 2012). This, along with the slight volatility of the much shallower downward trend in home prices over the past two-year, suggests that home price might be stabilizing and long-term investment in real estate might again be a wise decision in areas tracking the national trend and especially in those areas where home prices have currently dipped below the pre-bubble trend line.

In the 90210 zip code, however, the story of real estate speculation and bubbles is far less clear. The sudden sharp off-trend increase in home prices is obvious in a chart tracking national real estate averages, but a look at a graph of Beverly Hills and 90210's home prices tell a very different story -- there is a definite upwards trend in home prices from 200 through 2007 and a fairly significant dip in 2008 and 2009, yet neither the rising trend nor the dip are as extreme as in the national average (PARSONS, 2012; Trulia, 2012). For the 90210 zip code specifically, there is actually a great deal of volatility at a time when the national average sloped smoothly and inexorably downward (Trulia, 2012). The nation's average is expected to show less volatility due to the enormity of the sample size, of course, yet the sharp upswings of Beverly Hills/90210 real estate that occurred during the 2008 and 2009 housing turmoil is indicative of what makes this zip code a… READ MORE

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