💵 Household Income. 🏠

Brock's newsletter | January 24, 2025

I have a dear friend who lost his house in the Eaton Fire and, like most, had no idea what his insurance covered until his home was gone.

His coverage was well below what he owed on his mortgage and even less than the cost of rebuilding it. From what I've been hearing, this is not uncommon.

So readers, obvious advice: check your homeowner's insurance policy and ensure you're sufficiently covered.

And more general advice is, don't have all your wealth in your house.

If your bank accounts feel low, we get it. Saving cash is hard; building wealth with home equity is not.

If you own an average-priced Los Angeles home (just over $1mil), it went up 5.7% last year. So you made $57,000 without doing a thing. Most of us couldn’t save that if our lives depended on it - almost $5,000 a month!

By the way, $57,000 is almost exactly the median salary in Los Angeles.

So, your average house, with average appreciation, gave you a second (average) annual income. Gives the term “household income” a whole new meaning.

That’s why, again, L.A. home prices will increase this year.

I’m not going out on a limb to predict that. Predicting house appreciation is like predicting winter. If we look at the last 30 years, out of 360 months, home prices went up in 310 of them. That’s 85% of the time—a pretty easy bet.

There are still many homebuyers; the fires haven’t changed that.

And mortgage rates won’t make a difference. Prices and mortgage rates are not correlated.

Here’s an example of how that looks. Maybe your parents told you about buying their house at a 17% mortgage rate. From 1974 to 1980, mortgage rates went from 7% to 17%. It must have been crazy - surely prices dropped as mortgages became insanely expensive?

Nope - in that same period, home prices TRIPLED.

With respect to today, the housing shortage isn’t going anywhere. In fact, it just got worse (with newest numbers showing almost 12,000 homes lost).

So own a home, build a home, buy a home, and continue to own that home - it's your golden goose laying an average of $5k/mo in golden eggs.

But also, be aware of recent events and make sure that you have diversified assets (income property, IRA, cash savings, etc. - I recommend Ramit Sethi's book I Will Teach You To Be Rich, it's a good place to start). Because when times get tough, you will need a plan B.

And not only because of fires. You will face other non-"Act of God" challenges in life that elicit the question, “Should I sell?” Medical bills, debt, divorce.

The joke goes, What do realtors call divorce? Answer: One seller, two buyers. But that’s not the reality. The reality is: one seller, two renters.

A better plan? Having a cash reserve/payment plan to buy out your ex.

Selling your house to pay off debt is never a good solution; it's the last solution.

As I recently told a film & TV writer amidst the recent strikes, “You should move heaven and earth to keep this house.” He did, and recently came to an open house to thank us for the advice.

Our Top Weekend Open House Picks

🔑 6900 Los Tilos Rd, Hollywood Hills - Gorgeous Spanish hacienda located in the Outpost Estates - Listed at $3,595,000 - Open Sunday 1-4pm

🔑 3069 Valevista Trl, Hollywood Hills - Renovated modern home with soaring ceilings with hillside views - Listed at $2,850,000 - Open Sunday 1-3pm

🔑 2789 Westshire Dr, Beachwood Canyon - 1928 French Normandy hillside home and gardens designed by local architect Arthur Bone - Listed at $2,499,000 - Open Saturday & Sunday 1-3pm

🔑 5698 Holly Oak Dr, Los Feliz - A stunning and thoughtfully designed home in the Los Feliz Oaks - Listed at $3,495,000 - Open Sunday 1-4pm

With love and prayers for our city,

-Brock

P.S. There’s a lot of great information online for those who lost their house and have to deal with insurance - start here: Top Ten Tips for Wildfire Claimants.