Kelly Hamon recently beat out several other home shoppers for a cream-colored North Hollywood home. But the victory came at a steep cost.

Frustrated after getting outbid five times by all-cash buyers, Hamon ultimately bid $47,000 more than the asking price. She pursued the home so aggressively, she said, out of fear that the days of low interest rates and affordable prices would soon vanish.


“I got really scared,” Hamon said. “I got scared that everything was going up.”

The once-in-a-lifetime mentality, fueled by a shortage of for-sale homes, is driving the Los Angeles area from recovery to frenzy, according to real estate agents and experts. A report released Friday by the real estate data and brokerage firm Redfin.com called Los Angeles one of the “bubbliest” housing markets in the U.S., second only to Washington, D.C.


“Smart investors are starting to bail out,” said Redfin Chief Executive Glenn Kelman. “It feels crazy.”

Out of all homes sold in March, 91% of the company’s deals involved a bidding war. And about 10% were investors flipping a property at a profit after buying it just a short time before. Some agents representing buyers have called Redfin agents offering to double their commissions to ensure clients win bidding wars, Kelman said. And, increasingly, deals are being financed with smaller down payments — meaning buyers are able to take on more debt.


While cash offers may have proliferated in 2012, this year has ushered in stronger competition in the mortgage market, said Guy Cecala, publisher of Inside Mortgage Finance Publications. Banks had been relying on a wave of refinancing business. But as that slows, they are setting their sights on new home buyers by loosening their underwriting standards and accepting lower down payments.

Some lenders have even begun offering piggyback loans — which enable buyers to take multiple mortgages to avoid putting any money down, Cecala said.


“It is mostly something that started in the last month or two,” he said. “The good news for borrowers is that they are starting to see looser underwriting, but it is not looser underwriting across the board.”

Since 2000, home prices have risen twice as fast as incomes in the Los Angeles area, according to Redfin’s data. In January 2000, per capita income in Los Angeles was $31,002, and the median home price was $234,000. Since then, income has risen only moderately, to $44,423, while the median home price has soared to $421,000, according to a Redfin analysis.


The Redfin report comes as others have begun to raise concerns that housing might be approaching speculative territory. Professors Karl Case and Robert Shiller — creators of a widely followed home price index — have cautioned about fast-rising home prices in recent months.

Tom Barrack, founder and chairman of private equity firm Colony Capital, which is making big investments in single-family homes, recently told Bloomberg News that he was concerned housing was in danger of approaching bubble territory again.


Leo Nordine, a real estate agent in Manhattan Beach, said he recently listed a one-bedroom home in South Los Angeles and got 49 offers. People looking to make money from real estate are out in force, he said. And there’s little chance of a new wave of foreclosures, because banks have become much more flexible in working with delinquent borrowers.

More investors are buying homes to quickly sell again at a profit.


“Everybody I know is trying to do flips right now. It’s like the day trading of the 1990s,” Nordine said. “We went straight from Armageddon to speculation; there was nothing in between this time.”

Still, Nordine is advising clients to buy now if they can, citing low interest rates and low risk of another foreclosure crisis.


“That is how the American economy works now,” he said. “It seems as if we just go from one bubble to the next.”

There is a distinct difference between the home price run-up of the last decade and the current upswing. During the previous boom, listings abounded and sales soared. Now, rising prices are driven by a shortage of supply. And although underwriting standards may be relaxing, they remain tight when compared to the days when lenders issued enough subprime loans to crash the U.S. economy.


Christopher Thornberg, founding partner at Beacon Economics, said today’s market remains rational, despite a rise in prices.

“It’s not a bubble by any stretch of the imagination,” he said of the recent price gains. “If you can’t borrow, you can’t speculate — that is the primary thing that will prevent this from happening.”


Syd Leibovitch, president and broker of Rodeo Realty, echoed those comments, saying that even though prices may be approaching their previous peaks in certain markets, he is not concerned people will overextend themselves.

“I have no concern about that. I think this was a unique real estate drop tied to a loss of loan funding,” he said. “Now the loans are back and much more prevalent, and there is a lot of money to loan.”


Nevertheless, for Hamon, the accepted offer for the North Hollywood home represented the end of a long home-shopping ordeal. At the open house for the three-bedroom home, near the North Hollywood Arts District, a bustling scene full of families, neighbors, investors and real estate agents crowded the place. They inspected the home’s dark brown patio and backyard orange tree.

Hamon initially offered $15,000 over the $455,000 asking price. A day later, she said, she upped her offer to $502,000 after the sellers picked the top five bidders to battle against one another.


The family celebrated the victory over Brazilian food, but also prepared to tighten up household finances.

“I am going to have to tighten the budget,” Hamon said. “Maybe not get TV right away — just Netflix. Little things; don’t go out to restaurants. But I think it’s worth the sacrifice.”


alejandro.lazo@latimes.com

andrew.khouri@latimes.com