San Diego Housing Bubble News and Analysis

If you're not scared that it could be had for $470K in two years, by all means go ahead and buy it!

Mello-roos will only be with you for 30-40 years...no worries there, either.

One last thing...this bubble began long before 2003, my friend...it was on Wall Street's drawing board in early 2000.

What development in 4S are you looking at? Some friends recently bought in Silhouette, and we've heard they are selling quite well.
Pienza will be sold out by April.

If you NEED a home in the area soon, it sounds like a good price, if not, you might want to wait.
Either way, Mello-Roos will not be going away.

Also might want to consider what interest rates will be in the next few years. Since my house is paid off, I'm hoping for 10% Jumbo CD's in the very near future.

At today's jumbo rates 5K/year mello roos effectively increases the purchase price by ~70K.

What model/neighborhood is it, and what's the official listing price?

This house is a builder phase closeout at Maybeck. This model start at $740K. someone fell off escrow and thus, I can get this cheaper.

The price sounds good for Maybeck, based upon their previous price points--if you NEED to buy now. Just be aware that some people find that, over time, they really don't like an alley-loaded home. That's why my friends chose a home with a front-loaded garage.

With Maybeck, you have no backyard, and they felt the alley would become a nightmare of noise, with kid's playing, people backing out of their garages--right near your bedrooms--not to mention the echo-chamber effect an alley can have, etc., etc.

Just some things to consider--wish you the best!

If you decide to buy, check this out

https://www.dcu.org/mortgage_he/index.html

Jumbo 30-year fixed mortgage up to 90% LTV - 5.125% with 2 points, 5.625% with no points

All in all you're looking at something like $4000/month (honest fixed mortgage with 20% down)

2003 is not pre-bubble.
Wait for 2001 of better yet, 2000 prices.

At least wait and buy a foreclosure.

5K Mello Roos? thats 4x my rent and I live in SF.

for $470K in two years

2003 is not pre-bubble. Wait for 2001 of better yet, 2000 prices

http://www.zillow.com/HomeDetails.htm?zp...

This guy committed to paying something like $4500/month for a comparable house in 4S Ranch ... in 2000.

(He probably got lucky and brought his payment down $1000/month by refinancing in 2003, but that's beside the point)

Randy,

The price offered to you by the builder is quite attractive when compared to the "current market price". And that's expected, because builders are under pressure to generate revenues, so they have to offer low prices in order to sell houses.

The problem is: just as your current deal is better than the John Doe who bought last year, another guy who buy this time next year will get a much better deal than what you're getting. In term of prices, we are nowhere near the bottom.

IMHO, the chances that prices will go down significantly more is 99% (the 1% is for the scenario in which another "credit bubble" appears to pump money into real estate).

@ esmith--

just wtf are you trying to say here? if you are throwing doubt on future enormous price drops, please state your situation, i.e. when you bought, where and what you bought (generally), and at what price, so that you may help us all begin to see it your way and/or see you as a bubble deny-er through and through.

Otherwise, I'll just continue to think of you as another "born on third, thinks she hit a triple" type.

just wtf are you trying to say here? if you are throwing doubt on future enormous price drops, please state your situation,

What I'm saying is simple. Back in 2000, a house like that cost $4000/month. If you're waiting for 2k or 3k/month, you may be waiting forever. If you can comfortably afford to pay 4k/month and you're sure that you won't have to sell for 10 years, you might as well buy today.

It may go down from 670 to 470, if interest rates go up, but you will still be paying $4000 a month.

esmith:

too many holes...too little time.

perhaps someone else has the patience and time to set this poster straight...I'll start:

1) prices have been falling in spite of lower interest rates over the past year (you claim they may fall if interest go up)

2) $4000 a month (your figure, not mine, so accuracy not checked and presumably skewed to make a bullish point) will almost certainly buy a hell of a lot nicer home in two years than it does now.

op: keep your $134,000 down payment (20% of $670,000) for now...you'll be happy you did

prices have been falling in spite of lower interest rates over the past year

your figure, not mine, so accuracy not checked and presumably skewed to make a bullish point

$536k jumbo fixed 30-year mortgage @ 5.125% ($2920)
Property tax ($560)
Mello-Roos ($400)
HOA ($100)
---
$3980

Did I forget anything?

will almost certainly buy a hell of a lot nicer home in two years than it does now.

If $4000 only bought you this much in 2000 before we even had a bubble, why do you think it will buy you a lot nicer home in 2010? What exactly is "a lot nicer" than a centrally-located brand new 3500 sq ft home in 4S Ranch? La Jolla, Del Mar, RSF and Coronado taken together have something like 15,000 homes. (In a county with 3 million people and 100,000 millionaire households) CV, Scripps Ranch and 4S Ranch are next in line.

Once it falls down to less than 417k + the 20% down payment, and you do not need a jumbo loan...that will be around 500k in price. You are looking at 3000 a month? Also, what happened if the builders also paid off the MR?

I'm moving on from this thread, however, you forgot (at a minimum) the opportunity cost on $134,000 down payment. At 4% interest this is an extra $446 monthly on top of your $3980. (an extra 10% a month is more than just a little difference, too...isn't that amount enough to sink most ARM holders?)

Lastly...the home you linked to isn't even in 4S Ranch. It appears to be in Patina...much, much nicer than 4S Ranch, likely with an ocean view and beautiful upgrades.

Don't forget the poor quality of these homes for the price. Have you actually examined these homes closely? It seems the new homes aren't built to last like the ones built just 20 years ago. I wonder how your "investment" will withstand the years--aside from loss in equity.

If you're counting all the expenses and taxes, might as well take in the tax deduction as well to be fair.

the opportunity cost on $134,000 down payment

Assuming that the guy at 10771 La Alberca Ave put 20% down, he had a down payment of $128,000, and CD interest rates were probably higher back in 2000.

It appears to be in Patina...much, much nicer than 4S Ranch, likely with an ocean view and beautiful upgrades.

It's called Bernardo Springs. Basically an older version of 4S Ranch. I happen to be renting an apartment in the area and I can assure you that there's no ocean view there. (Maybe if you climb on top of Black Mountain, you'll see the ocean.) Can't speak for upgrades and build quality, I'm too poor to afford a SFR in either one of those two neighborhoods.

If you can afford to wait, why not rent in the area and see if you like it? You might not like the shopping, schools, commute, etc. What is the rush? I think prices will continue to drop and if you read some of the previous postings, you will get a better idea of the trends in the region. Good luck to you.

Even if (and a very not plausible if) prices don't even drop very much in that area from here on out, there certainly isn't any pressure for increased prices anytime in the near future, so you really have no reason not to wait.

Worst case: Prices remain flat for a few years and you have more money saved and can buy at the same price without having wasted any money on maintenance, etc.

Best (likely) case: Prices drop during the next few years, you have more money saved, and you can buy that house at quite a discount or a bigger house for the same amount of money.

2000 is pre THIS bubble. But prior to that there was the previous bubble that inflated from 1996-2000 thanks to the dot-com bubble. The swelling portfolio cause people to go house hunting.

I expect THIS bubble to be taken back, still leaving us with some pretty inflated prices.

La Alberca has more land. Maybeck is almost a row-house (but I like the alley design).

I expect prices on those Maybeck 3000sf + houses to decline to the mid $450k within the next couple of years. Most Maybeck houses are under 3000sf. Only the ones with the guest suite are above 3000sf.

I'm not crazy about 4S but I think that it's nicer south of Camino Del Norte.

For all who thinks we'll go back to 2000 price, I sure hope you're right but please take a look at Rich's extensive amount plots here. They all show we didn't hit bubblelicious territory until 2003. If we return back to 2000 prices, we'd be well under the trend line. It's definitely possible if we undershoot by a big amount. But realistically, I highly doubt it'll happen.

If we go back to 2000 price, houses in Mira Mesa would be around $200k. At today's rate, your mortgage for a decent 4 bed/2 bath house would be around $1000/month while rent of a 2 bed/2 bath apartment in Mira Mesa would be $1300/month. Also, a similar house in Mira Mesa in 1996-7 would fetch about $1200/month in rent w/ a 10% down (I know people who bought such house in 1996). So make your own judgment but please be realistic. If you do think it'll go back to 2000 price, please provide data to support your point. I've just provided mine.

Here

The bubble started when the light-blue line separated from the brown line.

asianautica, do you have money to lose if prices continue to drop? By 2003, houses were way overpriced.

marion, no, I don't have money to lose. I'm just stating the fundamental. That's the best I can hope for. Sure, we'll probably undershoot just like we overshoot. But that's just icing on the cake. I agree, 2003 price, houses were over priced. I'd reserve the "way" part to 2005, but that's beside the point. But 2003 nominal price + 5 years of inflation, would not be too bad of a deal. When I'm talking about 2003 price, I mean Jan 1st, 2003, not Dec 31st, since 2003 saw a HUGE run up. You have to do the calculation for your own specific case, but you also have to consider that renting is losing money as well. If you can buy a house where the mortgage (P+I) = rent, then why wouldn't you. I hate to sound like a perma-bull but you have to live somewhere. So if the interest you're paying the bank is less than the rent you're paying, then what do you have to lose? I'm also using 0% down to do the comparison as well, to keep the calculation as fair as possible.

asianautica, almost anything can be rationalized. If you buy a house at 2003 prices and it drops to 2000-2001 prices, you're still going to lose money. You'll be paying more money any way you slice it, with a comparable interest rate. An agent at one of the new developments has been bugging me for weeks, trying to get me to qualify for one of his stupid houses. What he always asks is "can you afford xxx payment?" Well, that's like your argument, it's not whether you can afford the payment, it's the price of the house that's important. The reason, obviously is whatever that payment is (affordable or not) when the price goes lower, that payment goes lower.

Gullible people buy based on that rationalization. It's like the sleazy car salesmen: "Can you afford xxx payment?" It's not the payment. You want to get the best deal and the best deal is the overall price. Sure, individual situations have to be taken into account, I'm talking about those who plan on staying in their home for long term with a fixed rate mortgage.

It's always best to get the lowest price. Not to mention, you'll pay less on property taxes.

P.S. I softened that to "gullible".

Where did I even mentioned about being able to afford x payment? Please read Rich's primer and come back here once you understand his point about fundamental and why we called this a bubble. I'm talking about fundamental, not being able to afford x payment. Can you be 100% sure rate won't go up if price drop to 00-01 price? I can't, that's why I stick to fundamental. Wishful thinking on the way down is no different than wishful thinking on the way up. Enjoy your wishful thinking, I'll stick to my fundamental, thanks. We can very well see 1985 price too if rates goes high enough.

asian:

job stability. would you buy a house, put money down on a house when you could lose it if you lost your job and had to sell in a down market?

the dot com bubble. 2001 prices were driven by dot jobs, after which, were gone. the rate cuts were to mitigate that recession, reinflating real estate onwards and upwards past 2003.

now i wonder... will the current rate cuts reinflate this bubble yet again?

esmith, when you quotoed the jumbo fixed 30-year mortgage @ 5.125% , who will pay you the points???