San Diego Housing Bubble News and Analysis

I think he's missing the biggest positive about renting today, which is: FLEXIBILITY / MOBILITY which ought to have a huge premium in today's economic market. One could move & get a job anywhere in this country w/out trying to sell an underwater shack.

Poor coverage of the topic.Much abuse of assumptions and ignoring of cumulative benefits possible with having purchased wisely. Had he bought the place he is renting 10 years ago he might be singing a different tune.

I wondered when this would start to come off the MSM. Timing is everything. One thing many of these "analysts" dont calculate into their analysis is that the govt allows $250K cap gains profit with no tax after 2 years of occupation. That's a 25% boost in CA right there. And what other investment allows this??? Of course, it needs to be increasing in value.....

I'm glad we're finally seeing articles like this. While we're not at the bottom, articles like these at least show that we've made substantial progress and that the "buying real estate is always good" meme is largely worn out. When Newsweek's cover says, "How to avoid ever buying a house again," then we'll be at the bottom.

I think there are some legitimate points raised in the article and here...

But, if you plan to stay in your house, long-term, then "free rent" once the mortgage is paid off is a factor. We are looking forward to our mortgage freedom.

Strictly from a financial viewpoint it is about opportunity cost. I sold my house in Los Angeles in 1999 for a decnet gain before moving to San Diego for a job change and immediately saw that it was less expensive to rent than to own in most all parts of San Diego (even in 1999!). We rented a small 3 bedroom/2 bath house on the hillside in Bay Park with a view of the bay for $1600. In the 2001 the owner offered it to me for $495000 to buy. What a joke...but some fool bought it. Considering the condition it was in I'd say that it is probably worth around that now after nearly 10 years. I more than tripled my net worth through alternative common sense investments during this last 10 years (even with the recent market swoon of the last two years). That certainly wouldn't have happened if I had bought real estate instead.

That said, the "I want to be free of mortgage payments" is just a excuse for not being able to manage your assets proactively.

You know when "news" magazines start talking about it's better to rent than to buy, then it's time to start looking to buy in the distant future.

6. Termites
7. Repair
8. Upkeep/Upates
9. Insurance
10. Rents going down (TBD)
11. Local government shenanigans
12. Neighbor shenanigans

In regarding to your net worth tripling, can you tell us how much such house was going for in 1999? It would also be helpful to know how much such house is rented for today. That way, we can run our own calculation to see how much $ you saved from renting vs buying over the last 10 years, which would contribute to your tripling of net worth. I'd have to call BS on:

Unless your net worth is tiny.

So what sort of "common sense investments" tripled your net worth in 10 years? Hit the lottery? Marry a rich girl? Inherited the family business?

I was trying to figure out how much better off we would have been if we rented instead of buying.
My first problem is that I cannot figure out how many times we have increased our net worth because when we first bought our net worth was negative.

We have continually owned property in San Diego since 1996 (currently one rental house, in Bay Park coincidentally).
Since ~ 2000 our net worth has increased by a factor of 6x (was nearly 10x at the peak). Since we are currently about 1/3 cash, 1/3 property, 1/3 stocks I guess we will be back down to 3X net worth gain when stocks go to zero and housing declines another 50%.

But your point is correct...
A little mathy exercise I did suggests that we would be even further ahead if instead of putting 25% of our income away, that we rented instead of owned and put an extra 7% of our income away (7% of income is about the average difference between renting and owning for the neighborhoods we've lived in over the past decade).

But I am not good at managing my assets proactively so I would have probably just lost that to the stock market swoon anyway.

This Summer I am planning to move out of Temecula and rent an apt. in the RB area.

I am staying in my house until I can hopefully refinance under Obama's plan - and then I'm getting the hell out of Temecula.

TBD indeed. With all the government borrowing and printing, and most smart people (most notably on this website, Rich Toscano, you know, the guy who was dead right about the bubble) anticipating runaway inflation before too long, rents going UP could be an argument for owning instead. If you go in fully expecting short term price declines but long term inflation, a 30 year fixed that shrinks in real terms overall might prove to be better than free floating rents.

There are good reasons to either rent or own. It all comes down to your personal situation and what's right for you.

This is the take-away point. Rent vs. own is not a one size fits all.

If we were renting we would not have been able to build a handicap accessible granny flat for my in laws to live in. Building it may not have been the best use of our money, when you compare it to investing, but it was the right decision for our family needs, our lifestyle, etc. Math doesn't factor in the upside benefit of having my kids' grandparents live 100 feet away.

But, renting would have been far cheaper than buying. And not building the companion unit would have been a LOT cheaper.

Everyone has to do the cost/benefit analysis for themselves.

I'm looking at less than 9 years till the mortgage is paid off. Realistically, less than 10 years (probably around 5 years) before my in-laws aren't able to live independantly or pass on... at which point we'll rent out the granny flat for income... It's all good in the long run.

Why buy when you can rent?

Peter and DavelJ make good points. Even when real estate is unequivicobly a good investment compared to renting, this stuff will be in the MSM. It is just the opposite of stupid RE shilling. I thought the article was so bad that I looked for an ulterior motive. Maybe it is just a coincidence that Mr Hough has a book out called, " Your Next Great stock: How to Screen the Market for Tomorrow's Top Performers".

This article looks more like competition over where the money will go and through whom. With real estate and stocks apparently getting cheaper in lockstep, we will probably see a lot of this jockeying for position.Maybe it is just bias. Much to be taken with a grain of salt.

But are stocks really that great? Over the last forty years it's been a bit of a bumpy ride. Some now say, over the very long term then it pays off, but not for the average investing life span.

13. Property taxes are going up.

link

Well, at least you can live in a house. Stocks make lousy homes. Also, if you could actually pay-off the house....what's the value of not paying rent or mortgage to live somewhere as your income reduces in later life?
But taxes and "fees" are rising as is unemployment and foreclosures. The game is still in very early innings yet. Gaurd your cash and watch the show. I have a feeling the last half of 2009 is going to have some great fireworks.

As I commented in another thread that you posted this... Why is this news? The way Prop 13 works, taxes go up around 2% every year. Even when property values go up 20%, even when property values decline 20%. Because prop 13 sets the assessed value at your purchase price, and increments it based on that... NOT on current market.