San Diego Housing Bubble News and Analysis

What ever you do, don't buy anything yet. The bust hasn't even really touched the higher priced homes yet. So far the subprime loan resets have decreased home prices in lower and mid range homes up to 60%, but next year the higher tier alt A and prime exotic loans are due to reset. In a few months you'll see some real downward price movement in the higher range houses that you're looking at.

Long time poster and you are looking in my back yard. Feel free to post questions and I'll do my best to answer them.

FWIW, I dont beleive you will much or any downward price movement in a few months. You will have to wait until next Fall for that.

I have been looking in these areas for a year and a half - in the same price range as you. My target is actually $750K by end of next year.

La Costa Greens - San Marcos school district other than that little pocket north of Poinsettia. I would rather live in SEH.

Other areas you should consider are Mariner's Point, The Bay Collection (poised for a beat down soon), and Santa Fe Trails.

I agree with your 100K comment but I look at it a different way. My range hasn't changed but the quality of house/hood I get for that has improved significantly. I used to pray for SEH at $700 - now I see Aviara, LCV, or SFT easily there in the next 12 months.

It's higher than the 900K range, but I would be interested any thoughts people have on "The Ranch" in south Carlsbad. It's in the the Encintas (San Dieguito) school district, but as far as I can tell, you get better value and more convenient location than Olivenhain.

Any comments or prediction for this area?

The Ranch is supposed to be a great neighborhood. I love the houses there, (way out of my range). I understand at Halloween there are adult refreshments all along the route.

Personally I'd prefer Olivenhain but mostly so I could build a batting cage for the kids and I don't think most Piggs are into that kind of thing.

I do like The Ranch though, I am sure sd can chime in. The couple of homes I've been to seemed great for entertaining. Of course so does La Costa Valley. I've not been anywhere in Aviara to compare.

wfb
LCGreens prices are heading toward SEH prices. Homes are far nicer as is the community and location. Take it hands down over SEH as long as the premium is not too high.

Mariner's Point-some homes with great views but construction can be very mediocre.

Bay Collection-spectacular homes, as good quality for tract built as it gets, great location

Santa Fe Trails-nice quiet location, lots tend to be small, slightly above average construction quality, no amenities

Aviara-look up where ever you buy there, enough said

LC Valley- wide variation in construction quality, great location and amenities, probably the best overall community for young families

I agree LCG is better than SEH but the premium is way out there right now. You can get a 2800 sq ft home on culdesac in SEH for $550K or less, $625K gets you a good home with a pool, $799 top of line with ocean view (Schoolhouse).

Cheapest listing I see in LCG is $799K. I might pay 10-25% more but not 50% more than SEH. What do you think is appropriate?

Aviara - I take it you are referring to power lines.

My beef with LCV is the 'busy' feel to it. Maybe it is that Calle Barcelona goes right through it and connects to ECR and RSF. SFT just seems more peaceful...albeit without the nice clubhouse--need a home with a pool there.

WFB
I've seen 5BR/4.5BA 3000 sq ft resales in the 600's in LCG already with all the bells and whistles. Without thinking too hard, I would say $100K to 150K is an appropriate premium over SEH.

Check on the Aviara Power Lines

LCV is all about location. Its a great location but you also need to get a good to great location in LCV for it to be worthwhile as there are some lousy locations within the community. If you arent a community person and crave peace and quiet, its probably not for you. Better go to Olivenhain.

Same goes for SFT as there are some lousy locations there too.

Lets see.... you are willing to spend up to 900K and put 100K down. That would make it a 800K loan.
That would put you in a jumbo loan, you are way over the standard conforming and new "jumbo" conforming limits in the mid 500s

If I were you, I would wait and save for a bigger down payment and likelihood of lower prices next year. There is still a huge spread between a conforming and a jumbo. Current rates are mid to high 7%

You will get ripped off going with jumbo loans when 30yr conforming are approaching under 5%. I hope you both have stable dual income jobs in good industries. You should be able to save quickly for a large downpayment if so.

http://www.bloomberg.com/apps/news?pid=2...

I know, I know...

My range is truthfully $550K to $900K, depending on how bullish I feel that week.

$900K is doable with $210K of income, comfortably. Probably too risky for my taste but I would love that ocean view house in The Bay Collection.

$550K is more like $170K - again, comfortably. This includes max 401k and IRA - which is default for me.

If my schoolteacher wife can pull in 65K, that meansI need $105K for $550K or $145K for $900K.

I make more than that now, but call me conservative or cautious....I'll probably split the difference and end up around $725K.

Wouldn't it be nice if the conforming limit stayed at $697K...

wfb
I would expect a nice house to be doable in every neighborhood in your original post except one (Arroyo Vista). Hang in there. BTW, I have 3 schoolteacher wives lving on my street, perhaps more I dont even know about.

sdr

current buying in south carlsbad is not a wise
idea: for a 2000 sqt SFH built around 1990-2000,
you probably got to pay at least 550k in peripheral
area, but you can get same square footage with about
350K in south Vista, San Marcos ( or Oceanside,
although it's not my choice).

If you insist on buying in carsbad ( which I quite
understand), wait for another 1 or 2 years. The
prices in Carlsbad, or Encinitas, or Carmel Valley,
may drop to a more reasonable range, Maybe not,
it's your gamble, and if you can wait.

WFB
Dont listen to people who dont know what is going on. 5BR/3BA 2600+sq ft with nice size west facing yard in LCV just closed for $678K. The house was verty vanilla but had nothing wrong with it. Thats close to rental value on the PITI w/ 20% down.

sdr - thanks for all the info, you are a great resource.

Whether or not I buy in the next 6 months depends on 3 things - 1) Confidence in my retail-related industry, 2) Gov't incentives (4.5%, tax credit, etc.) and 3) Right house at right price.

That house on Aliso was OK other than busy street. Good news is it sold for same as that run-down foreclosure on Aliso a few months back one data point that market is falling.

I would pull the trigger on the same house on a quieter street, like the one on Limon that sold for $825 a few months back. When that hits the 700-750 range I will be in.

Greetings Sdrealtor,

Hope you had a good weekend.

Thanks for all your info. I have been reading your various posts and they seem to make sense to us.

We just seen Messina at La Costa Ridge today. And they have some very nice homes. Big lots with lots of extras in the homes. The prices seem to be higher of course compared to Viridian at La Costa Greens. Do you know anything about Shea Homes? They are the builders for Messina. Also, what is your take on Viridian- we are coming very close to buy there. But feel we should get a little more from them as credits. The Alga park should be built soon. I wonder if that will add value to the area......

Cheers
RPN

Shea builds very nice homes and they tend to come up with floorplans different than all the others who seem to copy each other. Some nice views up there also.

Viridian is built by Davidson who builds even nicer homes (probably the ebst tract builder in SD county) but my worry would be their survival (as a smaller, higer end regional tract builder). Air traffic is a big negative in my mind there. The Alga Norte Park was supposed to be a water park but got scaled down. If built as promised it would be an awesome asset to the City of Carlsbad but I dont know if I'd want to live next to it.

sdr

curious how you compute this: '$900K is doable with $210K of income, comfortably' at 210K income? Are you putting approx 300k down? Asking because I'm in the same income bracket, but no way could afford a 900Kish hose.

No, my math is with 20% down and a 5.5% rate. With HOA, total payment would be around $5300.

Take home pay on $210K at 67% net is $11,725 per month. 67% includes $3000 pre-tax for health care and $15500 pre-tax for 401k. It also includes 7% state tax, 11% effective federal rate or 19% on taxable income (interest deduction helps huge) and full FICA.

This leaves $6425 after house payment. I spend about $2200 on groceries/gas/utilities, leaving $4225. Take out another $1600 for cars/student loans/daycare, then $800 to max out IRA's. I still have $1825 left over for household and entertainment. Very comfortable for me.

I'd much rather have a $4000 or less mortage to have a bigger downside buffer in the case of income loss.

Thanks for the detail. Think I need to cut back on my sushi and maybe get rid of a couple kids so I can save some $.

wfb, you stated $15,500 for 401k, but if 2 people working, shouldn't you be contributing $31k? Can you even get 5.5% w/a loan above $700k? I also don't see you count in savings. $2200 seems low for monthly expense when you're maintain a 3000+ sq-ft house.

Do not forget AMT guys. The wife and I are getting hit with that. The interest deduction slowly decreases.....
I enjoy sleeping at night therefore we want to pay off our home under 10 years.

This interest/property tax deduction stuff is a farce. Its like getting coupons just to use them and spend money....

Cheers
RPN

asianautica - Not really on the 401k. My wife's employer does not match but provides a pension instead (inefficient state gov't - but that's another topic).

No, you currently cannot get a $700K loan for 5.5%. Flaw with my logic - for now.

Many things can happen between now and the time I buy. The conforming loan limit could revert back to $697K; banks could start doing 80% 2nd's again which would allow me to get a $550K conforming plus $150K 2nd. Who knows what else...that's what makes this so much fun.

$2200 is my budget today, and I currenly live in a 3000 sq ft rental.

I agree with you assessment RPN. Spending Say $2,000 a month on interest to save maybe a combined $800 on taxes. So you're out a net $1,200. Pay off your houses and use the extra money you have in your pockets each month to save for your future because we can't count on the Feds to bail us out when its our time to retire.

I did consider the AMT in my scenario above. AMT does not affect the interest deduction, only property taxes.

My biggest fear with the AMT is the 'patch'. The baseline AMT deduction is around $45K. Congress has patched it 3 years running to $69K. No patch for 2009 and my tax liability would go up over $6K.

While I agree you should not spend money (interest) just to get the tax deduction, it is mis-guided to call it a 'farce'. It's worth $800 a month in my $900K house scenario - that's money I would be spending anyway.

I guess you're considering living w/out a saving would be comfortable but when I have about $10k/month in expense, I won't be comfortable until I have at least $60k in savings for the rainy day fund. $120k would be preferred. By your calculation, at max, you can only save $1800/month. That hasn't count in car maintenance, insurance, presents, vacations, etc. yet. I guess everyone have a different definition of comfortable.

arrife22-

That assumes you can pay off your house - I can't.

Besides, not making prudent use of leverage just leaves opportunities on the table.

If I have to choose between $2000 in interest or $2000 in rent - all else being equal I will pay interest because of the tax deduction.

AN -

I would save $500 of the $1800. In addition to the 401k & IRA and including the 401k match, that is over $40K per year of savings. Geez, a brothers gotta live a little too.

BTW, I do include car insurance in my monthly budget. Vacations and gifts are paid out of my 20% annual bonus. For example, Xmas 2009 is already paid for and the cash will be in my account in February. No bonus= no vacation or gifts (unless funded through the monthly budget).

Also, my down payment does not deplete my savings. I still have 6 months salary plus my employment contract provides for 6 months severance.

It's funny - my wife thinks I am the most financially conservative person in the world. We drive old Nissans, our underwater neighbors all drive BMW's or the like. I'll let her know you think we should save more...

WFB, like I said, everyone have a different definition of comfortable. I max out 401k & IRA too. But I don't count those as saving since I can't touch those until I'm 59.5. So, to me, saving is cash on hand. To me, $500/month saving is too little. But that's just me. If I make that much, I'd expect my self to be saving at least $3-4k/month.

sdrealtor, what in your opinion is a good price for this home:

http://www.sdlookup.com/MLS-080084620-24...

thanks

pemiliza
Thats a beautiful home with lots of upgrades and very nice landscaping/hardscaping. Its a short sale so it would likely take at least 3 or 4 months to actually close escrow. That looks a good price for that home and they should ahve no problem generating offers on it at that price.

Seller paid 1.2M and likely put $100K plus into it after closing outside and inside. Buyer put about $350K down and then heloc'd out 250K a month later to finish upgardes and exterior improvements. Buyer looks like they owe about $1.1M. There are comps in the last 6 months in the $1.1M range. This looks like an attempt to generate a quick offer and its questionable as to whether the bank would go for this.