San Diego Housing Bubble News and Analysis

Quick correction...I type too fast! Our cost of living (PITI) will be cheaper than RENTING an equivalent house (factoring in the tax writeoff). This is factoring in doing an FHA Loan with 3.5% down. On a similar note we have taking the doomsday approach and can easily afford the house on one income if need be.

That's great. I agree that you have to act quick and cash offers are preferred. Congrats.

Congrats - and being in the LJHS map boundary is a good thing if you plan on raising kids there.

Congratulations! It was smart to go the FHA route!

Is really there a such thing ? I thought homeownership cost is usually 2X of rent in most of middle to high end San Diego area. Not to mention the LJ.

Or do you mean your tax payment is less than renting (because your all cash offer) ?

Congrats!!!!!!

padre:

I mean our PITI payment is (for example) $3000. With the tax writeoff it is effectively $2500. For us to rent the equivalent house in the LJ school district similar to this house would cost $3000. This is all based on an FHA loan with a DP of 3.5%. Make sense?

The numbers I used are arbitrary but convey the point.

We did the FHA loan for a few reasons (we are all cash with no loan contingency but are still planning to go FHA):
1. We can afford the mortgage even with the low DP no problem.
2. The interest rate etc. is similar to a typical 30 year conventional.
3. Money is cheap right now so I might as well borrow as much as I can.
4. Maximize interest write-off.
...and lastly...
5. I am not stupid. The world is crazy right now. Who knows we might go into a depression and both of us might lose our jobs. With the FHA loan I keep a significant amount of cash and cash-equivalent on hand as needed. Both my fiancee and I have jobs with big bonuses so we can use those to pay down principal as we deem fit. The FHA insurance premium bleeds off after 5 years or you can pay the loan down to LTV of 80% and you can get rid of it.

First of all congrats! We just moved from the La Jolla school district. We LOVED the location and all that city has to offer!!!

I am clueless, would someone explain how you make an all cash offer and then go FHA. This is the second time I have seen this idea. How does that work? They verify you have the cash but don't care if you end up financing?

Our offer is all cash with no loan contingency. In the meantime we are going through the hurdles to put the FHA loan in place. If at the end of 30 days we don't have the loan we will close with all cash and then refinance. We won't be able to do a 3.5% dp though..therefore our mortgage broker better earn his keep and get the deal done. But I am not worried, today is day one and our loan is going into underwriting first thing tomorrow morning (we had all our docs lined up and ready to go).

Sounds almost too good to be true. I didn't think there were such deals in LJ. Congrats!

Is your house technically in PB?

Pacific Beach Zip Code. La Jolla School District. But being directly adjacent to Bird Rock Elementary I guess it's Bird Rock???

I haven't confirmed who are Council Member is. I think that's probably the deciding factor.

Congrats. Another joining the dark side.

PB and Mount Soledad belong to one council district, coastal LJ belong to a different one. Yours is probably Faulconer.

An advice. This statement that the house rents for more than your expected PITI bothers me. If I were you, I'd do an experiment. Put an ad on craigslist, describe the house, give its general location, see if there are any takers at the rent you expect.

I have the best comp possible, the current tenant. But really it's no important as we are moving into the house. The point was to demonstrate that there are homes out there that can be bought for prices that at least come close to penciling on a rent vs. own basis.

Congratulations! Do you mind me asking who your mortgage broker is and do you recommend them? We are looking for a good broker or two to move forward with the GFE/pre-qual/pre-approval process.

I think Bird Rock is charming. Congratulations.

I'll be blunt. I don't think it pencils out or even comes close. I'm not very familiar with Bird Rock area, but similar size condos in the area seem to rent for high 1000's. And there's no way your FHA PITI less tax deduction is less than 3000. A single tenant willing to pay 3000 to rent the house is not sufficient to demonstrate that the property comes close to penciling on a rent vs. own basis.

You might argue that it comes close if you compare rent and PITI less tax deduction, less principal. Though even that is a bit of a stretch.

Of course, if you have enough cash to buy the house outright, you don't need to worry about the possibility of losing 100k in equity before PB bottoms out. And a 3.5% FHA loan will protect you nicely against any downside.

Congrats Gousc, Birdrock area is a very cool spot to set down.

Congratulations, GoUSC!!!

Sounds like you got a great deal, and your decision to offer cash while trying to finance FHA in escrow is right on target, IMHO.

Nice job! Enjoy your home. :)

Congrats! Just in time too. The Taste of Bird Rock event is only two weeks away: http://www.birdrock.org/

Greekfire,

Send me an email at radelow AT yahoo DOT com and I will get you are brokers info. He is the best in town if you are looking coastal. For a lot of reasons.

Thanks.

Props GOUSC/radelow, groundbreaking stuff to get one to pencil out in La Jolla and your financial plan is well thought out and contains a lot of options and potential fallback positions. You may not realize it, but you and the half dozen other posters/buyers this week are laying out the blueprint for the other piggies. Heavy reserves, underextending, guarded optimism and a solid plan for what might or might not happen. Not one of you is banking on appreciation.

My hat is tipped to you!

TG, what is this thing "appreciation" you talk about?

Is it a thank you from the seller?

I just like the general theme of the latest buyers' overall plan. None of them are calculating an increase in value into their plan. Things like "the same as my rent," "able to afford on one income if neccesary" and "a year of reserves" are catch phrases that warm the heart. None of them say "real estate will go up in value" or "I'll just refi later when it adjusts."

It's also nice to see affordability for my brothers and sisters in S.D., six months ago, my hood was the only place it was happening, at the time I postulated that this trend would move into the other areas and markets and we all know how much I enjoy being right.

Thanks for explaining your finance plan. That was an awesome plan. I would love to hear how it all plays out in the end.

USC- Welcome to the hood. So sounds like a lot of action on that property. How did you find it and did you use your own realtor? Congrats...hope closing goes smoothly.

Thanks for all the compliments guys...Much appreciated. For my fiancee and I this is a conservative play that gives us plenty of wiggle room if things take a turn for the worse. I believe values will continue to fall on the coast but from our perspective is doesn't impact us. Plus I believe our purchase price is below what the house is really worth (more like the land value alone) We can afford our payment (even on one income), we have plenty of reserves (many many years of PITI in the bank), and worse come to worse we could rent the property out and get very close to break-even (I know you disagre Eugene but it is close...people are willing to pay rent for the LJ school district). We could have gone out and bought a $1.5 million house and eeked by but at the end of the day we decided a conservative lay-up is the way to go.

The point is, there are deals out there. There are a TON of people sitting on the sideline that will come out and make offers on REAL deals. This house has SIXTY buyers through it in one day.

waterboy, we have a realtor we use. The deal came up on the market and we get daily updates to the MLS. We went and saw it, and made an offer on the same day.