San Diego Housing Bubble News and Analysis

I'd say Temecula is significantly ahead of the OC in the cycle. I'd say TG's purchase does not apply.

I think you are right about the bailouts slowing down the process. I can imagine how frustrating it is for folks like you.

I'd guess late 2009 would buy you quite a bit if you are looking above the condo/small house level.

Wait until June 2009 and see how you feel. RE prices are going down and unemployment is rising.Time is on your side, if you dont own right now. 2009 is looking to be way worse than 2008. Despite Uncle Sams efforts.

peterb- I'm interested to know why you're thinking that the Govt's newly announced plan doesn't stop the drop and push prices sideways. Is it simply a lack of faith that the Gov't can do anything right? I share this sentiment in the long term, but I wonder: if they succeed in stemming foreclosures through payment reductions (be it interest rate or principal reductions) and moratoriums, won't that indeed cause a leveling of prices, near term?

(You may recall I decided to sell my house a few months ago before I got into a negative equity situation and I appreciated your comments then. I'm hoping the fact that I'm now debt-free with a solid job is a better position to be in then counting on the aforementioned Gov't homeowner rescue. )

I ran the same numbers and used the same rationale but please don't apply my purchase to the O.C., you still have a ways to go. Use this formula, when P&I of the full purchase price is equal to or less than rent, then it's time. P&I on 550k is 3500 at 6.5, you still have a third to go. I use the P&I since tax offset is about equal to the tax and insurance and use the full purchase price for calculation, not the loan after down payment.

Factor in the difference between your rental and your purchase, they may not be equal, figure out what the rent would be if you rented the same house you plan to buy. In my case my P&I based on purchase price is about 1700, 200 more than my rent, but the purchase house is double the size so I had to factor the rent of the house I was purchasing, which was 2000+, since I was under that, I pulled the trigger.

Wait for 350k based on the numbers you quoted, the financial world is falling apart, it will get there.

There is an old saying about the mortgage tax deduction not being the savior some make it out to be. "Paying $1 to the government is still cheaper than paying $3 to the bank."

Fletch, Yes, I remember you now. Smart move you made!
My reasoning is based mostly on historical evidence. Market forces are almost impossible to deny. Delay, yes, but not deny. But all this aside, unemployment is really gaining momentum at this point. And unemployment is a killer for RE. How will the govt save people that have no income? I am sketical, to say the least.
Are you in a hurry to buy? Sounds like it's a little better than renting for you. Financially speaking. Are you concernced about missing the "bottom"?
Think about what the world is going through right now. We've just seen a world coordinated interest rate cut. When's the last time that happened? The last 6 years saw every asset class rise to incredible levels. When was the last time that happened? These are historical events that are exremely rare. The down-side for this is really bad.
Massive bank failures and zombifications. State and local govt starting to go BK. Now GM,Ford and all auto makers are in serious do-do.

My advice to anyone in this evironment is to stay liquid and reduce all costs. Eliminate debt. Have cash ready for the future.The more, the better. This is a major contraction in the works. I dont even think that govt jobs may be safe.

Well you make some solid points Peter. No, I'm not in a hurry to buy again. Though we're VA loan eligible, I'd like to save up for a down payment (again) to increase my options. We do need a bigger house as we're expecting our 5th child. I know, I know-- I'm insane. Children are not very liquid assets. Not legally, anyway. Hopefully, sitting on the sidelines for two years will allow us to save up and have a better selection of houses when we're ready to buy in again.

I do think Federal jobs are safe (even though they shouldn't be). There is no way the Federal government will lose personnel under Obama.

Stu, I hope you don't think I'm hijacking your thread!

There's always the question "will you atually be employed in Winter of 2009?"

I think everyone needs to seriously consider the risk of this. The economic bad news seems to be coming in an endless stream now.

Your down payment cash may need to towards paying rent for several months. If it is already spent on a purchase, there goes your cushion.

It makes alot of sense to wait until we are past the recession to buy, just on the chance your employment situation changes.

Fletch. I think it wise to give this a year or two in order to determine how ugly it will get. There's so much govt intervention and lack of transparency that things are unfolding in waves of bad news. My guess is that it's pretty bad, and the powers-that-be are trying to keep the melt down as orderly as possible to avoid chaos. But, it's a melt down nonetheless. Save your cash, eliminate debt, spend quality time with your kids. It's old school and it works. Time to get back to what's real anyway.

No Fletch, no problems at all.

TG: yeah, I see your point. Thanks for the feedback.

Thanks all for the comments.

It was tough convincing the wife at first, but she now agrees that we made the right choice by waiting. I think I can keep her at bay for a little longer.

If things seem to remain constant for the next 6 to 9 months, we will probably buy next year. Like you all said, mid 2009 could be so bad that even my wife will say, "whoa, this did get worse." I'm convinced it will, so like someone said, time is only our side. There is probably nothing we will miss by at least waiting another year.

Thanks again for the comments; and no sweat Fletch.

My two cents: the risk to the downside on the economy far outweighs the upside risk. I am in the Pasadena area and sold my home in 2005 (for reasons other than speculation), but decided not to re-buy since I believed prices were way out of line.
We've been renting ever since and glad of it. I've been in federal civil service jobs and private, right now I work for a FFRDC (as close as you get to civil service, w/o being it) as a senior person who brings in more money than I cost--and I am concerned about my job).
I've been very gloomy on the economy and every negative prediction I believed has come true or been proven optimistic. We are at the beginning of a crap-storm that will last, at least, through '09. Stick it out. Unless you get a major deal, stick it out, prices are not going up anytime soon.
Give it until the spring, at least. Good luck.

Stu I would have to agree with the prevailing sentiment especially for the OC. You got to keep it regional and TG's area has already been walloped so his downside risk is significantly reduced. As pointed out here additionally we are really going to feel the economic affects of the downturn which by and large have NOT been felt yet. While there could be widespread relief for distressed homeowners that should be cancelled out by economic stresses at the macro level at least in the OC

downside risk is still quite high in OC/LA. while pre-2001 pricing are easy to find in Temecula Valley and actually starting to pop up here and there in San Diego, I do not think the time has come for the OC.

remember, OC/LA were about 1 year behind SD. and if you see how much hurt SD folks that bought in late 2007 are feeling, that'll be you in late 2009.

they just dropped the conforming loan limit in OC/LA to $625k, that's going to accelerate the decline especially in top tier prices.

DO NOT END UP UNDER HOUSE ARREST just to save some money on taxes.

We figure we net $500 a month back in our pocket by buying a $550,000 house.

So, you would net $6000/year. The problem is 2 years from now, that $550k house is very likely to be worth only $450k or less.

So, you gain $12k but lose $100k in equity.

So, you would net $6000/year. The problem is 2 years from now, that $550k house is very likely to be worth only $450k or less.

So, you gain $12k but lose $100k in equity.

The $12k is guaranteed.
The $100k is speculation.

The $12k is guaranteed.
The $100k is speculation.

"Speculation" similar to how the Piggs "speculated" a few years ago that the real estate market would crash big time :-)