San Diego Housing Bubble News and Analysis

Realtor like response:

1) If you LOVE the house and can afford it, then buy it.

(Never mind that you can get a nicer house for the same amount or less, later)

2) Finding a house is like finding a wife or husband. The "right one" only comes along once.

(Never mind that such things are known to be frequently wrong and also come around frequently)

3) You only live once so do that makes you happy.

(Never mind that when you're house poor, you have no money to do what you want to do. Plus you spend all your free time maintaining and restoring the house because maintenance costs weren't figured in your budget).

well, money's not going to be worth anything, so you might as well geta real asset with pretend dollars?

briansd1, your #1 and #3 contradict each other. If you can afford it, then why would you be house poor?

I ain't buying until prices for decent places in decent areas that I'd be happy to live in get closer to 1996 prices plus wage inflation. Right now these prices are still double to triple the adjusted 1996 level.

Never underestimate the financial state of your peers. Not everyone is financially "ruined" as the media would like to portray, though it's much more convenient to think so.

(Still in search of positive cash flow properties)

Depends on the Area I think, in T.V. (which is a good enough area for me anyways) I think they are way below 1996 plus wage inflation (minimum wage does not count, there have never been a lot of minimum wage earners buying homes -- 2003-6 being the exception).

And I still say although the area may not be at the absolute bottom, it's close enough that it won't matter in ten years (except bragging rights).

Sure if Carlsbad starts selling 3000+sqf homes for 400K, I will turn my T.V. home into a rental and move but I feel I am covered (happy with my T.V. home) if it does not get that low.

It takes all of about 45-50 minutes to get to the beach I like (in OC) on the few hot day's I want to be outside and I have never had an electric bill over $125 dollars and I am not stingy with the AC during the summer.

But to each their own.

I concur with a lot of the observations in the original posting. In terms of employment, there are no guarantees in life, you could always loose your job.

On the other hand I think a lot of people buying today are like those who bought in 1931/32....

Totally agree. BTW, there are plenty of positive cash flow properties, just not in north county. South bay has some good options. If you want to go farther, Fresno have some starter homes for $60-80k and can be rented for about $850-1000. PITI would be around $320-420 w/ 30% down ($18-24k). That's profit of $400-700/month. It's in the "ghetto" area though, but it's out there.

You mean in 70-80 years, they'll be filthy rich from their property investments?

I'm not looking wholeheartedly. Dealing with tenants are the last thing I'm thinking about right now...Though, eventually I will get off my lazy union arse. Folks mentioned Vista and Escondido have some opportunities.

The interesting thing that people mentioned before is, if you put down a big down, you're foregoing interest/dividend on that downpayment...My question is...In this environment, WHAT INTEREST INCOE? :) Oh that's right, I didn't even know about that 1.5-3% CD rate existed....Lol...

The ones with the financial means to hold out, you mean...I agree.Not all of them will. In my book, it's all relative. Me thinks this is probably not a bad time to speculate (in general) IF you have the means to take your losses with a lump.

How much does a small 3/2 1300 sq-ft house rent for in Escondido. They're going for around 130-180k right now.

That's very true. However, that's the case for all investments, right?

Friend said he rented one out for around $1400-1500. Don't know if he is blowing smoke (haven't checked). Person bought 3 of them...paid in cash. (stock options :))

Fair enough. TV prices look good right now. But I'd like to go swimming off the beach every morning after b'fast. Too far for me.

I agree, Rt. 66. In the mid and higher end areas, prices for homes are still too high. There is virtually no move up market, since most of the sales in the lower end are foreclosures, not someone who wants to sell and move up. And those that do want to sell and move up are facing a huge gap between the lower and mid level areas.

I keep hearing that low interest rates are a good reason to buy, but I don't necessarily agree. If interest rates go up, the selling price of the home will have to fall. I'd rather buy a home for a lower selling price, with a lower property tax assessment, and a higher interest rate paying more interest (a better tax advantage). I can always refinance later on if rates fall.

But you hit the nail on the head when describing the macro economic conditions we are facing, and will be facing over the next several years, especially here in California. A massive number of people losing jobs, or fearful of losing jobs, does not lead to an improving real estate market. Wages are not going up, and have been stagnant for years. It keeps coming back to affordability. Without the magic loans we had during the boom, which allowed unqualified buyers to pay artificially inflated prices for homes, and now with people having to prove they are qualified, and have down payments, I don't see how (real) home prices don't keep falling.

You and probably everyone else :-).

Some yes, most no

That's why the rich keeps on getting richer.

Well, yah - that's why this collapse was engineered to begin with - a big land grab for those who love money more than anything else.

To be fair - some people (maybe not many) have been saving and riding out the bubble and some may have even timed it right, sold at peak and stashed their cash. They are in a better position than some to buy. Some, maybe not many, but some do have secure jobs.

I can understand for those people, if they see a house they want that they really like and intend to be there long term, I can understand them buying, even though others do not believe we are at bottom. Some people maybe have done the math and determined the cost to buy versus rent and although some may not think we're at bottom, maybe it's close enough to tip the scales in favor of buying in certain areas, rather than continue to rent.

No doubt these are uncertain times, but having a house can sometimes even make people feel a little more secure. Maybe some people just don't care if they buy at bottom. After seeing so many people living for free, some for a year, I guess they figure that's the worse that can happen if everything goes sideways.

I know for me personally, it still doesn't make sense to buy where I'm looking. That still doesn't stop me from looking and making lowball offers. I do hope someday to find something that makes sense to me. That is different for everyone. I'm sure there are some places out there that make sense for that particular person's budget and area and not for others.

Brian - the key would be "afford" and that definition is very personal. I would say if you have sufficient savings and have a secure job - as secure as can be nowadays - and the house is being purchased w/a 30-year fixed and payments that are not at the limit where you squeaked into qualifying, I can see why some people would just take the plunge.

What's wrong with surfing the internet while watching cartoons with my cereal and coffee and bagel with cream cheese.

You guy's just are too healthy.

(actually I take the hiking trail that goes into the mountains just behind my house).

Not a realtor - but I am a homeowner.

Some people buy, not for investment, but to get shelter in an asset they can pay off before they retire. They aren't planning on selling, so increase in value doesn't matter to them. They can afford the payment and have either sufficient savings or job security that they are not worried about losing their jobs. They found a house that is a good match for their lifestyle and family.

I put myself in that category. I bought in early 2003 - and saw my house appreciate on paper to a stupid price, then revert back to a somewhat obscene price, IMO. (It's a 45 year old tract home - it would cost about $500k less than we paid if it were in the midwest or south.) But it suits our family's needs. So much so that we built a granny flat for my in-laws to live in. It is so customized to our needs that it would take a nuclear blast to get us out of here. I don't plan on cashing out any paper profits if the housing market goes up... I don't plan on walking away from my mortgage if the housing market goes down. And I've got the resources to pay the mortgage if my job goes away.

If the buyer is on the edge, financialy - buying more than they can comfortably afford - your points are valid. If the buyer is buying for strictly investment purposes - like buying stock, or beanie babies... then your points are well taken.

Some buyers, however, are buying because it suits their family needs long term and it is a long term home for them.

Perhaps they should be buying spending their money on cars instead. Clearly you are bullish on that idea. ;)

I am in escrow right now in SEH. I rented here for two years - houses have dropped about 30% since.

I am buying becuase I can put 20% down and still have enough reserves to live for 6 months. That does not include tapping IRA, 401k, etc. That would be terrible but keep me out of the soup lines. In theory, I also have a 6 month severance from work.

My payment is such that I could afford a 1/3 pay cut and still live fine. We wife is a teacher so insurance is not an issue.

Market may fall another 10-20%, but we are in for 15 years and will rates ever be lower?

That's why I bought....feel free to rip away...

I got the perfect honda recommendation. It comes with a Jeff Bridges lookalike in the trunk :

Congrats....What happened to the waiting_for_bottom is in escrow post? :)

Maybe the definition of bottom is different for everybody.

I was referring to the custom that once a pigg goes into escrow, that he/she would let the rest of us know..sort of as a pigg barometer...Oh well.

Look at how much time, most middle class folks spend maintaining and DIYing their houses.

Look at the condition of the houses that are 30 years old in Mira Mesa, Clairmont, etc.. (houses that you would think have been paid off).

I'm sorry, I'd rather be do something else with my free time and money.

As far as brian's comment about being house poor, it certainly would apply to anyone who bought close to peak's value and today's value, and probably a good ways into the future value.

flu - got your point. waiting for bottom, did I miss a thread that you bought or is this the announcement?

There's a huge spectrum. Especially in MM and other areas that don't have HOA to force you to do things. People who are like you and don't like to fix up your house, I see it pretty run down, but they're still living in there. So they probably don't spend that much time and $. Others, like me, love to modify/remodel our homes. It's a joy/hobby. Hobby cost money, but it's fun and fulfilling. I guess you'll never understand that. How do you know those people who bought their house 30 years ago don't have it paid off? I know a few people in MM who are w/in a few years of owning their house free and clear.

Your peers will generally overstate their wherewithal. Just like your peers overstate how great their children are.

Now, I'm sure that there are plenty of rich people. Those people are not buying stucco boxes in suburbia.

With real estate, as with stock, it's not the people who have the staying power to hold-on that determines the market price of all houses. The marginal sale of the next house determines the price of all similar houses.

While that maybe true for most area's I would point out the exception where prices are already so low you would need to have a gun pointed at the owners head before they would sell for what the foreclosure down the street sold for, then it's just the next foreclosure that you would be comparing against (and at some point the foreclosure ride will be over).

I don’t think I can time that.