Buy a $700,000 house – you can get a nice house for that price even in Encinitas and Carlsbad now. Pay cash. Live off of the remaining 1.5 million. Put it in a savings account paying 5% and live off of the $75,000 interest per year. If only we were all so lucky…

First let me say, RENTING SUCKS!

I echo your frustration. I am sitting in a 1700 sf Torrey Hills house. Everything in here is cheapest of the builder cheap, and daily I ponder whether to just install a good faucet, good dishwasher, and so on, myself. I could put $1K into fixtures and make this a happier place, no doubt. Of course, I draw the line at the crappy laminate flooring and cheap builder carpet; too much $$ to replace those.

Would I rather be still sitting in my $900K San Jose house? Hell no. When I need consolation I just log in to schwab.com. This is what I had to do to get myself, my kids, and my dog out of the bay area, and I’m not looking back.

Your concern about Chinese propping up values is fringe speculation and equates to the “immigration will bolster housing prices” argument. Sure, some overseas folks will buy U.S. properties, but that hardly seems enough to prop up the values across large areas. Anecdotal reports of immigrant buyers are belied by the indices, which continue to march downward.

You are embittered by your rent payments, but how do they compare with the cost of mortgages, property taxes, maintenance, HOA fees … and let’s not forget, if you are a cash buyer, the opportunity cost of the money … that $700K could have been earning you 5% or so, almost risk free.

And lest we forget, the immense transaction costs associated with selling a house. Casually buying a $700K house … you’ll incur a, say, $35K transaction cost when you sell it.

So a question for you: With your $millions, why not rent a phat house with all the goodies, like home theater, that you seek? Treat yourself to a really great place, to console you for the lack of ability to customize. Get away from your looky-loos and nosy landlord, and get a pool, a view, whatever gives you a woody. You’ve got the dough; pay some dudes to come in and pack up all your stuff for you and move you.

Cashman, I hear you and understand the frustration. I too think prices will come down, but every year that goes by moves the average opinion of this board out 2-3 years more when the drop does not meet expectations. The last round threw around 2012 quite a bit, and I’m sure that will be extended further in 2010. With that type of progress we will eventually be able to just skip the whole house thing and start looking at retirement homes.

That said, there was actually an interesting suggestion that you could up the rent paid now and start enjoying your money. If you spend 6k to 7k on rent you can probably get a pretty nice place for the next few years and see how things pan out in the market. With the cash you have I wonder if it might be a good idea to start looking for unique properties that might come one the market in the next year or two – ones that would be very desirable in any market to give you an edge if you want to sell it.

Cashman,

Sadly, your observation is correct. When RICH asians that want to send their children to United States for education, they like to send them to heavily Asian populated areas such as San Francisco, Los Angeles and New York. Since they are already spend tons of money to send their kids to get education in the United States, it is natural they will like to send them into areas with the BEST school district. In Los Angeles, that means areas such as South Pasadena, San Marino, Arcadia, Diamond Bars, PV and etc. You need to spend about $100K/year if you have two kids that are getting school in one of those areas. Housing cost (even Rent), housekeepers, Cars (BMW, Audi, MB.. you get the idea), air flight tickets for your kids and yourselves and other spending. Imagine, if you can afford to spend this much money on your kids getting education here, you don’t think they can easily buy a house for $1 million to $2 million? Those Asians usually buy the house with a lot of cash since they can’t get mortgage deduction from the US government. They are NOT your typical American home buyers. In my opinion, you cannot really analyze those areas with price and local income. It is VERY VERY clear that majority of those foreign buyers DO NOT work in the United States. I hope this information help.

Cashman, congratulations on having the good sense to sell when you did. You may not see prices dropping in your old neighborhood yet but you probably don’t see nearly as many sales either. I sold in the spring of 2005 and left CA. I’ve been convinced since around 2001-2002 that the housing market would collapse and I’ve always thought that it would take 4-5 years for it to spiral down to the bottom from the very top. Condos are always the first to drop……..then the SFR’s in the outlying areas like Temecula, Riverside, etc. I’m convinced that it will work it’s way to the more desirable areas. If you follow the other housing blogs in CA and in other cities, you will see that the burners are starting to warm up. There is plenty of info in the area-specific blogs that communities like Pacific Palisades and Santa Monica are also starting to build inventory, see significant price drops and feel the heat. IMHO, you have done exactly the right thing if you’ve going to live in CA for the next two to four years because I think it’s going to take that long for everything to shake out. My prediction is that mid 2011 to mid 2012 will likely be the bottom which when reached, will sit for quite a while before any appreciable ramp-up is seen again. Countrywide presently has over 12,500 REO’s (3000 in CA) at the present time and they are only one of many lenders who are sitting on foreclosed inventory. Sooner than later, these lenders will need to convert these REO’s to cash and start slashing prices. If you can avoid it, you do not want to be a property owner in a bubble market like CA when this happens. There are also over 5.1 million homes for sale nationwide.

Mo…………Total…Exist. homes…months to sell….New for sale
Aug 07…5.11 million….4.58 million……..10.0 mo………529,000
Aug 06..4.49 million…..3.92 million……….7.5 mo………568,000
Aug 05..3.34 million…..2.86 million……….4.7 mo………479,000
Aug 04..2.88 million…..2.48 million……….4.6 mo………404,000

Look at the growth in inventory of homes for sale in the USA since Aug of 2004. We are headed into a bad recession and very possibly, a depression. You do not want to be a knife-catcher and you ARE doing the right thing at the present time.