Prior to becoming a regular reader in April of 2005, I owned my 3BR Clairemont home (for 7 years), owned a Penasquitos condo rental (my wife has owned for 14 years), and owned a Clairemont rental (1.5 years.)
Rich’s analysis proved to me that hanging on to the most recently purchased rental was not the right thing to do so I sold it in Aug. of 2005. I am quite confident that I sold at the absolute top of the market. Even if I didn’t I’m pretty happy being out of the property. I was $300/month short (rent less outgoing cash flow – mort/tax/insur) and didn’t see any appreciation on the horizon, with market conditions ripe for a major fall. Plus, I had already seen it appreciate from $400K to $575K in 2 years.
I follow the site and the market closely still, though I have no intention of buying a new property, and no intention of selling either one I own. The economics of the properties I own are too attractive to sell, and the economics of buying another are impossible.
I believe that the market will linger flat for another year or more, with “bubblers” and “permabulls” arguing their faces off about month-over-month data that doesn’t tell a clear picture. But so many conditions are right for a crash, it will surely happen, and I think it will be worse that the early 90’s crash.
Just look at the charts in the bubble primer.
Just look at the cost of owning vs. renting.
Just look at the affordability index.
Just look at the number of ARM loans that will eventually force a sale.
Trust the numbers.
They tell a story and Rich is a master of spelling that story out.
In 2009 and 2010, you will regularly hear the words “Cash is King” (which means prices will be low, but you won’t be able to borrow enough to buy) so start saving it now. Rent, don’t buy. Put the $1,000 you will save each month into the bank and sit on it. Pull it out when you can walk into a foreclosure auction as the only buyer.
I can’t predict how low but I think it will be pretty bad, maybe down 30% to the bottom in 2010. It won’t be the height of the fall that hurts, but the length of time the fall lasts. We may not see last years’ prices for another 8 or 10 years.
