TG, I dont think of myself as bearish, just rational. I’ve made plenty of money buying and selling residential RE over the years. And I’ve been a landlord. For me, it sucks. But for some, it works. And if you can hold a property in CA for 10 or more years, your odds are very good to make some great returns or have a great cash cow. But vacancies, repairs and tenants from hell can sour you for life.
Having said all this, if you can cash flow 30% or more positive, you’re probably in good shape to weather some tough times.
My one caveat to all of this is that this is a credit contraction and not a normal recession. It could get a lot worse from here. If I thought this was an early 1990’s scenario recession, I would be one of the people going “all in” right now as well. But I dont think it is. This has been much more severe and much faster than I ever imagined it would be. This causes me great concern. Although it doesnt “feel” different to me yet, the numbers tell me otherwise. The research I’ve done indicates unemployment as the number one factor or indicator of RE price direction in CA. At anything above 7%, it starts to fall. Unemployment going from 6% to 10% 4 months ago… has got to be a record. 30% of all SD county mortgages upside down…has got to be a record. 12% of all mortgages going into non-performing status….has got to be a record.
I could start to site demographics as well, but I think you get my drift at this point. IMO, this is going to be a record level contraction. So, I’m keeping my powder dry for a while yet.
There’s an old saying from the Great Depression, “The smart money was all lost after the 1929 crash.”. I would caution people to not be too smart here.
