About as crazy as ever

[spdrun]

I made an offer 10% below asking price on a condo, against my broker’s advice. Got a call back 2 months later that no one else had performed, I was next in line, would I like it? (Still in the SS process, but getting close to approval.)

[all]

When was your SS first listed? The environment changed a lot since spring of 2012. A condo complex that is taking cash-only offers due to litigation had 6-8 listings a year ago, down from 10-15 two years ago. Right now there are only two, both contingent.

[Jazzman]

SK has it right. A year of nothing, and then boom! Everything can fly up in your face. The higher the cap rate, the greater the risk. If you don’t want the hassles invest into your demographic, and you might get one extra night’s sleep, but not the yield.

If I were a FTB, I’d stick with renting. The problem is that many are spurred on by the frustrations of buying in this market. The scratch begets the itch. It feeds on itself, and the obsession grows exponentially with the frustration.

Many overlook the costs of ownership, which are the same as they are for investors. Many of my young neighbors seem to be maxed out, just to get into the ownership game. Some now can’t afford a decent car, or nice furniture, or even to landscape their yards. It requires two incomes, even with kids, and many seem to hate their work. Is that a life?

[barnaby33]

Is that a life?

Boy there is a loaded question. Do most people ever really live? They shuffle through their years plodding from one experience to the next, never really questioning what it is they’re doing. It’s comfortable, I suppose. It’s not a life well lived.

This thread and the subtext of being a jealous frustrated (formerly bitter) renter prove that nobody seems to learn much of anything. Not only is there nothing wrong with renting, in times of uncertainty and these most certainly are, flexibility is key. Why is any young couple struggling to buy a home? Oh wait, first paragraph.
Josh

[zk]

.

[SDowner]

Very true SD Realtor. I have been searching for 1-1/2 years. Inventory is pretty tight now. PPSF is ridiculously high. Properties BOMK are raising their asking price by 30 to 50K. Last year I thought prices may still come down on some locations, but the whole situation just exploded in my face. Now, I really regret not closing on a home in mid 2012.

[SD Realtor]

Sorry to hear it SDOwner. Yeah prices are gapping but even getting in the mix is hard now. Listing in Poway at 535-545 came on market last week. Close to 16 offers. We came in over list price and got a counter back at 580k, no appraisal contingency, no termite, no repairs. Another listing on Kern Crescent at 550k, no showings unless you have an accepted offer, and they already have a bunch of offers well. It is a joke right now in that submarket.

[Scarlett]

Hello SDR, How about the North County area – Carlsbad, San Marcos, Encinitas? Is that market so crazy as well? Now that I have a job in Carlsbad we’re thinking of getting a house up there in the general area. I like those neighborhoods. Our limit is 600K and a cursory look on sdlookup yielded less than a dozen listings total (4 bdr SFH). But if it’s that crazy and have to offer above the LP and compete with cash offers…we’d rather rent some more than deal with that.

Thanks!

[skerzz]

San Marcos is showing significant price improvement this year as well, I believe this to be mostly driven by tight inventory. Prices in my immediate area have gaped up significantly since December/January. I viewed this as an opportunity, while prices are artificially high, to refi out of an FHA mortgage into a conventional 30 yr. Don’t think I’d be a buyer at current prices. However, I did purchase under similar, but less extreme, market conditions ( limited inventory/ multiple offer bidding wars) back in mid 2009 and don’t think I could have found a better investment considering the combination of leverage, appreciation, and tax efficiency. I’ve seen 30% + appreciation (based on recent appraisal) in less than 4 years on a 320k house I purchased with effectively 1% down ($8K FTB tax credit and a 3.5% down FHA loan). This all seems a little too good to be true and makes me a little concerned that a new bubble is forming.

[skerzz]

Scarlett-

Here is an article about the North County, mostly San Marcos, housing market from a home builder/land development perspective. This particular organization is pretty optimistic about the San Marcos area.

San Diego Housing Market Continues to Rebound

[farbet]

Varadero Gated community off of Camino Del Arroyo off of Rancho Santa Fe Rd in the Lake San Marcos 92078.between 2 golf courses. Vista views of Ocean,lake and mountains.
Several bargains still exists. No Mello Roos, Vista Views.Built by California Cove in 2006.
We picked up a short sale 3950 Sq ft. The spacious plan 4 was going for 1.1mill.Job losses due to 2013 sequester cuts reason for drop in prices. 4 on market Better community than San Elijio Hills. 1 mile from Carlsbad line of Melrose and Rancho Santa Fe rd intersection.Below is an example
http://www.sdlookup.com/MLS-120059644-934_Camino_Del_Arroyo_Dr_San_Marcos_CA_92078

[SD Realtor]

Pretty bad there as well Scarlett.

[SDowner]

what is the piggs opinion on the new homes built by Pardee and Pulte along the 56 corridor?

[ctr70]

Back to Phoenix….one good thing about rentals in Coastal CA is you get a lot of “pop” in rent. Rent in CA goes up over time nicely. Rents in endless suburban sprawls like Phoenix are not much higher then they were 15 years ago. Stucco box SFR’s in the burbs of PHX are still renting for $900-$950/mo.

You also get much better tenants & demand in Coastal CA (even in lower end neighborhoods) vs. places like Phoenix. With rentals in a lot of out of state areas with higher vacancy rates, you lose so much money on turnover, evictions, vacancies that what looks like a high return on paper turns out to be a much lower return in reality. In CA a lower return on paper can end up being a higher return as you have so much more demand for your rentals and better rent increases and appreciation over time. However I still would never buy a negative cash flow rental in CA just hoping it appreciates. That is bad business.

But that being said, the window has mostly closed to be able to cash flow a rental in Coastal CA with 20% down. Late 2008 to late 2011 there were a lot of opportunities to get great cash flow right in San Diego in great rental areas. But in those years the sentiment towards real estate was that it was “a bad investment that would never go up again”. LOL. So you had to go against the negative crowd mentality to be buying back then (like usual). And like usual, now that prices are going up, everybody wants it again. It’s “Animal Spirits” at work, just like Robert Shiller says.

[Anonymous]

You definitely get better demand and appreciation in Coastal CA. However, even in the depth of the slump, I was actively looking and didn’t see any property in South Coastal OC that I can cash flow with 25% down. So, like ctr70, since I would never buy a negative cash flow rental in CA just hoping it appreciates, I ended up buying in dusty ol’ Phoenix. So far, tenants have been good. I think making a broad statements about “better tenants” in CA is interesting, I think it depends on diligent screening and luck in either state.

Now if I had just bought something in South OC hoping for appreciation and put up with some cash flow losses, I’d be eating steak tonight! Or if I had looked in San Diego, doh!

[Author]

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