About as crazy as ever

[SK in CV]

[quote=Want_to_Retire]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![/quote]

Most of Phoenix has appreciated at least as much as SD has over the last 15 months. So you should have both cash flow and appreciation, where in OC, you’d have negative cash flow and appreciation. I suspect you bought both at the right time and the right place. Particularly if you can keep it rented to the same tenant. (turnover kills)

[jstoesz]

These stories blow my mind. I have nothing to contribute but shock and disgust.

[Anonymous]

I did have some tenant turnovers in the last couple of years but all were orderly and I’ve been able to minimize vacancy and maintain a decent cap rate. Although Phoenix prices have risen pretty quickly (I think even rents gone up somewhat in central Phoenix), looking at the price history I also see they dropped to the mid 90s level (or worse) during the depth – much worse than Southern California. So I try to focus on the rental returns and if there’s price appreciation when the day comes it will be a bonus.

[SD Realtor]

Updating….

Definitely into uncharted waters (with regard to demand) for SFH for owner occupancy in desired school districts such as PUSD and TP. Also including Encinitas and Carlsbad. For the in between homes (maybe 500-800k) I am seeing pretty radical paradigm shifts. Homes that come on the market and are listed according to comps are getting swamped with multiple offers most of them overbid. Other sellers are simply listing several percent above comps. I can honestly say this is insanity. You can cross check this with JTR’s blog as he has similar data. For buyers I recommend you sit out for awhile or if you are going to go in, go in very strong and go in early. Forget about trying to get a deal, forget about trying to negotiate with counter offers because if your offer is not strong, you probably will not get a counter at all.

At some point prices will level off but right now the restricted supply has drastically altered market dynamics in these areas, (and probably many others)

[FlyerInHi]

[quote=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.)[/quote]

Any news?

I made SS offers and they’re are still lingering after 6 months to one year
Most of them don’t get approved and get withdrawn.

I hope you get it. But if you don’t you might have missed the bottom

[spdrun]

Offer is moving along nicely in the process, wouldn’t want to jinx the thing by saying more 🙂

If I don’t get that one, there’s no shortage of interesting things going to REO (not trustee, they’re already bank-owned) auction locally (we’re either at the bottom in NY/NJ or maybe just past it), so no big deal.

Two non-auction examples:
(1) Estate-sale duplex listed at $130k, taxes+water+sewer+trash $500/mo, rents for $900-950 each unit. Decent shape, no critical work needed. In a “less-nice” area on the border of a very toney town. Put in an offer at $120k — executor is apparently away but will respond in a few weeks.

(2) Duplex listed at $300k, bank will accept $250k, decent mixed white and blue-collar town (actually the one where I grew up – 35 min from NYC by train and at the border of a rather nice state park). Taxes $600/mo, rents $1600/mo per unit, needs probably $50k of updates. Separate furnaces for both units.

I’m actually physically in NJ this month, since it’s a lot easier to take the electric train into the city for client appointments/work, than to leave the city at odd hours to chase often-unpunctual brokers. (The people with a lot of REOs seem to be bottom of the heap for some reason!)

[FishGuy]

My wife and I recently closed on a SFH in Northeast RB. We are a relatively young (34/35) couple and just had our first child last year. We weren’t looking to flip, just to buy a decent home in a nice neighborhood where we can raise our family.

We made our first offer back in September and the entire process was a nightmare. We made a total of 9 offers and lost out on every one, mainly to flippers and investors who were paying cash. We were the high offer on one property, but the seller accepted an all cash offer that was $5K lower than ours.

Ultimately the first property we made an offer on fell back into our laps, as the higher offers eventually dropped out due to the length of the SS approval process as well as some funny business by the sellers.

Patience and persistence, as well as a little luck, were the key to our successful purchase. We were also extremely fortunate that family allowed us to live with them from the time our home sold in November until now. Two adults, a baby, two big dogs, a 90 gallon reef tank and a 40 gallon frog tank is a lot to put up with for 6 months.

[flyer]

WOW! What a story, FG. You certainly hit the
jackpot–both in getting your offer accepted, and in the gracious behavior of the sellers. No doubt something you and your family will remember for all of your lives!

Congrats!

[FishGuy]

[quote=flyer]WOW! What a story, FG. You certainly hit the
jackpot–both in getting your offer accepted, and in the gracious behavior of the sellers. No doubt something you and your family will remember for all of your lives!

Congrats![/quote]

Sorry, I wasn’t very clear on that. My family let us stay with them.

The sellers were a real piece of work. No payments in 5 years, backed out of our deal to try a loan mod, and then came back to us when they were denied. Then they refused to leave at COE. On top of that we had to pay off a chunk of their 2nd and 3 years of back HOA dues.

Still got a great deal in the end.

[flyer]

Oh, I see–very nice of them–your family, that is. Still glad to know it all worked out for you!

[utcsox]

[quote=SD Realtor]Updating….

You can cross check this with JTR’s blog as he has similar data. For buyers I recommend you sit out for awhile or if you are going to go in, go in very strong and go in early. Forget about trying to get a deal, forget about trying to negotiate with counter offers because if your offer is not strong, you probably will not get a counter at all.

At some point prices will level off but right now the restricted supply has drastically altered market dynamics in these areas, (and probably many others)[/quote]

JTR had a post yesterday of CV heading for +20%.. Is that fairly close to what you are seeing also? I think the house on the post yesterday is either on Torrey Hills area or Carmel Country Highlands. South of 56, 4+ bedroom with one bedroom down stair.
If this is true, you will not be underwater if you bought it in 2011, 2012 time frame.

[bearishgurl]

[quote=spdrun]Offer is moving along nicely in the process, wouldn’t want to jinx the thing by saying more 🙂 . . .[/quote]

spdrun, I wouldn’t want to jinx anything but I hope you are able to get a SS approval on an offer you placed in SD. You seem to have been very diligent, practical and patient and deserve to be able to close on an accepted offer in SD.

The SD residential RE market is no doubt very different from the east coast market in many ways.

[SD Realtor]

Yes utcsox I have been seeing the same things as Jim. Anybody that bought in 2011 or 2012 is not underwater at all. There are people who bought in 2003-2006 who may still be underwater but those who state that this is some sort of great overhang, or a prelude to some drastic event are wrong. Similarly those numbers are decreasing daily. As I have said we have legged up sharply, I would expect that things will level off and then return to a more subtle appreciation rate. However in my opinion the only reversal of the trend will come due to sharp increases in interest rates. Again this is the sub market and types of homes I have been discussing.

[XBoxBoy]

SD Realtor,

I’d be interested in hearing why you feel things will level off as opposed to just blow up a huge bubble? Seems to me the fed is likely to keep printing money longer than currently expected, and rates will remain low for a long time. In that environment with rising house prices a person can make way more money borrowing money and buying up real estate than they can putting the money into savings. So why wouldn’t they? And why wouldn’t the current fed policy blow a bubble that dwarfs 2006’s bubble?

XboxBoy

[quote=SD Realtor]As I have said we have legged up sharply, I would expect that things will level off and then return to a more subtle appreciation rate. However in my opinion the only reversal of the trend will come due to sharp increases in interest rates. Again this is the sub market and types of homes I have been discussing.[/quote]

[SD Realtor]

xbox in the end it will all blow up. However this time around the blow up will be much more catastrophic because it will be the bond market that explodes. It will play out pretty much as you have outlined above. We cannot monetize our debt. Currently the fed has what, 16% of our bonds or something like that. It is, and we are nearing the end game. However, nearing the end game is relative isn’t it? Is the explosion going to happen in 1 year? 3 years? 15 years? That is really the only question in my mind. As you saw my caviot is and has always been rates. So yes yes yes the explosion will dwarf 06. Instead of taking our medicine then, we were told that the sky was falling so we implemented policies that in my humble opinion were much worse then dealing with the problem and letting the market crater. Now we are in a spiral that some like to think will be resolved by inflation and an increased GDP. Personally I don’t see that happening. Moreover I see what you implied, and the only question is, when.

So absent of that event or “until that event happens” the San Diego housing market will move forward, driven by an excessive demand that has far outstripped supply. Prices have chunked forward and an equilibrium will be reached as the buyers pool will simply be reduced by many being priced out. Then we will level out and the inventory will catch up. We may see a modest dip but that is just the settling to the new equilibium and then a more subdued appreciation.

Now when the explosion happens…. wowsers it will be ugly. Unless the govt pulls their heads out of their ass and figures out we need to reduce spending and increase taxes and stop monetizing our debt.

[Author]

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