cannot wait anymore, buying a condo now instead of a house at 4S Ranch, and wait to buy a bigger house later?

[JWM in SD]

“You’re giving up a lot of purchasing power for the benefit of owning now. So a paper loss is a REAL loss in opportunity.”

I think this is an important point that many people do not understand. You are gambling with your FUTURE INCOME stream!!! If I go out and buy a stock for cash and it loses money then I have only lost money saved and not my future earnings. If someone goes out and leverages too much in an overpriced stucco box then they have lost their future income stream and the use of that money!!! That is a very scary proposition in the face of a looming recession where employment could be even more volatile than it has been in the past several years.

All this garbage about how one is going to stay in that home for 20 to 30 years is absolute nonsense and completely unrealistic. How does anyone know for certain where they will be in 5 to ten years anymore given the nature of even professional employment nowadays???

[mixxalot]

I do hope he can get his wifey to wait

As for me, I see prices dropping but its a slow deflate in the bubble.

I have flyers for same condos and homes from last year that now sell for 50k less. Thats a lot of coin. Just tell wifey that luxo SUV she always wants will be a steal if she can hold off on the nesting urges.

Thank goodness I am single!!!

[an]

patientlywaiting, the original post mentioned a $380k condo. If that thing goes to $80k, I’ll buy 10. If you’re talking about the $600k house dropping to $300k, then I’ll buy several. We all have to pay for a place to live. It’s up to wtb to determine of the risk of losing $X on paper is worth it to keep his wife happy.

[Anonymous]

One other disturbing thing about condos that “may” occur. Given a large complex that will undergo severe depreciation and may see substantial foreclosures that will have a potentially severe effect on HOA reserves. Remaining homeowners “may” indeed face assessments or reserve requirements payments due to the fact of shortfalls from higher vacancies….I doubt that a lender pays HOA dues for an empty condo, perhaps I am wrong. It is speculative to mention this but it certainly is not out of the realm of possibility.

SD Realtor

This was the first thing I thought of when I read they were looking at a condo. Although the bank is liable for HOA dues from the day they take title in foreclosure, they often don’t pay till they unload the property (The HOA would be smart to file liens against the property so it can’t be sold until those back dues are paid in full).

Before buying in a complex I would really do my homework, reviewing their reserve funding levels and looking to see if the dues are realistic for the building and what you’re getting in amenities and services. When times get tough and the foreclosures start hitting your neighbors you may find yourself in a building that’s having a severe cash flow problem because a) they left dues too low for too long b) foreclosures are imminent and your neighbors feel no need to pay their dues.

If major projects like roofing or painting need to be done and there’s insufficient funds in the reserve accounts, the only way to do it is special assessments. If your neighbors can’t pay their HOA dues, you’ll never get special assessments out of them. That means the building gets neglected and starts looking run down.

The other factor is who is buying up your neighbor’s foreclosed units and what are they doing with them? If they’re renting the units out to undesirables, your building can go from chic to “ghetto fabulous” in no time at all. That of course will draw down prices even more, meaning you suffer for even longer.

If you do move into a condo building, consider getting on the board – to look out for your investment if nothing else.

[patientlywaiting]

AN, I was referring to a brand new SFR at 4S.

Easily $100k for landscaping and home decoration + depreciation + difference between rent and buy = $300k very quickly. If the market crashes, the loss may be more.

Even if the OP can comfortably afford the house payments that’s $300k he’s have to work to pay-off. JWM put it very well. It’s future cash that he would otherwise have that’s going straight to the bank.

Now, a wife who nags and demands a house is useless. She needs to grow up. It’s not high school.

It’s much wiser to wait and buy a resale that is ready for move in. Like any major purchase you need to time it and wait for the big discounts.

*

AN, in the coming recession you may not have a job to buy anything. I predict that the venture capital that fueled SD tech companies will dry up.

[JWM in SD]

“AN, in the coming recession you may not have a job to buy anything. I predict that the venture capital that fueled SD tech companies will dry up.”

Precisely. That is why I wrote in my post from Saturday (Nostradumbass Strikes Back) that I don’t care about house prices anymore because that is the least of my concerns at the moment. My bigger concern is how to remain employed at a high salary…and I currently work at a well known SD Start Up company (featured on Good Morning America quite frequently).

[NotCranky]

I really hope you keep your job JWM…or get a more secure one. I recall you have posted about some misfortune on that matter.

[Coronita]

Precisely. That is why I wrote in my post from Saturday (Nostradumbass Strikes Back) that I don't care about house prices anymore because that is the least of my concerns at the moment. My bigger concern is how to remain employed at a high salary…and I currently work at a well known SD Start Up company (featured on Good Morning America quite frequently).

JWM,

 

I wish you the best of luck. I've been at numerous startups when I was still in the Bay Area. I've seen enough to know that startups are great for a few people: mainly the managing board, exec's, and VCs. Everyone else get's screwed. I guess I got lucky, because of all the startups I were at, I moved up everytime I moved, and the ones I were at either went public or  I was long gone before a hemmorage occured. Times have changed… I like working at a larger company with a presence in SD.

[an]

patientlywaiting and JWM, I agree that if your job is not secure and your salary is considered high relative to your position, then yes, housing price is the least of your worry. What if you work for the health care industry? Do you foresee people getting less sick with the coming recession? Two nurses working 1-2 extra shift can easily make $200k/year between them. I foresee people getting more sick, not less. So I’d consider that pretty recession proof. If that’s the case, employment for them is not a worry.

patientlywaiting, your adding in options and such on top of the $600k price. What if the builder give those options as an incentive without raising the price? I highly doubt a house will lose 50% from the currently level, since it already lose about 10-30% already, depending on the area.

I highly doubt that a nagging person would stop nagging after high school. Would you recommend someone divorce their wife because she acts in a way that YOU dislike, the the husband?

[Raybyrnes]

asianautica

I have enjoyed your posts over the last year or so. I seem to share the same feeling that one’s profession can be recession proof. My wife is working on her dental licenses here in the US. She routinely is asked to meet with dentists with very busy practices. She simply need to complete her exams. Our income and risk changes dramatically once she passes. I can comfortable say that even working for someone a dentist is going to make between 75 and 100. This is low end estimate. In this scenario if Husband makes 150 and wife is making 100 the risk of real estate going down becomes less significant.

On a side note have you seen any resales at Airoso. I think Standard Pacific did a fairly good job with those units. I would probably become interested around 350 to 400. Might be a looooong time before it happens.

[an]

Raybyrnes, great minds think alike :-). Anyways, I believe your scenario is shared by many in the health care industry and government jobs as well. Also, even in a recession, if you’re under paid and your company is not going out of business and you perform well at what you do, I don’t think you’ll be relatively safe. If you’re overpaid on the other hand, you’ll probably be the first to go. Also, I would think that in a recession, startup are the first to go.

Regarding Airoso, I’ve been following the resale of the complex very closely. I noticed that there’s not that many resale on the market and the only one that sell are the reasonable priced one. I see several plan 3 listing around $600-625k and sits. Recently, I saw a plan for REO listing @ $535k-ish and it it sold w/in a few weeks. Plan 4 and plan 3 at the peak were sold for around $600-650k IIRC. The lowest they’ve sold for before it was sold out was around $530-550k. One thing I haven’t seen recently is plan 1 & 2 on the resale market. Those were last sold for mid $400k. I would definitely be interested at $350-400k range as well. I don’t know about you but I’m also considering the largest plan in Wateridge (Sorrento Valley) and those new condo in PQ by Del Sur as well in that price range.

[lostkitty]

How old is the Arioso complex? I thought it was fairly new.

Maybe it isnt old enough for ARM resets to be having an effect on resale activity. Could it be we’ll start seeing action in 1-3 years?

Just a thought.

[patientlywaiting]

AN, your job being recession proof does not mean everybody else’s jobs are. Other people loosing their jobs will cause your house to lose value. So what if you afford the payments? You’re still paying for an overpriced house.

I own my own business so I’m not too worried for my own financial well-being. I’m only talking in general about people considering buying.

Why would a wife nag for a house? So she can decorate. How much does home decoration costs? It’s not cheap.

My net-worth is higher than most individuals and I certainly don’t want to lose $300k, not even $100k. $100k equals about $665/mo for 30 years + property taxes. Wouldn’t you rather have the money to save or spend on what you want rather than sending it to the lender?

Anyway, if you guys want to buy, go ahead. I’m done discussing this topic.

[JWM in SD]

“I agree that if your job is not secure and your salary is considered high relative to your position, then yes, housing price is the least of your worry.”

AN, my compensation is not high relative to my position, I’m fairly compensated given my relative position, but that compensation is high relative to the median HHI.

My point is not that overpaid people are in more jeopordy in a downturn (that is a given), but rather that companies will opt to downsize in general and it will get increasingly difficult to find high paying jobs period.

[JWM in SD]

“Anyway, if you guys want to buy, go ahead. I’m done discussing this topic”

PW, I hear you. I’m quickly getting to the point where I don’t even want to bother warning people anymore. There seems to be a certain mindset with some people and they refuse to acknowledge the inherent risk in investing in Residential real estate right now.

[Author]

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