How High Can Prices Go?

[Coronita]

[quote=profhoff]It seems one argument against high prices reflecting a bubble is if buyers are owners as opposed to speculators, investors, etc. So just the other day I was talking to a colleague who lives in Del Mar and he told me that in the past few weeks two buyers came in and paid stupid money priced in cash for nearby houses. One was from Taiwan and one was from Brazil and neither are going to be owner occupiers.

This surprised me because we know this is happening with real estate in NY, SF, Orange County, parts of LA, but I didn’t realize it was happening here in the village of Del Mar.

So, that helps to explain the crazy increases in list price and adds to fears that normal people are being priced out. I can’t compete with foreign cash.[/quote]

You don’t need to compete against foreign cash because foreign cash is only about a 1/3 of these purchases. Maybe more for higher end. But not that much more.

And one thing for certain, U.S. is probably the safest place to park money. Everyone knows that.

I think even the Swiss have negative interest rates, right?

[profhoff]

Foreign cash is killing the comps.

[an]

[quote=flu]You don’t need to compete against foreign cash because foreign cash is only about a 1/3 of these purchases. Maybe more for higher end. But not that much more.

And one thing for certain, U.S. is probably the safest place to park money. Everyone knows that.

I think even the Swiss have negative interest rates, right?[/quote]flu, I think you do, even if it’s not directly. The people who got beat out by these foreign buyers won’t just drop out of the market. Since the supply is limited/fixed, they will move down market or push others down market. Which mean that those people will be competing w/ you. It’s a domino effect.

[FlyerInHi]

[quote=poorgradstudent]If I was thinking about buying right now I’d be very concerned with how high prices are. I’m still hesitant to throw around “Bubble”, although we’re creeping in that direction. Lending standards are still a lot tighter than they were during the Bubble.

Some fundamentals are off (income ratio) but others like the Rent/Buy ratio are fine. San Diego, especially the “Desirable” areas of San Diego County does have a supply crunch. Especially if you’re not looking to but a $1.2M giant home on a small lot in Del Sur. New construction of “starter” homes is basically non-existant.

Since supply is unlikely to catch up with demand in the short run, it’s more likely that rising rates will be what finally slows prices. It’s entirely plausible that coastal SD County will be a lot like San Francisco in 10 years, where most people who work in the city can’t afford to live anywhere near the city.[/quote]

Poorgrad, I love reading your comments because they are all so well considered.

The last part of your post about SF rings true.
We have the rise of global cities where people are attracted to because because is globalization of information. Even in developing countries, the big cities are very expensive.

That said, SD is more of a third tier global city, so I wouldn’t worry so much about being priced out (At least not yet for professionals).

[FlyerInHi]

[quote=flu]
And one thing for certain, U.S. is probably the safest place to park money. Everyone knows that.
[/quote]

I agree. Every smart person knows that because we are the only large developed economy with consistent growth.

But you stil hear of pending economic collapse, dollar debasement due to deficit spending, etc…. Trump is saying we won’t have a country unless he’s elected and 40% of the population believe him.

[spdrun]

This doesn’t mean that all US based assets increase in value linearly and ahead of inflation.

[Author]

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