How will Qualcomm layoff impact SD housing market?

[Coronita]

[quote=utcsox]I wonder why the “corruption sewage from Red China” are not destroying Carlsbad, Encinitas, Cardiff and Solana Beach with “suit of cash”. Can it be these beautiful lizards and the prices of walls are deterrents to them? Other cities in California shall take notes and learn from it to reduce the price bubble!![/quote]

lol….

[mixxalot]

Well I am seeing a lot more Chinese in San Diego renting and buying places in group tours than just a few years ago. I will preface my thoughts that I have no issues with them as I do have friends from China and Asia but the problem is lack of common sense with overpaying real estate prices. I was telling my buddy the other day that I can buy a home outside of coastal areas for under 500K and a nice sailboat with a live aboard slip for a fraction of coastal real estate and have a better experience being in a big place and have water recreation.

[bearishgurl]

[quote=mixxalot]Well I am seeing a lot more Chinese in San Diego renting and buying places in group tours than just a few years ago. I will preface my thoughts that I have no issues with them as I do have friends from China and Asia but the problem is lack of common sense with overpaying real estate prices. I was telling my buddy the other day that I can buy a home outside of coastal areas for under 500K and a nice sailboat with a live aboard slip for a fraction of coastal real estate and have a better experience being in a big place and have water recreation.[/quote]

Uhh, mixxalot … a “live-aboard” slip, such as those with full utility hookups on the (secured) J Street Marina in Chula Vista, cost quite a bit more than the $500 month you stated earlier here that you were considering paying on Harbor Island (SD) on the “Are home prices just silly right now” thread.

If you already had a <=$500K home in SD County, you would ostensibly have no need for a "live-aboard" slip in SD County if you owned a vessel longer than 25'. You could park it on your own property for free (if you bought the "right kind" of property). Why don't you just focus right now on accumulating your downpayment and qualifying for a mortgage for that home right now and save your boat/plane dreams for a later date? It's not going to get any easier to buy a house in SD County a few years from now because the last vestiges of distressed property left over from 2011 and prior is now being marketed in pockets of East County (and likely inland North County as well). Once these properties are gone, distressed property listings will be fewer and farther between, IMO (stemming from random HELOC defaults, no doubt). Of course, this suggestion is all predicated on the notion that you will stay in SD County for the long haul and not move or get transferred to another locale. If you don't know where you will be in five years (or have no control over this), then it is probably not worth it for you to buy a house here.

[FlyerInHi]

[quote=flyer]Many articles indicate that fewer and fewer of the native-born population are able to buy homes, so the influx of foreign funds in certain housing markets like CA may end up being a sustaining force for housing prices in those areas longer term.

That’s a good thing for those who already have property–but not great for those who don’t–especially not for young people who would like to buy in the areas in which they were raised. We bought property for our kids years ago, but it’s a different world today.[/quote]

Flyer, you did well by your kids. You invested and stayed in California and appreciation helped you along the way.

Expensive housing markets is the price of growing up and becoming more of a world-class city (which San Diego is only in the 3rd tier). Compare to prices in other world-class cities.

I don’t have much sympathy for people who complain because I’ve heard such complaints for decades now. A lot of people complained that new entrants were ruining California. Well no, they came, worked hard and made more wealth for everyone.

Over the years, I know a few people who sold and left California. They are now unable to return.

[bearishgurl]

I don’t think the average Chinese citizen who bought RE in the US (most of whom still live in China) are attracted to “trophy” properties. They want rental income from bread-and-butter real estate investments, plain and simple. Chinese investors cleaned up big time in over 20 East LA County cities during the recent downturn of 2009 through early 2012. This group bought up SFRs and condos en masse, almost all of which were built from 1950 to 1985. The vast majority of these investors still live in China to this day. They have hired local property managers who mainly speak Mandarin, Tagalog, English and Spanish to keep them filled and properly managed.

Oh, and btw, I am told that almost all of these investors bought these properties sight unseen (from internet pics and with a local agent). They didn’t particularly care about the condition and did whatever improvements were necessary after COE (thru their property mgr) to immediately get their propert(ies) advertised for rent.

These Chinese investors weren’t stupid. In hindsight, almost all of the properties in their new RE portfolios (in LA County) turned out to be cash cows 🙂

[bearishgurl]

[quote=FlyerInHi] . . . Over the years, I know a few people who sold and left California. They are now unable to return.[/quote]

I know more than a few people (even SD natives who are now senior citizens) who moved out of state after retiring in their 50’s and cannot now return even to their old “working-class” home turf in CA.

This is the main reason why I will “retire” in CA. I’m just not sure exactly where yet, and may have to lease my home for 1-2 years and lease elsewhere in the state before I make that decision.

FIH, you are a SD native and still have relative(s) in SD, no? I feel you may still be young enough to return to CA and buy a home for yourself.

[Coronita]

[quote=mixxalot]Well I am seeing a lot more Chinese in San Diego renting and buying places in group tours than just a few years ago. I will preface my thoughts that I have no issues with them as I do have friends from China and Asia but the problem is lack of common sense with overpaying real estate prices. I was telling my buddy the other day that I can buy a home outside of coastal areas for under 500K and a nice sailboat with a live aboard slip for a fraction of coastal real estate and have a better experience being in a big place and have water recreation.[/quote]

Again, I said it before, whether you think it’s a good time or not good time to buy is irrelevant to some buyers, since it depends. For the 1% wealthy in China you are talking about, buying a home here and possibly losing 20% of the value here is still probably better than keeping money in China and losing 100% of it when the communist regime are looking for scapegoats to blame for the financial crash. And while it seems like a big deal to people here, for some of these buyers a few million is pocket change. To them, it’s like taking a depreciation hit the the moment you drive off the lot with a new car. So it’s a completely different ballgame for them. You can bet the 1% right now are more scared about government confiscating their wealth OR finding any reason to put them in jail as a scapegoat, and less worried about losing 20-30% on say $1-3 million home.

http://www.ft.com/cms/s/0/ada9ca96-4bab-11e5-b558-8a9722977189.html
So basically, the stock market crashes, government probes brokerage firms, bans short selling, warns media about reporting on bad financial news, and throws a few people in jail. And this is just the start…And people thought government intervention in the US to save wall street was bad…

While you say it doesn’t bother you, it does seem like you do have a problem with foreign buyers buying, otherwise you wouldn’t have brought it up. It only accounts for about 18-20% of all RE purchases, and really only more so if you only look exclusively at the high end, in certain areas, namely tied to the public schools and proximity to where other asians are congregating. So unless you are in the market for the high end, it’s unlikely their purchases (cash or otherwise) is going to affect your ability to buy a home, since for most purposes, it’s unlikely those cash buyers are in the same market.

I doubt many of them, for example, are buying condos or homes in sorrento valley, for example. You can blame those people who bought those properties who wanted to capitalize on the achievable cash flow, given how high rent prices are right now. And you can blame the same folks for holding on to those homes until they (hopefully) get a bigger payout next year. And those buyers are pretty diverse.

So you don’t really need to worry about San Diego turning into Irvine or Montrey Park or Arcadia. Even in carmel valley, only 14% of the households would be classified as asian.

http://www.sdlookup.com/Market-92130-Carmel_Valley

What is interesting is there apparently are more women in carmel valley than men.

[Coronita]

[quote=bearishgurl]I don’t think the average Chinese citizen who bought RE in the US (most of whom still live in China) are attracted to “trophy” properties. They want rental income from bread-and-butter real estate investments, plain and simple. Chinese investors cleaned up big time in over 20 East LA County cities during the recent downturn of 2009 through early 2012. This group bought up SFRs and condos en masse, almost all of which were built from 1950 to 1985. The vast majority of these investors still live in China to this day. They have hired local property managers who mainly speak Mandarin, Tagalog, English and Spanish to keep them filled and properly managed.

Oh, and btw, I am told that almost all of these investors bought these properties sight unseen (from internet pics and with a local agent). They didn’t particularly care about the condition and did whatever improvements were necessary after COE (thru their property mgr) to immediately get their propert(ies) advertised for rent.

These Chinese investors weren’t stupid. In hindsight, almost all of the properties in their new RE portfolios (in LA County) turned out to be cash cows :)[/quote]

IF you say so.

[Coronita]

Anyway, blame all you want on whatever group you feel like blaming it on as to why real estate prices are high, rent prices are high. Whether it’s because you feel like it’s foreign buyers, speculators, low interest rates, too many cash buyers, weather, too many well paid people.

One of my neighbors just paid close to $1.3 million for a home in my neighborhood. Previous peak price was closer to $1.15. And they aren’t from china. Just a two income family which both adults are doctors relocating from out of state.

I’ve been seeing a lot of doctors relocating to CA buying in my neck of wodds, much more so than engineers. This is the third doctor family around me. Perhaps, you can blame the sudden uptick of doctors migrating into CA because of Covered California?

[bearishgurl]

[quote=flu]Anyway, blame all you want on whatever group you feel like blaming it on as to why real estate prices are high, rent prices are high. Whether it’s because you feel like it’s foreign buyers, speculators, low interest rates, too many cash buyers, weather, too many well paid people.

One of my neighbors just paid close to $1.3 million for a home in my neighborhood. Previous peak price was closer to $1.15. And they aren’t from china. Just a two income family which both adults are doctors relocating from out of state.

I’ve been seeing a lot of doctors relocating to CA buying in my neck of wodds, much more so than engineers. This is the third doctor family around me. Perhaps, you can blame the sudden uptick of doctors migrating into CA because of Covered California?[/quote]

Yeah … I noticed Sharp has been heavily recruiting for medical professionals of late. The truth is, many (most?) of the best doctors in SD are over the age of 70 and a good portion of them are over the age of 75. I KNOW all mine are and they were all Aexcel designated providers (the cream of the crop) when I had Aetna for several years. My current carrier (Blue Shield) has all but one of them in network, which is why I chose BSoC.

These doctors (mostly all male) aren’t going to last forever. Except for the occasional “expert-witness” stint in court, I see most of my longtime providers finally retiring.

Advanced age of longtime SD providers is the sole reason for Sharp/Scripps and other SD medical groups recruiting en masse, imho.

[bearishgurl]

I don’t blame any one group in particular for higher RE prices in CA coastal counties. RE should be higher-priced in these counties than other CA counties and inland states …. especially within 5 miles of the coast. This has always been the case. If a prospective buyer isn’t satisfied with what they can qualify to buy in SD County, then they should rent or relocate to another county or state with cheaper real estate. It is what it is.

[bearishgurl]

[quote=flu]IF you say so.[/quote]Yes, I DO say so, flu. Check it out for yourself! And, if you don’t already have an acct there, check out all the services this bank offers to out-of-country LL’s and their (local) property mgrs.

https://www.cathaybank.com/

The wheel has surely been invented.

[bearishgurl]

Back to the OP, I’ve posted before here than I don’t think QC layoffs will affect the local RE market. Mostly because I feel most of the laid off employees will be the least senior (currently renters) or the most senior (forced into retirement). The employees forced into retirement likely bought their SD County residence 15-30 years ago (or even earlier). They’re just going to retire and go on about their business and maybe teach at CC, SDSU or UC extension or consult, etc for pocket change. This group will be fine.

Also, the QC employee base is spread out all over the county. Many of the employees who were already established in SD prior to being hired by QC never moved to be closer to work and stayed in their “home turf” areas where the bulk of their families reside and commuted to work every day.

I don’t even feel that MM or CarmelV RE markets will be affected by the layoffs. Perhaps some apt complexes may have to find some new tenants because those recent hires who got laid off had to relocate for new jobs. But that will be the extent of it.

These layoffs are a drop in the bucket compared to what happened in the mid-nineties in SD with the mass layoffs within the local corporations which were part of the military industrial complex.

[FlyerInHi]

BG, I’m still a part time resident and I will keep my connections in california. But I’m not interested in living full time in CA. I’d rather not pay state income taxes in Vegas.

[XBoxBoy]

[quote=Rich Toscano]So I just don’t see this as being a big issue for San Diego housing as a whole. It’s a big city.

[/quote]

Hi Rich, let me start by stressing that I don’t see this as a big issue, particularly for SD housing as a whole. My view however is that this will impact areas that are popular with QComm engineers. (And probably overflow a bit into more expensive areas where management and those with large stock options would have bought. Or long time employees would have been move up buyers.)

Note my previous post:
[quote=XBoxBoy]If it is true thousands laid off in San Diego, then I would think that’s enough to impact housing market.[/quote]
We got 1314 layoffs. Not into the thousands, but over a thousand. So the impact will not be large. Will it be large enough to show up in the charts you put up every month? Maybe, but maybe not. But I do think it will be large enough to impact specific neighborhoods. (Note though that impact is not equal to collapse)

[quote=Rich Toscano]So even if 4k people get laid off from qcom, that’s less than 1 month’s job growth. And that assumes that none of these people will find other jobs in San Diego, which is of course not the case. Given the general state of the tech industry as I see it (which is: techies are in high demand), I would be surprised if even half of the people had to move out of town. Let’s say 40% have to leave — now we are down to about 1 week’s worth of San Diego job growth to replace those folks.
[/quote]

I don’t think this is a fair argument. While undoubtedly some of the people will find jobs in SD and not move, for everyone who does stay, there is one less person moving into SD to fill a vacant job. After you lose the 1314 jobs, the number of people employed in jobs that pay well and the number of houses available remain the same regardless of who moves and who stays. And the bottom line is there are now 1314 fewer well paying jobs in SD. And that translates into fewer buyers and more sellers which in turn impacts where supply and demand balance. (Regardless of who stays and who goes)

[quote=Rich Toscano]
That said, I could see there being an impact in the surrounding areas that are popular among QCOMers. If enough people need to move, there could be a bit of a mini-glut in that area for a while. But I would view that more as an opportunity for people who are looking to buy in those areas — not as a game changer for the overall housing market.

Do you think I’m missing something?[/quote]

No, I think we’re more in agreement than disagreement. I probably think there will be more of an impact for three reasons: 1) Psychological impact due to job uncertainty, 2) not agreeing with the some people will stay argument, and 3) (something not yet mentioned) stock options of QCOMers in the past were a source of big down payments, but QCOM stock options probably aren’t as lucrative as they used to be.

Lastly, I’ll also mention that while I’ve been a housing bull for the last several years, I’m beginning to wonder if it’s time to shift towards bearishness. House prices have been going up around 10% a year for several years, yet general inflation has not, nor has wage growth or incomes. I think we’d both agree this can’t go on forever.

So I wonder: when does this run up start to slow? to stall? does it turn back down or just ride steady for a while? One thing I did learn from 2006 is that house price trends are like aircraft carriers. They take a really long time to turn. Could the QCom layoffs put pressure on that turning? Personally, I think so. But QCom layoffs won’t turn the housing market all by itself. No where near. But QCom layoffs along with other forces? Maybe. But more importantly, I think it’s imprudent to extrapolate the current trend out indefinitely into the future. (But I half suspect you’d agree with that principle too, even if you disagree with other details of my argument.)

XBox

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