“It’s going to be a long time before we see it bottom out and recover”

[patientlywaiting]

davelj, i think your prediction will be right on.

Assuming the prices will nominally stagnate from 2011 to 2014, when would you rather buy? Closer to 2011 or 2014?

2014 should present many more choices at the best prices. I probably won’t buy my next “dream” house until then. If it’s just a regular house to live in then anytime during that bottom period would be fine.

Looking back to the 1990s at some of the anecdotal price histories, I think that 1996 was a much better time to buy than 1991.

[patientlywaiting]

davelj, i think your prediction will be right on.

Assuming the prices will nominally stagnate from 2011 to 2014, when would you rather buy? Closer to 2011 or 2014?

2014 should present many more choices at the best prices. I probably won’t buy my next “dream” house until then. If it’s just a regular house to live in then anytime during that bottom period would be fine.

Looking back to the 1990s at some of the anecdotal price histories, I think that 1996 was a much better time to buy than 1991.

[zzz]

Not having been here in SD in 91 or 96, what were the factors outside of low interest rates that started the buying trend? Were there any sound fundamentals – IE. job growth spikes, population spikes, etc. -or was it market perception, speculation, lax lending, etc?

Assuming you have exited the housing market and are a renter – If the market declines by 35%, and the rent vs buy values have relative parity, and alternative investments, discounted payback period are all taken into effect, what would be your advice to others? Buy or continue to rent?

[zzz]

Not having been here in SD in 91 or 96, what were the factors outside of low interest rates that started the buying trend? Were there any sound fundamentals – IE. job growth spikes, population spikes, etc. -or was it market perception, speculation, lax lending, etc?

Assuming you have exited the housing market and are a renter – If the market declines by 35%, and the rent vs buy values have relative parity, and alternative investments, discounted payback period are all taken into effect, what would be your advice to others? Buy or continue to rent?

[davelj]

pw, the short answer is: I don’t know. I bought in 2000 and sold in 2004 (long story) and then bought again late last year in a very unusual transaction that protects me from 30% of the downside between when I bought it and 2010 (and the price was already marked down 15% from the seller’s cost basis). If it weren’t for the strange deal I’d still be renting. My advice – worth exactly what you’re paying for it – is that you just keep looking and when you find something you can comfortably afford that you feel is “reasonably” priced (not necessarily the bargain of the century, that is), you buy it. I’d like to buy a condo to use as an office – I rent space right now – so I’m hoping to find something in 2010 or so. I’ve never felt the need to get the absolute best deal in my business life or personal life. I try to find a good deal and leave something on the table. Life’s too short to get caught up in agonizing over every last dime. Just my opinion.

gg, I think the buying trend was started by simple exhaustion of the selling trend. Builders stopped building, employment stopped dropping and people started moving back to SD and it just picked up steam after that. I think I kind of addressed the rent vs. buy decision above. Everyone’s got their own situation. The most important thing is that whatever you’re doing it fits comfortably into your financial picture. As an extreme example, there are plenty of people for whom it makes sense to buy right now. If you have a family that needs to get settled, you’re wealthy and have a lot of liquidity and don’t mind watching your home decline in value by 30% then why wait to buy? Sometimes it’s not worth losing your sanity… especially if you’ve got a lot of cake to begin with.

[davelj]

pw, the short answer is: I don’t know. I bought in 2000 and sold in 2004 (long story) and then bought again late last year in a very unusual transaction that protects me from 30% of the downside between when I bought it and 2010 (and the price was already marked down 15% from the seller’s cost basis). If it weren’t for the strange deal I’d still be renting. My advice – worth exactly what you’re paying for it – is that you just keep looking and when you find something you can comfortably afford that you feel is “reasonably” priced (not necessarily the bargain of the century, that is), you buy it. I’d like to buy a condo to use as an office – I rent space right now – so I’m hoping to find something in 2010 or so. I’ve never felt the need to get the absolute best deal in my business life or personal life. I try to find a good deal and leave something on the table. Life’s too short to get caught up in agonizing over every last dime. Just my opinion.

gg, I think the buying trend was started by simple exhaustion of the selling trend. Builders stopped building, employment stopped dropping and people started moving back to SD and it just picked up steam after that. I think I kind of addressed the rent vs. buy decision above. Everyone’s got their own situation. The most important thing is that whatever you’re doing it fits comfortably into your financial picture. As an extreme example, there are plenty of people for whom it makes sense to buy right now. If you have a family that needs to get settled, you’re wealthy and have a lot of liquidity and don’t mind watching your home decline in value by 30% then why wait to buy? Sometimes it’s not worth losing your sanity… especially if you’ve got a lot of cake to begin with.

[cr]

I too tend to think the “experts” extrapolate in straight lines. And we’ve seen it from both sides, in both directions. Month to month sales are up and we’re through the bubble, they’re down and they just now start saying the worst is yet to come.

I trned to agree with a 3-4 timelines best case scenario. At worst it will go down as far and as quickly or slowly as it went up, probably from 2000-2001 prices.

This article in the Daily News today is more evidence of dropping prices:

http://www.dailynews.com/ci_7198220

On average, a foreclosed property sells 20.3 percent below its market value. The median discount level is slightly lower in Orange County at 19.6 percent compared with 21 percent in Los Angeles County.

70 percent of homeowners who are foreclosed on bought their homes between 2003 and 2005. Homeowners who bought during this period and at the peak of the housing market are likely to be in a negative equity position now.

A typical home that goes into foreclosure was originally purchased for $465,000 in Los Angeles County and $532,000 in Orange County.

The average sales price of a foreclosed property is $447,000 in Los Angeles County and $479,000 in Orange County.

[cr]

I too tend to think the “experts” extrapolate in straight lines. And we’ve seen it from both sides, in both directions. Month to month sales are up and we’re through the bubble, they’re down and they just now start saying the worst is yet to come.

I trned to agree with a 3-4 timelines best case scenario. At worst it will go down as far and as quickly or slowly as it went up, probably from 2000-2001 prices.

This article in the Daily News today is more evidence of dropping prices:

http://www.dailynews.com/ci_7198220

On average, a foreclosed property sells 20.3 percent below its market value. The median discount level is slightly lower in Orange County at 19.6 percent compared with 21 percent in Los Angeles County.

70 percent of homeowners who are foreclosed on bought their homes between 2003 and 2005. Homeowners who bought during this period and at the peak of the housing market are likely to be in a negative equity position now.

A typical home that goes into foreclosure was originally purchased for $465,000 in Los Angeles County and $532,000 in Orange County.

The average sales price of a foreclosed property is $447,000 in Los Angeles County and $479,000 in Orange County.

[patientlywaiting]

davelj, I mostly agree with you.

My situation is a little different though. I built my house when I was younger and more energetic. Now, although I watch the market, I don’t have much incentive to move unless it’s a deal of a lifetime. That’s what age does to you. You don’t feel very excited about material possession anymore. I pretty much have everything I need.

So if I’m going to buy, it will be at the very bottom where I can choose from a large inventory.

I know that young folks who need a house and are itching to buy, they will jump in at at the first sign of a “deal.”

[patientlywaiting]

davelj, I mostly agree with you.

My situation is a little different though. I built my house when I was younger and more energetic. Now, although I watch the market, I don’t have much incentive to move unless it’s a deal of a lifetime. That’s what age does to you. You don’t feel very excited about material possession anymore. I pretty much have everything I need.

So if I’m going to buy, it will be at the very bottom where I can choose from a large inventory.

I know that young folks who need a house and are itching to buy, they will jump in at at the first sign of a “deal.”

[zzz]

I think I’m looking for personal details aside, what the clinical real estate driven – most opportunistic time is? Does anyone have any empirical data on historical trends that have shown when it becomes more economically effective to buy versus rent? At what price per sq ft, evaluating interest rates if they are moving inversely to prices, etc, inventory levels and their trends, etc. to determine optimal time to buy versus rent.

I know there is no magic ball – I’m just looking for some statistical analysis if anyone has looked at this?

[zzz]

I think I’m looking for personal details aside, what the clinical real estate driven – most opportunistic time is? Does anyone have any empirical data on historical trends that have shown when it becomes more economically effective to buy versus rent? At what price per sq ft, evaluating interest rates if they are moving inversely to prices, etc, inventory levels and their trends, etc. to determine optimal time to buy versus rent.

I know there is no magic ball – I’m just looking for some statistical analysis if anyone has looked at this?

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

The thing that worries me is what I think I (as well as a lot of others) are seeing in the finance markets (stocks and fixed incomes), I have said this before and I will state it here again, I think the Fed/Government knows there cannot be allowed a serious economic downturn (and therefore there is much control in verious forms going on) for several reasons,

1) By 2003 Pension funds were going belly up in record numbers because of the stock market decilnes (The fed just cannot affort to bail these out)

2) The economy is seen as a large part of the war on terror (it cannot be allowed to fail in any significant way).

3) The risks here is that the U.S.A. would lose and never be able to regain it’s world leader status (think USSR).

I believe there will be continuous heroic efforts to avoid any serious economic downturn.

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

The thing that worries me is what I think I (as well as a lot of others) are seeing in the finance markets (stocks and fixed incomes), I have said this before and I will state it here again, I think the Fed/Government knows there cannot be allowed a serious economic downturn (and therefore there is much control in verious forms going on) for several reasons,

1) By 2003 Pension funds were going belly up in record numbers because of the stock market decilnes (The fed just cannot affort to bail these out)

2) The economy is seen as a large part of the war on terror (it cannot be allowed to fail in any significant way).

3) The risks here is that the U.S.A. would lose and never be able to regain it’s world leader status (think USSR).

I believe there will be continuous heroic efforts to avoid any serious economic downturn.

[stansd]

Dave,

I’m keenly interested in the way you structured your transaction to protect from the downside…that’s the type of thing that really could remove some friction in the market, especially in the current environment. Heck, I’d buy now if someone would protect me from the downside in exchange for receiving any upside in the next 5 years.

If you are willing to share some details, I’d love to see them.

Stan

[Author]

Posts