August 23, 2006 at 2:15 PM #7278
First of all, this site is very informative, and I’m glad it exists. It talked me out of buying a condo last year, and FHEW I really dodged a bullet there.
Anyways, my wife and I have wanted a house for a while now (we got our first boy on the way) and since the housing market has took a turn, we thought this would be the perfect time to get our feet wet.
We started looking, and found a great house in Escondido, put an offer in…demanded our terms, and we eventually got our way. We got a 1 year old, 4 bedroom, 3 bath house for 485k (with them paying all our closing costs!) This is a great deal!!!
Well we are in escrow now, and after reading some articles here, I’m getting worried. Financially, the 3,500$ payment isn’t going to be a problem at all. We both have great, stable jobs. Her job is even letting her work from home 3 days out of the week. ANYWAYS, my question is, am I screwed?
We plan on staying in this home for roughly 5 years. We wanted to sell at that time, and have 50-75k worth of equity to use as a nice down payment for something in Denver. Is this just not going to happen? Am I going to lose money on the deal?
Either way, we need a house, we need more space, and we need something we can customize (meaning, not a rental) But I’m scared, and I guess I’m just looking for some positive words… haha. (if there are any)
So….did I shoot myself in the foot? Are we screwed?
August 23, 2006 at 2:28 PM #32837AnonymousGuest
If you want positive words about buying, you are reading the wrong blog. If you have to buy then buy, but do not speculate on a 20% gain in five years. I do not think the most optimistic person here would say this is a good deal noting your plans.
Warm regards to your coming addition.
August 23, 2006 at 2:35 PM #32839
we don’t expect a 20% gain in five years, we wanted 10-15% (not that it’s that much different)
So is this blog just about being negative then? I’ve been reading it for the past year, and all I read are bad things.
“dont buy, dont buy, dont buy” Is pretty much the mantra.
If I can’t expect a 10% gain, then what can I expect in 5 years?
August 25, 2006 at 9:47 AM #33198LookoutBelowParticipant
“Negativity” Do what seems right in your mind, a sucker is born every minute. Your a big boy David, are you asking for approval here ?
Good luck. You’ll need it. There are always 100 times more victims than victors, god bless em.
“Negativity”?…. Hahahahaaaaaa ! ……Your funny.
Its only “negative” if your trying to sell a house that you foolishly bought a year ago ! For the rest who are the restrained, disciplined, potential buyers, its Nirvana ! Unless you own a printing press, somebody has to lose (or give up) for somebody else to get the gain in a contracting economy.
August 23, 2006 at 2:39 PM #32842
I would second sparkey’s comments. You’re probably read enough of this blog to see what everyone’s opinion is. If despite reading this blog for 1 year, and despite delaying a purchase until now, you’re about to close escrow on a house, then I think that you’re pretty much decided that you’re ready to buy.
I don’t think that even our most optimistic realtor friend would predict a 50k-75k equity gain on your Escondido house in 5 years. I’m sure there are non-monetary quality-of-life benefits to owning that can justify your purchase.
Check and see if there’s a St Joseph statue buried somewhere on your new property. 😉
August 23, 2006 at 2:38 PM #32840
My advice, is to buy only if you meet these 3 conditions:
1) Your income is stable throughout the upcoming recession. You know you will not be laid off in the downturn.
2) You have a mortgage you can afford so you can ride out the downturn. You won’t be forced into foreclosure when your ARM adjusts.
3) You don’t mind losing half of your home’s value. Prices will decline 35% – 50% from their summer 05 highs, and you don’t care about losing the equity.
I have 3 kids, and I rent. What’s the problem with renting a house?
In 2010, your Escondido house could be worth $280K. If you don’t care, go ahead and buy.
I don’t want to say anything harsh, as I admire your courage to come here and say you are buying a house. That takes guts. But I think it’s a crazy move. Unless you are a millionaire who doesn’t mind losing 200K, why in the world would you buy an asset whose value is pretty much guaranteed to shrink by half?
Your house purchase is like buying Lucent in May 2000. It had come down off its peak, and seemed like a good buy. You really wanted to start a 401(k) stock portfolio and get started with dollar cost averaging. That is your situation. Just like I watched my $5 LU stock go all the way down to $2.50, losing half my $2K investment, you will watch your house lose its value all the way down to $250K or thereabouts.
The best thing to do: put your cash in Treasury bills or FDIC insured bank rated A+ by Weiss ratings, and earn 5%. Rent a nice house for a fraction of the mortgage cost. For $2500/month you can rent a really nice house.
And if you have kids, think seriously about whether you want to be in the Escondido school district. I know some of the schools have good ratings, but very few. Think about the coast or Poway schools. Coast if you can afford it.
Oh, you want to go back to Denver. Then you will be selling at the bottom of the market, when 10% of the MLS will be foreclosures. So you are not in a position to ride out this downturn, since you plan to sell at the time we predict will be the bottom.
Wheew, if I reached you, then I can chalk up household saved.
One more thing – do you know how hard it is to work when you have a baby around? Even with a nanny to help out, baby will cry for mom. Your wife may not want to leave her baby in day care, and prefer to raise him herself. Then, your ties to the mortgage will not give you the flexibility to have mom at home. Your baby will be better off with mom at home, and he won’t know the difference between a yard owned by the bank or by the landlord. He really won’t. He will know it is his mom holding him in her arms as she rocks him to sleep, vs. being laid down in a cot inside a noisy day care room. Once your son is born, you will see what I mean. You don’t feel it yet, but you will.
So I vote for a rental, to support a flexible family lifestyle, and to give your young family a good financial start.
August 23, 2006 at 2:38 PM #32841Diego MamaniParticipant
You are not screwed, you’ll survive and will be able to make your monthly payments. But I think your decision is not good, financially speaking. If being the “owner” is so important to your psychological well being, then go ahead, but it’s going to cost you dearly. You’re paying almost half a million dollars for a house in an inland area, a house that is probably not worth more than $250K.
We know that RE cycles in So Cal are very long, of 10-20 years duration. (Problem is, many people have only 3 year memories!) Prices just peaked in 2005 and we have several years of home depreciation ahead of us (as it happened in 1990-1996, 1982-1986, and 1973-1976).
How did I arrive to the $250K valuation above? I guess you could rent an almost identical house for $2K a month (gardener included), without the headaches and added expense of ownership. You think your baby will mind whether you own or rent the exact same house? I don’t think so. In fact, you’ll spend more quality time with your family if you don’t have all those trips to Home Depot. And you’ll save a fortune too.
Unfortunately for current buyers, in 5 years, this house will be worth at most $485K, possibly a lot less, and once you factor in inflation, you’ll realize you lost much more than just those $3500 a month payments. If I were you, I would get out of the deal, forgo my deposit and rent a house on the same block if I really liked the neighborhood.
August 24, 2006 at 4:58 PM #33074AnonymousGuest
I’ve been reading this website/blog with great interest off and on for a couple of years. I realize people have short memories for the real estate market so I am going to relay my experience.
I moved to San Diego in 1992. The real estate market was in the tank. I bought a foreclosure condominium in La Mesa in 1997 for $100K. The owner who was foreclosed on paid about $146K. The place had some cosmetic damage that didn’t cost much to fix. I made some upgrades and lived in it until 2003. I moved to Northern California to take a promotion. I rented my condo to someone I knew and I was a renter in NorCal. I figure it was worth about $300K in early 2003. I sold it in three weeks in April 2005 for $400K.
I am still renting. I have all that equity sitting in the bank earning 4-6% in CD’s and I am waiting for the crash.
I was addicted to those TV shows about flipping and I figure if there are that many novices out there who know nothing about flipping, making money, then something’s got to give. Plus, the irresponsible lending practices convinced me that things were going to change to a down turn. I got burned in the stock market crash in 2000. It rose the most quickly right before it crashed. I think the RE market is (was) doing the same.
August 24, 2006 at 5:33 PM #33084
Chrispy – The three scenarios you outlined still leave the door open to Perry’s theory. Buying a house on your own doesn’t prove to me that you are still not socialized to find a husband to take care of you. Perhaps you are still looking for a man or alternatively perhaps you are in a state of denial, doing everything possible to create the illusion that you don’t need a man, when in fact any day the right man could come along, whisk you off your feet and steal half your equity:)
August 24, 2006 at 5:43 PM #33091
Good point, JES. However, in my state of denial about needing a man, I sold my house and thus, my equity is now sitting in a bunch of mutual funds and CDs.
I suppose I might *need* a man to figure out how to cash these things out.
August 23, 2006 at 2:39 PM #32843svferrisParticipant
It sounds to me like you made a (relatively) good decision. You’re buying a house because you want a place to live. You’re also buying to address other concerns you have, such as space and customization. I think as long as it makes you happier and you can afford it, don’t worry about if the value goes down a bit. It will eventually come back up. In the meantime, you’ll be in a place that makes you happy. And that’s what really matters.
I think what you find on this blog are people (myself included) who were priced out of the market and cannot afford a place if they wanted to. The fact that you can comfortably pay the monthly payment puts you in a whole different category. Unfortunately, I need to wait a while longer before this even becomes an option for me.
August 23, 2006 at 2:54 PM #32847AnonymousGuest
Bad decision buying a house right now. In 5 years it will definitely be worth much less than you are paying for it. That is just the cold, hard truth.
This blog is not about being negative, it is about being realistic and most important honest. Nobody here is looking to sell you anything.
Also, we are not all “priced out of the market”. I could easily buy a house at todays prices but I choose not to because I realize it is stupid to purchase something that is going to go down in value, that is moronic.
August 23, 2006 at 2:55 PM #32846
svferris, there are plenty of people here who can afford to buy but don't wish to overpay when they can rent a similar house for 50% the cost of owning. The 50% delta can be saved and invested wisely for the future.
davidpeace, whatever your decision is, keep up updated on your homeownership experience.
August 23, 2006 at 3:53 PM #32861
Any chance of you moving to Denver sooner? The market there is absolutely horrible right now, and prices are 1/3 the price they are here and still going down. My wife and I and two kids have been looking in Ft. Collins, Denver and Colorado Springs and the deals are amazing, but considered high by locals!
My advice is to break your escrow and not buy. Even if we assume no recession, and small drops in price, it is still not a good time to buy as this year it will only get worse now that the summer is over. Rent a house at 1/2 the cost ($1900 for a small home even in Carlsbad, Encinitas), closer to the ocean in a better school district. Put your money in money market/Tbills/Savings and secure your ability to buy that nice home in Denver. As your money grows, watch Denver and San Diego fall and look for deals.
August 23, 2006 at 4:10 PM #32870
If you plan to move out of state in 5 years, it’s not a safe bet, since So Cal real estate cycle are typically 10 years or more from peak to peak. I think you need a longer commitment to this area before it makes sense to purchase.
Why not buy a house in Denver today, rent it out at a loss (you’ll get the tax break you would get on the SD house) and rent your residence here for the few years.
You’ll lock in today’s prices in Denver for a place you can be committed to live in 10 years from now. This seems to me a safer bet.
If the national RE bubble crowd is wrong you win. If they are right, you win because you plan to be in that house 10 years from now, long enough to ride out the 7-10 year RE cycle.
August 23, 2006 at 4:15 PM #32871
whats with all this “troll” nonsense? I came here for real world advice…got nothing but a-holes with oppinions that obviously have no basis, because no one has brought me any proof except for their negative oppinions.
Thanks for all the useless information guys…I’ll be sure to take you oppinions to the bank!
August 23, 2006 at 4:30 PM #32879
We try not to call each other names here. Also, you might want to spell-check the word opinion.
August 23, 2006 at 4:25 PM #32876
I’m thinking davidpeace might have house for sale in Escondido. Instead of planting a St. Joseph statue in his yard, he’s trying drum up interest in Escondido real estate and convince us all that the giant spike in prices is reasonable sunshine tax.
There is no way this guy has been reading Piggingtons or he would not have trotted out the same old mantra about how great it is to live here.
August 23, 2006 at 4:29 PM #32878
$3,500 payment in Escondido
Say no more.
August 23, 2006 at 4:33 PM #32884
davidpeace, if you want to buy and that makes you happy, please buy.
Also please come back next year and tell us how you’re enjoying your new neighborhood.
August 23, 2006 at 4:04 PM #32867AnonymousGuest
Ok, let us break this down with simple math.
Calculating with a 20% increase in 5 years. Buy and sell in 5 years$485k * 120% = $582k New home value$582k * 6% = $35k Realtor fees to sell$582k – $35k = $547k $547k – $485k = $62k ProfitThis is only mortgage not HOA, Property tax…and other fee/maintenance Rent for 5 years$3500 – $2500 = $1000$1000 * 60 mth= $60k Not including interest
Purchasing this house has to help your psychological well being to be a good deal because it is a lot of risk and you will most likely come out negative.
August 23, 2006 at 3:39 PM #32856
The trend I’m seeing here is matter-of-fact thinking. Are you all psychics? Last time I checked, I thought any kind of economic speculation is just that, SPECULATION. I hate to get a little miffed, but here are my responses to some comments here:
“Your income is stable throughout the upcoming recession.” What recession are you speaking of? Can you link me to some proof, or is this your speculation?
“You won’t be forced into foreclosure when your ARM adjusts.” I dont have an ARM, i have a 30 year fixed I+P 6.6%
“You don’t mind losing half of your home’s value. Prices will decline 35% – 50%”
Again, are you psychic? Are you guys forgetting we live in the most desirable place on the planet?
“In 5 years it will definitely be worth much less than you are paying for it. That is just the cold, hard truth.”
Again, oppinions touted as fact?
I think what many of you fail to see is that San Diego will ALWAYS be desirable (save for a bad terrorist attack) People want to live here…we are running out of space, so of course prices will continue to rise. I know prices are dropping, but I also believe it will rebound like it always does in a few years.
Heck New York got attacked, and their home prices are still outrageous!!! Or what about the Bay Area? Same idea…
We live in San Diego folks!!!! This place is where people WANT to be…I don’t know where you guys can get these crazy figures. (50% decline is almost laughable to me)
Anyways, thanks for all your comments….but I see that I will not get any actual REAL advice here. Only people saying outrageous figures for effect.
And btw: don’t bring the history repeats itself argument. Yes, history does repeat itself, but we’ve never seen a real estate increase like this either…never seen before increase, means a re-establishment for our ideas about real estate. It does NOT necessarily mean a catostrophic crash.
August 23, 2006 at 3:58 PM #32864
Seriously guys, this clown is a troll…”everyone wants to live in San Diego…” bwhahahahaha. Where have we heard that one before.
Nobody with half a brain has been reading this site for a year and then suddenly decides that now is the time to buy. That is the most idiotic thing I’ve heard in my entire life. Davidpeace, get lost brother. You don’t need to troll here.
August 23, 2006 at 4:01 PM #32865Diego MamaniParticipant
Hmmm, are you a troll sent here by the RE industry?
Your statement “Are you guys forgetting we live in the most desirable place on the planet?” has been considered here before. The desirability of coastal So Cal is there, has always been there, and it explains why historically land is worth more here than, say, Idaho, even after taking economic actvity into account.
What you are telling us is that, suddenly, this desirability has increased in the last five years? How so? Has the sun been upgraded? Is the ocean any bluer than before?
You also mentioned that “this time is different”. I think I’ll grade your contribution to this forum with a D minus, because you forgot the rest of your lesson, er… mission:
3. Real estate always goes up
4. If I don’t buy now I will be priced out forever
5. I need the tax deduction. Heck, the tax deduction alone will pay for the house!
6. You can always cash out your equity to afford your family’s needs now (SUVs, other gadgets) and in the future (fund your retirement)
7. Renting is un-American and for losers only
8. Everybody knows that owning is way cheaper than renting
August 23, 2006 at 4:05 PM #32869socalarmParticipant
i don’t know which camp this advice fits in. it’s simple. if you need it and can afford it, buy it.
August 23, 2006 at 4:19 PM #32874
Talk about speculation and psychic thinking: how about your own?
San Diego will always be desirable. How can you predict this? What it’s like today may not be what it’s like in ten years.
Your other predictive comment: We are running out of space, so prices will continue to rise.
One does not necessarily follow the other. Condos are an excellent example of housing whose prices plunge over time. Lack of space doesn’t mean housing is always expensive – look at our own downtown. Tons of units in a very small space and all of them cheaper by the day!
You’re right about one thing though – you won’t get any REAL advice here – would you go to a mortgage broker site for information about buying certificates of deposit?
August 23, 2006 at 4:20 PM #32875TracyParticipant
It seems to me that you’re getting defensive because you want everyone here to validate the decision you made to buy your home right now. If you want people to co-sign your decision, you’ve come to the wrong place.
If you’ve been reading this site for any length of time you’d realize that pretty much everyone here agrees that property values will fall.
What goes up must come down, no?
August 23, 2006 at 5:18 PM #32895
I hate to say it but you sound like a troll. Bubble primer be damned buy the house in Escondido. Its hardly a place people WANT to live. You’re gonna find that out the hard way. Good luck Dave.
August 23, 2006 at 6:05 PM #32900desmondParticipant
Just take a Sunday drive with your wife down Valley Parkway and see how long it takes for her to lock her door. Stop and visit one of the city parks and go for a stroll, point out all the +’s and -‘s. Stop by Orange Glen H.S. your kid could be a Patriot. That is Escondido. Or you could drive down Revolution Blvd. in T.J. and see the same thing.
August 23, 2006 at 7:51 PM #32910
David, read the Bubble Primer. Get yourself a basic understanding of the housing bubble and historical San Diego housing cycles. Then come back and post.
August 23, 2006 at 8:26 PM #32916Chris JohnstonParticipant
Please stay here and contribute, we need some bulls in here for balance. I think your odds based on my model of making a gain like that at the end of a 10 yr upmove, are fairly slim. Remember, the weather as I recall was also nice in the 90’s and land was also scarce, yet RE fell sharply.
If you want to debate cycles, I am the right opponent. However, your decision is made so just enjoy your home and forget about getting reinforcing opinions. I just hope you did not buy the home for appreciation reasons as that is unlikely to happen in the next 5 years from my research.
We could be wrong. I never assume my opinion is correct, as a trader I cannot be that arrogant it is too expensive. The chance of a recession is there but it is far from a certainty. Even if one occurs, people still survive and move on.
Congrats on your place, and stay with us. It is not stupid to buy a house, that is a bit extreme IMO. People are very opinionated about this subject in here for various reasons. I sold in the fall of 2005 just trying to time the market a bit, so obviously I think prices are going to come down. The magnitude is anyone’s guess, but I do not think 50% is going to happen. The last cyle the median dropped about 20% or a smidge more so something on that level is what I am expecting, maybe up to 30%, no more.
Buying a home should be for the reasons you stated except the appreciation portion, any appreciation at any time is a bonus. We have all become RE experts due to the large run up we have had, this does not mean we know anything that others do not.
August 23, 2006 at 8:41 PM #32918
Advice to not buy should not be viewed as negative advice. I’m optimistic. If you get out of this deal now I’m very optimistic you will find greater opportunities in the next 1-2 years. Also consider that if you buy right now you still will not really own the house, the bank will. You’ll just be making payments to a different place.
August 23, 2006 at 8:52 PM #32920AnonymousGuest
davidpeace is braindead. Guys, quit wasting your time trying to explain the obvious to this guy. Based on his emails he is either braindead or on crack. There is no sense in trying to rationalize with people like that.
August 23, 2006 at 9:10 PM #32922
“davidpeace is braindead. Guys, quit wasting your time trying to explain the obvious to this guy. Based on his emails he is either braindead or on crack. There is no sense in trying to rationalize with people like that.”
I stand corrected…there still are pompous aholes here. I’ve been called moronic too.
Wow…thanks guys…this is the positivity I love around here! Lets go have drinks some time!
Is there a way to close this forum, so I don’t get jerks like you judging me?
August 23, 2006 at 9:30 PM #32927
Oh, and another thing. It seems rather hypocritical to call other people on here “pompous A-holes” when I see that you have no qualms bragging about what you do and how much money you make. Well guess what sparky, I’m in the same income bracket as well as my wife. I found a job in Finance just as quickly as you did when I moved here from Chicago in late ’04. We also have the money for 20% downpayment (yes cash) on a 600K house (you do math genius). But you see, I like to think that I actually get something of value for my money and not the overprice stucco crap boxes that are slapped together here is So Cal. I’ll say it again, go troll somewhere else.
August 23, 2006 at 9:08 PM #32921
Finally some polite responses….thank you for toning it down! The only thing I protest is I’ve seen several responses about the schools in Escondido, and:
‘Just take a Sunday drive with your wife down Valley Parkway and see how long it takes for her to lock her door. Stop and visit one of the city parks and go for a stroll, point out all the +’s and -‘s. Stop by Orange Glen H.S. your kid could be a Patriot. That is Escondido. Or you could drive down Revolution Blvd. in T.J. and see the same thing.’
It sounds as if you are referring to the eastert sides of Escondido…the west side is much nicer (near San Marcos). Also, I’m having a BABY, and the hardly constitutes me planning for their high school? I, myelf, grew up in Escondido…I went to L R Green! Escondido itself is not bad…it just has ghetto parts! Both my parents live in Escondido…my wife and I know Escondido inside and out. You sound like you’ve only seen the ghetto parts.
Also, to whoever asked about my profession, I’m a senior software architect for a company in Mira Mesa. A month ago I looked for a job, I got 9 calls in 24 hours, and had a job by the following week. My skills are in demand, and I’m confident in that. Since I have 6 figures+ coming in, I am not worried about the monthly payments you all think are ghastly.
I appreciated the POLITE advice I got now, much more than the impulsive negativity i originally got. I do see there is a trend with all your advice. Prices will continue to drop…I know this…my wife knows this. Our OPINION is that the prices will continue to fall for MAX 3 more years. The CA minimum wage will kick up in January 07, HOPEFULLY helping boost salaries over all, devaluing the dollar a little. And it’s supposed to raise a little more in 08. I’m no economic expert…I go by what I see & feel. But by those means, I could easily see my house appreciating in 5 years. (but apparently the ‘recession’ everyone here is talking about, is inevetable)
And BTW: Just because I WANT to disagree with you all, because I’m in the middle of the biggest purchase of my life, doesn’t mean I’m a real estate agent. Anyways, I think I’ve gotten all the advice I need. Thanks.
August 23, 2006 at 9:15 PM #32923
Then why the hell are even posting here? Sorry, but something about all this doesn’t pass the smell test. If you’re really that certain about what’s going to happen with real estate, then why are posting on a bear site and asking for advice? What kind of advice did think you going to get from bunch strangers on a blog more or less dedicated to why SD housing prices are inflated?
It’s your money.
August 23, 2006 at 9:24 PM #32924AnonymousGuest
Here is the advice you are looking for: Buy a house in Escondido and sell it in 5 years. By then everthing will be positively rosy.
August 24, 2006 at 12:43 AM #32963CardiffBaseballParticipant
I have a 6 figure job software job, the wife does ok teaching at a private school (not public school money though), and in no manner do I want to spend $3500 to buy a home in Escondido. I’ll continue to rent and we are both upper 30’s with elementary aged kids. They still have bedrooms, and a place to play, and we don’t live in a less than desirable town.
The thing you need to realize David Peace is that most of the folks on here are doing fine, and are seeking to make the wisest use of our resources. Right now buying a depreciating home isn’t smart, if your horizon to sell is so short. You are simply dismissing everything as negative when post after post on this board outlines very good reasons with DATA that explains most of the opinions of the market around here.
If you truly were here for over a year you’d know about some of the folks who sold out and are sitting on large wads of cash waiting for a better time. And they are discovering how easy it is to make 5% on that money while waiting.
August 24, 2006 at 7:30 AM #32967ocrenterParticipant
david, 6 figure income is nice, but not nice enough for the type of prices available these days.
let’s just assume you make $120,000. Monthly would be $10,000, but take home after tax would only be $6600.
Most of the decent places out there still command $600,000. Let’s assume you have 20% down and your credit allow you to get a 30 year 6.5% fixed. you’re now looking at $3000/month of mortgage. property tax would take up another $500/month and let’s shave off another $100/month for HOA. now you are down to $3000/month for you and your family. (note I didn’t count mello roos because I don’t know if you have it or not).
You’ll be significantly dependent on the need for this house to appreciate because at such high cost of owning you are looking at maybe only saving $5-6000/year. Renting a similar home for $2000/month will enable you to double that saving rate.
escondido may be fine in your mind, but when there’s a downturn it will get hit hard. Lennar didn’t decide to drop their Eureka Springs prices down by $100,000 between June to August across the board for no reason.
August 24, 2006 at 10:58 AM #32972
David, since you mentioned you are moving right next to San Marcos, this has to be the development off of Barham Ln near the Woodland Parkway exit on the border between Escondido and San Marcos? If so there are things you need to know about that area.
For starters, the San Marcos neighborhoods directly to the west are flooded with homes for sale. Look at Silvercrest, the bigger homes next door. Big price reductions there. Then go further down Barham, take a left on LaMore and look at that gated community on your right side. It is adjacent to Cal State and there are 15+ homes for sale in that small gated community, and some are being foreclosed with others on the way. Then look at that huge monstrosity of a track that rises over Woodland Parkway near what I’m assuming is your chosen n-hood. That is called the Sprinter and will soon have 2 x diesel trains running from 6 am until 11 at night, every 15 minutes all day long. On top of all this, the area is surrounded by mobile home parks and there is a major gang tagging problem. The n-hood I’m guessing you have chosen was tagged with a huge gang symbol (over 50 feet long) last year.
August 24, 2006 at 11:40 AM #33013
our house is not on the border of San Marcos, but is still considered the “west” side of Escondido. We are still about a mile-ish east of the 15. And also about a mile north of the 78. It’s a country club area (near Riedy Creek). There arent any train tracks, and aren’t mobile homes either. It’s all new communities around there.
August 24, 2006 at 12:15 PM #33018
Please buy in San Elijo Hills!
August 24, 2006 at 12:37 PM #33019DanielParticipant
Just my 2 cents: if you can afford it, like it, and feel better that way, by all means, go for it. From a purely financial perspective, I think it’s better to wait. But if customization and other things are important to you, and if you can’t find a rental that you like (although this is really doubtful, you can nowadays rent one-million-plus homes easily), then yes, you should buy. Just keep in mind that, although nobody can predict the future, there are pretty solid signs that prices have further room to fall.
Regarding the insults that went back and forth, I am not going to apologize for what others have written (they should do that). But I would prefer if you didn’t insult back all the regulars here when you are attacked. If someone calls you a moron, it’s only fitting that you respond in kind, but please direct your anger only at those who deserve it. Thanks, and good luck to you.
August 24, 2006 at 2:53 PM #33050bob007Participant
my advice to david:
house is a social need. you must be smart to be a software architect. home is not a financial asset. i know it costs a lot of money to get one. if you cannot afford to take a loss on your house do not buy it.
August 23, 2006 at 9:49 PM #32929AnonymousGuest
Look jackass, you can’t solicit speculative opinions and then object to comments for being speculative, or lacking “proof.” Of course no one has a crystal ball (that works anyway), that’s why, in part, there are market cycles. Hey, if we could all see the future then we wouldn’t even be having this discussion b/c there’s no way in hell you’d be buying that money-pit you’re about to close on.
August 23, 2006 at 4:17 PM #32873
did I mention you all sound like pompous self-righteous a-holes? cuz that’s what I meant…
August 23, 2006 at 4:38 PM #32885
Advice?? Yeah, don’t buy a house right now…how’s that for advice.
I really don’t think you’ve been reading this blog for a year. If you really had been reading it, you would not be entering into a contract to buy a house right now in Escondido of all places. If you truly had been reading this blog for a year, then you would not pull out the lame arguments you did which have been discussed here and on Ben’s blog for months now. It’s that response which makes your whole post very suspect of Trolling. Either that, or you need justification of a really bad decision that you were somehow cajoled into recently. Either way, you won’t get support here for buying a house right now.
August 23, 2006 at 5:12 PM #32894BugsParticipant
I don’t think you’ll find a bigger group of bears anywhere, but that doesn’t mean we’re wrong. If you’ve been following this forum you’ll see that one of our favorite subjects is trying to ascertain the price point that makes re-entry into the market a profitable endeavor. That’s not what I would call sour grapes or negativity. I’d call it optimism.
The bottom line is that this region currently has a record number of listings available for sale and the volume of sales is down. Just in the last 12 months many of the lower priced residential markets have declined 10% and some more than that. There’s no reason anyone can point at to say it can’t drop another 10% – or more – in the next 12 months. If SD County was golden because everyone wants to be here, we wouldn’t be losing the high-dollar employment or the number of high-dollar wage earners we’re currently losing.
There’s nothing wrong with wanting a buy a home for your child. Everyone wants to do right by their kids. If you are confident of your staying power over the next 10 years the chances are reasonable – but by no means a lock – that you won’t lose money in the long haul. Just make sure you understand the difference between being able to suffer the results of such a decision and being able to make a good decision that doesn’t require suffering in the first place. Hopefully your employment situation has nothing to do with real estate, real-estate-driven consumer spending, or anything related to real estate.
It kinda looks like you’ve already made up your mind. If so we wish you and yours well, and we sincerely hope not to see your house come up with some tale of woe on Craig’s List. But if you haven’t come to a decision, try this: Write down your 3 biggest reasons why you think the market won’t continue to decline and your 3 biggest reasons why you think it might decline. Then compare your best reasons for each side of the argument and see which ones are based more on facts and data vs. which ones are based on what other people are saying.
August 23, 2006 at 4:51 PM #32889mydogsarelazyParticipant
So here is my advice:
Let’s say that you can rent a really nice place for $2,000 per month. Let’s also say that since you won’t have a huge interest deduction for your tax return that you can kiss another $500 per month goodbye.
If you rent for five years, save $1,000 per month and earn 5% interest you will have — I need math help here — what close to $70k in the bank in addition to what you have saved now?
If you buy you risk losing your equity. You also might need to spend some $$ redecorating or repairing this home.
Renting looks good to me
Not a real estate professional, just someone who follows the market
August 23, 2006 at 5:11 PM #32893lendingbubblecontinuesParticipant
Smart enough to know that $3500 a month for a house in Escondido is ree-farkin-dick-yuh-liss, yes.
Congratulations…you have just inhaled the equivalent of “housing bubble anthrax”.
August 23, 2006 at 5:51 PM #32896
did I mention you all sound like pompous self-righteous a-holes? cuz that’s what I meant…
In this thread there were at least three POSITIVE responses to your situation as follows:
“davidpeace, if you want to buy and that makes you happy, please buy”
“i don’t know which camp this advice fits in. it’s simple. if you need it and can afford it, buy it.”
“It sounds to me like you made a (relatively) good decision. “
Were those those responses from pompous a-holes ?
Do not paint us all with the same brush.
August 23, 2006 at 5:56 PM #32897
Thanks for all the useless information guys…I’ll be sure to take you oppinions (sic!) to the bank!
And who is pompous ?
Congratulations on finding the deal of the 20th century !
August 23, 2006 at 8:36 PM #32917salo_tParticipant
davidpeace, I’m in almost the same situation you are with a baby on the way. I am currently renting a nice big 2 bed condo in mission valley for $1250 a month. Let me repeat that – $1250 a month. Between my wife and I we could afford to pay much more but we are enjoying saving the extra money and now we can sit back and watch housing prices fall and jump in anytime we are ready. I too get frustrated at not having my own home but then again I make up for it by buying motorcycles, taking road trips and whatever I want with the extra money we have. Its really about what makes you happy. If you have the option you might want to get out of that contract and wait a little longer.
August 23, 2006 at 8:40 PM #32919
If you came on and said you plunged into La Jolla or Del Mar that would be one thing. I think where ur moving is the bad press on this thread. Think about it long and hard. No one wants to put their family at risk. What are the schools like? AND most important, Suzane research this right?
August 23, 2006 at 9:28 PM #32926salo_tParticipant
Lee? Lee Sterling is that you? Reveal yourself!!!
August 23, 2006 at 9:42 PM #32928
maybe it is lee???
August 23, 2006 at 9:50 PM #32930lendingbubblecontinuesParticipant
Final thoughts for our friend in Escondido. You wanted 50-75k in "equity" five years henceforth, in order to buy a place in Denver. Well, had you rented a nice place for $1750 a month and saved the other $1750 you are going to spend on your mortgage, etc., you'd have saved up $105,000 over the next five years. The loss of tax deductibility of mortgage interest would have some impact here, however, I think it is plain to see that you blew it. Oh well. Someone here said it best: "it's your money" , only I'd have put it like this: "it was your money".
August 23, 2006 at 10:06 PM #32934SD RealtorParticipant
Hi David –
I am not sure where to start. First off as you know everyone and EVERYTHING on this board is speculative. With that said, my friend Powayseller who is one of the more bearish posters, always backs her speculation up with really good arguments. Again though, all of our postings are simply speculations so don’t get to bummed out by them okay?
I am a Realtor and I would say that if you are happy where you live, and you like the schools, and you are not in an arm loan then I think you will do just fine. Some of use like Escondido and some of us don’t but don’t sweat it if people badmouth it compared to Del Mar or La Jolla.
My personal opinion, and it is VERY SPECULATIVE, is that the market will depreciate over the next 2 years at least. That depreciation rate will vary on a few things, first and foremost being a recession that can be as light as a simple slowdown or decelleration of the economy or a heavier one due to loss of lost of jobs. I think it will be middle of the road, many others think it will be heavier. Anyways I believe the current pricing has already depreciate by at least 5-10% in Escondido and will continue. I personally think you can get a better deal if you wait a year or two.
With that said, buying now, if it makes you happy is okay. I think that in 5 years you “could” see that 10-15% appreciation you are seeking. However, what makes me uncomfortable is that you “could” just as well be underwater at that time.
Yes San Diego is the best place on Earth (IMO) yet it is the 6th least affordable place to buy a home. Also note you are buying a home at a time where we have more inventory then we have had in years. This point is not speculative, it is fact. You are also buying at a time when prices are depreciating, market times are lengthening, and cancelled and expirations are increasing. This is not speculative either. Finally NODs and Foreclosures are also increasing. This is not speculative.
So with that said, I think again, you would be better served financially to buy when these indicators start to level out.
If you have not past your contingency period you can exit without loss of deposit.
However, if you are gonna be there several years, you will be okay in the long run. Hang in there and if you need any advice, please don’t be afraid to post.
August 24, 2006 at 3:32 PM #33056
I’m totally new to this site — as a matter of fact I just ran across it today for the first time. Some observations that I have made while reading through this thread:
– It appears that you’re looking for validation, not advice. There were “polite” comments before your first response, yet your only reaction was to get defensive about your decision to buy.
– Your decision to buy seems to be based on sound reasons (non-financial) until you mention wanting to sell at a 10% to 15% profit in five years. That’s speculative, and is certainly subject to a LOT of risk, especially given recent news (as in yesterday’s home sales figures)
If you can afford to buy, then by all means, buy. But know that this website seems to be dedicated to the research of the real estate “bubble.” I’m here (as I’m sure is the norm) because I am hoping that there is a bubble and that I can get in when it bursts. You’re not going to find a lot of validation here. Sure, some of the “regulars” may have strong opinions, but if you can’t stand the heat… well, you know the rest.
Why not consider some of the advice that you’re getting to back out of the contract now so that you can rent and save the difference? Buying a house is a BIG investment, and if you were so certain about your decision, you wouldn’t be posing this question here. You’ll get the $$ that you’re looking for from the house if you just invest the difference in an ING Direct or an Emigrant Direct account.
I think that you already knew what to expect when you asked, “Are we screwed?”
BTW — to others — what’s a “troll?”
August 24, 2006 at 3:32 PM #33057NateKParticipant
You know what this drama kinda reminds me of. I remember when my brother, who also brings in over 6 figures. An all around bright guy or so I thought. Well he was going out with this gold-digging B!+ch…And he was in love, she was the only one for him and he was thinking about marrying her until he finally saw her for the lazy gold-digging good for nothing that we all saw her for. And then he thanked me..But then he meets this new girl…And it’s like a different year but virtually the same type of girl…We again remind him of the previous girl but he thinks this one is different.
Well the idiot got trapped and got her pregnant…She supposedly said she was on the pill, but ohhh well. And now they’re married with a kid. The nanny pretty much raises the baby…I’m serious the most I’ve heard her do was try and breast feed the baby the first couple days after birth and that didn’t work out. And now she does virtually nothing except just sit her lazy butt at home, spends most of the money and gains weight. Honestly she did look pretty good before the baby…But 2 years later and 40 lbs later. It’s like she pulled the rip cord. Poof!!!!
Sorry, but anyways…Moral of the story. People are obviously gonna keep going after what they are attracted to no matter how sound the advice. But for David…It’s still not too late. I know it feels great right now, but PULL OUT DAVID!!! No pun intended. Look through all the numbers and data provided for you here. You listened once and you were rewarded and you thanked this site. Remember that gold diggin B!+ch that was gonna take your money last year…Well it’s a new year, a new house, but the same downturn(B!+ch).
August 24, 2006 at 3:41 PM #33059AnonymousGuest
That’s classic. Are you a Tom Leykis listener Nate?
August 24, 2006 at 4:23 PM #33064
Nate, my brother is in pretty much the same situation as your bro. Some of the things that my sister-in-law pulls to get attention is hillarious. The drama is kinda fun to to watch.
I think however that women are socialized to find husbands who’ll take care of them.
For me, egalitarian relationships are the best.
August 24, 2006 at 4:33 PM #33065
Hey, hey, hey!!!
I was in the reverse situation (I’m the woman), and I guess in retrospect, divorce saved me. We were homeowners, and after divorce, we had to sell the house. Bought in 2002 for $285K, sold in 2005 for $525K. I made the mortgage payments, but I had to split the value. He took his $ and bought a condo for $305K (900 square feet). Long story short, I’m holding my cash, renting, and waiting…
But HEY!!! Not all women are gold diggers that are “socialized to find husbands who’ll take care of them.”
I hope this doesn’t come across as a bitter response — it’s not intended that way at all…
August 24, 2006 at 4:36 PM #33066
“But HEY!!! Not all women are gold diggers that are “socialized to find husbands who’ll take care of them.”
QUIT LYING 🙂
August 24, 2006 at 4:43 PM #33072
PerryChase – you are opening up a can of worms with that comment. There are some women who depend on men to take care of them, there are other women (like me) who have bought property without men and did well all on their own, and there are some men who want women to take care of THEM.
August 24, 2006 at 5:33 PM #33083
Boy, there sure are alot of 6 figure incomes on this thread, are you sure you’re all putting the decimal point in the right place?
August 24, 2006 at 5:44 PM #33092
Doesn’t the comma in 50,000 make it six figures.
Right? Is my counting off ? Someone check my math.
August 24, 2006 at 5:58 PM #33099
The reason I said that about women is not because I’m a misogynist. I frequently visit my bro at his upscale townhouse complex and many of the neighbors are middle age divorcees or single professional women. Despite their well-to-do status, they resent men, yet still hope to meet the right one. Money has nothing to do with it.
I think that men care about charm and good-looks whereas women care about security. I’m not saying that either way is better — just my observation. My friend who is a sociology professor (not in San Diego) agrees with me.
August 24, 2006 at 6:08 PM #33104
If you look at it from an evolutionary standpoint, men look for a fertile female (a certain waist to hip ratio is a good indicator of fertility – Marilyn Monroe is a good example of a figure in that ratio), women look for a male who will give her offspring the best chance of success. As a human, that means a successful man who can easily provide for all of the needs of her children. Further, we both look for symmetry in face and form.
Having said all that. I did not care that my (future) husband was stacking produce when I met him. He was hot (and still is)!
August 24, 2006 at 6:09 PM #33105
A long time ago a boyfriend of a friend of mine said (about his girlfriend) : “She’s all looks and personality, and that’s it.”
It took me awhile to figure out that what was missing was depth. I think character and integrity is more important than looks, charm or being able to provide security – but if you get all four, no need to look further!
August 24, 2006 at 6:29 PM #33108
“I suppose I might *need* a man to figure out how to cash these things out.”
I know a guy who wears CostCo jeans that can help you with that.
August 24, 2006 at 5:40 PM #33087AnonymousGuest
Your BOSS is paying you an almost 6 figure income to probably not spend work hours on a forum all day. Your BOSS would also probably appreciate if you got back to work.
August 24, 2006 at 7:39 PM #33115
I have to dig deep to determine whether you’re right Perry… I would say that as a general rule, society is “structured” (for lack of a better word) in such a way that women feel that they need to “find” a man to take care of them… even if not in monetary ways, we think that we at least need a man to fix things around a house (yeah, that would be nice even for me). But I think that my personal problem with “catching” or “keeping” a man is that I don’t stroke his ego enough to make him feel needed enough… I love men though… don’t get it twisted.
In any case, to add something meaningful to the real estate discussion, I was fortunate enough to buy a condo in 1996 in West Hollywood for $75K after the previous owner had been foreclosed on (grammar?). She had paid $120k. A 37.5% decline. Boy was I lucky. I am crossing my fingers that we will see a similar decline. I hate that I’m hoping for the misfortune of others in the process, but it is what it is…
August 24, 2006 at 8:24 PM #33121bubba99Participant
you did not tell us how much they were asking for the house, or what you think is should sell for. I am guessing that you got a very good deal on the purchase, and thats why you are reluctant to back out of the deal. What was the asking price?
August 24, 2006 at 8:48 PM #33125
barnaby, I wonder too if people exaggerate their incomes, or if only people earning over $100K/year come to piggington. How much do software engineers earn anyway, assuming they are in management? I think it’s $120K max for an engineer. Don’t we have any median type of people here?
DarylK, what would you advise David to do about the house? Are you planning any layoffs over there or is his job secure?
waiting hawk, you’ve really got to go shopping with me. I bet you’re real hot, but who would know in those costco jeans?
August 24, 2006 at 9:13 PM #33133
It depends PS, right out of college most software engineers make around 50k (So far as I know). At about 8-10 years its 80-110. You can break that 120k level but you need a niche. The only way to make good money anymore is to own your own company and be successfull. Its the second part that gets most of us in trouble.
I only posted my comment because it seems too many people here are willing to throw around the 6-figure income in a most unseemly fashion. It does not matter what any one of us earns; what matters is what the median person earns and can afford. Statistics aren’t built off the few thousand engineers who have access to this website at work all day(me). Nor are they built off the illegal immigrants washing lettuce at your favorite tacqueria(lots of them). They are built by the massive interactions of the millions of people in this city (2 or so million to my knowledge) blindly going about their ways.
I’d be alot happier if this blog were frequented by a fuller cross section of society but you gotta take what you can get.
One last item, yes if you include the comma, 50,000 is indeed six digits. I am glad we got that fleshed out, I was going to loose sleep over it.
August 24, 2006 at 9:26 PM #33137DanielParticipant
“DarylK, what would you advise David to do about the house? Are you planning any layoffs over there or is his job secure?”
Either you didn’t get Daryl’s joke, or I’m not getting yours…
August 24, 2006 at 9:38 PM #33142AnonymousGuest
In todays dollars 100k salary is not very much, and it definitely doesn’t go very far in San Diego as we all know. So the term “six figure income” doesn’t really mean anything anymore.
To really be ahead of the power curve you need 150K or above salary.
August 24, 2006 at 9:22 PM #33135technovelistParticipant
Since when was a comma a digit? They must have changed that about the same time they decided Pluto wasn’t a planet any more.
As for engineers making 6 digit salaries as employees, it is indeed possible, even in “lower-paid” areas like Dallas. You do need to be very skilled and find the right employer, but some of them are willing to pay that much for someone who really knows what he is doing.
August 24, 2006 at 9:42 PM #33144
if( (“50,000”.length() == 6) == true)
// TODO figure out how to express this as code!
// goto dictionary.com
// submit “figure”
// read definition 2 && read definition 4
August 25, 2006 at 12:00 AM #33153anParticipant
There was an article recently on CNN about 6 figure income. In order to consider yourself truly making 6 figure in San Diego, you have to make around $150k/yr while in Texas, you just have to make $88k/yr. So unless he’s making over $150k, he truly isn’t making 6 figure.
August 25, 2006 at 5:36 AM #33157
It depends what you do with it (salary and passive income.) I know some people who make well into the six figures who are drowning in debt. Then, there are others with more moderate incomes who always seem to have enough, if not plenty.
The savviest people don’t talk about how much money they make – even though this seems to be a constant cocktail party topic.
August 25, 2006 at 7:41 AM #33164
Growing up, my husband and I learned that grades, sex, and money are private matters.
August 25, 2006 at 8:00 AM #33170
Who mentioned their income other than davidpeace?
August 25, 2006 at 9:14 AM #33186
I did, but not in exact terms only the general area to prove a point to Davidpeace. Otherwise, I agree with a lot of the other posters that it’s simply bad form, and frankly uncooth, to discuss incomes that way.
August 25, 2006 at 9:49 AM #33201
avidsaver, several people have mentioned incomes over the past months, saying everything from “I make 6 figures” to “I am a millionaire”.
August 25, 2006 at 9:22 AM #33189AnonymousGuest
If you were anywhere near as smart as myself you would just walk away from the deal…..oh wait….I’ve got a phone call…
August 25, 2006 at 9:56 AM #33205
hahahahaha….okay….apparently my friends got ahold of this forum and posted a lot of crap to me…
and let me clarify…my income I mentioned earlier is JOINT income….that’s what my wife and I pull in combined. And to the smart guy who said you have to make more than 150 to be 6 figures…that makes no sense. 6 figures = 6 numbers, it’s not rocket science, LOL!!!!
Anyways…thanks for all the constructive (uh) critism. We ARE buying the house, it is NOT for an investment, but so we can own a property, and have a place to live that we can call our own. (Plus is it close to family, which = free baby sitters) You are right, I posted to the WRONG site looking for validation. But I feel confident in our decision. I expect a decline, but not a catostrophic one like you guys are all expecting. 🙂 Have a good one.
August 25, 2006 at 10:02 AM #33207
Man, you really don’t get it do you? Don’t let the door hit you in the ass on the way out.
August 25, 2006 at 10:03 AM #33209VCJIMParticipant
avidsaver, will you marry me?
August 25, 2006 at 10:24 AM #33215AnonymousGuest
“a place to live that we can call our own”. You can call it your own if it makes you feel better davidpeace but in reality the bank owns it unless you pay with cash. Within one year you will probably have negative equity and all you will own is an upside down mortgage.
August 25, 2006 at 11:00 AM #33228
I can certainly understand wanting to own because I am struggling with those feelings myself. There are good things about renting but I am happier owning. I’m also willing to pay a little premium in order to own my house. Just yesterday I did a bunch of calculations on a place that may come up for sale in a neighborhood where I would like to own. We could make it work with a 6.5% fixed. However, when I subtracted tax benefits and principle payments and then added in homeowners and property tax, I was left with a number that was $1,500 more a month than I could rent the place. Further, the opportunity cost on the money I would have to put down in order to buy the property works out to $1,200 a month at 5% interest. Plus, I did not even add in the opportunity cost of the extra $1,500 I was going to have to shell out every month. This was all assuming that the property does not drop any more than the 10% it has already seen.
I have to beat myself over the head with the numbers periodically in order to resist the lure of owning.
August 25, 2006 at 11:12 AM #33232
I remember renting my first apartment. It did not make economic sense. I could have lived at home for free and munched on food, watched cable, used electricity/water/gas subsidized by my parents. But instead I chose to pay $250 per month to share a townhouse with three other guys, plus utilities, food, etc for a total of about $400 per month in 1989 dollars. Why didn’t I consider the future value of that money ? If I instead invested in Microsoft, I would have made a fortune.
If you are currently renting a SFR, doesn’t it make more economic sense to move into a 2-BR apartment or a trailer park in East county. Sure it does. Are you going to do it ? Well someone might, but most won’t.
My Point :
Everybody has their own threshold of pay(n) that they are willing to sacrifice for a place of their own, whether it’s owning or renting. davidpiece’s pay(n) threshold is just about 30-50% higher than other posters.
August 25, 2006 at 12:00 PM #33241
FormerSanDiego, the reason you pointed out is exactly why I didn’t sell and rent. It was a lifestyle decision more than an economic decision. However, I’ll wait for the right time to buy my next home and move to where I’d rather live.
Many recent immigrants I know can afford to buy houses because they lived with their parents for many years while saving up.
I’m waiting for the time when the boomers reach the age when they have to move back in with their children. Medical intervention these days lenghten lives so caregiving will be a big issue soon. My auntie in NYC is 92yo. She just moved in with my cousin’s who’s 62 and just retired. My cousin struggles daily with caring for her mom with Alzheimers.
What will such demographics do the prices of housing? It’s not so far down the road. Imagine that it’ll take 15 years for this crash to clear up. In 20 years, the early boomers will be in their 80s.
August 25, 2006 at 12:19 PM #33243
Me too … still an owner for both lifestyle and investment diversification purposes.
Regarding demographics, sounds like you are familiar with Harry Dent, who predicted a long slide in RE starting in 2011 or thereabouts, based on boomer demographics.
I want to know is what impact the group he called the “echo-boomers” are going to do. This generation is nearly as large as the boomers.
Since I am very near the null in US births between the boomers and echo boomers (I’m 39) I feel like I am almost always in a different stage than the rest of the poulation and naturally am counter-trend.
What impact do you think the echo boomers (~”gen Y”) will have on the next RE cycle ?
I think you and I are probably both between these large demographic popoulation peaks.
August 25, 2006 at 1:21 PM #33255
Harry Dent once said that the Dow would hit 40,000 by 2008 then will fall back down to 10,000 as the boomers liquidate for their retirement.
My anecdotal view of this is that the Generation Xers are already spending their early inheritance so there won’t be an investment boom when the Xers come to their most productive years. Plus the Xers will have to care for aging parents creating friction between the two generations. Boomers will use their money as carrots. The Xers are quite a happy-go-lucky lot so I don’t believe that they have the ambition of their parents. Boomers go for self-esteem and self-realization, whereas Xers are touchy-feely.
In terms of real estate I see a possible decline since people certainly won’t be able to care for the elderly while still have time and money to enjoy that second home they inherit. There’s a good chance, however, that we’ll see a big increase in immigration (which will help real estate) because we’ll need to import service workers to care for the elderly boomers and to help out the more indolent Xers. In this global world, the health of foreign economies will affect our asset prices (at least in the glamour cities).
The Gen Ys won’t have many children. They are more tech savvy and will lead the urban core renewal. They’ll want to live closer to the city so they can hang out with their friends. Gen Ys are likely to buy homes and share with friends and roommates. I see a coming rift between the globalized population of the large cities and the population of the traditional red-states.
I’m 38 and, yes, I feel like a contrarian stuck between generations. It doesn’t help that I’m the youngest of all my cousins and that many of my friends are younger than me. Depending on the situation, sometimes I feel 50yo and at other times, I feel 25yo.
August 25, 2006 at 2:23 PM #33273
I agree most of Dent’s specific and short-term forecasts are hogwash, but I like to consider the general demographic trends he outlines.
I think keeping an eye on the Gen-Y’ers will pay off. Attention on Boomers trends for investment advice seems to permeate media and will be known to all, so not much of a chance to get ahead of others in general.
I too feel really young/old sometimes. e.g. – I feel young when I play softball, but I feel really old the next morning.
August 26, 2006 at 3:17 PM #33420
Would you both agree that boomers will pull their money out of the financial markets and spend it in their later years as opposed to viewing it as something to pass down to their kids? Compared to their parents, I think most boomers will, although I could be wrong.
August 27, 2006 at 7:38 AM #33474
VCJIM – thanks for the proposal. if only davidpeace could find such validation here.
I am really learning from you all as I too am in that “null” between generations (i’m month’s away from 39). I read an article recently about the money being passed from the boomers to the next generation (Y? perhaps), but I don’t remember where…
Sorry, my post isn’t very informative, but I’m just learning.
Also, I agree about people needing to suffer the amount of pay(n) that they can tolerate. I struggle with my decision to rent where I am because I could live in a worse neighborhood or in a smaller place and save more, but I’m here because the school district is good and I feel safer…
August 27, 2006 at 9:46 AM #33498
I think that the boomers will go to their graves kicking and screaming. Medical advances will keep them alive longer than their parents. And they’ll use their money as carrots so that their children will take care of them. I don’t see how the boomers can avoid spending their savings. Boomers are already passing their money to the Gen Xers (early inheritance).
In my views the biggest demographic shift will happen in about 30-50 years when the Gen Ys come of age. We’ll have declining population at that time, unless we allow more immigration.
August 25, 2006 at 10:24 AM #33214
David – Good luck to you and your family. There are people out there who are pulling less than 50k a year deciding to buy similar priced homes, but you clearly have the income to make it through a downturn, even if it is steep. Assuming all software engineering jobs are not outsourced to India next week.
I am curious about the analysis you have done to determine that you are better off with this decision. You mentioned the emotional aspect of owning a home, and if that is the basis of the decison then I understand. But as far as the numbers are concerned, how much of a drop do you think we will see? And under the scanario you are going with, how will the numbers work out for you in 4-5 years when you sell?
I’m curious because I have a family as well, sold a home last year, want to buy another house for emotional reasons, but have decided that right now is the worst time ever to buy. When I say right now I literally mean this month and the rest of this year, not necessarily next year. The selling season is over, inventory is at record highs and not selling, prices are being slashed everywhere. Most on this board believe that this will be a prolonged downturn, and even a recession. But even the ones who don’t believe that still think the rest of this year will be a bloodbath. I sold a home near Escondido earlier this year, and in just 4 months prices in that neighborhood have dropped 10% and the whole street is for sale.
It sounds like you got a great deal, but consider that in the same way Spring 2004 was the best time ever to buy a home here because prices were going up daily and inventory was super low, this may be the worst time ever to buy.
August 25, 2006 at 12:04 PM #33242
Perry – Only someone raised in France would use the word ‘auntie’ 🙂
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