Opinions please…

[george]

I’ve been closely watching $2M range homes in Rancho Santa Fe & Olivenhain (rural Encinitas)markets for the last 15 months. I’m still seeing mostly price reductions week after week. A number of the properties I’ve been watching have sold, but so far I haven’t had to kicked myself over any missed opportunities. I think the high-end market will drop another 10-20% and it will be AT LEAST 12 months before that happens. At this time, I would be very reluctant to buy anything priced at 2004, or later, levels. My guess is that we will see 2002 prices (not factoring in inflation) by spring of 2011. Keep in mind that if a person buys now with 20% down and prices drop even 10% they have lost 50% of their investment. A previous poster made the point about the huge home equity gains, and easy jumbo loans in the past. These forces are no longer present to drive upgrades to the higher end market and it takes a long time for most people to save up for a down payment (or to make up for a investment loss) if they have to do it the old fashined way of banking their excess dollars & coins the end of the month.

[Rt.66]

[quote=patientrenter]No one has a crystal ball, so it’s a question of odds. With that, here are my thoughts.

If you want to give yourself the best odds of the best financial outcome, then you should wait. All the negative factors that hit the lower end of the SD market haven’t percolated through to the high end yet. (A few people here think they never will but, as I said, it’s a question of judging the odds…)

Psychologically, it’s a completely different story. Most people who bought houses in the last few years paid with what I will call “Monopoly money”. That’s why they could bring themselves to write a check for $1 million for a dumpy place. For every 100 people who wrote that check, there were only a few who had actually saved most of that money by spending that much less than their net earnings stripped of capital gains. Most of the others borrowed most of the money, expecting to pay the loans back painlessly from a higher future sale price, or they used prior gains from previous home price appreciation (“equity”). It was therefore easy money, and they spent it more freely.

Based on your comments, I am guessing that you have a large pot of money for this next home purchase, and a lot of that money came for substantial prior home price appreciation. Each $1 of your housing pot didn’t come from a $1 saved by scouring the supermarket shelves for good deals, or taking cheap vacations, or some other self-denial. It came from high previous asset price appreciation, which was pretty painless, so it “feels” OK to spend a lot of it without counting the pennies.

With that (cheap, and worth every every penny) psycholgical profile, I’d say that you should just find a place you like, and make sure that a loss of 30% of the price would not exceed your prior gains.[/quote]

Great Post, it deserves its own thread and discussion. I vote you make a Monopoly money thread.

[Rt.66]

[quote=patientrenter]No one has a crystal ball, so it’s a question of odds. With that, here are my thoughts.

If you want to give yourself the best odds of the best financial outcome, then you should wait. All the negative factors that hit the lower end of the SD market haven’t percolated through to the high end yet. (A few people here think they never will but, as I said, it’s a question of judging the odds…)

Psychologically, it’s a completely different story. Most people who bought houses in the last few years paid with what I will call “Monopoly money”. That’s why they could bring themselves to write a check for $1 million for a dumpy place. For every 100 people who wrote that check, there were only a few who had actually saved most of that money by spending that much less than their net earnings stripped of capital gains. Most of the others borrowed most of the money, expecting to pay the loans back painlessly from a higher future sale price, or they used prior gains from previous home price appreciation (“equity”). It was therefore easy money, and they spent it more freely.

Based on your comments, I am guessing that you have a large pot of money for this next home purchase, and a lot of that money came for substantial prior home price appreciation. Each $1 of your housing pot didn’t come from a $1 saved by scouring the supermarket shelves for good deals, or taking cheap vacations, or some other self-denial. It came from high previous asset price appreciation, which was pretty painless, so it “feels” OK to spend a lot of it without counting the pennies.

With that (cheap, and worth every every penny) psycholgical profile, I’d say that you should just find a place you like, and make sure that a loss of 30% of the price would not exceed your prior gains.[/quote]

Great Post, it deserves its own thread and discussion. I vote you make a Monopoly money thread.

[Rt.66]

[quote=patientrenter]No one has a crystal ball, so it’s a question of odds. With that, here are my thoughts.

If you want to give yourself the best odds of the best financial outcome, then you should wait. All the negative factors that hit the lower end of the SD market haven’t percolated through to the high end yet. (A few people here think they never will but, as I said, it’s a question of judging the odds…)

Psychologically, it’s a completely different story. Most people who bought houses in the last few years paid with what I will call “Monopoly money”. That’s why they could bring themselves to write a check for $1 million for a dumpy place. For every 100 people who wrote that check, there were only a few who had actually saved most of that money by spending that much less than their net earnings stripped of capital gains. Most of the others borrowed most of the money, expecting to pay the loans back painlessly from a higher future sale price, or they used prior gains from previous home price appreciation (“equity”). It was therefore easy money, and they spent it more freely.

Based on your comments, I am guessing that you have a large pot of money for this next home purchase, and a lot of that money came for substantial prior home price appreciation. Each $1 of your housing pot didn’t come from a $1 saved by scouring the supermarket shelves for good deals, or taking cheap vacations, or some other self-denial. It came from high previous asset price appreciation, which was pretty painless, so it “feels” OK to spend a lot of it without counting the pennies.

With that (cheap, and worth every every penny) psycholgical profile, I’d say that you should just find a place you like, and make sure that a loss of 30% of the price would not exceed your prior gains.[/quote]

Great Post, it deserves its own thread and discussion. I vote you make a Monopoly money thread.

[Rt.66]

[quote=patientrenter]No one has a crystal ball, so it’s a question of odds. With that, here are my thoughts.

If you want to give yourself the best odds of the best financial outcome, then you should wait. All the negative factors that hit the lower end of the SD market haven’t percolated through to the high end yet. (A few people here think they never will but, as I said, it’s a question of judging the odds…)

Psychologically, it’s a completely different story. Most people who bought houses in the last few years paid with what I will call “Monopoly money”. That’s why they could bring themselves to write a check for $1 million for a dumpy place. For every 100 people who wrote that check, there were only a few who had actually saved most of that money by spending that much less than their net earnings stripped of capital gains. Most of the others borrowed most of the money, expecting to pay the loans back painlessly from a higher future sale price, or they used prior gains from previous home price appreciation (“equity”). It was therefore easy money, and they spent it more freely.

Based on your comments, I am guessing that you have a large pot of money for this next home purchase, and a lot of that money came for substantial prior home price appreciation. Each $1 of your housing pot didn’t come from a $1 saved by scouring the supermarket shelves for good deals, or taking cheap vacations, or some other self-denial. It came from high previous asset price appreciation, which was pretty painless, so it “feels” OK to spend a lot of it without counting the pennies.

With that (cheap, and worth every every penny) psycholgical profile, I’d say that you should just find a place you like, and make sure that a loss of 30% of the price would not exceed your prior gains.[/quote]

Great Post, it deserves its own thread and discussion. I vote you make a Monopoly money thread.

[Rt.66]

[quote=patientrenter]No one has a crystal ball, so it’s a question of odds. With that, here are my thoughts.

If you want to give yourself the best odds of the best financial outcome, then you should wait. All the negative factors that hit the lower end of the SD market haven’t percolated through to the high end yet. (A few people here think they never will but, as I said, it’s a question of judging the odds…)

Psychologically, it’s a completely different story. Most people who bought houses in the last few years paid with what I will call “Monopoly money”. That’s why they could bring themselves to write a check for $1 million for a dumpy place. For every 100 people who wrote that check, there were only a few who had actually saved most of that money by spending that much less than their net earnings stripped of capital gains. Most of the others borrowed most of the money, expecting to pay the loans back painlessly from a higher future sale price, or they used prior gains from previous home price appreciation (“equity”). It was therefore easy money, and they spent it more freely.

Based on your comments, I am guessing that you have a large pot of money for this next home purchase, and a lot of that money came for substantial prior home price appreciation. Each $1 of your housing pot didn’t come from a $1 saved by scouring the supermarket shelves for good deals, or taking cheap vacations, or some other self-denial. It came from high previous asset price appreciation, which was pretty painless, so it “feels” OK to spend a lot of it without counting the pennies.

With that (cheap, and worth every every penny) psycholgical profile, I’d say that you should just find a place you like, and make sure that a loss of 30% of the price would not exceed your prior gains.[/quote]

Great Post, it deserves its own thread and discussion. I vote you make a Monopoly money thread.

[Coronita]

[quote=goblue]
3. Flu – I grew up in NY, but I have lived in different areas of CA and have always liked SD the best. No more haggling on the house as they already accepted my offer and that was a struggle in itself. For us, due to time contraints it is either take this one by tommorow (of course I have 17 days to walk away after start of escrow) or start looking for another rental.
[/quote]

Well, then it seems like you made up your mind. Welcome to SD…Just check what the appraisal comes in at. If it’s lower than what you paid, you might be able to negotiate again at that point. Considering you had some appreciation on your previous home, I don’t see a problem if your wife really likes this home. Money is money. I don’t check when someone hands me a bill whether it can from 40 hours of work or from capital appreciation personally. It pretty much all looks the same to me.

I would concur with flyer’s opinion. Life it too short.. You seem to be in a different league where money isn’t a primary “issue”.

Save a lot of money? What for? ..So that if you get hit by a bus, you can subsidize GM/Chrysler/AIG/BAC/C or “spread the wealth” back to irresponsible people that overleveraged and clamouring for a financial bailout? Enjoy your home. Might as well enjoy what you earned (sometimes).

[Coronita]

[quote=goblue]
3. Flu – I grew up in NY, but I have lived in different areas of CA and have always liked SD the best. No more haggling on the house as they already accepted my offer and that was a struggle in itself. For us, due to time contraints it is either take this one by tommorow (of course I have 17 days to walk away after start of escrow) or start looking for another rental.
[/quote]

Well, then it seems like you made up your mind. Welcome to SD…Just check what the appraisal comes in at. If it’s lower than what you paid, you might be able to negotiate again at that point. Considering you had some appreciation on your previous home, I don’t see a problem if your wife really likes this home. Money is money. I don’t check when someone hands me a bill whether it can from 40 hours of work or from capital appreciation personally. It pretty much all looks the same to me.

I would concur with flyer’s opinion. Life it too short.. You seem to be in a different league where money isn’t a primary “issue”.

Save a lot of money? What for? ..So that if you get hit by a bus, you can subsidize GM/Chrysler/AIG/BAC/C or “spread the wealth” back to irresponsible people that overleveraged and clamouring for a financial bailout? Enjoy your home. Might as well enjoy what you earned (sometimes).

[Coronita]

[quote=goblue]
3. Flu – I grew up in NY, but I have lived in different areas of CA and have always liked SD the best. No more haggling on the house as they already accepted my offer and that was a struggle in itself. For us, due to time contraints it is either take this one by tommorow (of course I have 17 days to walk away after start of escrow) or start looking for another rental.
[/quote]

Well, then it seems like you made up your mind. Welcome to SD…Just check what the appraisal comes in at. If it’s lower than what you paid, you might be able to negotiate again at that point. Considering you had some appreciation on your previous home, I don’t see a problem if your wife really likes this home. Money is money. I don’t check when someone hands me a bill whether it can from 40 hours of work or from capital appreciation personally. It pretty much all looks the same to me.

I would concur with flyer’s opinion. Life it too short.. You seem to be in a different league where money isn’t a primary “issue”.

Save a lot of money? What for? ..So that if you get hit by a bus, you can subsidize GM/Chrysler/AIG/BAC/C or “spread the wealth” back to irresponsible people that overleveraged and clamouring for a financial bailout? Enjoy your home. Might as well enjoy what you earned (sometimes).

[Coronita]

[quote=goblue]
3. Flu – I grew up in NY, but I have lived in different areas of CA and have always liked SD the best. No more haggling on the house as they already accepted my offer and that was a struggle in itself. For us, due to time contraints it is either take this one by tommorow (of course I have 17 days to walk away after start of escrow) or start looking for another rental.
[/quote]

Well, then it seems like you made up your mind. Welcome to SD…Just check what the appraisal comes in at. If it’s lower than what you paid, you might be able to negotiate again at that point. Considering you had some appreciation on your previous home, I don’t see a problem if your wife really likes this home. Money is money. I don’t check when someone hands me a bill whether it can from 40 hours of work or from capital appreciation personally. It pretty much all looks the same to me.

I would concur with flyer’s opinion. Life it too short.. You seem to be in a different league where money isn’t a primary “issue”.

Save a lot of money? What for? ..So that if you get hit by a bus, you can subsidize GM/Chrysler/AIG/BAC/C or “spread the wealth” back to irresponsible people that overleveraged and clamouring for a financial bailout? Enjoy your home. Might as well enjoy what you earned (sometimes).

[Coronita]

[quote=goblue]
3. Flu – I grew up in NY, but I have lived in different areas of CA and have always liked SD the best. No more haggling on the house as they already accepted my offer and that was a struggle in itself. For us, due to time contraints it is either take this one by tommorow (of course I have 17 days to walk away after start of escrow) or start looking for another rental.
[/quote]

Well, then it seems like you made up your mind. Welcome to SD…Just check what the appraisal comes in at. If it’s lower than what you paid, you might be able to negotiate again at that point. Considering you had some appreciation on your previous home, I don’t see a problem if your wife really likes this home. Money is money. I don’t check when someone hands me a bill whether it can from 40 hours of work or from capital appreciation personally. It pretty much all looks the same to me.

I would concur with flyer’s opinion. Life it too short.. You seem to be in a different league where money isn’t a primary “issue”.

Save a lot of money? What for? ..So that if you get hit by a bus, you can subsidize GM/Chrysler/AIG/BAC/C or “spread the wealth” back to irresponsible people that overleveraged and clamouring for a financial bailout? Enjoy your home. Might as well enjoy what you earned (sometimes).

[urbanrealtor]

[quote=SD Realtor]I believe that we will indeed see continued depreciation in the high end market. The question is how much. My wife and I like Birdrock a lot and back in 02 we toyed with the idea of moving there and regretfully did not.

To be honest I think you are overpaying for the home however you are purchasing smack in the middle of a spring rally. if you are intending on holding for 10 years like you implied I tend to think that you will have an opportunity to not be underwater at some point in that timespan. If financial considerations are the only factor then it is a no brainer, do not buy. Only you can measure the decision of lifestyle verses financials. You already mentioned that your current rent is higher then what this payment will be. Did you include property tax as well?

I will tell you that Birdrock is a great place to live. I will also tell you that other opportunities will arise but you will have to be patient. There are always more homes that come along, however the good ones seem to not come along to often. If you are trying to guess what the bottom will be for la jolla and Birdrock…hard to say…right now it is seeing more demand then in the past year or two but I think another 10 to 20 percent is not impossible iF things really crap out.[/quote]

Dammit.
I hate when Adam says what I was thinking faster and better than I did.

Also, bear in mind that the product in questions here only has to drop a small amount in asking to create effective demand (as your story illustrates).
This is very different than the areas I focus on where a drop of 40-60% from peak is often required to generate interest.

Even if you have to sell suddenly in the next 2 years, it is not clear to me that you would be looking at such a large loss (relatively speaking). Do bear in mind that these are not interchangeable goods (and therefore not a “perfect” market in an econometric sense). Also, timing the absolute bottom for your particular micro market is the kind of exercise that often ends up leading to a lobotomy.

This is a fancy way of saying that if you like an item and it is affordable and cheap (relative to its market niche), then market timing becomes more of a game than an actual strategy.

My two bits.

[urbanrealtor]

[quote=SD Realtor]I believe that we will indeed see continued depreciation in the high end market. The question is how much. My wife and I like Birdrock a lot and back in 02 we toyed with the idea of moving there and regretfully did not.

To be honest I think you are overpaying for the home however you are purchasing smack in the middle of a spring rally. if you are intending on holding for 10 years like you implied I tend to think that you will have an opportunity to not be underwater at some point in that timespan. If financial considerations are the only factor then it is a no brainer, do not buy. Only you can measure the decision of lifestyle verses financials. You already mentioned that your current rent is higher then what this payment will be. Did you include property tax as well?

I will tell you that Birdrock is a great place to live. I will also tell you that other opportunities will arise but you will have to be patient. There are always more homes that come along, however the good ones seem to not come along to often. If you are trying to guess what the bottom will be for la jolla and Birdrock…hard to say…right now it is seeing more demand then in the past year or two but I think another 10 to 20 percent is not impossible iF things really crap out.[/quote]

Dammit.
I hate when Adam says what I was thinking faster and better than I did.

Also, bear in mind that the product in questions here only has to drop a small amount in asking to create effective demand (as your story illustrates).
This is very different than the areas I focus on where a drop of 40-60% from peak is often required to generate interest.

Even if you have to sell suddenly in the next 2 years, it is not clear to me that you would be looking at such a large loss (relatively speaking). Do bear in mind that these are not interchangeable goods (and therefore not a “perfect” market in an econometric sense). Also, timing the absolute bottom for your particular micro market is the kind of exercise that often ends up leading to a lobotomy.

This is a fancy way of saying that if you like an item and it is affordable and cheap (relative to its market niche), then market timing becomes more of a game than an actual strategy.

My two bits.

[urbanrealtor]

[quote=SD Realtor]I believe that we will indeed see continued depreciation in the high end market. The question is how much. My wife and I like Birdrock a lot and back in 02 we toyed with the idea of moving there and regretfully did not.

To be honest I think you are overpaying for the home however you are purchasing smack in the middle of a spring rally. if you are intending on holding for 10 years like you implied I tend to think that you will have an opportunity to not be underwater at some point in that timespan. If financial considerations are the only factor then it is a no brainer, do not buy. Only you can measure the decision of lifestyle verses financials. You already mentioned that your current rent is higher then what this payment will be. Did you include property tax as well?

I will tell you that Birdrock is a great place to live. I will also tell you that other opportunities will arise but you will have to be patient. There are always more homes that come along, however the good ones seem to not come along to often. If you are trying to guess what the bottom will be for la jolla and Birdrock…hard to say…right now it is seeing more demand then in the past year or two but I think another 10 to 20 percent is not impossible iF things really crap out.[/quote]

Dammit.
I hate when Adam says what I was thinking faster and better than I did.

Also, bear in mind that the product in questions here only has to drop a small amount in asking to create effective demand (as your story illustrates).
This is very different than the areas I focus on where a drop of 40-60% from peak is often required to generate interest.

Even if you have to sell suddenly in the next 2 years, it is not clear to me that you would be looking at such a large loss (relatively speaking). Do bear in mind that these are not interchangeable goods (and therefore not a “perfect” market in an econometric sense). Also, timing the absolute bottom for your particular micro market is the kind of exercise that often ends up leading to a lobotomy.

This is a fancy way of saying that if you like an item and it is affordable and cheap (relative to its market niche), then market timing becomes more of a game than an actual strategy.

My two bits.

[urbanrealtor]

[quote=SD Realtor]I believe that we will indeed see continued depreciation in the high end market. The question is how much. My wife and I like Birdrock a lot and back in 02 we toyed with the idea of moving there and regretfully did not.

To be honest I think you are overpaying for the home however you are purchasing smack in the middle of a spring rally. if you are intending on holding for 10 years like you implied I tend to think that you will have an opportunity to not be underwater at some point in that timespan. If financial considerations are the only factor then it is a no brainer, do not buy. Only you can measure the decision of lifestyle verses financials. You already mentioned that your current rent is higher then what this payment will be. Did you include property tax as well?

I will tell you that Birdrock is a great place to live. I will also tell you that other opportunities will arise but you will have to be patient. There are always more homes that come along, however the good ones seem to not come along to often. If you are trying to guess what the bottom will be for la jolla and Birdrock…hard to say…right now it is seeing more demand then in the past year or two but I think another 10 to 20 percent is not impossible iF things really crap out.[/quote]

Dammit.
I hate when Adam says what I was thinking faster and better than I did.

Also, bear in mind that the product in questions here only has to drop a small amount in asking to create effective demand (as your story illustrates).
This is very different than the areas I focus on where a drop of 40-60% from peak is often required to generate interest.

Even if you have to sell suddenly in the next 2 years, it is not clear to me that you would be looking at such a large loss (relatively speaking). Do bear in mind that these are not interchangeable goods (and therefore not a “perfect” market in an econometric sense). Also, timing the absolute bottom for your particular micro market is the kind of exercise that often ends up leading to a lobotomy.

This is a fancy way of saying that if you like an item and it is affordable and cheap (relative to its market niche), then market timing becomes more of a game than an actual strategy.

My two bits.

[Author]

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