Opinions please…

[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.

[patientrenter]

This is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.

For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.

Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.

I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:

1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices

or

2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.

[patientrenter]

This is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.

For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.

Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.

I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:

1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices

or

2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.

[patientrenter]

This is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.

For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.

Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.

I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:

1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices

or

2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.

[patientrenter]

This is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.

For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.

Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.

I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:

1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices

or

2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.

[patientrenter]

This is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.

For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.

Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.

I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:

1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices

or

2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.

[Coronita]

[quote=patientrenter]

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
[/quote]

If it comes to that, it won’t matter whether you’re holding onto cash or purchased a home…It’s all going to be toilet paper and everyone is screwed. The economic pecking order paradox…..When the entire economy collapses, it’s game over for everyone.

But if you’re a “borrower”, don’t worry ,because at least with this current administration, they’ll at least try to throw money will be thrown at you months after month, courtesy of every other still paying tax payer who were savers, draining them to $0 along with you 🙂 Har Har Har…

[Coronita]

[quote=patientrenter]

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
[/quote]

If it comes to that, it won’t matter whether you’re holding onto cash or purchased a home…It’s all going to be toilet paper and everyone is screwed. The economic pecking order paradox…..When the entire economy collapses, it’s game over for everyone.

But if you’re a “borrower”, don’t worry ,because at least with this current administration, they’ll at least try to throw money will be thrown at you months after month, courtesy of every other still paying tax payer who were savers, draining them to $0 along with you 🙂 Har Har Har…

[Coronita]

[quote=patientrenter]

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
[/quote]

If it comes to that, it won’t matter whether you’re holding onto cash or purchased a home…It’s all going to be toilet paper and everyone is screwed. The economic pecking order paradox…..When the entire economy collapses, it’s game over for everyone.

But if you’re a “borrower”, don’t worry ,because at least with this current administration, they’ll at least try to throw money will be thrown at you months after month, courtesy of every other still paying tax payer who were savers, draining them to $0 along with you 🙂 Har Har Har…

[Coronita]

[quote=patientrenter]

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
[/quote]

If it comes to that, it won’t matter whether you’re holding onto cash or purchased a home…It’s all going to be toilet paper and everyone is screwed. The economic pecking order paradox…..When the entire economy collapses, it’s game over for everyone.

But if you’re a “borrower”, don’t worry ,because at least with this current administration, they’ll at least try to throw money will be thrown at you months after month, courtesy of every other still paying tax payer who were savers, draining them to $0 along with you 🙂 Har Har Har…

[Coronita]

[quote=patientrenter]

That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
[/quote]

If it comes to that, it won’t matter whether you’re holding onto cash or purchased a home…It’s all going to be toilet paper and everyone is screwed. The economic pecking order paradox…..When the entire economy collapses, it’s game over for everyone.

But if you’re a “borrower”, don’t worry ,because at least with this current administration, they’ll at least try to throw money will be thrown at you months after month, courtesy of every other still paying tax payer who were savers, draining them to $0 along with you 🙂 Har Har Har…

[urbanrealtor]

PR, I like your reasoning and would like to engage you on two points.

1:
The problem with what you are saying PR is that it assumes that you can both effectively discount risk out of a successful purchase and still successfully compete as a buyer.

In my experience, achieving perfection in risk management (especially by discounting) is desirable but not practical.

If one is to drop a price in order to avoid being upside down, then in most purchases there will be another buyer who is marginally more risk tolerant.

2:
The other issue is that if, as history would suggest, home price dynamics reflect household income, then it may be rather safe to assume that values will increase in the long term. I very much agree that the boom was unsustainable but the historical trend tends to oscillate around income oriented coefficients. Those coefficients are relatively constant and those income numbers tend to increase over time. Ergo, housing tends to increase over time. This is not bullishness but an observation of visible data. Most of it has been pointed out by Rich.

[urbanrealtor]

PR, I like your reasoning and would like to engage you on two points.

1:
The problem with what you are saying PR is that it assumes that you can both effectively discount risk out of a successful purchase and still successfully compete as a buyer.

In my experience, achieving perfection in risk management (especially by discounting) is desirable but not practical.

If one is to drop a price in order to avoid being upside down, then in most purchases there will be another buyer who is marginally more risk tolerant.

2:
The other issue is that if, as history would suggest, home price dynamics reflect household income, then it may be rather safe to assume that values will increase in the long term. I very much agree that the boom was unsustainable but the historical trend tends to oscillate around income oriented coefficients. Those coefficients are relatively constant and those income numbers tend to increase over time. Ergo, housing tends to increase over time. This is not bullishness but an observation of visible data. Most of it has been pointed out by Rich.

[urbanrealtor]

PR, I like your reasoning and would like to engage you on two points.

1:
The problem with what you are saying PR is that it assumes that you can both effectively discount risk out of a successful purchase and still successfully compete as a buyer.

In my experience, achieving perfection in risk management (especially by discounting) is desirable but not practical.

If one is to drop a price in order to avoid being upside down, then in most purchases there will be another buyer who is marginally more risk tolerant.

2:
The other issue is that if, as history would suggest, home price dynamics reflect household income, then it may be rather safe to assume that values will increase in the long term. I very much agree that the boom was unsustainable but the historical trend tends to oscillate around income oriented coefficients. Those coefficients are relatively constant and those income numbers tend to increase over time. Ergo, housing tends to increase over time. This is not bullishness but an observation of visible data. Most of it has been pointed out by Rich.

[urbanrealtor]

PR, I like your reasoning and would like to engage you on two points.

1:
The problem with what you are saying PR is that it assumes that you can both effectively discount risk out of a successful purchase and still successfully compete as a buyer.

In my experience, achieving perfection in risk management (especially by discounting) is desirable but not practical.

If one is to drop a price in order to avoid being upside down, then in most purchases there will be another buyer who is marginally more risk tolerant.

2:
The other issue is that if, as history would suggest, home price dynamics reflect household income, then it may be rather safe to assume that values will increase in the long term. I very much agree that the boom was unsustainable but the historical trend tends to oscillate around income oriented coefficients. Those coefficients are relatively constant and those income numbers tend to increase over time. Ergo, housing tends to increase over time. This is not bullishness but an observation of visible data. Most of it has been pointed out by Rich.

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