Opinions please…

[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.

[Anonymous]

WOW! There are a lot of valid statements in these threads. It is a pleasure to see folks sharing such great perspectives. Goblue, you are definitely looking in a micromarket. Birdrock is very desirable for those that like the beach area yet don’t want to be in a claustrophobic beach community like PB. A property is always only worth what someone is willing to pay for it. You have already negotiated to what you claimed to be willing to pay. The seller accepted even though they wanted more because they have heard the market speak. Now you have cold feet. That’s normal. It is the biggest financial decision most people EVER make. You really need to take your focus off of what the current owner may be coming out of it with. That is completely unfair. They have seen plenty of unrealized equity disappear. Timing a purchase for the bottom can only be confirmed in hindsight. Then it is too late if you didn’t act. This only needs to be about you, your wife, and what value you place on the property- financially and emotionally.

FINANCIALLY…I can tell you this- there is a very conservative financial advisor named Dave Ramsey. He runs sessions called “Financial Peace University”. Maybe you have heard of him. I have heard he has recently begun encouraging people to buy houses. He completely discourages debt and always suggested you should have substantial down to purchase. For a person of this philosophy to be advising “BUY” if you can…there is something to it. Check it out.

EMOTIONALLY…You have looked at enough places to know it is not so easy to find one you both like. You are tied to this one because you do really like it of what you have seen. You say you can hold out long term if value declines some short term. You will never buy if you are going to analyze it to death. So go with what you can live the most enjoyably. The questions are simple- can you afford it short and long term? Can you keep your stress to a minimum if the values drop? Do you want it? Will you enjoy it? If the answer to all these questions are YES- go for it!

Question of the hour…when is your contingency period up?

[Anonymous]

WOW! There are a lot of valid statements in these threads. It is a pleasure to see folks sharing such great perspectives. Goblue, you are definitely looking in a micromarket. Birdrock is very desirable for those that like the beach area yet don’t want to be in a claustrophobic beach community like PB. A property is always only worth what someone is willing to pay for it. You have already negotiated to what you claimed to be willing to pay. The seller accepted even though they wanted more because they have heard the market speak. Now you have cold feet. That’s normal. It is the biggest financial decision most people EVER make. You really need to take your focus off of what the current owner may be coming out of it with. That is completely unfair. They have seen plenty of unrealized equity disappear. Timing a purchase for the bottom can only be confirmed in hindsight. Then it is too late if you didn’t act. This only needs to be about you, your wife, and what value you place on the property- financially and emotionally.

FINANCIALLY…I can tell you this- there is a very conservative financial advisor named Dave Ramsey. He runs sessions called “Financial Peace University”. Maybe you have heard of him. I have heard he has recently begun encouraging people to buy houses. He completely discourages debt and always suggested you should have substantial down to purchase. For a person of this philosophy to be advising “BUY” if you can…there is something to it. Check it out.

EMOTIONALLY…You have looked at enough places to know it is not so easy to find one you both like. You are tied to this one because you do really like it of what you have seen. You say you can hold out long term if value declines some short term. You will never buy if you are going to analyze it to death. So go with what you can live the most enjoyably. The questions are simple- can you afford it short and long term? Can you keep your stress to a minimum if the values drop? Do you want it? Will you enjoy it? If the answer to all these questions are YES- go for it!

Question of the hour…when is your contingency period up?

[Anonymous]

WOW! There are a lot of valid statements in these threads. It is a pleasure to see folks sharing such great perspectives. Goblue, you are definitely looking in a micromarket. Birdrock is very desirable for those that like the beach area yet don’t want to be in a claustrophobic beach community like PB. A property is always only worth what someone is willing to pay for it. You have already negotiated to what you claimed to be willing to pay. The seller accepted even though they wanted more because they have heard the market speak. Now you have cold feet. That’s normal. It is the biggest financial decision most people EVER make. You really need to take your focus off of what the current owner may be coming out of it with. That is completely unfair. They have seen plenty of unrealized equity disappear. Timing a purchase for the bottom can only be confirmed in hindsight. Then it is too late if you didn’t act. This only needs to be about you, your wife, and what value you place on the property- financially and emotionally.

FINANCIALLY…I can tell you this- there is a very conservative financial advisor named Dave Ramsey. He runs sessions called “Financial Peace University”. Maybe you have heard of him. I have heard he has recently begun encouraging people to buy houses. He completely discourages debt and always suggested you should have substantial down to purchase. For a person of this philosophy to be advising “BUY” if you can…there is something to it. Check it out.

EMOTIONALLY…You have looked at enough places to know it is not so easy to find one you both like. You are tied to this one because you do really like it of what you have seen. You say you can hold out long term if value declines some short term. You will never buy if you are going to analyze it to death. So go with what you can live the most enjoyably. The questions are simple- can you afford it short and long term? Can you keep your stress to a minimum if the values drop? Do you want it? Will you enjoy it? If the answer to all these questions are YES- go for it!

Question of the hour…when is your contingency period up?

[Anonymous]

WOW! There are a lot of valid statements in these threads. It is a pleasure to see folks sharing such great perspectives. Goblue, you are definitely looking in a micromarket. Birdrock is very desirable for those that like the beach area yet don’t want to be in a claustrophobic beach community like PB. A property is always only worth what someone is willing to pay for it. You have already negotiated to what you claimed to be willing to pay. The seller accepted even though they wanted more because they have heard the market speak. Now you have cold feet. That’s normal. It is the biggest financial decision most people EVER make. You really need to take your focus off of what the current owner may be coming out of it with. That is completely unfair. They have seen plenty of unrealized equity disappear. Timing a purchase for the bottom can only be confirmed in hindsight. Then it is too late if you didn’t act. This only needs to be about you, your wife, and what value you place on the property- financially and emotionally.

FINANCIALLY…I can tell you this- there is a very conservative financial advisor named Dave Ramsey. He runs sessions called “Financial Peace University”. Maybe you have heard of him. I have heard he has recently begun encouraging people to buy houses. He completely discourages debt and always suggested you should have substantial down to purchase. For a person of this philosophy to be advising “BUY” if you can…there is something to it. Check it out.

EMOTIONALLY…You have looked at enough places to know it is not so easy to find one you both like. You are tied to this one because you do really like it of what you have seen. You say you can hold out long term if value declines some short term. You will never buy if you are going to analyze it to death. So go with what you can live the most enjoyably. The questions are simple- can you afford it short and long term? Can you keep your stress to a minimum if the values drop? Do you want it? Will you enjoy it? If the answer to all these questions are YES- go for it!

Question of the hour…when is your contingency period up?

[Anonymous]

WOW! There are a lot of valid statements in these threads. It is a pleasure to see folks sharing such great perspectives. Goblue, you are definitely looking in a micromarket. Birdrock is very desirable for those that like the beach area yet don’t want to be in a claustrophobic beach community like PB. A property is always only worth what someone is willing to pay for it. You have already negotiated to what you claimed to be willing to pay. The seller accepted even though they wanted more because they have heard the market speak. Now you have cold feet. That’s normal. It is the biggest financial decision most people EVER make. You really need to take your focus off of what the current owner may be coming out of it with. That is completely unfair. They have seen plenty of unrealized equity disappear. Timing a purchase for the bottom can only be confirmed in hindsight. Then it is too late if you didn’t act. This only needs to be about you, your wife, and what value you place on the property- financially and emotionally.

FINANCIALLY…I can tell you this- there is a very conservative financial advisor named Dave Ramsey. He runs sessions called “Financial Peace University”. Maybe you have heard of him. I have heard he has recently begun encouraging people to buy houses. He completely discourages debt and always suggested you should have substantial down to purchase. For a person of this philosophy to be advising “BUY” if you can…there is something to it. Check it out.

EMOTIONALLY…You have looked at enough places to know it is not so easy to find one you both like. You are tied to this one because you do really like it of what you have seen. You say you can hold out long term if value declines some short term. You will never buy if you are going to analyze it to death. So go with what you can live the most enjoyably. The questions are simple- can you afford it short and long term? Can you keep your stress to a minimum if the values drop? Do you want it? Will you enjoy it? If the answer to all these questions are YES- go for it!

Question of the hour…when is your contingency period up?

[patientrenter]

[quote=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.[/quote]

ur, I agree that you cannot simply order that the price of a specific property be lowered until it satisfies your own risk comfort level. What I am saying is that most people should be computing that comfort price level first, assuming (for safety) some depreciation, such as 30%.

Then go find the property that you like best for that price. It might be smaller than the home you’d like (if you didn’t ever have to actually pay for any of it), but it’s what you can really afford.

On the notion that house prices track with incomes over the long haul, I basically agree. However, the assumption that the deviation from the growth in incomes will be benign, or won’t last very long, is not reliable. Just as stock prices can go through lousy 20-year periods, so can house prices. We just have seen only the opposite for 20-year periods in our lifetimes, and that means we tend to assume a bad 20-year period is too unlikely to worry about. But take a look at the long Shiller indexes, and you can see that recent home prices were more inflated than at any time in recorded US history. Unwinding that over the next 20 years means it’s more likely we’ll see unusually bad returns – quite possibly net losses, after inflation.

[patientrenter]

[quote=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.[/quote]

ur, I agree that you cannot simply order that the price of a specific property be lowered until it satisfies your own risk comfort level. What I am saying is that most people should be computing that comfort price level first, assuming (for safety) some depreciation, such as 30%.

Then go find the property that you like best for that price. It might be smaller than the home you’d like (if you didn’t ever have to actually pay for any of it), but it’s what you can really afford.

On the notion that house prices track with incomes over the long haul, I basically agree. However, the assumption that the deviation from the growth in incomes will be benign, or won’t last very long, is not reliable. Just as stock prices can go through lousy 20-year periods, so can house prices. We just have seen only the opposite for 20-year periods in our lifetimes, and that means we tend to assume a bad 20-year period is too unlikely to worry about. But take a look at the long Shiller indexes, and you can see that recent home prices were more inflated than at any time in recorded US history. Unwinding that over the next 20 years means it’s more likely we’ll see unusually bad returns – quite possibly net losses, after inflation.

[patientrenter]

[quote=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.[/quote]

ur, I agree that you cannot simply order that the price of a specific property be lowered until it satisfies your own risk comfort level. What I am saying is that most people should be computing that comfort price level first, assuming (for safety) some depreciation, such as 30%.

Then go find the property that you like best for that price. It might be smaller than the home you’d like (if you didn’t ever have to actually pay for any of it), but it’s what you can really afford.

On the notion that house prices track with incomes over the long haul, I basically agree. However, the assumption that the deviation from the growth in incomes will be benign, or won’t last very long, is not reliable. Just as stock prices can go through lousy 20-year periods, so can house prices. We just have seen only the opposite for 20-year periods in our lifetimes, and that means we tend to assume a bad 20-year period is too unlikely to worry about. But take a look at the long Shiller indexes, and you can see that recent home prices were more inflated than at any time in recorded US history. Unwinding that over the next 20 years means it’s more likely we’ll see unusually bad returns – quite possibly net losses, after inflation.

[patientrenter]

[quote=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.[/quote]

ur, I agree that you cannot simply order that the price of a specific property be lowered until it satisfies your own risk comfort level. What I am saying is that most people should be computing that comfort price level first, assuming (for safety) some depreciation, such as 30%.

Then go find the property that you like best for that price. It might be smaller than the home you’d like (if you didn’t ever have to actually pay for any of it), but it’s what you can really afford.

On the notion that house prices track with incomes over the long haul, I basically agree. However, the assumption that the deviation from the growth in incomes will be benign, or won’t last very long, is not reliable. Just as stock prices can go through lousy 20-year periods, so can house prices. We just have seen only the opposite for 20-year periods in our lifetimes, and that means we tend to assume a bad 20-year period is too unlikely to worry about. But take a look at the long Shiller indexes, and you can see that recent home prices were more inflated than at any time in recorded US history. Unwinding that over the next 20 years means it’s more likely we’ll see unusually bad returns – quite possibly net losses, after inflation.

[patientrenter]

[quote=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.[/quote]

ur, I agree that you cannot simply order that the price of a specific property be lowered until it satisfies your own risk comfort level. What I am saying is that most people should be computing that comfort price level first, assuming (for safety) some depreciation, such as 30%.

Then go find the property that you like best for that price. It might be smaller than the home you’d like (if you didn’t ever have to actually pay for any of it), but it’s what you can really afford.

On the notion that house prices track with incomes over the long haul, I basically agree. However, the assumption that the deviation from the growth in incomes will be benign, or won’t last very long, is not reliable. Just as stock prices can go through lousy 20-year periods, so can house prices. We just have seen only the opposite for 20-year periods in our lifetimes, and that means we tend to assume a bad 20-year period is too unlikely to worry about. But take a look at the long Shiller indexes, and you can see that recent home prices were more inflated than at any time in recorded US history. Unwinding that over the next 20 years means it’s more likely we’ll see unusually bad returns – quite possibly net losses, after inflation.

[XBoxBoy]

goblue,

I’ve struggled with what if any opinion to offer. But you asked….

Rule 1 about La Jolla. Comps can be very deceptive. Very few houses that sell in La Jolla have good comps that are similar. Everything is different street to street, house to house. Ultimately you have to make a decision based on what you are willing to pay and how much you like the house.

With that in mind, I would not pay much attention to price per square foot. In Manhattan, it’s probably a good metric to gauge how good a deal you are getting. But in La Jolla, where a huge part of your purchase price is for the land, not the house, you would do as well to consider price for lot size. But even that is a terrible metric, because where that lot is located is tremendously important. (Never forget – Location, Location, Location. And in La Jolla, that changes block to block)

Even in Bird Rock, where most of the streets are quiet and have a tremendous sense of neighborhood, there are a few blocks that have heavy traffic and little sense of neighborhood, and should be discounted significantly because of that.

You mention wanting to see what shakes out in 9-12 months. Let me offer the opinion that not much will shake out in 9-12 months. I could be wrong, maybe this fall a lot will shake out, but my hunch is more likely 2-3 years. If you’re going to wait, get comfortable.

Interest rates are definitely the wild card in your plan. If you decide to not buy this place, who knows where interest rates will be in a year or two. I could see them as low, or even lower than they are currently, or I could see them much much higher. Both scenarios seem possible to me. (Although obviously only one will come to pass)

XBoxBoy

[XBoxBoy]

goblue,

I’ve struggled with what if any opinion to offer. But you asked….

Rule 1 about La Jolla. Comps can be very deceptive. Very few houses that sell in La Jolla have good comps that are similar. Everything is different street to street, house to house. Ultimately you have to make a decision based on what you are willing to pay and how much you like the house.

With that in mind, I would not pay much attention to price per square foot. In Manhattan, it’s probably a good metric to gauge how good a deal you are getting. But in La Jolla, where a huge part of your purchase price is for the land, not the house, you would do as well to consider price for lot size. But even that is a terrible metric, because where that lot is located is tremendously important. (Never forget – Location, Location, Location. And in La Jolla, that changes block to block)

Even in Bird Rock, where most of the streets are quiet and have a tremendous sense of neighborhood, there are a few blocks that have heavy traffic and little sense of neighborhood, and should be discounted significantly because of that.

You mention wanting to see what shakes out in 9-12 months. Let me offer the opinion that not much will shake out in 9-12 months. I could be wrong, maybe this fall a lot will shake out, but my hunch is more likely 2-3 years. If you’re going to wait, get comfortable.

Interest rates are definitely the wild card in your plan. If you decide to not buy this place, who knows where interest rates will be in a year or two. I could see them as low, or even lower than they are currently, or I could see them much much higher. Both scenarios seem possible to me. (Although obviously only one will come to pass)

XBoxBoy

[XBoxBoy]

goblue,

I’ve struggled with what if any opinion to offer. But you asked….

Rule 1 about La Jolla. Comps can be very deceptive. Very few houses that sell in La Jolla have good comps that are similar. Everything is different street to street, house to house. Ultimately you have to make a decision based on what you are willing to pay and how much you like the house.

With that in mind, I would not pay much attention to price per square foot. In Manhattan, it’s probably a good metric to gauge how good a deal you are getting. But in La Jolla, where a huge part of your purchase price is for the land, not the house, you would do as well to consider price for lot size. But even that is a terrible metric, because where that lot is located is tremendously important. (Never forget – Location, Location, Location. And in La Jolla, that changes block to block)

Even in Bird Rock, where most of the streets are quiet and have a tremendous sense of neighborhood, there are a few blocks that have heavy traffic and little sense of neighborhood, and should be discounted significantly because of that.

You mention wanting to see what shakes out in 9-12 months. Let me offer the opinion that not much will shake out in 9-12 months. I could be wrong, maybe this fall a lot will shake out, but my hunch is more likely 2-3 years. If you’re going to wait, get comfortable.

Interest rates are definitely the wild card in your plan. If you decide to not buy this place, who knows where interest rates will be in a year or two. I could see them as low, or even lower than they are currently, or I could see them much much higher. Both scenarios seem possible to me. (Although obviously only one will come to pass)

XBoxBoy

[XBoxBoy]

goblue,

I’ve struggled with what if any opinion to offer. But you asked….

Rule 1 about La Jolla. Comps can be very deceptive. Very few houses that sell in La Jolla have good comps that are similar. Everything is different street to street, house to house. Ultimately you have to make a decision based on what you are willing to pay and how much you like the house.

With that in mind, I would not pay much attention to price per square foot. In Manhattan, it’s probably a good metric to gauge how good a deal you are getting. But in La Jolla, where a huge part of your purchase price is for the land, not the house, you would do as well to consider price for lot size. But even that is a terrible metric, because where that lot is located is tremendously important. (Never forget – Location, Location, Location. And in La Jolla, that changes block to block)

Even in Bird Rock, where most of the streets are quiet and have a tremendous sense of neighborhood, there are a few blocks that have heavy traffic and little sense of neighborhood, and should be discounted significantly because of that.

You mention wanting to see what shakes out in 9-12 months. Let me offer the opinion that not much will shake out in 9-12 months. I could be wrong, maybe this fall a lot will shake out, but my hunch is more likely 2-3 years. If you’re going to wait, get comfortable.

Interest rates are definitely the wild card in your plan. If you decide to not buy this place, who knows where interest rates will be in a year or two. I could see them as low, or even lower than they are currently, or I could see them much much higher. Both scenarios seem possible to me. (Although obviously only one will come to pass)

XBoxBoy

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