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bearishgurl.
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January 17, 2013 at 5:32 PM #20461January 17, 2013 at 11:30 PM #757934
flyer
ParticipantInteresting–er, but not really too surprising, especially for those who have lived here for quite awhile.
Regarding the 20-24 age bracket and beyond, this stat reflects a trend we’ve been seeing for quite awhile also, since we, and lots of people we know have been buying real estate here for years, not only as investment properties, but for our kids and other family members.
Unless I missed it, the article didn’t distinguish between condos, SFH’s, or zip codes, so I’m guessing the stats are countywide, and include both condos and SFH’s.
Overall, perhaps another indication of an increasingly tight market, and ever-escalating pricing the majority of young people, and future buyers in general may face in San Diego in years to come.
January 18, 2013 at 12:36 PM #757974earlyretirement
ParticipantYeah Flu. I guess we’ve just heard so many years after the bubble burst about all the negative equity in San Diego County that you get stuck into thinking about that side of it.
My buddy that lives in Lemon Grove mentioned that many of the people there are older and have owned their houses forever and long since paid off. Same as in parts of Point Loma and other neighborhoods.
Property here in San Diego used to be affordable. I just figured that more people played the home equity ATM machine game.
No, I didn’t see a breakdown of SFH’s, condos, etc. I assume it’s countywide.
January 18, 2013 at 1:48 PM #757977bearishgurl
Participant[quote=earlyretirement]Yeah Flu. I guess we’ve just heard so many years after the bubble burst about all the negative equity in San Diego County that you get stuck into thinking about that side of it.
My buddy that lives in Lemon Grove mentioned that many of the people there are older and have owned their houses forever and long since paid off. Same as in parts of Point Loma and other neighborhoods.
Property here in San Diego used to be affordable. I just figured that more people played the home equity ATM machine game.
No, I didn’t see a breakdown of SFH’s, condos, etc. I assume it’s countywide.[/quote]
ER, for the longtime-resident over-55 crowd in CA, it wasn’t worth it for a lot of them to keep moving up to a bigger house. They felt they would have been eventually taxed out of it. The reason there are so many paid-off homes is because the assessment on them is so low.
If a long-owned CA property is only assessed at $34K this year, next year it will be assessed at $34,680. $346.80 would represent the annual “ad valoream” portion of their tax (acc to Prop 13) plus fees for local services and voter approved bonds. Their TOTAL TAX BILL for the year is likely $385 to $420!
IOW, 2% from “almost nothing” = “almost nothing” 🙂
In addition, most of LG (your “buddy’s” town) has awesome long lots, many with 80+ yo trees!
If I had the good fortune of owning a CA property in a coastal county with these benefits attached to it, I would never give it up. Why would anyone? It doesn’t matter how much money you have. If you don’t want to live there year around anymore, buy a vacation home in another county/state! Or go live in your RV part of the year.
The “home equity ATM machine game” was played primarily by Gen X-ers and very late boomers (born ~1962 or after).
Boomers and generations prior to them don’t have the same values as X-ers and beyond, thus their daily needs and wants aren’t as great unless they are actually “wealthy.” IOW, the older generations are more used to and inclined to live within their means.
January 18, 2013 at 2:14 PM #757978ParticipantI forgot to add that 99% of the “paid-off” properties in CA lie in areas which are NOT FAVORED by or UNAFFORDABLE to the younger, family-raising set (read: OLDer areas).
The reason why you have been exposed to only the “over-indebted homeowner” crowd is likely because you have never lived in any micro-areas of CA where the overall indebtedness is low, ER ;=].
Nothing wrong with that, but just sayin’ …
January 18, 2013 at 2:47 PM #757980The-Shoveler
ParticipantIMO with rates this low, it only makes sense to have a paid off place if you are completely retired (well at least if you have some self control with spending etc..)
But that’s just my opinion.
maybe BG is correct, maybe 21% represents for the most part the completely retired.
January 18, 2013 at 3:38 PM #757981ParticipantZillow, which typically analyzes negative home equity, switched gears this time to look at the share of homeowners with no mortgage. This is an important indicator because it points out a group of homeowners who may be more flexible than people with mortgages in putting their homes on the market, said Stan Humphries, chief economist at Zillow.
“By determining where these homeowners are located, we can also gain insight into potential inventory and demand in those areas,” Humphries said….
Several factors help explain an area’s mortgage-free rate. Obvious ones include the median age of homeowners: People 65 to 74 are the most likely to have no home-loan debt because they’ve had enough time to pay off their mortgages.
Even if every local agent/broker went door-to-door in their older “farm areas” to assess how many senior-citizens wanted to sell, I don’t see them getting very many listings, if any at all.
Most will never sell … they will simply leave the property to their estate, so their heir(s) can decide if they want to keep it “in the family” (individually or collectively) and thus inherit the old, low assessment.
As long as Props 58/193 remain “on the books” in CA, the bulk of these properties won’t change hands (out of the family).
I really don’t see a lot of current “demand” for these properties, anyway … at least not in the areas more than 2 mi from the beach.
The current “family-raising” set of buyers doesn’t want them. Largish lot aside, the floor plans of these seniors’ houses don’t necessarily “flow” and most have “dated” features.
The younger set would rather line up to bid on the over-taxed, over-indebted properties situated on miniscule lots.
I’m not trying to be facetious here. It’s the truth :=0
However, the Zillow analysis also showed that nearly 35 percent of homeowners nationwide in the 20-24 category had no mortgage. The share in San Diego County is 42 percent.
Housing analysts said parents with enough means are likely helping these young adults take advantage of relatively low housing prices. They may be giving money or extending private loans to their children.
Of course, the “20-24 year-old” set is too young to have graduated from college and become established in a career. Obviously, parents/grandparents are paying cash for homes and then deeding them to their children. Or giving them a long-owned home that used to be one of their rentals. Even if the parents are extending “private loans” to their children, their lawyers would advise them to file trust deeds on those loans. Since there were no TD’s recorded in the UT survey, then they were all-cash sales or intra-family transfers. And trust me when I say that parents who can afford to do this have lawyers chained to their ankles 🙂
The share of kids whose parents bought them a home in SD is higher because they are more unaffordable here than other parts of the nation. Local parents could have also deeded their kids a SFR or condo to live in while attending college so they would be less inclined to leave the area after graduation in search of work ;=]
In decades past and currently in the “flyover states,” it was/is not uncommon for 20-24 year-olds to purchase their first home (yes, even in SD). But the type of homes they purchase(d) on their own are NOT what the typical families headed by a Gen Y would want to live in today, NOR were/are they located in areas that this buyer-group would be even remotely interested in.
Sorry if I sound like a broken record. I don’t hate Gen Y. My kids are Gen Y :=D
January 18, 2013 at 3:52 PM #757982ParticipantBG, I think you’re right that probably a fairly large percentage of the homes that are paid off are in “older” areas.
Of course, those who purchased homes here many years ago most likely have homes that are paid off, but, in general, it would still be possible, even for those who bought as recently as the late 80’s and 90’s, when property was much more “affordable.”
For example, you could purchase a SFH in CV for under $200K during in that time period. Homes that are now $1M++ in LJ, Sunset Cliffs and Point Loma, Del Mar, etc. were not much more.
Just using my family and friends as reference points–along with the great areas in east and south county–there still seems to be quite a lot of interest in “older” areas such as Del Mar, LJ, Point Loma, Sunset Cliffs, RSF, etc., by the current crop of buyers.
Many of the folks in those areas also own their homes free and clear, so it would seem the distribution is pretty much countywide.
January 18, 2013 at 4:16 PM #757984Participant[quote=flyer]BG, I think you’re right that probably a fairly large percentage of the homes that are paid off are in “older” areas.
Of course, those who purchased homes here many years ago most likely have homes that are paid off, but, in general, it would still be possible, even for those who bought as recently as the late 80’s and 90’s, when property was much more “affordable.”
For example, you could purchase a SFH in CV for under $200K during in that time period. Homes that are now $1M++ in LJ, Sunset Cliffs and Point Loma, Del Mar, etc. were not much more.
Just using my family and friends as reference points–along with the great areas in east and south county–there still seems to be quite a lot of interest in “older” areas such as Del Mar, LJ, Point Loma, Sunset Cliffs, RSF, etc., by the current crop of buyers.
Many of the folks in those areas also own their homes free and clear, so it would seem the distribution is pretty much countywide.[/quote]
Yes, flyer, I used the term “2 mi from the beach” to denote that those properties situated within that parameter, regardless of age, are desirable to all age groups, and, regardless of initial cost, have more owner-residents “well-heeled enough” to pay all cash or retire their mortgages early. And I have posted before that I saw two listings (cosmetic fixers) situated on 1/2 AC+ lots located in your neck of the woods (Rancho Santa Fe) for $277K and $336K as late as 1994.
Bargains abounded in Coastal SD County RE (mostly cosmetic and heavy fixers) as late as 1997 in most desirable areas of SD County and as late as 2002 in a few areas. I observed a few heavy (structural) view-fixers get snapped up for cash in 92106 (Fleetridge, Roseville and LaPlaya) between 2001-2002.
I agree that it is entirely possible for a buyer from the early nineties to have retired their mortgage(s).
January 18, 2013 at 4:25 PM #757986
CoronitaParticipantI don’t get the fascination in today’s environment with the desire to pay a primary home off early, especially for someone who is young that has still a lot of earning potential and can afford to take risks and still recover.
Economic situation changes, and so does one’s strategy. Maybe decades ago when mortgage rates were at the bendover 10+% rate, there was an incentive to pay off early…But look around. Mortgage rates are 2.5% for 15 years fixed, 3.375% for 30 years on a primary. Equity in primary home is pretty dead (at least until you move out or move up)…In this current environment, why do you want your money just to still there doing nothing?
Phillip Morris pays a 3.4% dividend, AN probably has a few recommendations on dividend stocks that do over 10%, and even the sucky Intel will be paying close to 5% dividend (though, it’s still a crappy company)…And these rates won’t ever change. Someone who is well qualified and who can take advantage of this. Hell, you probably can get more than 3% by buying and selling crap on craigslist.
Paying off early is sooooo old school. Hell, I was part of that old school of thinking. Not so much anymore.
January 18, 2013 at 4:31 PM #757990Participant[quote=flu]I don’t get the fascination in today’s environment with the desire to pay a primary home off early, especially for someone who is young that has still a lot of earning potential and can afford to take risks and still recover.
Economic situation changes, and so does one’s strategy. Maybe decades ago when mortgage rates were at the bendover 10+% rate, there was an incentive to pay off early…But look around. Mortgage rates are 2.5% for 15 years fixed, 3.375% for 30 years on a primary. Equity in primary home is pretty dead (at least until you move out or move up)…In this current environment, why do you want your money just to still there doing nothing?
Phillip Morris pays a 3.4% dividend, AN probably has a few recommendations on dividend stocks that do over 10%, and even the sucky Intel will be paying close to 5% dividend (though, it’s still a crappy company)…And these rates won’t ever change. Someone who is well qualified and who can take advantage of this. Hell, you probably can get more than 3% by buying and selling crap on craigslist.
Paying off early is sooooo old school. Hell, I was part of that old school of thinking. Not so much anymore.[/quote]
I agree. At today’s rates, there’s not much incentive to pay it off … even if/when you are able to.
The majority of SD’s current crop of senior-citizen homeowners paid their properties off in the seventies/eighties (20-30 yrs after SD’s postwar building boom).
January 18, 2013 at 4:36 PM #757987Participant[quote=bearishgurl]I forgot to add that 99% of the “paid-off” properties in CA lie in areas which are NOT FAVORED by or UNAFFORDABLE to the younger, family-raising set (read: OLDer areas).
The reason why you have been exposed to only the “over-indebted homeowner” crowd is likely because you have never lived in any micro-areas of CA where the overall indebtedness is low, ER ;=].
Nothing wrong with that, but just sayin’ …[/quote]
Thanks for the good points BG. Yep, you’re absolutely right. I’ve never lived or bought property in California prior to 2011 so I wasn’t exposed to any of this. Most of the exposure I had was watching friends or former classmates buy properties they apparently couldn’t afford. Or that they could afford and just milk the equity out of them. (None of them live in San Diego anymore).
And I LOVE LOVE LOVE Prop 13!
[quote=The-Shoveler]IMO with rates this low, it only makes sense to have a paid off place if you are completely retired (well at least if you have some self control with spending etc..)
But that’s just my opinion.
maybe BG is correct, maybe 21% represents for the most part the completely retired.[/quote]
The Shoveler. I agree it really makes sense to have a paid off place if you’re completely retired. But even being semi-retired, I love the feeling of having my place paid off. I know it’s super conservative to have properties paid off and not to have it leveraged but I’ve purchased several properties and waited until I had the funds to purchase them. In several parts of the world, mortgages either don’t exist or they are extremely expensive to finance so in many parts of the world people buy with cash.
Americans are VERY fortunate (and spoiled) with these super low interest rates and the ability to pay over 15-30 years.
[quote=flu]I don’t get the fascination in today’s environment with the desire to pay a primary home off early, especially for someone who is young that has still a lot of earning potential and can afford to take risks and still recover.
In this current environment, why do you want your money just to still there doing nothing?
Paying off early is sooooo old school. Hell, I was part of that old school of thinking. Not so much anymore.[/quote]
Flu, definitely I can see your point and chain of thought. I agree in this very low interest rate environment many want to take on leverage and debt. But there is a segment of the population out there that is already well exposed to the stock market and other investments.
Absolutely no need to hit “home runs” or take on really any risk at all. I know several people like this. They don’t need to take on any leverage whatsoever.
January 18, 2013 at 4:46 PM #757994ParticipantI find it strange that the local media is just now deciding to discuss this issue. For the last 30 years, I have been well-aware of the magnitude of free-and-clear properties here in SD County. But I have always lived in areas which were filled with much more than 21% of these types of owners (read: OLDer areas).
I think the UT is trying to put two Gen Y’s heads together to scare up a story on how to increase SD County’s MLS inventory, lol.
It won’t work.
January 18, 2013 at 4:49 PM #757995Participant[quote=flu]I don’t get the fascination in today’s environment with the desire to pay a primary home off early, especially for someone who is young that has still a lot of earning potential and can afford to take risks and still recover.
Economic situation changes, and so does one’s strategy. Maybe decades ago when mortgage rates were at the bendover 10+% rate, there was an incentive to pay off early…But look around. Mortgage rates are 2.5% for 15 years fixed, 3.375% for 30 years on a primary. Equity in primary home is pretty dead (at least until you move out or move up)…In this current environment, why do you want your money just to still there doing nothing?
Phillip Morris pays a 3.4% dividend, AN probably has a few recommendations on dividend stocks that do over 10%, and even the sucky Intel will be paying close to 5% dividend (though, it’s still a crappy company)…And these rates won’t ever change. Someone who is well qualified and who can take advantage of this. Hell, you probably can get more than 3% by buying and selling crap on craigslist.
Paying off early is sooooo old school. Hell, I was part of that old school of thinking. Not so much anymore.[/quote]
flu, I agree, for younger people who purchased their homes in the last decade or so, and paid hundreds of thousands more for their homes than previous buyers, keeping a mortgage might not only make more sense, but, in many cases, is probably a necessity. Personally, I always wanted to keep funds free for investment properties, so I had a different strategy when I was in the “buying” mode.
On the other hand, I can also understand why the younger folks (and/or their parents) who are part of the current 21% mentioned in the OP might want to be free and clear homeowners.
Even though, when we’re young, we think we’re invincible, when unexpected things in life happen, it’s really nice to have your home paid off–just in case you lose that job, or have to pay all of your medical insurance, or, or….
To each his or her own–whatever works for your bottom line!
January 18, 2013 at 4:52 PM #757996ParticipantDoes any Pigg know exactly when the “30-year mtg” became available?
I believe it was around 1952 (with the older, 20-year option still available).
Gotta do some research on the FHA.
IIRC, ARMs were not in widespread use until about 1981.
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