People still buying – masses have no clue about bubble

[no_such_reality]

DKS, the OC is a different story. It’s different here. 🙂

Actually, I suspect it’ll hold up much better than the IE or outlying LA. We’re lagging at least a year behind SD. LA appears to be a few months ahead of us.

Essentially, the peak was about two months ago. The market has slowed, but pricing has been holding. It’s starting to break, but how fast and how deep is another story. Unlike SD, we don’t have a glut of condos. Nor do we have a glut new developments in near range.

They have a long way to go down, but they still have a lot of stuff pushing them up to keep them from going way down.

[mixxalot]

I really really hope that prices go down by 20-30 per cent as I save up my down payment for my first home here in southern California. It sucks because I am now finally making a decent living and will get nailed on my taxes. But at least my rent is only $550 a month since I am renting a small room in a house in Ventura close to my job. Then again even if I was rich and could buy a new home for a million bucks at the insane prices today if I was layed off tomorrow it would be a disaster. One can never know if work is secure anymore which makes home buying risky. The only real irritant are my lucky bastard co-workers who bought years ago and brag about how much their homes are worth. One guy is trying to sell his place that he paid 500k for years ago for 1.1 million.

I agree dumb asses with money will always buy homes and overpay. Case in point- the filthy rich neighbor of my co-worker who wants to sell his place in Moorpark near Ventura in San Fernando Valley is willing to overpay on a home for his son.

Well I will sit this one out a few years on the side lines. Since I had to do a chapter 7 BK this past year due to a layoff I cannot even think about buying a home without a major cash down payment in 1-2 years. SO I will bite the bullet and save save save and pray to keep my new job and not piss off my roommate in Ventura to keep the cheap rent.

Which is better?

Case 1

Income after taxes (no home)

100k cash after expenses (based on 200k income)
rent=550/month for small furnished room in Ventura
20k toward 401k

Case 2
Buy new home at 900k
Income 200k before taxes

[barnaby33]

Keep waiting…I’m sure that one special deal on that house that no one is in the market for is waiting for you, because, after all, you’re the smart one with the plan and of course, no one is behind you waiting for the same thing with the same idea. We’re all going to get rich or into a home when the big boom hits and the foreclosure market opens up and we’ll all have our pick of whatever house is out there….

get real.

Wow that sounds like me! It sounds alot like marriage. All I need is one, priced right.

Lots of people have the same idea, the difference is going forward, most won’t have the cash. If you don’t agree with the concensus on this board, then by all means stick around and provide facts(contra). Otherwise, you are just another troll.

Josh

[(former)FormerSanDiegan]

Josh –

When we hit bottom, nobody in their right mind will want to buy a house. We’ll be at a “permanantly lower plateau” and any initial run-up will simply be prices “correcting” a bit before they go lower. I wouldn’t worry too much about the competition as Pasadena broker suggests.

[surveyor]

How about this:

Case 3:

$200k income…

Rent $550k/mo.
20k towards 401k.
5k towards Roth/Regular IRA

Put $20k-40k on a 4 unit cash flow property in Boise ID, North Carolina, Texas property (cash flows about $100-$300/mo.). Depreciate $100k to $200k property to offset taxes (results in about $800-$1600 tax savings).

Lower your taxes and be able to get cash flow…

My two cents.

[(former)FormerSanDiegan]

surveyor –

In my opinion, renting in So cal and holding cash flow real estate is a great idea, just hard for most to execute. Problem is that you have to purchase out-of-state to do so. Tough for the amateur to pull off without inimate knowledge of the rental area. Amateurs will tend to get screwed because of lack of connection to the area(s).
But this strategy is an excellent way to hedge your bets in the current environment.

[surveyor]

Out of state Real Estate…

FormerSanDiegan:

Investing in any area tends to be difficult, no doubt about it. It requires a lot of reading, searching, research, re-reading, seminars, and math. And then you have to build up contacts and do a little travelling. It has taken me a good year to set up for it. Still, I think that it is definitely worth the effort though.

And if properly set up, you can have a salary of $200k but have the tax footprint of $50k or even less.

[Anonymous]

I work for a mortgage broker and we have seen a massive slowdown this past year. People I work with are predicting many foreclosures over the next few months to years as ARMs come due. One push we are doing is to get these people into fixed rates before this happens.

When you look at the SoCal market you also have to realize where the money is coming from. Not all of these sales are coming from the typical working family. In some cases we are seeing two or more families going in on a house. You also have those that purchase and immediately begin renting out rooms. The last place I lived in Chino Hills was renting $625 a room. The owner never worries about his house payment now.

Just as you have creative financing you also have the creative borrower. People who are determined will find a way to afford that house on the hill. This is another factor that will probably keep housing prices where they are at for at least two or three years.

The real determining factor for SoCal will be the economy. Should we start to see fewer jobs coupled with a weaker SoCal economy AND higher fuel prices (which fuel prices are almost guaranteed) then you will see your property values finally start to drop. Once those inventories start to increase then the decline will really take off.

And don’t think you are going to see this happen immediately in the LA or OC suburbs, instead keep an eye on the high desert areas and outer Riverside locations to slip first.

[Anonymous]

jbc, it seems to me that, last time, LA and OC cooled off first, followed by Riverside and San Bernardino (see maps beginning on page 11).

http://www.firstamres.com/pdf/Cagan_FireBurn_1104.pdf

Outstanding work by this guy, those maps on pages 11-28.

I forgot where I first saw this; was it here?

[Anonymous]

I am considering the massive amount of development that has been occuring in the Inland Empire and High Desert. The development is still going on and is not showing any signs of a slowdown. Being that these properties are still very high priced for where they are at, I am predicting (and yes I could be wrong) that these areas will get hit harder than expected.

[Author]

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