Prediction: San Diego market goes up 8%+ over the next year

[gzz]

Unemployment low

Rates at record lows

Stock Market at/near record high

New Construction Low

Rents beating inflation year after year

State and local govs staffing up after long period of cuts and hiring freezes

Spillover from the even hotter LA/SF markets

I am trying to think of a single bearish factor here, but I am at a loss. Problems with the Navy/Qualcomm I am not aware of?

[gzz]

OK I can think of one semi-bearish factor. Lending standards are still much tighter than during The Great Bubble of 00’s.

Really though, that isn’t saying much. That was a single crazy episode in US history. Overall, by any other historical period, lending standings are moderately loose.

Also, China is having a crazy housing bubble right now in all of its major cities, but lending standards there are extremely tight compared to ours. The standard down payment is 50%.

[Rich Toscano]

[quote=gzz]
I am trying to think of a single bearish factor here, but I am at a loss. [/quote]

Valuations!

Pretty good list overall though. And the valuation thing is offset to a good degree by low rates. (On that note, though… if record low rates figure into your one year forecast, that implies that rates still have to be here next year).

Anyway, seems like a reasonable overview… I just had to bite on the one bearish factor… 😉

[Anonymous]

[quote=Rich Toscano][quote=gzz]
I am trying to think of a single bearish factor here, but I am at a loss. [/quote]

Valuations!

Pretty good list overall though. And the valuation thing is offset to a good degree by low rates. (On that note, though… if record low rates figure into your one year forecast, that implies that rates still have to be here next year).

Anyway, seems like a reasonable overview… I just had to bite on the one bearish factor… ;-)[/quote]

well mathematically rates can’t really get much lower than they currently are, so if you accept the reality that the low rates of ZIRP and it’s side effects are the singular reason for the current asset bubble, stands to reason that upside is limited.

Other than that, sure dump all of your savings into stocks and real estate now, no better time to buy than when prices are historically high. That is certainly what the Fed wants you to do, that is their explicit policy.

[gzz]

if record low rates figure into your one year forecast, that implies that rates still have to be here next year

I’ve been thinking rates would drop all year, and will probably stay low or fall further.

This is mostly because they are so crazy low in Europe and Japan right now. Why not here? Why can the 10-year rate in Japan, Germany, France, Holland, UK, Switzerland and Denmark all go to 0 or even -0.5, but our rate stay above 1%?

I know the “official reasons” why US rates are higher: higher expected inflation, economic growth, and currency depreciation. The problem is that other US asset prices should also be lower if people are expecting a weak dollar, but they are not. US stocks are doing great and loved by foreigners, but our Treasuries simply are not loved as much. I also do not think there is much reason to think the dollar will weaken over the long term v. yen and euro.

Anyway, seems like a reasonable overview… I just had to bite on the one bearish factor… 😉

OK, here’s one more bearish factor: student debt is exploding and reducing the the ability of younger buyers to get credit or save down payments.

This is bearish, but I think looking at total private household debt shows that it is partly offset by other categories of debt going down compared to prior years. Mortgage and revolving household debt went down a lot in the recession and have not recovered. And if you go another step further, and consider low rates over the past five years, the monthly cost to service existing mortgage debt may be on the low side historically, and mortgage debt is by far the largest U.S. household debt.

[livinincali]

Seems like the last couple of years 3/4 of whatever upside comes in the spring. I suppose if the economy is still doing well Jan 2017 then you might get a 8% pop. From the economic cycles were sort of due for a recession soon, but even if that occurs in the next year maybe it won’t be felt in San Diego until later.

[The-Shoveler]

I don’t know about 8%, but I see two things feeding the housing market increases over the next few years IMO.

1) Demographics (largest bulge in population is now 25-26 years old).

2) The Gov has gotten serious about creating wage inflation over the next 5-6 years.

[spdrun]

Let’s hope livinincali is right and we get the recession we’re overdue for. And how!

This being said: if you’re going to put money into property, why not put it into a market that has a more favorable buy/rent ratio than San Diego? Somewhere that still has fucklosers aka foreclosures.

[FlyerInHi]

[quote=The-Shoveler]I don’t know about 8%, but I see two things feeding the housing market increases over the next few years IMO.

1) Demographics (largest bulge in population is now 25-26 years old).

2) The Gov has gotten serious about creating wage inflation over the next 5-6 years.[/quote]

In coastal areas. For sure. We’re not seeing a national situation like last time

You forgot not enough new construction.

[FlyerInHi]

[quote=spdrun] Let’s hope livinincali is right and we get the recession we’re overdue for. And how!
[/quote]

What makes you think a recession should happen like clock work.

We are in a new normal. Maybe slower growth gives use double the period of continued growth.
Everything that tradional folks said about the deficit, the stimulus, interest rates, dollar value… since 2008 has be disproven. They have been wrong for nearly a decade now.

[quote=spdrun]
This being said: if you’re going to put money into property, why not put it into a market that has a more favorable buy/rent ratio than San Diego? Somewhere that still has fucklosers aka foreclosures.[/quote]

Not too many of those places left. Plus they are far away from San Diego.

[spdrun]

Um, most of the country has a more favorable buy/rent ratio and cheaper housing than San Diego. Average home price in the US is $188,000, whereas that’s low-end in San Diego.

https://smartasset.com/mortgage/price-to-rent-ratio-in-us-cities

As you know, Vegas has a ratio of 19 to San Diego’s 30 and isn’t that far away.

[FlyerInHi]

[quote=spdrun]Um, most of the country has a more favorable buy/rent ratio and cheaper housing than San Diego. Average home price in the US is $188,000, whereas that’s low-end in San Diego.[/quote]

Yes. I meant foreclosure deals are getting rarer.

But if you live in SD, riverside or Las Vegas, maybe AZ are the farthest you could go. Unless you want to trust property manager all the time.

I was in lake Elsinore yesterday. Not cheap anymore. The inland empire has appreciated very nicely already.

[The-Shoveler]

[quote=FlyerInHi]

I was in lake Elsinore yesterday. Not cheap anymore. The inland empire has appreciated very nicely already.[/quote]

People may laugh when I say Temecula is becoming a Job center, but that’s why the you see sub-suburbs expanding.

Suburbs start having suburbs LOL.

[spdrun]

Looking at sheriff’s sales near where I grew up in NJ, there are 5x as many properties selling as there were two years ago. A lot of them go back to the bank for $100. Future REOs!!! YAY!

And Mel “The Skell” Watt’s plan to write down loans only covers about 6,000 of the 240,000+ underwater loans in NJ. Beautiful.

NV, FL, NY, PA, and MD are also “good” states. LOL.

As far as managing long-distance, you don’t need a property manager for a condo further away, if you’re willing to go for a week when a tenant moves out, do some work, and get it rented.

Picking your tenants carefully so they’re reasonably self-sufficient and reliable. Best tenants are self-employed and grad students. People who can be very reliable, but who other landlords might be hesitant to rent to. They know they’ll have a harder time finding a different place, so they remain quiet as church mice, pay like good little tenants, and count themselves lucky not to be under a bridge.

[gzz]

Worrying about price to rent ratios three years ago in the bay area would lead someone to rent rather than buy and miss big appreciation. It is simply one factor.

[Author]

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