SD Home Prices/Personal Finance Rant

[skerzz]

My approach to home buying was the inverse of yours, Kristopher. In 2009, one year out of college and 23 years old, I purchased my first home with an FHA mortgage and 3.5% down (which worked out to be about 1% down once you factor in the $8K federal tax credit (“handout”) I received for being a first time home buyer). It was a stretch purchase affordability wise at the time, but fortunately my salary/job situation continued to improve over the years. In 2013, I purchased a second home with a 0% down/ no PMI mortgage and kept my first home as a cash flow positive rental. Today I have a 10,000% + increase (on paper) on my original 1% equity/down payment. The point I’m getting at is leverage can be a great thing, especially when interest rates are historically low and not much capital is risked for potentially very high returns. A more conservative approach and/or all cash home purchase will make more sense when nearing retirement age assuming the equity isn’t needed to fund retirement.

[spdrun]

Leverage amplifies gains as well as losses. You bought low with leverage. Current people would be buying high, till the next beautiful opportunity.

[Coronita]

OP should be thankful he can qualify for direct cheap fixed rste loans. Many people can’t and that’s why they are stuck. Some people can’t buy their first home because they can’t qualify and some can’t refinance because they can’t qualify. So if the OP can qualify, I’d milk it for what it’s worth while you still can.

There is always a greater fool that you think you are. Just as long as you can outlast the other fools financially.

[FlyerInHi]

[quote=flu]You guys want to talk about inflation,

A new 2014 911s was selling for $95k
A 2017 911s STARTS at $104k and comparably equip, is closer to $115k

A new starter BMW 330 with a 4 cylinder engine can put you back around $50k.
Now that’s insane.[/quote]

Banks have figured that people don’t default on their cars so financing is easier. Repossession is also easier than in the past.

[La Jolla Renter]

Pretty much everything I see in SD at the $1M price point is break even rent vs buy. If you are confident you are going to live here for 10 plus years, why not buy now. In 10 years we may be flat on home prices and 8% interests rates.

Look at it from some other angles, you could buy your first investment property and live in it now. 4plex maybe? Or just a condo.

Another consideration might be to get something now while your single and can set it up as a premarital asset investment property.

Also, what is your life financial goal? Play it safe Millionaire next door type? or do you want to take more risks and think a little bigger. Either way is a fortunate position.

I would buy now. Buying smart is the key. Present more data on your situation and you will get some great view points here. Work location, ideal home location, do you see yourself as a landlord, do you have any home improvement skills? What does the perfect home look like to you?

[KristopherSD]

Thank you for all of the replies so far, it’s been about what I expected. Half saying to wait it out and keep saving and half saying to suck it up and either go a different direction or purchase. I can definitely see truth in both aspects. I have considered buying a condo in the past and waiting to buy a home until later. The benefit of a condo would be that I get into a nicer area, specifically Point Loma, which I really like.

I really like the idea of being debt free and can see myself paying off a condo quickly and later purchasing a home and renting out the condo. I think if I were to purchase a condo I would likely pay it off in under 5 years and move on. I understand that I could be investing the money in the market but I already have a defined benefit pension and max my 401k so feel like my bases are covered there. Aside from that I feel we are on the precipice of a recession anyways and would be wary of Investing heavily into the market outside of my retirement accounts which won’t be touched for decades.

My other option would be to purchase a $550-600k home that needs significant cosmetic work. I am fortunate to have a family member who is very experienced in remodeling homes and is chomping at the bit to help me. I would still probably try and pay a home down as well. Either route I would go would hopefully result in having low bills and flexibility to travel and not be constantly stressed about money like a lot of my peers. Most of my family is in San Diego and I plan on remaining here until retirement age at least.

[La Jolla Renter]

Or buy a 1200sqft beach city tear down that is maybe even zoned for 2 or 4 units. Just do a cheap cosmetic fix up and move in. Get it paid off. When or if the market tanks pull a 15 yr mortgage out and develop it when construction costs are cheap.

Damn I wish I had done that 6 years ago.

Great way to leverage/position yourself for any market.

[flyer]

In past years, those who invested in real estate in CA–long before it became a chosen destination–found it possible, for the most part, to exit the rat race at an early age if we planned well.

The world has changed since then, and, imo, the OP is wise to consider all aspects of his decision, especially with the economic challenges our country (might–who knows?) be facing in the coming decades. It remains to be seen how long we can kick the current can down the road, so being well-positioned to endure and profit during a downturn, imo, is the most enviable position of all.

[FlyerInHi]

[quote=flyer]In past years, those who invested in real estate in CA–long before it became a chosen destination–found it possible, for the most part, to exit the rat race at an early age if we planned well.

The world has changed since then, and, imo, the OP is wise to consider all aspects of his decision, especially with the economic challenges our country (might–who knows?) be facing in the coming decades. It remains to be seen how long we can kick the current can down the road, so being well-positioned to endure and profit during a downturn, imo, is the most enviable position of all.[/quote]

Planned well? Or just rode the rising market that led to the very situation we have today where young people cannot afford to buy?

Over the years, I have seen a lot of people moving to Colorado,
Washington, Oregon,, Utah, Nevada, Arizona, because they could not afford San Diego.

[flyer]

Along with planning well, it’s true that those who happened to get into the market in the past had greater opportunities than today.

I’m certain that anyone who was interested and in a position to do so at the time would have done the same. Many elements are to blame for creating the lack of affordability in CA, not just those who took advantage of investing in the right place at the right time, and my point was that I think the OP is wise to very carefully weigh his decisions in the current economic environment.

[joec]

No planning needed IMO in the past.

Anyone who had good amounts of cash and purchased places from Marin down to Santa Clara in CA from the 80s-90s is sitting on triple or many times profits.

Having parents who did just that, EVERYTHING they purchased is up a lot and like LA and SD, I don’t think you had to be a rocket scientist or anything to make good money.

Back in the 70-80s, real estate wasn’t viewed as much of an investment as it is now and with prop 13, a problem for most every other state making real estate not as profitable, long term leverage gains in the bay area was an awesome asset/income/step off the rat race situation.

This is very different now with global competition and prices being what they are now.

(Not that it can’t go higher…

… or lower).

[flyer]

I realize the experience of investing in real estate is different for everyone, but my comment concerning planning centered around the planning processes our families went through over a period of years to strategically acquire residential and commercial properties from north of The Bay Area all the way down to San Diego. We were buying when others wondered why.

As you said, joe, global competition really did not exist at that time as it does now, and, imo, younger people, like the OP, would be wise to proceed with caution.

[spdrun]

Wasn’t everyone terrified of the Japanese buying up half of California in the 80s?

[SK in CV]

[quote=spdrun]Wasn’t everyone terrified of the Japanese buying up half of California in the 80s?[/quote]

No.

[an]

[quote=spdrun]Wasn’t everyone terrified of the Japanese buying up half of California in the 80s?[/quote]
Does it really matter? Just look at where prices were in the 80s and where it is today.

[Author]

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