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January 23, 2007 at 8:51 AM #8257January 23, 2007 at 10:21 AM #43980PerryChaseParticipant
Regardless of the historical appreciation rates, if you’re going to buy a house, make sure that you don’t buy during the bubble cycle in that area.
Rent for 1 year or more then watch the market. That’s the best way to see if the market is headed up or down. Don’t buy as long as you see a downward slide. During that time you’ll have a lot of time to review historical trends. Buy only when prices are reasonable when compared to historical trends. Or continue to rent and enjoy your life. For the San Diego Area, I think that Rich provides good charts here on Piggington. Price to household income is a good metric to gauge the market.
January 23, 2007 at 10:56 AM #43986bigmoneysalsaParticipantPast appreciation rates are not going to be helpful even if you find good data. To answer your question, no, you most definitely CANNOT simply carry thouse appreciation rates forward. Past performance is no guarantee of future results. If you have been reading this blog for months then you know that the wrong idea that past appreciation rates will continue indefinitely was a big source of fuel for the housing bubble.
If you want to stay in SD, why would you leave? IMHO life is too short to live somewhere you like less just to save a few bucks. Decide where you want to live first, then decide whether to rent or buy.
January 23, 2007 at 11:06 AM #43987surveyorParticipantRates, Appreciation
I would think that other forces would make your decision for you regarding where you want to live, but oh well.
Here’s money magazine’s forecast: http://money.cnn.com/popups/2006/fortune/invguide_realestate/index.html
It’s based on Moody’s information. As for San Diego appreciating 9.3% over 30 years vs. Georgia’s 4.9% that does sound correct (maybe the numbers do not indicate the “bubble” territory). But those numbers are probably only valid if you keep the house for 30 years, which may or may not happen.
Georgia is a real nice appreciating market right now, because of all the people fleeing Florida, so the prices might approach a bubble in a few years. Maybe.
The Denver real estate market has been terrible for the last few years, but it’s been seeing a lot of activity. Certainly you can pick up foreclosed homes in Denver real easily. There are certain signs that say that it has maybe one more year of bottom, and then it will start going up.
Depending on your capabilities and situation, if I were you, I would buy a four-plex and live in it. This method will allow you to access all sorts of tax deductions, as well as reaping the benefits of appreciation and cash flow.
January 23, 2007 at 11:35 AM #43991kicksavedaveParticipant“Past performance is no guarantee of future results.”
This concept is not lost on me one bit, I am fully aware of all the factors that go into the future economics of this whole thing, so many factors that cannot be “guessed” at. I’m also fully aware how critical timing is on this…. but to me, timing is MOST critical in a volitile market (Cali is volitile)- buy at a peak (2005) and you’re going to need most of those 30 years to make up for the loss. Buy at a valley (1997) and you’re going to blow away the markets as a whole (300%??). Whereas in a stable, slowly appreciating commodity(Georgia?), your timing becomes less critical – 3 to 4% ever year, doesn’t matter so much when you jump in. Could things change? Of course, but you have to start somehwere.
I agree that you choose a city first, then find a home. If all other things were even close to equal, San Diego would be the only choice. But as it stands right now, I’m fairly sure we cannot afford to buy anything remotely acceptible in this area, unless prices come down 33%. For $300K here, you can’t buy anything to raise a family in a neighborhood I can live in. For $500K your options are still very limited. When those $600K places start selling for $400K, they’ll be in my ballpark. I won’t do a suicide loan just to squeeze into something I want, I’ve seen first hand the carnage that creates. I can wait it out, but not forever. I’m almost 40 and don’t have much savings, I need to get this one right, and I don’t have a ton of time to make it up if I botch this decision.
Some people think that 33% is possible, some say more, some say less. Who knows. Who can even accurately say HOW it will happen – one big dump over two or three years, or 15 years of pricing stagnation? We all have to make our predictions and cast our lot. I’m just looking for accurate data to help me run the options. Thanks to everyone who has responded already… the discussion is invaluable to me. π
January 23, 2007 at 11:39 AM #43994kicksavedaveParticipantBTW, the decision on where to live is a lot more than “a few bucks”.
Over 30 years, the difference between $400K houses at 4.9% vs 9.3% is over $4.2 Million bucks. Its the difference between retiring well, and scraping to get by.
January 23, 2007 at 12:35 PM #43998AnonymousGuestPast performance is not entirely indicative of future performance, however it is also entirely valid that some areas tend to maintain their value more than others over time. In San Diego, builders are shifting to smart growth strategies, townhomes, apartments etc., and can you imagine how this is going to affect the demand for traditional single family homes with yards over time when no more homes are being built? Compare this to Denver or Atlanta where there is no limit to the suburban sprawl.
If you truly love San Diego, a strategy might be to rent for the next 2-3 years and try to time the bottom. If it doesn’t go down, you can always move to Atlanta or Denver at that time, and prices will likely not have moved up much and may have actually gone down. I was in Denver last week and they have huge inventory problems, huge foreclosure problems and prices are declining. Even if you move to Denver, I would suggest that you rent for 6-12 months to gauge the market. If you follow this stuff close enough to be on Piggington’s, you will likely have a good sense for when the bottom has arrived, or at least close enough to it to get a good value.
January 23, 2007 at 12:38 PM #43999AnonymousGuestBTW – Are we assuming you will make the same salary in San Diego, Denver and Atlanta?
January 23, 2007 at 1:06 PM #44006kicksavedaveParticipantJuice, thanks for the feedback. I would be making the same salary, my wife is a Nurse and she is subject to a pay decrease if she moved to another city… that offsets some of the COL savings we might find. If we saved $1K a month on housing but she makes $10K less per year, is it worth it? Not likely. It’s a complicated decision, nothing we will arrive at quickly.
We will be sitting on the sidelines no matter where we end up. Timing the bottom here in San Diego is my first choice, but that’s no sure thing either. As I mentioned, the “bottom” could be that todays prices stagnate for 5 to 10 years. I wish my crystal ball were less muddy π
January 24, 2007 at 7:31 AM #44055kicksavedaveParticipantDoes anyone have any opinions about this site:
http://www.housingpredictor.com/california.html
Seems they offer a mixed bag of expectations across the country – some areas expected to continue strong growth, others they predict double digit declines in pricing – San Diego, LA, SF, Miami, Boston, etc. Each state gets its own predictions by major city.
Thoughts, opinions?
January 24, 2007 at 8:06 AM #44057Chris Scoreboard JohnstonParticipantChris Johnston
My input would be not to view a home as an investment. The mustard has gotten completely off the hotdog in this aspect of home buying, during this unprecedented run we have had. Home prices have barely outpaced inflation historically, so that should be the expectation moving forward. If you work within this view, you will never get yourself into a bad situation where you cannot afford where you live.
It is my view that any home bought, should be done as a place to live happily and be within ones affordability parameters. Any appreciation you get is gravy. Second homes can be where the speculation can be done, and where timing should be employed. For this post, I had assumed you were referring to your primary residence.
I think the RE problem is nationwide, but more extreme in some areas than others. One of my relatives just emailed me last night, and he has bought properties in so many places I cannot even remember them all. He is pushing it to try and retire by 50. As a trader, I have heard and seen these types of things too many times, and the ending is always the same. People tend to become convinced in masses right at the worst possible time, that a new paradigm exists, and the key to riches is right in front of them for the taking. Unfortunately, it usually winds up being the Charlie Brown and Lucie field goal kicking scenario. She pulls that ball away right at the worst possible time, and he goes flying!
Buy where you can comfortably afford to, and also where you like the area and can be happy there. Do not buy just because you think values will rise more on a relative basis, they may not regardless of what any expert tells you.
January 24, 2007 at 8:37 AM #44061lindismithParticipantNicely put, Chris.
Kicksavedave, try this site for charts by state:
January 24, 2007 at 8:51 AM #44063sdrealtorParticipantWell said Chris. I too believe the key is buy what you can afford and where you like the area. If you cant afford it, don’t do it. Buying somewhere just because you think values will rise more there is the recipe for disaster that we are currently taking out of the oven. While a home shouldnt be viewed primarily as an investment, when you get around to buying, find an area you like and can afford. Then doing your best to figure out what will appreciate best in that particular area should help reduce the downside risk to your homes value.
January 24, 2007 at 1:20 PM #44102surveyorParticipantNew article
I found this: http://www.housingpredictor.com/top25.html
But like I said originally, you should make your decision based on other criteria, not whether or not a city is going up in price.
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