the equity answer

[tothjj]

I have been lurking on this site for a long while. It has been an great way to keep track of SD while I am out of state. It seems to me that people on this site continue to wonder why people are still buying these houses at outrageous prices. The one theory I have not seen put forward as to why the prices continue to stay wildly inflated is that so many people still have so much equity in the houses they bought 5 or more years ago, they are still able to get that 750,000 house in 4s by taking 200,000 they are sitting on and rolling that into the new place. Now the sting is going to come as those people who made all that equity dwindle. The market is still flush with equity, but it won’t be forever. My wife and I are patiently waiting this thing out. It is a pain, but it shouldn’t be so much of a mystery. That is only part of it, but I just haven’t seen anyone opine about it.

[sdcellar]

Oh, I think you’re absolutely correct on that point. I think people have talked around this scenario, but not necessarily talked it up.

Such buyers still take a pretty significant property tax/mello roos hit and they unfortunately pick this as what will probably be a bad time for a “move up”, but it won’t kill them financially. Some might go back to living paycheck to paycheck, but they can “afford” it.

[sdcellar]

Oh, I think you’re absolutely correct on that point. I think people have talked around this scenario, but not necessarily talked it up.

Such buyers still take a pretty significant property tax/mello roos hit and they unfortunately pick this as what will probably be a bad time for a “move up”, but it won’t kill them financially. Some might go back to living paycheck to paycheck, but they can “afford” it.

[Bugs]

I have no doubt that most of the new home purchases do represent move-up transactions for those buyers who generated equity via owning appreciating assets during the first half of this decade. However, I also see an overwhelming percentage of purchases relied upon 80/20 financing and ARMS. I take that to mean that many of those buyers had no significant equity to transfer to the new purchases. They didn’t all parlay their equity into stock purchases. I think a lot of these people just spent that equity of Hummers and plasmas.

I wonder how many of the Beemers, Hummers and Range Rovers driving around town were bought with home equity rather than actual income.

[Bugs]

I have no doubt that most of the new home purchases do represent move-up transactions for those buyers who generated equity via owning appreciating assets during the first half of this decade. However, I also see an overwhelming percentage of purchases relied upon 80/20 financing and ARMS. I take that to mean that many of those buyers had no significant equity to transfer to the new purchases. They didn’t all parlay their equity into stock purchases. I think a lot of these people just spent that equity of Hummers and plasmas.

I wonder how many of the Beemers, Hummers and Range Rovers driving around town were bought with home equity rather than actual income.

[Bob G]

Declining sales indicate the pool of buyers is shrinking. Who are these people that are still buying?

1)Sellers with equity in current house. People tend to be risk adverse. If someone sells their house and wishes to avoid risk, (and taxes), the safe course of action is to but another. As pointed out here, this doesn’tprovide a boast to the market because a house goes on the market to repalce the one that was sold.

2)High wage earners? Wothout toxic loan a $1,000,000 house requires about $300,000 family income. I’m not poor, but this is still more than I make.

3) Lotto winners? You better win the big one, cause 5 out of 6 won’t be enough money.

4) Immigrants, Columbian drug lords, and deposed dictators? Maybe, but I don’t have the data.

[Bob G]

Declining sales indicate the pool of buyers is shrinking. Who are these people that are still buying?

1)Sellers with equity in current house. People tend to be risk adverse. If someone sells their house and wishes to avoid risk, (and taxes), the safe course of action is to but another. As pointed out here, this doesn’tprovide a boast to the market because a house goes on the market to repalce the one that was sold.

2)High wage earners? Wothout toxic loan a $1,000,000 house requires about $300,000 family income. I’m not poor, but this is still more than I make.

3) Lotto winners? You better win the big one, cause 5 out of 6 won’t be enough money.

4) Immigrants, Columbian drug lords, and deposed dictators? Maybe, but I don’t have the data.

[tothjj]

cool, I just wanted to get that idea out there. Keep up the chat, it really is a pleasure reading this every day.

[tothjj]

cool, I just wanted to get that idea out there. Keep up the chat, it really is a pleasure reading this every day.

[jan777]

Here’s our situation and why we played the re market. Lots of equity in our home. Put home on market, bought a new construction home, sold home just in time as to not have to cancel new construction home.

Listed home for $599,000 sold for 529,000 1724 sq ft. home
New construction home bought for 582,000 3700 sq ft. closing costs paid by builder. Same area of South Corona.

We win!

[jan777]

Here’s our situation and why we played the re market. Lots of equity in our home. Put home on market, bought a new construction home, sold home just in time as to not have to cancel new construction home.

Listed home for $599,000 sold for 529,000 1724 sq ft. home
New construction home bought for 582,000 3700 sq ft. closing costs paid by builder. Same area of South Corona.

We win!

[blahblahblah]

tothjj has nailed it. It’s the folks rolling over from the sale of a previous home, combined with the remainder of the clueless 100% financing crowd, people who have come into substantial inheritances, with a few $300K/yr households and TJ narcojefes thrown in for good measure. The financially prudent middle-class first-time buyer is not participating, unless rich Aunt Martha just kicked it and left them a $300K windfall.

[blahblahblah]

tothjj has nailed it. It’s the folks rolling over from the sale of a previous home, combined with the remainder of the clueless 100% financing crowd, people who have come into substantial inheritances, with a few $300K/yr households and TJ narcojefes thrown in for good measure. The financially prudent middle-class first-time buyer is not participating, unless rich Aunt Martha just kicked it and left them a $300K windfall.

[Anonymous]

sandiegoslide

Bugs you are spot on about the cars. We had a neighbor in North Park (we moved) whose roof looked lke it was about to cave in, but he had a Mercedes SUV parked on his front lawn. The neighbor on the other side was a professor at State who wasn’t shy about telling us he used an equity loan to buy a Mercedes and a Land Rover. Last I checked young professors were not making 6 figures at SDSU.

I have wondered about all the new homes I see being purchased here in North Park. After living here for four years, I’ve seen dozens of the same houses being sold multiple times. Prices are going flat but they’re still getting upwards of 700K here in Burlingame for “cute” stucco houses. Who is buying? I only see mention of houses in North County on this blog. Who’s buying here in central San Diego?

[Anonymous]

sandiegoslide

Bugs you are spot on about the cars. We had a neighbor in North Park (we moved) whose roof looked lke it was about to cave in, but he had a Mercedes SUV parked on his front lawn. The neighbor on the other side was a professor at State who wasn’t shy about telling us he used an equity loan to buy a Mercedes and a Land Rover. Last I checked young professors were not making 6 figures at SDSU.

I have wondered about all the new homes I see being purchased here in North Park. After living here for four years, I’ve seen dozens of the same houses being sold multiple times. Prices are going flat but they’re still getting upwards of 700K here in Burlingame for “cute” stucco houses. Who is buying? I only see mention of houses in North County on this blog. Who’s buying here in central San Diego?

[Author]

Posts