The general premise of this site …

[sdsundevil]

I found this site about 2 years ago and have been trying to figure out the general premise ever since. In general, I enjoy the posts on here because the subjects vary a good deal, but the overriding message is one of doom for real estate prices in San Diego.

As I understand it, this site was started in early 2004 stating that there was a substantial bubble in the San Diego real estate market. San Diego was specifically noted as opposed to southern California, California, or the nation as a whole.

It would now appear that the real estate market as a whole (not just San Diego) is experiencing a correction/decline. Does this mean the professor was right? I would beg to differ.

If you bought into this premise two and a half years ago and decided not to buy because you thought things had peaked, you missed a huge run up in the value of what would now be your home.

If you think San Diego will correct/decline more than the nation as a whole, you may be right, but probably not to the degree that many of you predict (i.e. 30-50%). I believe most of these predictions are based on sour grapes (regretting missing the opportunity to buy earlier) or just general resentment of people who became wealthy in the boom market.

It’s easy to predict something like housing prices or the stock market will decline. It happens all the time as these things are cyclical. Given enough time, you will eventually be correct.

The rent vs. buy argument also seems to prevade on this site. I would state that this is the peak if you are a renter in terms of rent vs. value. Rents will rise as owners have to make higher payments and more people will rent because they can’t afford to buy or choose not to until prices correct. This will aide in the softening of any potential landings.

[rankandfile]

So what’s your point? For every 1 blog out there that is pro-housing bubble, there were EASILY 10-15 news or other media outlets raving about how home prices will continue to rise. Maybe some of us do have a bit of a sour grapes attitude. I think that many of us are just using common sense when looking at what’s going on in the housing market.

I personally wanted to buy years ago, but held out for something better. How was I to know that the market would skyrocket to proportions never seen before? It seemed that every month there was another 25% increase in housing prices. Part of me said to jump on the escalator. The other part said hold on a second, there’s something not right here. If you had told me then that the skyrocketing would last for almost 10 years, I would have jumped on the escalator.

The escalator is slowly moving in the other direction now. And you, along with millions of others, are in a similar (but opposite) position as we were when the bubble was building. I would answer your question with more questions: why do you seem to have a sour grapes attitude now that the situation is reversing? If you do not like the general disposition of this forum, why take the time and post here after you first visited it 2 years ago? Why not just glance at the forum topics, shake your head in disapproval, and move on?

I posit that you find yourself on the backside of a slippery slope that is falling home prices. Part of you wants to get off and sell. The other part says to stay the course, that there will be a soft landing. The problem is that there will be no soft landing and prices will decline significantly. You sound like a mirror image of me 10 years ago. I’ll be Doc Holiday and you can be Johnny Ringo.

[waiting hawk]

The area I’m tracking is back to 2004 prices so ur 2 year ago idea on buying is trash. Site was right then and it’s still right.

First it was RE doesnt go down
Then RE will go flat
Now it’s only going to go down a little.

Damn RE shrills cant get it straight. As for ur “soft” landing, thats already toast. We are seeing YOY negative counties all over. Only up from here! LOL

My website tracking Inland Empire

[4plexowner]

Your ‘rents will go up’ premise will also be wrong as several thousand condos downtown become rentals.

But you know, whatever helps you sleep at night …

[jepsd]

It would now appear that the real estate market as a whole (not just San Diego) is experiencing a correction/decline.

So, you expect Rich to report on Florida, or the whole US, or how about Europe and China? I believe Rich’s claim was that there is a housing bubble in Southern California (not San Diego). For someone who has read the site for two years, you should have known that.

It’s easy to predict something like housing prices or the stock market will decline.

Really? That is a ridiculous statement. No one can predict when a mania will end, but yes we know it will end. It isn’t just because a broken clock is right twice a day, either. It is because we have identified a current mania (or bubble). Apparently you don’t see it for what it is yet.

…you missed a huge run up in the value of what would now be your home.

Exactly why you don’t get it. You are worrying over 2 years of what you think are lost opportunity. Do you understand why home loans are traditionally 30 years long? It is because a house purchase isn’t a 2 year commitment (er, I mean flip).

Rents will rise as owners have to make higher payments and more people will rent because they can’t afford to buy or choose not to until prices correct. This will aide in the softening of any potential landings.

Good luck with that theory. Yes, owners will need to make higher payments, but renters aren’t going to be footing the bill. Renters can pick up and move overnight. People will live in cars before they pay some other idiot’s mortgage. You forget that renters have no obligation to pay anything to anyone.

[sdappraiser]

“People will live in cars before they pay some other idiot’s mortgage. You forget that renters have no obligation to pay anything to anyone.”

Huh? You get the dumb ass post of the day award.

[jepsd]

Huh? Should I have clarified it as ex-renters that tell the landlord they are leaving town that have no obligation to pay the ex-landlord? You should know what I meant when I said they have no obligation to pay. Or is it because you think homedebtors can also just walk away. Sure, they could, but not as easily as a renter.

Or because I said people will live in their cars? Maybe you don’t know that people already live in cars because they can’t afford housing.

So, please explain my “dumb ass” comment.

[Anonymous]

If you bought within the last two and a half years, and tried to sell today, you most likely would lose money. Things are only going to get worse. If you can’t understand that the housing bubble is bursting then you are a moron or you have your head in the sand just like the dumbasses who continue to support Bush.

[lindismith]

If you’ve been trying to figure out the general premise of this site for 2 years, then nothing any of us can say in this thread can help you.

Good luck!

[rseiser]

You know, this site is really one of the best I have ever seen, and that’s the product of Rich and a lot of smart posters.
Yes, you get into this occasional argument who sold when and got 100K more or less than somebody else, and where the market will go in the next 2, 4, or 6 months.
But I believe the issue is much bigger. There is a lot of logical reasoning coming out of this site, some of it very relevant to our future, even from a macro-perspective if you consider the fools of prior history including the fall of the Roman Empire, the Mississippi Company, or Japan’s economic fate. Maybe our politicians, including San Diego’s great city financiers should spend a few hours on this site.
I have a lot of friends that struggle their whole life to get out of debtor’s prison, and some of them are still dreaming about buying a house without ever having saved a dime. And guess what, the lopsided system would actually allow them to. Readers of this site are lucky to avoid a trap that’s still lurking out there.
Ignore it at your own risk!

[BuyerWillEPB]

I believe most of these predictions are based on sour grapes (regretting missing the opportunity to buy earlier)

I have to admit there is some truth to this post, and it does sting a bit. Better to deal with truth and work through it.

Back in 1998 I realized I needed to get a Bachelors degree if I wanted to buy a house here in San Diego, and move ahead in life. My goal was to graduate, get a good job, buy a house and stay in San Diego forever. Well, during the time I was at UCSD, the housing costs doubled, and tripled in some cases. After I graduated, and got a good job, I STILL could not afford to buy a house. Imagine, an engineer cannot afford a house in San Diego. That’s disgusting. So yes, I do harbor some resentment at this crazy RE market.

With the help of everyone in this site, I’ll get that house someday. I hope so anyway.

[PerryChase]

BuyerWillEPB, I know it’s easier said than done, but it’s best to get the emotion out of owning a house. Keep on renting until it makes sense to buy.

In the last few years people rushed to buy a house because they thought they’d get locked out if they didn’t jump in. That (and speculators) caused the runup that we saw.

Rushing to buy a house is like rushing to get married. It can ruin your life.

[Bugs]

I am not a football fan. However, I think a football metaphor is in order.

Regardless of which of these opposing teams a person finds themself, it would be foolish to declare the winner of this game before it ends. That is, until this economic cycle completes and starts over again. If we attribute the peak of the market as representing the end of the 2nd quarter of the game, that would mean that we are currently in the beginning of the 3rd quarter. We are a long ways off from the end of this game.

Now it could be that the 2nd half of this game will go a lot faster than the 1st half; that’s what our soft landing crowd thinks will happen. It’s also possible that the 2nd half could last just as long as the first half; that’s what our Revert-to-Mean adherents think will happen.

We already know that the uber-bulls who were pumping the New Paradigm were flat-out wrong because the market has already gone where they said it wouldn’t go. So the RtM crowd already has a partial victory. Many of the people who did purchase in the last 24 months have already seen their “profits” evaporate, whether they have to sell right now or not. So much for how smart they were.

As for rents, there are a couple things we need to never forget about rents. For one, renters have no long term upside; that is, they have no expectation of profits from appreciation. That means they approach housing costs as being solely about housing, not about retirement or moving up the property ladder or impressing their buddies at work with their financial acumen.

Secondly, rents are tied to solely to wages, not investment income. San Diego wages are increasing only slowly and unevenly, and there is no reason to think they will double or triple in the next 10 years. In fact, in a global economy they CAN’T double or triple in the next 10 years.

That’s why there is only so much room for rents to increase. Unlike a short-horizon investor, a renter has no incentive to spend 50% or more of their income on their housing because they do have options. One of those options is to leave town – we know this because that’s what has been happening here in town for a couple years now. Some of the people leaving town were homeowners and others were people who wanted to be homeowners.

So the bottom line on rents is that will not double or triple in the next 5 years and they will not support the current prices less losses at the soft-landing level.

Now if you have something other that “this is SD and everyone wants to be here” we’d love to listen. But if you want to influence our opinions you’re going to have to back that something up. So far, NOBODY has brought anything in that will stand up to even casual examination.

[sdcellar]

To continue on BuyerWillEPB’s response regarding sour grapes…

I don’t have sour grapes for myself as I was one of the lucky ones who benefitted from the ridiculous runup (and that’s all it was–luck), but I can taste them for a good many friends who have been completely priced out of the housing market. It just doesn’t seem like good people with good jobs shouldn’t be able to buy a house without setting themselves up for financial hardship and possible ruin. That’s one of my main reasons for hoping for a significant reversion to the mean.

Sometimes it’s hard for me to balance that against the notion that a number of people will be hurt by a downturn in housing, but for whatever reason, I don’t personally know many people in that boat. I guess most of my homeowner friends either bought long ago or otherwise steered clear of (what looks to be) the housing mess of the last year or so. Even so, I’m sure some good people will be hurt by this and that is really unfortunate.

Finally, lest you think I can’t be that altruistic (by saying I just want my friends to benefit), know that I’m not. Sure, I wouldn’t mind being able to get more for my money–who wouldn’t? The main reason I don’t buy today, however, is that it’s just plain stupid.

[PD]

Sour grapes? What nonsense. A good portion of regular posters on this site sold at or near the peak (myself included). No sour grapes for me, just nice tasty wine…

[Author]

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