very confused about mcamansion reality

[Duck]

San Diego may seem expensive to you, but I moved here in 2001 from the Bay Area because of the weather and the “affordable” prices. We bought for about $600k during the stock market crash and I heard about how there would be tons of foreclosures and the houses would be worth $300k in a year. Well, the opposite happened. With the recent downturn in prices over the last 18 months, San Diego is again looking more affordable to people from other CA areas – specifically LA/Orange County and the Bay Area.

I’m orignally from the Midwest (Chicago suburbs) and I’m astonished that homes back there are so expensive, but buying a home is what everyone does in their 20’s or whenver they get married. That leads in turn to the move up buyers in their 30’s and 40’s and 50’s which fuels the market. There are new $600k homes out there 50 miles from Chicago covered in 3 fet of snow where cornfields once stood. If you had told me 10 years ago that you would have to pay that price for a home in the boonies I would have bet my life against it. There might be pockets where you’re going to see depreciation, but prices are not going to crash. You have to look around at prices elsewhere and ask yourself what the premium should be for living here.

[mydogsarelazy]

Hello there,

Here are a few things that I keep in mind when trying to understand all the madness surrounding housing.

Part of what the Housing Boom did was create a greater gap between generations, economically speaking. In other words, those who have owned homes for a decade or more were made wealthier — at least temporarily, right? — by the boom. Many of them used their new equity wealth to move up and that has been a big factor in home prices.

During the boom, every homeowner became a speculator with fantastic leverage, and those who sold and moved up did some serious cashing in. Then there are those who inherited inflated real estate from their parents…

Also, I heard Henry Cisneros speak a few years back, and he made some interesting points. He pointed out that most of us middle class Americans look at housing prices and think in terms of “What will our one or two incomes buy?” Cisneros, who has been working for KB Home, stated that a great number of recent first time buyers are recent immigrants, many of whom buy as a family, pooling incomes and resources. We have this where we live: just across the street two Philippine brothers and their wives bought a big place. I count at least four incomes paying that mortgage, and the driveway is always full of cars. Maybe their visiting cousins kick in too?

The LA Times has an article today about banks offering special mortgages for people who want to buy second homes in partnership.

I believe in the bubble, but I also try to keep in mind that people really are incredibly motivated to buy homes.

JS

[blahblahblah]

I believe in the bubble, but I also try to keep in mind that people really are incredibly motivated to buy homes.

Let’s see how motivated they are to buy homes once they realize that prices are falling.

[recordsclerk]

Prices are way out of wack and need to come back down to earth, but with 100K income you can buy a home. You just have to be resourceful. I don’t recommend buying a home right now, might want to wait at least a while. I make about 30K a year and so do my co-workers. Many of whom, including myself purchased homes when they were 150k-250K. We were also only making 20K a year at the time, but worked as much overtime as we were given. Some of us rented out extra rooms and or lived with extended family members. I also ran a booth at the local swap meet on weekends to save for a down payment. So if you really want a home it’s possible. At first I was scared to buy, but now it all seems to be easy. As long as you can afford a fixed 30 year loan, and you don’t see yourself getting laid off anytime soon, it’s possible. Also your payments will stay the same, but your income will rise along with inflation. The people that are losing their homes took loans that they couldn’t afford. They also tend to spend more then they can afford. You see a lot of forclosures with Hummer’s or BMW’s in the driveway and wonder are these people nuts or what. So be patient, save your money for a down payment, and the market may just play into your hands.

[PerryChase]

recordsclerk, back when houses were $150k-$250k, how did you qualify for a loan on your $20k salary? A $200k house was 10x your salary. Did you have co-borrowers?

[recordsclerk]

A large down payment and my fiancee had good credit. They actually sold the home to us under her name, but with my earnings. She was a student at the time and did not work. I was able to use one of those stated loans since I was selling items at the swap meet. I had to pay a higher interest rate, but refied about a year later.

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

Yea same boat as you almost, Want MacMansion in North SD or Ventura (whatever come my way first) but will only part with about 500K for it. At least until inflation does a real number on my pay anyway.

I own a home now, so no hurry for me,

Still waiting ……

[PerryChase]

Nor_LA-Temcu-SD-Guy, same here. Would like to move to better digs but have plenty of patience. If needs be I can remain in my current home forever. I’ll wait ’til you buy first. 🙂

[Anonymous]

I can see the points everyone here has made. For several years I was discontent with San Diego. Two years ago, I decided it was time to move. After 1 1/2 years after relocating to Chicago I have decided to move back to San Diego no matter what it takes.

For me, the quality of life is a major factor, one that I believed would not be affected by moving. Prior to moving, my researched showed the job market was better (higher annual income) and cheaper cost of living. After living in Chicago, I realize my analysis only took into account many factors, and I did not consider unquantifiable factors such as availability of fresh fruit, noise pollution, and sophistication.

I am sure people reading this are thinking I am being petty. After 25 years of living in So Cal, eating fresh fruit every day of the year, and enjoying stories from educated professionals that have traveled the world, Chicago is really backwater and extremely provincial.

So if you really are interested in moving take some extra time to figure out if the values you have (other than money, job security & growth, and owning a huge new house) will really work somewhere else.

From my experience, I would rather work 60-80 hours a week in So Cal, eating fresh fruit, enjoying the sun than work 20 hours a week in a city where people are not worldy, have never traveled outside the midwest, and have to put on 4 layers of clothing so when you go outside your skin does not fall off.

So I will be seeing you all back home in SoCal very soon.

p.s. I wish I had $2000 a month after rent/mortgage to “play” around with. Consider yourself lucky or spoiled. That is $65 a day to spend on food and misc.

p.s.s. My mortgage (the same as your current rent) and misc housing expenses (water, trash, basic cable, elect) was 75% of my take home income (prior to moving) and I still managed to feed myself (though not well) and do some remodeling on the house.

[CardiffBaseball]

Wow the midwesterners get blasted for being provincial. For every interesting person here telling stories of worldly travel, there is a snot-nosed wuss in a Beamer, with a plastic wife.

[sdrealtor]

CB
I think his point was not so harsh. The town I grew up in on the East Coast was a wonderful place to be as long as you grew up there and were part of it all from the beginning. I can’t imagine moving there as an adult or teenager and enjoying it. One of the things that I love about SD is that it is a very easy place to move to and settle in nicely after 2 to 3 years. Back East I just dont think that is as easy, as everyone already knows each other and really aren’t interested in newcomers to the same degree as here.

SDR

[PerryChase]

at home in so cal, are there really no fresh fruits in Chicago? The cherries and peaches from Chile are not imported to Chicago in the winter?

A good buddy of mine lives in Chicago. It’s no wonder he keeps putting on weight.

I agree with cardiffbaseball that Californians are a little plastic.

[csr_sd]

wow,

I did not mean to suggest that people in So Cal dont make a choice to live here, or that the tradeoffs that you describe are not important.

I am from the east coast (Manhattan actually) and know a little about putting 75% of my take home to rent, and to figuring out how to make very little money go a long way.

I think all hometowns are parochial, be it Manhattan (you would never go to staten island, or Jersey) or southern california (san diegans dont seem to like lala land much).

This area is no more intellectual than anywhere else, if it were prices would not be what they are.

My point is that for all the developers here that are making pseudo tuscan villas, with no property to speak of, or horrendous condos with “resort style living”. People are making a choice to believe their line and that they can have their cake and eat it as well. You cant do that at 750K starting and a 100K income and starting from scratch…period.

When I am not being ‘spoiled’ with my 65$ a day or all my travel (all seven continents this year alone… not fun by the way), I like my cake. My cake is that I rebuild old cars, try doing that with some as@#$le HO association telling you what you can or cant do, and then paying MR on top! So for me, paying 450K for a 1951, 987sqft, 3 bed, 1 bath, house in clairemont is what I want. It also the most I can afford! It is also all that WE need!

Thus, whether you move here to surf, eat fresh fruit, get a plastic wife or whatever, you cant believe that the prices here arent out of whack with what normal people (like me and you) can afford.

So my comments were that for very risk averse / conservative investors (like myself) that are starting late blogs like this provide a lot of interesting advice. But it seems to be skewed towards these mcmansions.

When will the bottom come? Will older starter neighborhoods fall faster, deeper, than newer developments? These are the questions I am interested in. Because we all dont necessarily want a mcmansion or resort style living, especially when we have an ocean, mountains, and trails!

[(former)FormerSanDiegan]

I know some Chicagoans who have come to So Cal to visit and think our pizza sucks and ask , “where da heck are da brats, I want a brat. Don’t give me none of that fru-fru food.”
(Brat pronounced “brot” as in bratwurst).

I like Chicago … for about 1-2 weeks in late June.

[startingout]

Here here, csr_sd!

We bought a futon from someone on Craigslist last night, and when we went to pick up the futon, we found that the seller lives in a McMansion development (in the IE). It was really kind of creepy how the houses all looked like they were made of plastic, and couldn’t have been more than 10 feet apart from each other. They kind of look like all the fake buildings in Toontown at Disneyland!

On top of it all, they had absolutely no furniture or decorations- fair play to the minimalist style of decorating, but you’d think you’d at least have something to sit on– like a futon! It looked to me like he didn’t have any money to make his payments.

I’m with you csr_sd, I want a regular home, with some semblance of a backyard in a regular area. No Toontown for me!

[Author]

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