What ARE the fundamentals?

[sdduuuude]

I think it’s a good question, and the basic answer, as others point out, are rent/price ratios, price/income ratios, and payment/income ratios. Look at all of them.

When looking at payment/income – don’t compare the payment on a 20% down fixed loan in 2001 to the payment on a zero-down adjustable loan in 2005. Compare apples-to-apples in different years to see how the fundamentals ceased to support the price.

We always have and always will pay a premium for weather here. It is an underlying fundamental to support higher prices in So Cal than in other parts of the country.

However, as Rich pointed out many, many times, the weather didn’t suddenly improve here between 2000 and 2004. Thus, the premium had no fundamental reason to increase as it did.

Weather was simply fuel to the speculative ferver.

[DWCAP]

“of all San Diego mortgages issued in 2004, 80% were adjustable-rate, 47% were interest-only, and 27% involved no down payment.”

This is a quote from rich’s posts linked a few posts up. I had read this before, but I dont think it had really sunk in yet. One of the questions buzzing around in my head every time I read SDR’s short sale monitor, or see that graph about the reset schedules, is “how many can their really be.” The general media does an absolutly horrible job conveying the enormity of the situtation, (duh), but I guess I just didnt/dont grasp how many people are in trouble.
80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!
So what are fundamentals? They are something that apparently no one has been paying attention to for a very long time and we are gonna pay for it.

[DWCAP]

“of all San Diego mortgages issued in 2004, 80% were adjustable-rate, 47% were interest-only, and 27% involved no down payment.”

This is a quote from rich’s posts linked a few posts up. I had read this before, but I dont think it had really sunk in yet. One of the questions buzzing around in my head every time I read SDR’s short sale monitor, or see that graph about the reset schedules, is “how many can their really be.” The general media does an absolutly horrible job conveying the enormity of the situtation, (duh), but I guess I just didnt/dont grasp how many people are in trouble.
80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!
So what are fundamentals? They are something that apparently no one has been paying attention to for a very long time and we are gonna pay for it.

[DWCAP]

“of all San Diego mortgages issued in 2004, 80% were adjustable-rate, 47% were interest-only, and 27% involved no down payment.”

This is a quote from rich’s posts linked a few posts up. I had read this before, but I dont think it had really sunk in yet. One of the questions buzzing around in my head every time I read SDR’s short sale monitor, or see that graph about the reset schedules, is “how many can their really be.” The general media does an absolutly horrible job conveying the enormity of the situtation, (duh), but I guess I just didnt/dont grasp how many people are in trouble.
80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!
So what are fundamentals? They are something that apparently no one has been paying attention to for a very long time and we are gonna pay for it.

[DWCAP]

“of all San Diego mortgages issued in 2004, 80% were adjustable-rate, 47% were interest-only, and 27% involved no down payment.”

This is a quote from rich’s posts linked a few posts up. I had read this before, but I dont think it had really sunk in yet. One of the questions buzzing around in my head every time I read SDR’s short sale monitor, or see that graph about the reset schedules, is “how many can their really be.” The general media does an absolutly horrible job conveying the enormity of the situtation, (duh), but I guess I just didnt/dont grasp how many people are in trouble.
80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!
So what are fundamentals? They are something that apparently no one has been paying attention to for a very long time and we are gonna pay for it.

[DWCAP]

“of all San Diego mortgages issued in 2004, 80% were adjustable-rate, 47% were interest-only, and 27% involved no down payment.”

This is a quote from rich’s posts linked a few posts up. I had read this before, but I dont think it had really sunk in yet. One of the questions buzzing around in my head every time I read SDR’s short sale monitor, or see that graph about the reset schedules, is “how many can their really be.” The general media does an absolutly horrible job conveying the enormity of the situtation, (duh), but I guess I just didnt/dont grasp how many people are in trouble.
80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!
So what are fundamentals? They are something that apparently no one has been paying attention to for a very long time and we are gonna pay for it.

[Eugene]

So, about those fundamentals …

Case in point: Monarch at Scripps Ranch (east end of Mira Mesa Blvd)

Last November, some guy got himself a 2br/2ba 1300 sf condo in Monarch for 380K

http://www.zillow.com/HomeDetails.htm?zprop=71328118

And you can get a comparable condo across the street for 330-350K.

http://www.redfin.com/stingray/do/printable-listing?listing-id=1283984
http://www.redfin.com/stingray/do/printable-listing?listing-id=1390379

For simplicity let’s assume 5% down and 5.5% rate.
Down payment – $16.5K
Mortgage – $1777
Property tax – $275
HOA – $325
Tax deduction – $427 (assuming 25% bracket and maxed-out itemized deductions)
Monthly cost – $1950

What will a condo like that rent for?

http://www.forrent.com/apartment-community-profile/999903912.php

Starting at $2200/month, apparently.

In other words, you can buy a condo in Scripps Ranch TODAY and it will be cheaper than to rent an identical condo.

This does not address a more interesting question, why would anyone pay $2200/month to rent a 2-bedroom condo in Scripps Ranch when you can get a 3-bedroom house in Mira Mesa for $1800, because apparently there are enough suckers or else they wouldn’t be charging those rates…

[Eugene]

So, about those fundamentals …

Case in point: Monarch at Scripps Ranch (east end of Mira Mesa Blvd)

Last November, some guy got himself a 2br/2ba 1300 sf condo in Monarch for 380K

http://www.zillow.com/HomeDetails.htm?zprop=71328118

And you can get a comparable condo across the street for 330-350K.

http://www.redfin.com/stingray/do/printable-listing?listing-id=1283984
http://www.redfin.com/stingray/do/printable-listing?listing-id=1390379

For simplicity let’s assume 5% down and 5.5% rate.
Down payment – $16.5K
Mortgage – $1777
Property tax – $275
HOA – $325
Tax deduction – $427 (assuming 25% bracket and maxed-out itemized deductions)
Monthly cost – $1950

What will a condo like that rent for?

http://www.forrent.com/apartment-community-profile/999903912.php

Starting at $2200/month, apparently.

In other words, you can buy a condo in Scripps Ranch TODAY and it will be cheaper than to rent an identical condo.

This does not address a more interesting question, why would anyone pay $2200/month to rent a 2-bedroom condo in Scripps Ranch when you can get a 3-bedroom house in Mira Mesa for $1800, because apparently there are enough suckers or else they wouldn’t be charging those rates…

[Eugene]

So, about those fundamentals …

Case in point: Monarch at Scripps Ranch (east end of Mira Mesa Blvd)

Last November, some guy got himself a 2br/2ba 1300 sf condo in Monarch for 380K

http://www.zillow.com/HomeDetails.htm?zprop=71328118

And you can get a comparable condo across the street for 330-350K.

http://www.redfin.com/stingray/do/printable-listing?listing-id=1283984
http://www.redfin.com/stingray/do/printable-listing?listing-id=1390379

For simplicity let’s assume 5% down and 5.5% rate.
Down payment – $16.5K
Mortgage – $1777
Property tax – $275
HOA – $325
Tax deduction – $427 (assuming 25% bracket and maxed-out itemized deductions)
Monthly cost – $1950

What will a condo like that rent for?

http://www.forrent.com/apartment-community-profile/999903912.php

Starting at $2200/month, apparently.

In other words, you can buy a condo in Scripps Ranch TODAY and it will be cheaper than to rent an identical condo.

This does not address a more interesting question, why would anyone pay $2200/month to rent a 2-bedroom condo in Scripps Ranch when you can get a 3-bedroom house in Mira Mesa for $1800, because apparently there are enough suckers or else they wouldn’t be charging those rates…

[Eugene]

So, about those fundamentals …

Case in point: Monarch at Scripps Ranch (east end of Mira Mesa Blvd)

Last November, some guy got himself a 2br/2ba 1300 sf condo in Monarch for 380K

http://www.zillow.com/HomeDetails.htm?zprop=71328118

And you can get a comparable condo across the street for 330-350K.

http://www.redfin.com/stingray/do/printable-listing?listing-id=1283984
http://www.redfin.com/stingray/do/printable-listing?listing-id=1390379

For simplicity let’s assume 5% down and 5.5% rate.
Down payment – $16.5K
Mortgage – $1777
Property tax – $275
HOA – $325
Tax deduction – $427 (assuming 25% bracket and maxed-out itemized deductions)
Monthly cost – $1950

What will a condo like that rent for?

http://www.forrent.com/apartment-community-profile/999903912.php

Starting at $2200/month, apparently.

In other words, you can buy a condo in Scripps Ranch TODAY and it will be cheaper than to rent an identical condo.

This does not address a more interesting question, why would anyone pay $2200/month to rent a 2-bedroom condo in Scripps Ranch when you can get a 3-bedroom house in Mira Mesa for $1800, because apparently there are enough suckers or else they wouldn’t be charging those rates…

[Eugene]

So, about those fundamentals …

Case in point: Monarch at Scripps Ranch (east end of Mira Mesa Blvd)

Last November, some guy got himself a 2br/2ba 1300 sf condo in Monarch for 380K

http://www.zillow.com/HomeDetails.htm?zprop=71328118

And you can get a comparable condo across the street for 330-350K.

http://www.redfin.com/stingray/do/printable-listing?listing-id=1283984
http://www.redfin.com/stingray/do/printable-listing?listing-id=1390379

For simplicity let’s assume 5% down and 5.5% rate.
Down payment – $16.5K
Mortgage – $1777
Property tax – $275
HOA – $325
Tax deduction – $427 (assuming 25% bracket and maxed-out itemized deductions)
Monthly cost – $1950

What will a condo like that rent for?

http://www.forrent.com/apartment-community-profile/999903912.php

Starting at $2200/month, apparently.

In other words, you can buy a condo in Scripps Ranch TODAY and it will be cheaper than to rent an identical condo.

This does not address a more interesting question, why would anyone pay $2200/month to rent a 2-bedroom condo in Scripps Ranch when you can get a 3-bedroom house in Mira Mesa for $1800, because apparently there are enough suckers or else they wouldn’t be charging those rates…

[DWCAP]

esmith,

I dont know what to say, if it is a screaming deal, jump on it.
The thing I kinda see is the last part of what you said. “why would they pay that?” I thought, well, maybe schools? The problem is that there are a number of rentals in the area that are 2/2 for 1500-1800. So any young family is sure to not want to over pay by 500-700/month. Add in the whole of MM, with its 2/2’s at 1300-1600 and it looks even worse.
If I had to guess, this guy is sucker fishing. Maybe he has SS appliances and berber carpet and is trying to get a luxery premium. Maybe he wasnt able to maximize his investment like you described and is trying to cover himself.
The whole scripps ranch rents seem kinda distorted to me. The few craigslist listings I saw were all over the place. 3/2 condos for less than your condo. Some “creative” financing rent to own kinda stuff where they rip you off in rent, but if you are willing to buy, they put part of it toward the cost. Even a house for the same cost as your condo (PostingID: 537346452). I am no expert, maybe someone smarter than I can figure it out. But I suspect this is a sign of real stress in the market when LL’s who overpayed are trying to inflate the market to a point that they can survive. Why would I rent a 2/2 condo right next to the freeway when I could rent a 3/2 house on some quiet land a mile away for the same price, in the same zip code and everything? But hey, a sucker is born every day and this guy just needs one.

[DWCAP]

esmith,

I dont know what to say, if it is a screaming deal, jump on it.
The thing I kinda see is the last part of what you said. “why would they pay that?” I thought, well, maybe schools? The problem is that there are a number of rentals in the area that are 2/2 for 1500-1800. So any young family is sure to not want to over pay by 500-700/month. Add in the whole of MM, with its 2/2’s at 1300-1600 and it looks even worse.
If I had to guess, this guy is sucker fishing. Maybe he has SS appliances and berber carpet and is trying to get a luxery premium. Maybe he wasnt able to maximize his investment like you described and is trying to cover himself.
The whole scripps ranch rents seem kinda distorted to me. The few craigslist listings I saw were all over the place. 3/2 condos for less than your condo. Some “creative” financing rent to own kinda stuff where they rip you off in rent, but if you are willing to buy, they put part of it toward the cost. Even a house for the same cost as your condo (PostingID: 537346452). I am no expert, maybe someone smarter than I can figure it out. But I suspect this is a sign of real stress in the market when LL’s who overpayed are trying to inflate the market to a point that they can survive. Why would I rent a 2/2 condo right next to the freeway when I could rent a 3/2 house on some quiet land a mile away for the same price, in the same zip code and everything? But hey, a sucker is born every day and this guy just needs one.

[DWCAP]

esmith,

I dont know what to say, if it is a screaming deal, jump on it.
The thing I kinda see is the last part of what you said. “why would they pay that?” I thought, well, maybe schools? The problem is that there are a number of rentals in the area that are 2/2 for 1500-1800. So any young family is sure to not want to over pay by 500-700/month. Add in the whole of MM, with its 2/2’s at 1300-1600 and it looks even worse.
If I had to guess, this guy is sucker fishing. Maybe he has SS appliances and berber carpet and is trying to get a luxery premium. Maybe he wasnt able to maximize his investment like you described and is trying to cover himself.
The whole scripps ranch rents seem kinda distorted to me. The few craigslist listings I saw were all over the place. 3/2 condos for less than your condo. Some “creative” financing rent to own kinda stuff where they rip you off in rent, but if you are willing to buy, they put part of it toward the cost. Even a house for the same cost as your condo (PostingID: 537346452). I am no expert, maybe someone smarter than I can figure it out. But I suspect this is a sign of real stress in the market when LL’s who overpayed are trying to inflate the market to a point that they can survive. Why would I rent a 2/2 condo right next to the freeway when I could rent a 3/2 house on some quiet land a mile away for the same price, in the same zip code and everything? But hey, a sucker is born every day and this guy just needs one.

[DWCAP]

esmith,

I dont know what to say, if it is a screaming deal, jump on it.
The thing I kinda see is the last part of what you said. “why would they pay that?” I thought, well, maybe schools? The problem is that there are a number of rentals in the area that are 2/2 for 1500-1800. So any young family is sure to not want to over pay by 500-700/month. Add in the whole of MM, with its 2/2’s at 1300-1600 and it looks even worse.
If I had to guess, this guy is sucker fishing. Maybe he has SS appliances and berber carpet and is trying to get a luxery premium. Maybe he wasnt able to maximize his investment like you described and is trying to cover himself.
The whole scripps ranch rents seem kinda distorted to me. The few craigslist listings I saw were all over the place. 3/2 condos for less than your condo. Some “creative” financing rent to own kinda stuff where they rip you off in rent, but if you are willing to buy, they put part of it toward the cost. Even a house for the same cost as your condo (PostingID: 537346452). I am no expert, maybe someone smarter than I can figure it out. But I suspect this is a sign of real stress in the market when LL’s who overpayed are trying to inflate the market to a point that they can survive. Why would I rent a 2/2 condo right next to the freeway when I could rent a 3/2 house on some quiet land a mile away for the same price, in the same zip code and everything? But hey, a sucker is born every day and this guy just needs one.

[Author]

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