Who are the buyers in San Diego now?

[Anonymous]

[Anonymous]

[34f3f3f]

The one thing that is lacking here is the concept that houses cannot be traded like stocks.

…in spite of the perfect storm of negative news, prices have not gone down that much.

Chris, if it’s one thing that Piggintons has taught me its that housing is not like stocks. This point was pressed home some weeks back, by posts and youtube video clips.

Furthermore, since we accept the housing market is illiquid and not subject to the instant vagaries of the stock market, one would expect a slow and at times impercetible movement, and interspersed with small rallies as has been pointed out many times.

If you look at cyles the world over they are measured in years. What’s different about this one is that we have never seen such a huge surge in values. That’s the crux of the concern here and quite rightly too.

However, no smart person will call anyone dumb or stupid for buying now. It’s your choice, and your life. There may be people who would like to see a faster correction in prices and view buyers as delaying that process, hence the angst.

[34f3f3f]

The one thing that is lacking here is the concept that houses cannot be traded like stocks.

…in spite of the perfect storm of negative news, prices have not gone down that much.

Chris, if it’s one thing that Piggintons has taught me its that housing is not like stocks. This point was pressed home some weeks back, by posts and youtube video clips.

Furthermore, since we accept the housing market is illiquid and not subject to the instant vagaries of the stock market, one would expect a slow and at times impercetible movement, and interspersed with small rallies as has been pointed out many times.

If you look at cyles the world over they are measured in years. What’s different about this one is that we have never seen such a huge surge in values. That’s the crux of the concern here and quite rightly too.

However, no smart person will call anyone dumb or stupid for buying now. It’s your choice, and your life. There may be people who would like to see a faster correction in prices and view buyers as delaying that process, hence the angst.

[34f3f3f]

Me me me me…money money money money…pathetic Americans.

Uncomfortably numb, what makes you think we are all Americans? This is a problem that has affected many countries, not just the US. Besides this is a sounding board for ideas, not prejudices.

[34f3f3f]

Me me me me…money money money money…pathetic Americans.

Uncomfortably numb, what makes you think we are all Americans? This is a problem that has affected many countries, not just the US. Besides this is a sounding board for ideas, not prejudices.

[PD]

However, no smart person will call anyone dumb or stupid for buying now.

Not true.  Anyone who has heard housing analysis but buys right now at peak prices thinking they are going to make money in the next couple of years is dumb or stupid. 

If you buy knowing that prices may go down significantly and have decided that you can tolerate the losses, that is another thing (like Chris).

[PD]

However, no smart person will call anyone dumb or stupid for buying now.

Not true.  Anyone who has heard housing analysis but buys right now at peak prices thinking they are going to make money in the next couple of years is dumb or stupid. 

If you buy knowing that prices may go down significantly and have decided that you can tolerate the losses, that is another thing (like Chris).

[NotCranky]

Ricechex
“It does seem that owning a house is good for retirement, right? Pretty much you are going to be on a fixed income, so a house that is near paid off seems a good idea.”

It certainly is to me. I am not one of the people who seems to think that making money and more of it forever is a sure thing. Having a house paid for is a hedge against the possiblity that It becomes very hard to make money some point in time. As a renter you have to pay rent forever where as a an owner at least in theory there comes a day when it just property taxes and insurance.Maintenance,especially cosmetic stuff, is generally more optional than people believe.Buying an overpriced,oversized house in the best neighborhood does not necessarily help accomplish anything towards the goal of establishing that hedge anymore than renting does.

You seem to be making progress toward being mortgage free. My recommendation is to stay conservative buy a house when the timing is better. Keep the one you have and maybe over time, pick up a few more rentals.Sell something once in a while if it helps you get in a better position. If you don’t accomplish it sooner in 15 to 20 years you can be debt free, including rent.

Like you, I also have never made much money.Never inherited a penny.I own a nice home free and clear. I am 44,Mesa College drop out.Yes bubble helped. I am convinced that for not so high earners, owning multiple less expensive homes is smart path, even if you want to stay renting.

[NotCranky]

Ricechex
“It does seem that owning a house is good for retirement, right? Pretty much you are going to be on a fixed income, so a house that is near paid off seems a good idea.”

It certainly is to me. I am not one of the people who seems to think that making money and more of it forever is a sure thing. Having a house paid for is a hedge against the possiblity that It becomes very hard to make money some point in time. As a renter you have to pay rent forever where as a an owner at least in theory there comes a day when it just property taxes and insurance.Maintenance,especially cosmetic stuff, is generally more optional than people believe.Buying an overpriced,oversized house in the best neighborhood does not necessarily help accomplish anything towards the goal of establishing that hedge anymore than renting does.

You seem to be making progress toward being mortgage free. My recommendation is to stay conservative buy a house when the timing is better. Keep the one you have and maybe over time, pick up a few more rentals.Sell something once in a while if it helps you get in a better position. If you don’t accomplish it sooner in 15 to 20 years you can be debt free, including rent.

Like you, I also have never made much money.Never inherited a penny.I own a nice home free and clear. I am 44,Mesa College drop out.Yes bubble helped. I am convinced that for not so high earners, owning multiple less expensive homes is smart path, even if you want to stay renting.

[myito]

Cyphire,

I like your post, but your thinking was a bit simplistic and somewhat faulty on a few levels. I’m going to be somewhat tactical (robotic) in my responses for the sake of responding to your thoughtful feedback:

1) I don’t buy into the concept that if you don’t own you are a loser. I rent now and just prefer to own. I like the stability that comes with it and feeling like I can bond with like-minded neighbors. Living in a rental home in La Jolla puts you in a similar camp. Given how much you are paying for rent, you are the exception and not the norm.

2)After our downpayment we will have about $100-120K left over. The home we are buying is down about 20% from the height of the market.

3) Your reference to $500K in 401K only funding a few years of retirement is where you logic becomes fuzzy. I have been in the corporate workforce for 6 years (since 29) and have built up substantial income in bank and 401K — my earning power is increasing and I earn an additional $2K-4K per month (depending on month) doing consulting. But for the sake of your argument, let’s assume I suddenly stopped saving in my 401K and savings.

Let’s go with a 30-year scenario which is good in terms of housing and retirement scenarios given my age.

Just sitting on the 401K (not adding) in 30 years @ a modest 5% interest rate would give me about $2.2 million ($2.6 million if I add just $5,000 a year). A far cry from the 500K today.

The 100K in the bank @5% interest and saving a modest $100 per month on top of it (let’s assume some stocks and some conservative CD buying with this money) would result in $530K in 30 years.

So now I am at about $2.72 to $3.1 million in cash assets — which I will be able to access because I will be “of age”.

3) I get sick of people using this thing about what houses were worth 10-12 years ago. What about inflation? For the sake of your argument let’s go there. let’s take a $1 million dollar home in today’s market. Assuming it was $350K in 1995 it would be worth about $500K today (given a 3% compounded interest rate for inflation).

Let’s say I buy this $1 million dollar home today and it depreciates say by 1/3 over the next 5 years and then appreciates by normal inflation rates (3-4%). At the end of that 30 year period, the home would still be worth $1.4 million. I would not count that toward my liquidity but the home is paid for and I am sitting on a very hefty profit. I’m failing to see your logic.

4) True homes are not like the stock market in many regards, but they are similar in one way — you only lose if you sell when your equity is negative. The rest is just a paper loss. It’s amazing to me that many here criticize flippers, but your mentality about owning is very similar. Not everyone is in it for a quick dollar!

5) No, I am not buying in Carmel Valley or 4S ranch.

Cheers!

Myito

[myito]

Cyphire,

I like your post, but your thinking was a bit simplistic and somewhat faulty on a few levels. I’m going to be somewhat tactical (robotic) in my responses for the sake of responding to your thoughtful feedback:

1) I don’t buy into the concept that if you don’t own you are a loser. I rent now and just prefer to own. I like the stability that comes with it and feeling like I can bond with like-minded neighbors. Living in a rental home in La Jolla puts you in a similar camp. Given how much you are paying for rent, you are the exception and not the norm.

2)After our downpayment we will have about $100-120K left over. The home we are buying is down about 20% from the height of the market.

3) Your reference to $500K in 401K only funding a few years of retirement is where you logic becomes fuzzy. I have been in the corporate workforce for 6 years (since 29) and have built up substantial income in bank and 401K — my earning power is increasing and I earn an additional $2K-4K per month (depending on month) doing consulting. But for the sake of your argument, let’s assume I suddenly stopped saving in my 401K and savings.

Let’s go with a 30-year scenario which is good in terms of housing and retirement scenarios given my age.

Just sitting on the 401K (not adding) in 30 years @ a modest 5% interest rate would give me about $2.2 million ($2.6 million if I add just $5,000 a year). A far cry from the 500K today.

The 100K in the bank @5% interest and saving a modest $100 per month on top of it (let’s assume some stocks and some conservative CD buying with this money) would result in $530K in 30 years.

So now I am at about $2.72 to $3.1 million in cash assets — which I will be able to access because I will be “of age”.

3) I get sick of people using this thing about what houses were worth 10-12 years ago. What about inflation? For the sake of your argument let’s go there. let’s take a $1 million dollar home in today’s market. Assuming it was $350K in 1995 it would be worth about $500K today (given a 3% compounded interest rate for inflation).

Let’s say I buy this $1 million dollar home today and it depreciates say by 1/3 over the next 5 years and then appreciates by normal inflation rates (3-4%). At the end of that 30 year period, the home would still be worth $1.4 million. I would not count that toward my liquidity but the home is paid for and I am sitting on a very hefty profit. I’m failing to see your logic.

4) True homes are not like the stock market in many regards, but they are similar in one way — you only lose if you sell when your equity is negative. The rest is just a paper loss. It’s amazing to me that many here criticize flippers, but your mentality about owning is very similar. Not everyone is in it for a quick dollar!

5) No, I am not buying in Carmel Valley or 4S ranch.

Cheers!

Myito

[PD]

You don’t only lose if your equity is negative. You lose the opportunity cost of your downpayment and you lose the money you pay on your mortgage over what you would pay for a similar property in rent.

[PD]

You don’t only lose if your equity is negative. You lose the opportunity cost of your downpayment and you lose the money you pay on your mortgage over what you would pay for a similar property in rent.

[myito]

Rustico,

I think your advice to Ricechex is good. When I read the post I thought — “stay where you are until you have to move.”

Ricechex, if the rental is still working out don’t jump ship until you have to. You might also want to check and see if you are in a rent controlled building. If so, even if the landlord dies you may be protected against being thrown out. For my condo, even if I sell it I would be responsible for paying the tenants a relocation fee (something like $5K I believe).

If you ascribe to the overarching view on this site, chances are you will be able to get a better, lower priced home in a few years when you may be forced to move.

I would diversify my assets putting some in a stable option (like mutual fund, CD or high-rate bank account like ING) and then possibly investing some elsewhere. The stock market has been peforming well lately but many believe this bull run is coming to a close so I’d be careful with stocks. I was told Gold and international stocks are good, but I have not doing enough investigating to speak on the topic.

Best of luck to you.

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