Who are the buyers in San Diego now?

[cyphire]

Let me chime in Myito…

First of all, I absolutely see that some people will buy now and that they are less concerned about equity loss then a perceived stability for their family. We have all been sold the ‘if you don’t own a home, you are a loser’ concept for so long, that it makes it tough to emotionally deal with it.

As you were so forthcoming with your finances, let me ask you a question… You have 300K in cash in the bank (lets disregard your 500K in 401k, etc. as it is for retirement and is only a couple (a few) years of retirement income (based on my guess about your home situation) how much will you have after the downpayment? or is that net of the downpayment?

The reason I ask is that I think everyone has a different level of risk exposure. I did own a home until December, and when I needed to sell (it was too far to commute for my daughter’s school), I decided not to buy at what I consider still very close to the top of the market.

We currently live in am amazing house in La Jolla. Instead of paying 2.5-2.8M for this house, we are renting it for over 6K/month. We have a years lease with a years option at the same price. We plan on being here for 2 years. If we really love it, we will stay longer. It has a pool, 5 bedrooms, ocean view, gated, compound, and was completely renovated with all granite, marble, body showers, etc. It is on a kid friendly street (why we moved here) and is just great.

By your logic, I should hate this place… After all we are renting. But so far I love it and my kids love it and have friends on the street already. So not every rental is hell, some are off the hook!

If I owned this house, and the market just stayed even for a few years (although I do expect it to go down significantly as the economy cools), at 6.5% & taxes that represents a monthly cost of 15,700/month vs. 6,500/month. I also don’t have to fix anything, pay for the pool guy and the gardener – only utilities. From a tax perspective, only the first 1.1 million is deductible so you can reduce the 15,700 to 12,700. So if the house doesn’t go up in value, I saved about 75K per year.

If the market goes down (personally I think that it is a house of cards) I could lose from 100-700K on this house if I owned it. While it would not hurt me badly financially I don’t want to lose that kind of money.

The overwhelming point for me is that I think we are in a bubble coming down and you don’t seem to feel that we are, or are being illogical in ignoring it. If you are guessing that prices will stay the same, or go up thats fine – you made your choice. You could be right, I am not an oracle. When I see what is going on the the mortgage markets, the price of homes relative to demand, the price of homes relative to the rate of inflation, and more importantly the lagging of the hit to the economy as things soften, I am betting that prices will come way down. I think that the economy will go in the crapper, and a lot of people will be holding on to mortgages (and having lost the equity they have put down) that they wish they did not have.

Myito…. could you imagine the economy softening, a recession / depression hitting and what the true value of these homes which were 1/3rd the price 10-12 years ago? What is the percentage chance that this will happen vs. the chance that prices will start increasing? All while the level of affordability has gone into the single digits?

Personally I will keep my extra 70-170K per year I am saving from renting if I have made the right call. I can’t imagine a scenario where it would be in my families best interest to buy a highly leveraged asset as prices are still falling. But if this makes you comfortable I wish you excellent luck!

p.s. Are you buying a new Carmel Valley, or 4S home which is being constructed? Just wondering.

[cyphire]

Thanks lostkitty – I like your posts and I thank you for sticking up for me. JG doesn’t like my religion comments, my tax position, and my estate tax position. He also doesn’t like that I bash George Bush. I feel very strongly about these topics, but probably shouldn’t use this forum to vent them… But it’s been an escalating thing and if jg will stop attacking me, I will try to keep on topic… I promise jg.

And keep up the posts lostkitty… I am one of your biggest fans!

[cyphire]

Thanks lostkitty – I like your posts and I thank you for sticking up for me. JG doesn’t like my religion comments, my tax position, and my estate tax position. He also doesn’t like that I bash George Bush. I feel very strongly about these topics, but probably shouldn’t use this forum to vent them… But it’s been an escalating thing and if jg will stop attacking me, I will try to keep on topic… I promise jg.

And keep up the posts lostkitty… I am one of your biggest fans!

[Ricechex]

I have been lurking here for quite some time, and just had to respond to this thread. I am very confused about owning, buying and renting–let me explain….

I am in a somewhat odd and unique position. (I don’t make as much money as the rest of you, so please bear with me…)

I rented a home in December 1999, for a SUPER BARGAIN price. I got lucky because I knew someone and got the hook up. The buying frenzy was just beginning. I fed into the group think, and because I didn’t have enough money alone, I bought a house (July 2001) in a lesser quality neighborhood with a friend. Because the mortgage at the owned house was actually MORE than my rent, and I lived in a better house in a better neighborhood, I could not see moving! We rented the house and the rent did not cover the mortgage and we each paid out of pocket.

In 2003 we refinanced the house. Rents have gone up and new tenants moved in. We are now making a small profit of $150 a month. I am still living in the rental house at the SAME price, but I worry that the landlady will die and I will get the boot. If that happens, I really don’t want to move into the house that I own but it would be much more affordable than finding a rental similar to what I live in now.

Recently, I have inherited $40K. I am wondering what to do with it—should I buy another home that I would prefer to live in eventually when my luck runs out here?

Should I wait it out a few more years?

I agree that renters are definitely “looked down” upon in this society, and that is too bad. My father always rented, and discouraged me to buy. He always disagreed with the concept of renting is “throwing away money.” Consequently, he was force fed by the wife to buy a home in Santa Cruz over 10 years ago–presently it is worth a lot, and he was mid 50s for his first homebuying experience)

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.

Well…sorry for such a long post.

Any feedback would be appreciated.

[Ricechex]

I have been lurking here for quite some time, and just had to respond to this thread. I am very confused about owning, buying and renting–let me explain….

I am in a somewhat odd and unique position. (I don’t make as much money as the rest of you, so please bear with me…)

I rented a home in December 1999, for a SUPER BARGAIN price. I got lucky because I knew someone and got the hook up. The buying frenzy was just beginning. I fed into the group think, and because I didn’t have enough money alone, I bought a house (July 2001) in a lesser quality neighborhood with a friend. Because the mortgage at the owned house was actually MORE than my rent, and I lived in a better house in a better neighborhood, I could not see moving! We rented the house and the rent did not cover the mortgage and we each paid out of pocket.

In 2003 we refinanced the house. Rents have gone up and new tenants moved in. We are now making a small profit of $150 a month. I am still living in the rental house at the SAME price, but I worry that the landlady will die and I will get the boot. If that happens, I really don’t want to move into the house that I own but it would be much more affordable than finding a rental similar to what I live in now.

Recently, I have inherited $40K. I am wondering what to do with it—should I buy another home that I would prefer to live in eventually when my luck runs out here?

Should I wait it out a few more years?

I agree that renters are definitely “looked down” upon in this society, and that is too bad. My father always rented, and discouraged me to buy. He always disagreed with the concept of renting is “throwing away money.” Consequently, he was force fed by the wife to buy a home in Santa Cruz over 10 years ago–presently it is worth a lot, and he was mid 50s for his first homebuying experience)

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.

Well…sorry for such a long post.

Any feedback would be appreciated.

[lostkitty]

Thanks cyphire! Right back at you…
keep posting!!! : )

Trying to keep it balanced around here.

Fun fun fun!

[lostkitty]

Thanks cyphire! Right back at you…
keep posting!!! : )

Trying to keep it balanced around here.

Fun fun fun!

[Alex_angel]

For those of you that try to compare today’s situation with the mid 90’s is just sad. Look back to the mid 90’s and tell me how many millionaires there were before the .com boom? How many billionaires? How many 20-30 year olds did you know in the early 90’s that were making well over $100k and had a net worth of over a million dollars? You guys just don’t get it. There are more rich young people today then ever before. There are enough people with money to keep this market steady and going. You look at the high forclosure numbers but put that in perspective to the amount of new homes and condos that popped up in the last 5 years. Those people are not the norm these days but the exception. You all seem to forget that 1 in 5 americans live in California. Not all are poor illegal immigrants with sub-prime mortgages. You should try forgetting about the early 90’s because we are in a different time right now.

[Alex_angel]

For those of you that try to compare today’s situation with the mid 90’s is just sad. Look back to the mid 90’s and tell me how many millionaires there were before the .com boom? How many billionaires? How many 20-30 year olds did you know in the early 90’s that were making well over $100k and had a net worth of over a million dollars? You guys just don’t get it. There are more rich young people today then ever before. There are enough people with money to keep this market steady and going. You look at the high forclosure numbers but put that in perspective to the amount of new homes and condos that popped up in the last 5 years. Those people are not the norm these days but the exception. You all seem to forget that 1 in 5 americans live in California. Not all are poor illegal immigrants with sub-prime mortgages. You should try forgetting about the early 90’s because we are in a different time right now.

[The-Shoveler]

Alex,

Yes it’s different this time …

oh man Thanks,

I needed a laugh !!

[The-Shoveler]

Alex,

Yes it’s different this time …

oh man Thanks,

I needed a laugh !!

[LA_Renter]

“Rental from 11 years ago used as an illustrative purpose to let you know that the suckers that pay my mortgage are paying much more than I do — which is likely the case with your $1 million condo as well. Do you really think they paid that much for it? Don’t kid yourself, you are covering their mortgage and likely more.”

I’m the guy with the $1 Million condo. Again what you just said is irrelevant. And to your point yes my landlord basically owns this place outright, so its all gravy to him. Good for him, I really like the guy. I mean we could also discuss that buying Microsoft stock in 1989 was a fantastic move. Then there are the people who bough MSFT in early 2001 and sold at a loss in 2003 because they had to liquidate their investments. Both myself and Cyphire have illustrated that you are literally throwing away money buying right now. That is just fact supported by hard data. Here is the way I see it, if you buy right now you are facing significant risk within the next 6 years. Life happens, loss of job, divorce, sickness, etc. If you are forced to liquidate that RE purchase made now within that time frame you could be facing significant financial losses which will be difficult to recoup. Personally I am not willing to take that risk. What we witnessed in the RE Boom was the evaporation of risk for this asset class, that’s what propelled the excesses we see unwinding right now. Right now we are at a stage where the concept of risk is coming back into this asset class. It will be ugly. This is nothing new, it has happened many times before.

[LA_Renter]

“Rental from 11 years ago used as an illustrative purpose to let you know that the suckers that pay my mortgage are paying much more than I do — which is likely the case with your $1 million condo as well. Do you really think they paid that much for it? Don’t kid yourself, you are covering their mortgage and likely more.”

I’m the guy with the $1 Million condo. Again what you just said is irrelevant. And to your point yes my landlord basically owns this place outright, so its all gravy to him. Good for him, I really like the guy. I mean we could also discuss that buying Microsoft stock in 1989 was a fantastic move. Then there are the people who bough MSFT in early 2001 and sold at a loss in 2003 because they had to liquidate their investments. Both myself and Cyphire have illustrated that you are literally throwing away money buying right now. That is just fact supported by hard data. Here is the way I see it, if you buy right now you are facing significant risk within the next 6 years. Life happens, loss of job, divorce, sickness, etc. If you are forced to liquidate that RE purchase made now within that time frame you could be facing significant financial losses which will be difficult to recoup. Personally I am not willing to take that risk. What we witnessed in the RE Boom was the evaporation of risk for this asset class, that’s what propelled the excesses we see unwinding right now. Right now we are at a stage where the concept of risk is coming back into this asset class. It will be ugly. This is nothing new, it has happened many times before.

[PD]

After reading the posts by Alex-Angel and Myito, I now understand why the stock market has continued to go up despite all the negative news. It has been going up, therefore it will always go up. Jump in!
Alex thinks that huge numbers of rich 30 somethings are going to save to day. I posit that massive numbers of financially uneducated people are going to drag it into the gutter.
How can anyone think that spending $100 (prop tax) to save $50 (income tax) is a good idea? If you buy right now, you will be paying through the nose for the opportunity to lose big money.
I am sometimes amazed at the lack of understanding out there. I have a friend who recently told me that she was going to refinance out of her 5.25 fixed to pay off 6K in credit card bills. She was all excited because the TV add said that the refinance was free. I went into a long explanation as to why this was a bad idea (it isn’t free, your rate will increase, you’ve got a great loan) but I think she had already made up her mind. She doesn’t work and doesn’t have kids, she could have gotten a part time job and paid it off in six months. Instead, she wants the quick fix. My stomach hurts just thinking about it. What folly.

[PD]

After reading the posts by Alex-Angel and Myito, I now understand why the stock market has continued to go up despite all the negative news. It has been going up, therefore it will always go up. Jump in!
Alex thinks that huge numbers of rich 30 somethings are going to save to day. I posit that massive numbers of financially uneducated people are going to drag it into the gutter.
How can anyone think that spending $100 (prop tax) to save $50 (income tax) is a good idea? If you buy right now, you will be paying through the nose for the opportunity to lose big money.
I am sometimes amazed at the lack of understanding out there. I have a friend who recently told me that she was going to refinance out of her 5.25 fixed to pay off 6K in credit card bills. She was all excited because the TV add said that the refinance was free. I went into a long explanation as to why this was a bad idea (it isn’t free, your rate will increase, you’ve got a great loan) but I think she had already made up her mind. She doesn’t work and doesn’t have kids, she could have gotten a part time job and paid it off in six months. Instead, she wants the quick fix. My stomach hurts just thinking about it. What folly.

[Author]

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