You are all wrong…

[DesperateBuyer]

This is NOT a speculative bubble.

Tulip bulbs, internet stocks, and south sea exploration companies were speculative bubbles. They were caused by investor speculation in assets that had no fundamental economic value.

San Diego housing as a strong, underlying economic value. Almost ALL single family homes purchased in the 750,000+ price bracket in San Diego county were purchased by the primary resident who is currently living in and occupying that home. This market is NOT being driven by a bunch of speculators who are hoping to sell to the greater fool.

I’m not saying its not overpriced, but is simply absurd and ignorant to call this a speculative bubble.

Is the market overpriced? Sure, big deal, it cycles, but as is evidence by the overwhelming majority of people in this forum, you are not housing bears, but hopeful buyers.

Here is why you are going to be burned:

1) The dollar is going to lose a tremendous amount of purchasing power in the next 10 years. In nominal terms, today’s housing prices will look a steal.

2) San Diego is NOT the same San Diego it was 10 years ago. There is a new high-tech worker that lives here but works elsewhere. Their payrolls are not reflected in crappy government statistics.

For many years, Orange county was the poor version of Los Angeles…but it was transformed and the real estate market in Orange county became more valued then Los Angeles. What’s happening now in San Diego is the same wealth change that happened to Orange county.

It silly to compare San Diego today v. San Diego 5 years ago. What you should do is compare San Diego today to Orange County today. By that comparison, San Diego looks cheap while still offering many, if not more, of the same amenities.

Sorry to throw an umbrella on your doom and gloom parade, but the end of the world is not as close as it sounds like many of you hope.

[patb]

Okay, if San Diego is so transformed, why has the ratio between rent
and price so out of whack. If income’s are so good, people would
be paying more rent.

[kev374]

very good point patb, the OP is deluded. This is classical “it is different this time” thinking that always precedes all bubbles. The fact is that income growth is stagnant, most of the recent job growth is Real Estate related and that is rapidly shrinking, a big chunk of existing homeowners are overleveraged – just look at the rapidly rising property tax delinquency rate and the mounting number of foreclosures and you should get an idea, population growth is the slowest it’s ever been in San Diego and OC.. infact population growth was stronger during the DOWNCYCLE in the early 90s.

The recession is still on the horizon, it hasn’t happened because almost ALL homeowners think that the market is going to rebound by springtime so have not cut their spending by much. Late 2007 when RE prices contract sharply due to mounting foreclosures and lack of new demand it will cause a RUDE awakening! Homeowners will start their belt-tightening as the values of their homes plummet.

I have friends who work as mortgage brokers and they say the refi market in SoCal is all but DEAD as a duck! Subprime is just about over.

Also, there is a growing trend of offshoring high paying professions like Engineering and Finance. This causes downward pressure on wages which causes an exodus from high cost areas. I forecast SoCal losing the population that can actually support higher home values because of this. This is already happening in Boston where the city is actually paying new grads $10,000 to commit to stay 5 yrs in the local area, imagine that!

Hope you have money saved up in your emergency fund for the rough times ahead!

[zk]

I’ve only got time to comment on one of your errors. You say that, “Almost ALL single family homes purchased in the 750,000+ price bracket in San Diego county were purchased by the primary resident who is currently living in and occupying that home. This market is NOT being driven by a bunch of speculators who are hoping to sell to the greater fool.” You say this as though the two are mutually exclusive. They’re not.

You see, the only reason many of those primary residents are willing to pay so much for those single family homes is that they’re hoping to eventually sell them to the greater fool. If joe six pack can rent a house for $2500/month, but it costs him $5,000/month to buy the same house, why would he buy it? Because he’s got an unreasonable expectation of appreciation. Because he’s hoping to (someday) sell it at a much higher price to a greater fool. A “speculator” isn’t neccessarily the same as a flipper. All flippers are speculators but all speculators aren’t flippers. A guy who pays twice as much as he needs to to live in a house is speculating on that house appreciating. And if that guy borrowed 10x his income using an option ARM, and he counted on being able to refinance after his house appreciated in price, then not only will his speculation be wrong, but he’ll be selling his house soon. And he’ll be quite motivated.

[kewp]

A few notes:

Take a walk downtown sometime after dark and look at all the dark condo towers. I doubt those all belong to wealthy out-of-state vacationers.

Yeah, “Its condos!” and “Its downtown!”, but they will pull the market down regardless.

Regarding your tele-commuting high tech worker, those gigs go to folks in India, not San Diego. Cost of living is a wee bit cheaper over there.

I’ll concur that anyone thats over-extended themselves to get into a primary residence should be considered a speculator.

[HereWeGo]

Let’s revisit this topic in 3-4 months.

[Raybyrnes]

What about the guy who has the cash and credit to buy and then has 2 or 3 rommates taht are offsetting the cost of his mortgage. He owns the place, gets the deduction, he lkives wih his friends who benefit form the back yard etc.

There is also a fairly sizable gay populationliving in the San diego area. Most of these guys don’t ahve to worry about 529 plans or diapers.

Thete are also many retired military. These guys have a government pension coming in , mahy have a managemnet position and some have a working spouse. They are not concerned about the ups and down of the market and can easily weather the volatility.

Is it forgatten that these people are out there aswell and make up a larger segment of the overall homeowners in San Diego than the mere speculators.

[4plexowner]

Thanks for clearing it up, DesparateBuyer

I understand now – this time it’s different …

[masayako]

DesperateBuyer,

If you believe what you preach, please go out there and buy yourelf a nice house. We are not here to stop you. Believe what you want to believe.

I only trust the data and statistics. Statistics show me that housing is in a bubble. If you think otherwise, I honestly don’t see the point why you want to waste your time here.

The money I saved by renting is nicely funding my retirement and stock portfolio. No offense, I hope you get your nice $750,000(**) house soon, good luck, bro.

** The $750,000 house is really worth $400,000 at year 2000. (Inflation adjusted)

Masayako

[Anonymous]

Call it what you want, but the bottom line is that residential real estate in San Diego (and orange county and everywhere else) is losing value every day.

[Anonymous]

Show me your numbers! Are you seriously telling me that there are hordes of highly paid high tech workers living here and moving here, working remote/flying/commuting elsewhere and that these workers will somehow keep the housing mania alive?

In fact, the opposite is happening. The past five years we have seen an EXODUS of highly paid high tech workers from coastal areas to cheaper, more livable cities like Boise, Denver, Austin and even Des Moines, IA. They are making the same salary, because they can work remote and service customers in the big cities the same way they did before, but they are paying 1/5 the price for housing. We have also seen layoffs at Nokia (500+), and multiple other tech companies this past year in San Diego.

[masayako]

2945 AVENIDA CASTANA, Carlsbad, CA 92009

List Price: $795,000 – $850,876

Purchase price (6/16/2005): $900,000

At least $120,000 in the red!!

DesperateBuyer,

Check this out, you are telling us the above seller is buying this expensive house for their family to enjoy or simply speculating for price appreciation? Please explain to me like I’m a 5 yrs old. Some people DO deserve to get burned for their ignorance.

masayako

[masayako]

juice,

Talk about High tech jobs…. Not only Nokia, silently, even Qualcomm has setup R&D site in India for many engineering jobs already. It’s happening and more will happen. You know what is happening? The price of condos and townhomes near Nokia (Scripps summit dive – Canterra) has dropped hugely (15%-20%) after the 500+ layoff. More to come, guys… After this summer, the sellers will truly regret/suffer if they don’t dump their houses in time before the big drop.

I dumped mine Jun’06 so I am talking from experience, not trying to talk the whole thing down. I don’t have to. I see it coming and I acted accordingly to lock in my benefits. Everyone should.

masayako

[kewp]

Hey, I’m one of those highly-paid tech workers! Except I’m not highly-paid enough to afford a home in SD. Most other highly-paid folks (above the median) can’t afford one either.

Everyone should be thankful for us though, as we are gonna be the ones that eventually stop the housing crash.

Assuming there are enough of us left around, that is.

[JWM in SD]

Desparate Buyer??? More like Desparate Seller. Get lost you Freakin Moron.

Seriously, people do not get rattled by weak ass attempts like this clown made today.

Hey desparate buyer why don’t you go out and buy a few houses here in SD with 100% neg am loans then and tell us how you’re doing a year from now.

Get A Fucking Clue.

[Author]

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