[BostonAndOC_RE_perspective]

Powayseller,
Cut up those debit cards! They pose a HUGE risk for identity theft, and since they are linked to your actual funds you do not have the $50 fraud loss guarantee offered by credit cards.

[BostonAndOC_RE_perspective]

SDR,
That sounds pretty encouraging. Thanks for your time and knowledge-sharing.

[BostonAndOC_RE_perspective]

Josh,
Good argument. My theory is that Boston’s initial decline happened sooner due to less investor activity and a smaller sub-prime market (i.e. less mortage fraud). Houses near my office that were $650K a year ago can be had for $525K today – in one of the best public school districts in MA (The local high school sent 19 kids to Harvard out of a senior class of 300). The bubble burst and people got over it. I’ve heard that underwriting criteria tightened up considerably.

So today, one could get a $150K job and buy a house in a neighborhood with some of the best schools in the USA for $525K. It is indeed an interesting dynamic when comparing the situation in SD. I know, I know – the Sunshine Tax. Those poor fools using 50% or more of their take home pay to service their mortgage debt can always console themselves with their annual Sunshine Tax payments.

[BostonAndOC_RE_perspective]

SDR,

I’m grateful for your advice. I do subscribe to the rule that no is is irreplaceable, and try to live each day as if I’m competing for my survival (professionally). This is a behavior trait of driven, successful folks I try to emulate.

You’ve confirmed what I see with anecdotal data. Can I ask you to speculate on two more things?
1. What size house do you think I would be able to buy in Carlsbad in 1.5 years for $650K
2. do you think OC and SD prices will diverge much – either up or down?

[BostonAndOC_RE_perspective]

Perhaps they were all busy trying to refi to get enough to cover their tax bill from going EXEMPT to try and bring home enough cash flow to cover their outrageous mortage payments.

[BostonAndOC_RE_perspective]

SDR,
I always appreciate the insight of my elders.

We have a strict ranking and rating system which somewhat separates the quota achievement from the assessment of your ablities by mgt. The type of sales mgt you describe is common at hardware OEMs like Cisco, Juniper, MOT etc. Also software firms. I am extremely lucky that I work in a corporate culture that is the primary case study for a portion of Stanford’s MBA curriculum. Our past CEO was a TIME magazine man of the year.

Besides, only 35% of my compensation is variable, and its what we call a “managed” pay plan. That means no one gets to excced the threshold by too much, ususally accomplished through mid-year quota raising. If that happens, it is recognized as a good thing and you a rewarded with cash/stock etc at review time that more than makes up for any lost comissions from the higher quota.

As a high tech sales guy, I am very fortunate to work in the sales group that I do, because your description of the perils/risk is indicative of the norm.

We have a formal program to develop the “young” studs. Let me tell you, due to the complex nature of what we do, it is not only really tought to find enough qualified candidates at top schools to fill out the program every year, and then it takes them years on average to thrive in a quota-driven position. I wish we had more of them.

But back to RE, I saw figures this morning in the LA Times that I’d like to get your perspectives on:
*******
The median in San Diego, which has been viewed as a barometer of market trends because it was the first county to accelerate and the first to slow, rose 5.7% to $504,000 although sales fell 17.4%. Prices there have declined 2% in the last six months.
*******

Have you seen this actual “decline” in prices?

[BostonAndOC_RE_perspective]

SDR,

mid 30’s, at my current firm for 6 years, in my current role for 4 years. I did mostly product marketing and business development before I made the move to sales.

How long have you been a realtor? I don’t know too many with dual masters. You must clean up at the office poker games.

[BostonAndOC_RE_perspective]

Josh,
How did the desirability proxy jump so much from 2002 – ? Traffic got worse, all SD schools are way more crowded because no one will pass a bond measure, and the water is more crowded than ever. SD didn’t become any more desirable than it was in 1989, 1999 or 2002. Biotech is a ray of hope, but not until the products the SD-based biotech companies produce generate billions of $$ in revenue (like Genentech and Amgen did way back when). Even lawyers make way less in SD than they do in LA or SF. Always have.

The bottom line is that outside of Qualcomm (who pays pretty well) SD lacks a major non-defense corporation that can drive higher regional pay.

[BostonAndOC_RE_perspective]

Kong,
One observation is what OC and SD lack, compared to LA, BOS, NYC, SF/SJC: A major research university. UCSD is really awesome, but its not in the league of what you have in the aforementioned metro areas. BOS and SJC emerged as the tech hubs of America due to MIT and UCB/Stanford. LA has CalTech, UCLA and USC. NYC obviously has Wall Street, where you make crazy money as the norm.

An example from my company is that they pay a 15% adder for LA office location, but 0% additional for OC and SD. This implies a 15% gap in cost-of-labor, which is the metric used for this so-called adder (as opposed to cost of living).

Are you a developer or a sw engineering mgr? Either way, you should be making a lot more. Do you work for a software firm or an enterprise?

[BostonAndOC_RE_perspective]

speaker,
If I had it all over to do again, I would go to law school. Tech degree + JD = extreme versatility, especially as litigation $$$ over IP zoom skyward.

Good luck on your decisions. Education is always a good investment. Just have a plan to maximize ROI.

Keep hunting. Skilled people are in short supply, but in a place like SD you’ll have to dig and be more aggressive finding the opportunities. Consider the sales side if you have the personality for it. The money is usually better than R&D or product marketing-type jobs, especially if you have a technical degree.

And, sometime in the future, you should check out the Boston area. Its not for everyone, but it does have a vibrant job market similar to Manhattan or SF/SJC. For my money, I’ll take the sunshine, hence my wait for another promotion to open up in SoCal so I can move back with the same great job/company.

[BostonAndOC_RE_perspective]

Poway,
I think many sectors are, though none I feel qualified to comment on beyond telecom. In general, the increases in productivity aided by the technological leaps of the past 10 years with the internet, Moore’s law, ERP software and the ability to work virtually anywhere have fueled profit and reveue growth without necessitating extra hiring. Yet many of them (especially in high tech) surreptitously use their $$$ for open market purchases of their own stock to mop up the millions of options they’ve given out. This is one of the ugly truths of the tech bubble. There was a good article in the Sunday NY Times ~ 1 month ago on it.

I’m no economist, so I’ll need to think about your question. Looking at my company’s stock, it boomed during a time of high interest rates, depressed RE and lackluster job growth throughout the early 90’s (and al the way through). Our earnings are driven by consumer and business spending. In general it seems we do well after a Fed tightening cycle, historically speaking. I guess you could say we’re somewhat cyclical.

I wish that I had the time to pursue an advanced degree. My boss wants me to get an executive MBA (company pays) but I am loathe to invest the time away from my family. I look at our top sales mgt (5K person sales org), and none of them have MBAs – just bachelors degrees. However if I ever want to run a P&L, I’ll need it for sure.

The one thing I will always teach my son is that no matter how many fortunes one makes and loses, no one can take away your education. The memories of my college years and all the experiences entailed are priceless.

[BostonAndOC_RE_perspective]

Uncle Git,
Optical networking is booming. Ethernet is spreading from the LAN to the carrier networks. The recent Infonetics report forecasts the Metro Ethernet market tripling to $15 billion by 2009. ILEC video distribution (IPTV) is finally putting all those miles of dark fiber washed clean by CH13 from Global Crossing’s balance sheet to profitable use.

You’re close, but my firm in HQ’d on the west coast. IBM doesn’t pay that well and they’re stingy with the stock.

[BostonAndOC_RE_perspective]

Farls,
You make good points, and as a first time poster I respect the feedback.

Believe it or not, people are incredibly risk-averse out here. The majority of my peers and managers have 15 year mortgages and are on track to pay them off early. I am an oddity in that I moved here. Most everyone else is from here, and would never leave. Mostly Irish guys, firmly rooted. Comparing this group to my peer group in OC, the difference in spending habits with similar income are striking. Its not fair to chalk it all up to education, but perhaps lack of exposure to the accoutrements of the “good life” that we all enjoy(ed) so much in OC is an education unto iself 😉 Incidentally, the areas in Boston that are seeing rising inventory and price cuts are in marginal areas that appealed to marginal buyers that were marginally qualified. You could compare these areas to an Inland Empire or Lancaster/Palmdale from a relative desirability perspective.

Lastly, I understand your comments regarding stating income and education. I did this to baseline my “demographic”, and then frame the comparison. I lived in South OC before we moved, and while the neighborhood was nice and mostly families, I believe that less than 25% of my neighbors had jobs that required a degree. Many of them sold for large cap gains, and aspired to move to Coto etc. So they make $400K on their home, keep $100, and put $300K down on a new $1 million home in Ladera Ranch. Now they have an exotically financed $700K mortage to service, but still on their relative OC median income of ~80K (or $160K if dual income). How will they do it? They have no idea. No knowledge of fixed income markets, no knowledge of the Carry Trade, blindly believing they will experience double digit appreciation annually, allowing them to perpetually pull cash out at low rates and postpone their day of reckoning. I feel for these folks, but they’re mostly uneducated and more likely to be caught up in a mania.

To do sales at my company, you are required to have a minimum of a BSEE/BSCS/BSCE. We are required to manage executive relationships, hit quotas for sales and demand creation, and directly and forcefully challenge our executives when they make decisions adversely affecting our customers. It takes a lot of confidence to demand accountability from a guy running a $1 billion P&L. I constantly try to get colleagues that work in marekting, business development etc to come out and experience field sales, but most people don’t have the stomach for it. So I guess you could say its not a whole lot different from RE, except that it requires a formal education and likely provides a more secure career path – and the chance to work around some incredibly smart people that serve to remind me that I am nowhere near as smart as I think I am sometimes.

I have a wide variety of friends, both childhood and college, that are in various aspects of real estate. One was a high school dropout and is now a successful residential agent, two others went to USC with me and are mortage brokers, and the most successful ones are in commercial RE. Their career earning patterns look like a volatile stock’s chart. The big difference between us is my pay goes up every year, guaranteed (barring a huge meltdown in semis or my inexplicable shift to a life of crime), and I control my own destiny. I’m also fairly young, and can expect some huge capital gains from my stock options and restricted stock grants over the next 20 years I plan to work. Retiring any earlier would be cheating myslef out of a bigger pension.

So I don’t doubt at all that you know many folks with no education making more than my stated income. But in OC and SD, the percentage of them that derive that income from a stable source (i.e. not fully commissioned) is small, much smaller as a percentage than Metro Boston, which is both Silicon Valley East and the #2 financial center after NYC (Fidelity and many other huge mutual funds are HQd in BOS). At the end of the day, its all about jobs, and OC and SD are sorely lacking in high paying professional job creation.

I look forward to the lively exchange of information on this blog.

[BostonAndOC_RE_perspective]

Poway,
Corporate spending is booming. To put it in perspective, I just wrapped up an incredible Q1 that exceeded our quota to the effect we hit the 200% accelerator! I call on a Fortune 500 account (large OEM), selling specialized products for major telecommunications networks. There is a major network transformation underway for things like IPTV and mobility applications that is driving a big upcycle in telecom investment.

Any recession will be, IMHO, predicated by a weak consumer. Like I said, you have lots of people with high debt loads that lack stable 6-figure corporate jobs. Besides a professional income, I also have first-rate healthcare ($350/month for the family), a company car, stock options, and a PENSION! OC and SD just aren’t the place one finds these kinds of jobs, but rather the is the land of the small business owner, service professional (i.e. attorney) or RE industry tool. An engineer for my company living in SD probably makes $20-30K less than the guy working in San Jose, strictly due to the local “cost of labor”.

Everybody I know who lives in the Bay area makes >$200K. You’ll see ARMs, because even a guy making $200K has a tough time with a $1.5 million shack in Piedmont (premier East Bay family area). Chances are he’ll have plenty of qualified buyers there, however, compared to a guy making $80K trying to flip his $750K Irvine condo to a bunch of guys in similar economic boats.

Boston is unique in that most people are very well educated, and as such would never over-leverage themselves. My town is the kind of place where the guy down the street driving the 5 year old minivan is worth $20 million.

So in summary, any recession will be fueled by a lack of consumer spending. What will be interesting to see is whether business investment picks up the slack. And, oh, by the way, inflation? Double digit percentage raises were the norm at my Fortune 10 company this year. The skilled labor market, at least in high tech, is tighter than it has been since 1999 (though this can be attributed as well to 9/11 and the lack of visas available for the majority foreign-born US engineering and science grads). After all, how many of your friends have degrees in EE or CS? I’m the only one in my circle.

[BostonAndOC_RE_perspective]

I am another lurker deciding to join in…

I moved from South OC to metro Boston 3 years ago (job promotion). I work in sales for a Fortune 100 high tech company. I have a wife and 1 child, and make ~$150K (one income). We own here.

First, some statistics on the town I live in now:
Population: 25K
Avg household income: $95K
% adults >25 yrs with a minimum of a BS/BA: 49.5%
Avg house price: ~$500K

The only downside is that it is COLD in the winter, but the quality of education, number of educated people (all my neighbors!), cheap housing and Bay area-level salaries make moving back a tough decision. Being from LA, graduating from USC and living in SoCal my whole life, I miss the action. Here though, my boy could choose from Philips Exeter or Philips Andover or phenomenal public schools, likely giving him a better chance at the Ivies than 95% of CA public schools. He also has the advantage of my wife staying home with him, as I don’t need her income to pay our mortgage.

That said, we will likely be moving back in 1-2 years, and I am salivating at the market conditions we will encounter. Why? Because the vast majority of purchasers in OC and SD bought their houses in the last 2-3 years with nowhere near the income to qualify for conventional 30 yr loans in a tight credit environment. What do you call some joker making $80K a year taking on a $500K mortgage (and most are much larger)? An uninformed gambler. Talking to a friend that has been an OC mortgage broker for 13 yrs, these income/debt levels are the norm. I asked if she’s seeing $200-250K in annual income for a $600K mortgage. She laughed. The sad truth is that OC and SD lack, for the most part, high paying corporate jobs that require a degree or advanced degree. When 18% of the population could be one bad quarter away from selling used cars (all the RE people) one can see the makings of a localized economic depression. It reminds me of that clasic Doors song “Blood on the Streets”, except that instead of “the town of New Haven” or “Fantastic LA” substitute “OC and San Diego”. LA and SF/SJC have a much larger base of high-paying jobs that are non-RE related, and will likely be more resilient markets.

Thoughts from the forum?

[Author]

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