[Escoguy]

I think the term bubble isn’t the right one here. There may be pockets of certain markets which are overpriced due to a lack of new buyers earning high salaries locally, but what I’m seeing is a more fundamental shift.

In the past, investors might sell to take a gain but today, if there is no pressure to sell, rents are coming in, inventory is tight and foreigners are competing for the few homes on the market, and it’s harder to get a mortgage (i.e. real ability to pay matters) I’m not sure that bubble is the correct term. More lack of good perceived safe alternatives for mid to long term funds.

For now, the only catalyst I can see that would bring down housing would be if the risk free rate earned on T-bills and other “safe” assets would go above 4% on the 10 year. Not to say it can’t happen but it’s not in most forecasts for the next 5+ years.

“The implied forecast also shows forward 10-year U.S. Treasury yields rising to 2.71% in 2025, down 0.25% from December 18.” from seekingalpha today.

The doomsayers who suggested that commodities/oil/gold/the Euro were safe havens, have been proven wrong for the time being.

Even oil futures show only $53/barrel in 2019 which get us closer to the average price of 2015.

As the dollar continues to strengthen and more capital comes into the US, real estate will benefit in my view.

There may be some shift in perspective in a few years if other assets with solid yield become relatively cheaper but for now, there is liquidity and the perception of safety in US real estate. I just don’t see a specific catalyst which would change this dynamic in the next few years barring another huge 20% spike in prices (blow out phase) but I also don’t see that happening in San Diego specifically. I’m thinking more 2-5% gains/year over year. Driven by income growth of 2-4%/year, population growth of 1.5%/year, lack of building and continued low interest rates.

Days like today in the stock market only reinforce this.

If there is a solid counter point, I’d like to know but I’m not seeing it now.

[Escoguy]

I’ve been making this point for some months now. I track three zip codes where I have rentals: not coastal but a good cross section of North county, 92127, 92078 and 92027.

There is less and less supply for SFH with 3+BR
When I check zipRealty, there are 1100 SFR 3+BR (non manufactured) with 1200+ sf below 750K in the entire county going about 10 miles east of I-15. So no there is not much inventory and some of these 1200 homes are surely over priced by normal criteria.

same criteria below 650K is: 874 homes

In more exclusive areas, many owners may just realize the property is irreplaceable and thus will never sell unless a major tragedy occurs.

If one considers that in a given year, several hundred properties get bought by investors, then the remaining homes for occupancy drops further.

Scary to think that the entire “affordable” housing stock could be bought by a couple of plane loads of investors from any country of origin.

[Escoguy]

Two years ago we bought a Nissan Leaf and a Plug in Hybrid, cut our gasoline use by 80%, added solar. Just added a second system so our electric bill is minimal. Now adding solar on four rental properties here to get the cash flow of about 12%/year on average. I think there are thousands of others who are in some stage of doing the same. The total economic impact between additional revenue +$500 month and savings of $400 /month is about 33% of our mortgage plus our tenants get some savings too.

I think the transition to renewables will be faster than many expect.

[Escoguy]

Looking forward to it and the ensuing discussions.

[Escoguy]

My brother and sister and aunt live/work in Austin.

Property taxes are very high. Traffic is tough. Avoid south and East Austin. Schools are actually quite bad in some areas. Getting into UT can take a lot of work and commitment even though my niece got a full scholarship there (sophomore now).

My best advice would be for you to just go there for two-three weeks and look around, visit schools, see actual homes in person. The impression you get online can be very different, especially during the dry/cold Texas winter.
Having grown up in central Texas during my teenage years, I didn’t suffer from it but I knew I would go to college and while I could have stayed there, it wasn’t in my plans.

Homes in nicer neighborhoods in Austin start at 500K with 10-12K/year in property taxes. By comparison the average middle income family in California pays less in property and income taxes. Appreciation in Texas is usually modest.

You will get more space. It’s a good quality of life but more focused on a somewhat different set of activities. Even when the economy is slow restaurants are full.

Personally, I think you should rent out the place here and try it for a year. If things work out well, you can always sell in up to three years without losing the tax free exemption amount. You just need to have lived there two of the last five years.

Good luck with your decision!

As far as Houston, the neighborhoods there are all over the map. There are very exclusive enclaves which are unbelievable but most mid market neighborhoods aren’t that appealing. Do be careful as the last time there was a major oil slump in 1986, real estate in Texas tanked. There are only the first signs of a slowdown now, but anyone who remembers the 80s slump will know that things could deteriorate significantly in a few short years. That was one of the first times a region in the US had large amounts of jingle mail.

http://money.usnews.com/money/blogs/the-home-front/2009/06/19/americas-4-nastiest-regional-housing-busts-2

http://money.cnn.com/2015/01/23/investing/oil-texas-housing-houston/

http://austin.culturemap.com/news/city-life/11-03-15-highway-i-35-downtown-austin-most-congested-roadway-texas-department-transportation-traffic/

The lower energy prices will keep interest rates lower and actually keep California housing prices rising for the mid term.

[Escoguy]

We just don’t buy them.

[Escoguy]

Let’s just make the portfolio alcohol, tobacco and firearms. Government profits from these via taxes.

Let’s search out the companies which make precursor chemicals for meth, cocaine. Oh I forgot marijuana is legal now. Not to worry, it’s just a gateway drug.

Let’s buy medical devices used in abortions. Oh, I forgot the government condones this.

So is it really about what the Government does or doesn’t do? Or is it just who can make money which matches my beliefs rather than what is really right?

It’s not about liberty, some stuff is just bad and we need to work to limit the impact and those who suffer from it.

[Escoguy]

15 years ago (when I was 30) I picked a GP who is a few years younger than me as I was thinking long term. We are both in our 40s now, I do realize if I stay here, I will likely need to change doctors in 20 years or so when things start to get really interesting.

[Escoguy]

Gata

At the RSF level, homes are only a minor part of the overall portfolio. Usually several homes in a variety of markets along with significant financial assets.
Homes make up a much smaller portion of the wealth for those with 5M+ assets.

Basically everything in RSF is over 1M with much in the 3-5M range. Ownership, taxation and residence are entirely different things. There may be a few who don’t have their affairs in order and pay full California taxes but by and large these are sophisticated people who get good advice. T Boone Pickens is an example, Bill Gates, Janet Jackson etc.

The water issue is real for some and the resale stats are soft, but if you’re looking at a property in Santa Luz which doubled in value over 10 years, then a 10-15% drop isn’t so dramatic as often it takes months to sell such a property.

I’d be surprised if even a dozen Qualcomm execs leave RSF.

That being said, an agent I worked with a few years ago did mention spots of weakness in RSF but it appeared to me it is usually for personal reasons that a person would want to leave with the occasional strategic default, but on balance that’s rare.

[Escoguy]

Qualcomm has been around so long that the vast majority of employees could have bought years ago (especially in the 2008-2012 low price period). A former manager of mine was Managing Director for Qualcomm Europe. He made so much money on stock options, that he could easily retire, it was several million dollars for one person.

For more recent employees, you may have a point but even then, the effect will be minimal.

More Chinese buyers will buy more homes in one year than Qualcomm employees will sell. I was driving by an investment property in 4S ranch and see a group of them doing Tai Chi in the morning. The group keeps getting larger month by month.

With low interest rates, low supply, constant immigration, low energy prices, and lack of new construction, prices will be flat in the worst case, probably continue up at the 2-5%/year range for the mid term. If several years from now, the shale boom is over and we get some energy price inflation, then perhaps rates rise which will put a damper on things. In the mean time, Telsa, GM, Nissan are brining out more EVs which should cap energy cost inflation.

Wage inflation will stay capped by global competition.

So even if we have rent inflation in California, the rest of the country won’t be so bad because they will build more elsewhere like in Texas.

So big picture, some layoffs at one company won’t do much.

[Escoguy]

Even if 20-30% of these employees actually left San Diego, one can assume the ownership ratio is somewhat higher than the general population but at most a few hundred homes would come on the market and these wouldn’t be distressed sales. So best case for buyers, there may be a little more inventory.

As inventory is so low, one can only think this would be a small step to normalization but far from the basis for any larger correction.

[Escoguy]

I get the permits for the larger size but as I’m doing multiple properties, it does make a difference to right size for today’s tenants use vs expected future use. The difference for one property can be a few thousand so multiplied by 4-5 can be 20K more. Not a good use of money to add 20K in panels which aren’t needed. Just saying, all permits are in order, just a better approach from my perspective.

[Escoguy]

You can permit the system to the larger size and add the panels when needed. I.e. get the larger inverter now, then add more panels when needed to match.

You only need a new agreement if you add a second system which is stand alone.

The original NEM isn’t invalid because more panels are added to bring the system up the the permitted size.

[Escoguy]

Today was a RYU day, but you are correct, no text message.

Last year with solar we had 2-3 days. It took about $10-15 off the bill to meet the targets for 3 days. Not really sure it’s worth it as the day starts at 11 am to 6 pm.

[Escoguy]

I have five homes I’m putting solar on and have looked at many vendors. Solar City is about 30% more than Sungevity or the other company I’m using Alive Industries.

So far, I’ve installed two systems from Sungevity:
If you can’t use the tax credit, a prepaid lease is best from a cash flow perspective. 3 KW with 4400 kWh production cost $8800 as prepaid lease.

Second system was 4.9 KW producing 8300 kWh/year with a fixed $83/month cost for 20 years with no escalation, Solar City goes up 2.5%/year.

Third system is a prepaid lease 4.3 kw at 6300 kWh/year, prepaid lease for $12,000.

Sungevity referral code: 339190

Fourth system buying from Alive Industries as I can add more panels later.

Fifth system also from Alive for same reason so I can add later.

[Author]

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