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June 27, 2021 at 12:59 PM in reply to: San Diego drastically outperforms Bay and LA on rents #822298
Escoguy
ParticipantThey have a few interesting points in their concept and I hope they succeed:
Given my experience, I’d probably go with one of the lower range as a 110 outlet is everywhere. It’s very notable that’s what they are basing it on but if the vehicle is light enough, this makes sense.
I can see the appeal to some with the camper hookup but would only buy it for that purpose if in fact you actually have gone camping in the past.
ParticipantThis is a problem for youngsters, not older wealthier piggs. Drill on!!![/quote]
And you have exactly nailed the problem! Anyone over a certain age: say 60 can probably with some degree of comfort say that even if the worst case occurs, they won’t be too badly impacted if it’s only the last decade or two of their life.
For a person from 40-60, there are trade offs but it’s hard to see much positive impact from making changes like buying an electric car, adding solar, reducing water consumption. While there is a positive effect for many, they aren’t enough to change their ways which is unfortunate.
For thoughtful younger people, dealing with climate change is a great imperative.
I just don’t know how many are thoughtful, probably less than half.Probably the only solution is to add a carbon tax and use the funds for carbon recapture, but that would take billions and probably two decades to scale even if start now. So far, a carbon tax has been a political nonstarter in the US. Maybe if the committed to spend a large portion in states which produce carbon fuels now, it may be perceived as job neutral for those states.
In the meantime, property prices in AZ/UT will probably still rise until the crisis reaches a critical moment, like Mead or Powell dropping another 30% but even then the biggest drop should be on agriculture. At least in the US we have other regions which can grow many crops. I think here the recycle water programs and maybe more desalination will eventually be needed.
Participant[quote=XBoxBoy][quote=gzz]Redfin defines “high end” in that link as averaging $440,000.
Perhaps this is the first SD bull market where the high end does better than the mid and low end, but I’d want to see SD specific data first.
[/quote]In the article, if you scroll down there is a table with data for individual markets. San Diego:
Affordable – $485k sales 20% YoY price 9% YoY
Mid-Priced – $688k sales 28% YoY price 14% YoY
High-End – $1,050k sales 39% Yoy price 18% YoY[/quote]If I filter zillow for 1BR+1BA up to 485K, 750 sf with a cap of $500/monthly HOA, there are only 159 homes on the market. then it basically looks like a 2 BR condo (1000 sf) for about 350K. At some point in the not too distant future, the low end market may not exist as defined here. Kind of sad to say that.
Participant[quote=LAAFTERHOURS]Can we resurface this thread? Trying to decide on plans and have no idea which to go with. My deciding factors:
20 panel Solar array with Net metering.
Tesla.
Work from home.
Spouse may work from home as well.[/quote]If you already have a system:
With EV TOU5 rate of 9 cents per kWh at night, all charging should be done then for the EV. (FYI: we have a Model S and Model 3)If you are planning as sytem:
Any solar you put in would be strictly for AC in the summer and any peak and off peak use. Don’t worry about covering the EV charging (super off peak) as that will be about cost neutral.
Even then I’d target 80% of expected use as some years are cooler and then you can ensure 100% utilization as overproduction only gets 4 cents per kWh.
If you pick a vendor who can add panels, then you can add more if you needs change. Just get a larger inverter. I’ve put solar on my home and 4 rentals. Usage patterns change, it’s easy to get excited and buy too much.If you know you need AC all the time, you can go for more.
I’ve found except when it’s humid, a 2K whole house fan can get the temp down int the mid 60s in the house even now. On balance I’d rather spend 2K on the fan than the last 20% of panels to get to 100% of usage.Background: I’ve modeled solar installs for a few midsized companies. Did some consulting for Sempra a few years ago too.
ParticipantMeanwhile
The other day I got a call from a “buyer” asking me for a price on one I had bought a few months ago 92027 4BR 2400 SF. I threw out 950K partly to be ridiculous but partly as I think that is where the market will go in a year.
Sure enough, just down the street one is now listed at 990K (with a pool) and they are lining up to buy with 600 views in one day and 36 saves. Rule of thumb, every save on Zillow adds 1K above list.
Back in 2000 when I bought my first home, I thought about the theoretical possibility if the US went to Japanese interest rates of 1% or less.
I guess my point is, in a world with zero rates, US/So Cal and specifically San Diego real estate is a very appealing asset class. I’ve seen a few asset price collapse Texas in the 1980s, Russia in 1999. There will be a softening here, but not at all on the radar now.
ParticipantAnd there are all these massive retail parking lots which are begging to be redeveloped with some amount of green space. For background, lived in 8 countries over 20 years, the amount of land wasted here is mind boggling.
San Diego is better than many parts of the US but how many shopping centers do we have from 1960s and 1970s which are oversized so we can have 50 types of potato chips to choose from.
A couple of mass have limited underground parking which is closer to how things could be but still far from efficient land use.
Besides, what’s wrong with mixed use (retail/office/housing in one).
ParticipantWhen we arrived in 2000 (renting an apartment in Rancho Bernardo), a neighbor told us how all the homes but hers were foreclosed in the 1994 period (Riverside county). Defense cuts etc.
It is interesting how her one anecdote almost kept me from buying.
Then our apartment manager raised our rent for our 2BR from $1050 to $1150 when our initial six month lease was up.
As I was able to buy the first home in Escondido for 339K in Dec 2000, the mortgage payment at 6.75% interest was about $1700.
I thought at least I will know my costs as I had this awful vision of my rent going up by $100 every year without any equity. That countered the tale of woe from 1994.
Even buying in 2000 one encountered lotteries and some oddly aggressive pricing from individual sellers. Was just setting the stage for the next six years.
ParticipantI spent my middle and high school years in a smallish town in central Texas of 20,000 inhabitants. There was a reference to “the other side of the tracks” for the poorer areas which were in the North part of town, near the more scenic hills.
As a practical matter, the railroad line did make for a louder neighborhood and could delay access to the hospital.
ParticipantThis is a really fun thread and I had to dive in: we haven’t had many BATTLE ROYALS recently
Even if you make a series of good choices as an investor, life isn’t a bed of roses, there are still many questions to deal with (forecasting the future). In some ways, the stakes are higher as you realize how the circumstances which got you to this point are not likely to be repeated.
As many on this forum note, the 2000-2006 run up was quite phenomenal. Any reasonable person would look at that (some as soon as 2003, others later) and realize it was not sustainable. A drop off should have been expected and a mild throttling would have been healthy and in-line with normal trends.
The fall-out of the 2007-2008 crash was much greater than anyone was predicting. Yes, there may have been the occasional prediction of 33% drop in prices, but I don’t recall anyone saying it would cause a global financial crisis, trillion dollar stimulus, discussion of nationalization of banks, a 38% drop in equities, 2.6 million lost jobs in the US, 10 million lost homes. (500 California families per day in 2007/2008) which continued well into 2012/2013.
A friend of mine’s home was foreclosed in January 2018 even though he had stopped making payments at least 6 years prior.
For some of us, the aftermath was the greatest buying opportunity of a lifetime. Just being factual, I did 3 short sales, 1 post short sale, average down-payment was 25% or about 130K per property. There were articles being written at the time about the pending housing shortage in San Diego due to lack of construction which supported this decision.
One common element of all these short sales SIX FIGURE (HELOCS!). A large portion of the equity was borrowed out. As far as I can tell, these funds were not used to make house payments but to finance (cars/vacations/motorcycles/lifestyle/Maserati’s). These owners/borrowers knew they were one of 6 million nationwide and had given up hope!
They spoke of this to me directly. Some mentioning this may be a “false bottom in 2013”. They were scared and resigned as the short-sale process often took years to get to.I never see the housing bubble naysayers mention the HELOC issue. I would go so far as to say that ALL of these would have kept their homes if they had not borrowed equity.
So what does this mean for today? We are back at this point where absent detailed specific market data, a high level analysis would lead one to conclude that prices are going up to quickly. At least the pace should not be sustainable. But as soon as we break down the micro level details, we start to see a number of phenomena which may have a more lasting impact.
The lack of construction is by far the largest. This closes off many options to (upsize/downsize/right-size/modernize/etc). With the permanent effect of Prop 13, many will just stay in place. Yes lower interest rates help, but keep in mind, I could get a 30 yr fixed at 3.5% in 2013 as well.
But the factor which I think is most important is the RATIO of BUYERS to SELLERS. I have seen references of 4 buyers for each seller. So if 2500 have sold in a recent month county wide, that implies 10,000 want to buy.
The specific data by zip code confirm this:
I was considering listing a home a few weeks ago, spoke with a realtor. He mentioned they have 900 leads in the 92078 zip code who have expressed interest which may convert to 40 viewings and 5-6 offers. This is a zip code with about 30 listings with (3BR 1500 sf under 1.5M)
So the lead to house ratio of roughly 30. I don’t see this bottleneck clearing anytime soon.
Other zip codes like 92127 have a worse ratio of 70-80 potential buyers per listed home.
It is not uncommon for an open house to have 50-70 viewings.
Ten offers on day one is also not uncommon. I don’t want to go into everything I do to win bids but it involves a lot of data/analysis/patience and letting some go.I bought one more in 92127 in Sept 2020 and one out of Bankruptcy recently (took 8 months) and the seller tried to change the contracted price at the last minute.
When I go through underwriting for a purchase or refi, this can take weeks (I’m a CPA and always do full docs). So I have skin in the game even at today’s prices and won’t walk away. But the process is soul crushing even if you know what you are doing and have everything lined up. Maybe the underwriter doesn’t like your foreign property/bitcoin/wants all lease agreements/additional bank statements etc. But these are not the loans of 2006.
So in a nutshell, I can see how it is frustrating for anyone who didn’t dive in to look at the market and think something is terribly wrong or that it must correct.
A mistake is ignoring the actual data being given to you. In late 2019, one of my tenants who is sponsored by a NATO partner told me of his colleagues coming over, they were offering a much higher budget for rentals, about 30% more than I was getting on average. This is a government sponsored entity with real resources, I spent weeks trying to find a new home for the new-comers but they choose other options. But the point was I used the information and bought anyway as I realized I was being given a form of insider information on where the rental market is going.
So yes it can be unnerving to buy a home in Sept 2020 for 877K and rent it for $4200 a month but that’s where the market is. Today that home is worth 1.1M and rents for $4500 or more.
I recognize the market may soften and it may be healthy if it does. But I don’t think we will have another 2008 style crisis. If anything, the odd situation we are getting into looks more like a moderate to midterm surge of inflation with low interest rates. I.e. stay in equities and real estate and stay light on cash.
Yes collecting rent is easy, but one still has to pay attention, plan for property transition to heirs, capital gains taxes, upkeep.
But also, monitoring the market takes time and one should never mentally bank anything.
Cheers everyone!
ParticipantIn 92078 seeing 1.2M for 4BR is not uncommon if 3000 sf. Some listings playing catch up with 100K plus price increases.
Rents countywide are 4K plus for 4BR/2200+sf.
Some homes have 280 inquiries from renters on the first day!
Not getting pushback on 10% rent increases for 4 BR SFHs.
ParticipantReading Antifragile by Taleb, makes a case that manual labor makes us stronger etc. There is more to the book than that but your post made me think of this aspect.
I think anyone who does high repetition exercise: think spin/rowing has a better shot a longevity.
Also as far as absurd retirement plans, I drove 2,000 trips for Uber/Lyft a few years ago. Actually really enjoyed meeting all kinds of different people. I’m not working at the moment and was considering doing it again, wife was against due to Covid.
But might pick up sooner than later. No, it’s not about the money, it’s about being out and about etc. No real purpose to it in general but there are moments you can make into something i.e. conversations and things you see.
ParticipantIn eastern Germany, after the Berlin wall fell, there was a split in how time was referenced “vor der Wende” or “nach der Wende” as the change was so fundamental to all aspects of society.
We may also end up speaking about time in such a manner as pre-covid and post covid as many things won’t be the same, in particular attitudes towards working from home, wanting more space etc.
Maybe we can find a more eloquent way to express it (pre 2020) or “through 19”.
Still thinking Covid will linger in odd pockets so not sure we will have a clean post-covid. Personally would like to find a reference without the virus.
ParticipantIn eastern Germany, after the Berlin wall fell, there was a split in how time was referenced “vor der Wende” or “nach der Wende” as the change was so fundamental to all aspects of society.
We may also end up speaking about time in such a manner as pre-covid and post covid as many things won’t be the same, in particular attitudes towards working from home, wanting more space etc.
Maybe we can find a more eloquent way to express it (pre 2020) or “through 19”.
Still thinking Covid will linger in odd pockets so not sure we will have a clean post-covid. Personally would like to find a reference without the virus.
ParticipantOne more reason to hold on to any property you own here.
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