Forum Replies Created
-
AuthorPosts
-
FormerOwner
ParticipantI agree; there’s a global housing price bubble and credit bubble. Monthly payments on all that debt are NOT going to be made – people won’t have enough income/savings to make the payments. That’s why I’ve started trying to learn more about the Federal Reserve and the global financial system. I want to know how governments will respond and what the consequences will be.
I also agree that some areas are much more overpriced than others and that it makes sense to stay in a stable job (if you have one), sell your house and rent nearby. To me, it’s clear that housing will crash and that we’ll enter a pretty serious recession. What’s not clear is what will happen to the value of the dollar, inflation, etc. I think the entire financial system is going to be shaken but I’m not sure yet how to best position myself except to keep my stable job and put my money in short-term CD’s and (possibly) commodities. I wonder if the recession could turn into a depression. I really can’t think of one part of the economy or one area of the country that will be safe from this downturn, except maybe healthcare and commodities – things we all need to live our lives.
ParticipantThis is funny. I got into a conversation with the lady cutting my hair and she told me about how she sold her So Cal house and rolled the profit into a McMansion in San Antonio. Building houses without job growth to support them is a disaster. The whole country can’t buy a brand new home in Texas and expect there not to be a speculative bubble there.
ParticipantOK; I’ll post a summary of the book after I’ve read it. By the way, some of the stuff at the bottom of the link I sent seems pretty crazy but I don’t think that has anything to do with the book on the Fed.
Participant70’s deja vu; are we in for stagflation?
ParticipantYes, Mt. San Jacinto College is a plus for the area. I’d also like see something like a UC-Temecula.
ParticipantI’ve still got a lot to learn about macro-economics BUT wouldn’t #2 end up increasing long-term mortgage rates anyway since bond holders would require higher interest rates for holding dollar-denominated notes? Long term bond rates drive long term mortage rates as far as I know. That would still kill the housing market by driving up monthly mortgage payments. Any thoughts?
ParticipantI agree; Southwest Riverside County (Temecula, Murrieta, Lake Elsinore, Menifee, Sun City, Winchester, etc.) is in a HUGE bubble. Even though the homes are cheaper than SD, OC, or LA counties you’ll burn up all of that savings and more in commuting costs (not to mention wasting 2-4 hours per day of your life sitting in traffic). Here are the reasons I think this area is EVEN MORE overpriced than SD, Orange, or LA counties now:
1) With $3-4/gallon gas and wear and tear/depreciation on your car, the commute just isn’t worth it.
2) Not only is the commute expensive but it’s a massive waste of TIME. If you take your hourly salary and multiply it by the numbers of hours you’d spend behind the wheel and at tire and car repair shops waiting for maintenance to be done on the car your driving 30,000+ miles per year, you’ll see that it’s like working a part-time job as a cab driver and not getting paid for it.
3) Not only is the commute bad but the local traffic is horrible also due to horrible urban planning in the area. The traffic lights are not synchronized and are not sensored. You’ll find yourself in a line of cars waiting at a red light trying to get to the mall when no one’s coming the other way! DUMB! Plus, everyone DRIVES their kids to school in the SUV’s they bought with their home equity loans.
4) There is really no public transportation to speak of save for a few bus routes that really aren’t practical to use at all. The area was totally built for cars ONLY.
5) It’s HOT here. You’ll spend several hundred dollars a month in air conditioning bills during the summer – and’ that’s if no one’s home during the day. Plus it gets cold in the winter compared to the coastal areas – higher heating bills.
6) There is really NO local economy outside of housing/real estate/construction/mortgage loans and CARS. All declining industries at the moment.
7) Sure the costal counties cost more but when their prices drop, Inland Empire prices will drop even more.
8) There is not much culture locally, altough it’s improving in Temecula.
9) There are no good colleges or universities in the area – a pre-requisite for attracting innovative high-tech companies.
10) The area sits in between two international airports but 60 miles away from each. There is no good way to get to the area – you are forced to sit in traffic.
11) The mello roos cause the annual property taxes for most homes to be extremely high – 1.8% – 2%. In a lot of cases, your tax bill would be LOWER in SD or OC, I think.
12) There has been MASSIVE overbuilding during the last 5 years, fueled by speculators. There are many vacant homes for sale or for lease – with no takers!
13) Many people are living beyond their means in this area and there will be massive foreclosures within the next 1-2 years.In spite of everything I’ve said, I live and this area and still like it BUT I sold my house a few months ago and I’m now renting a house. I’ll have to see how the character of the area changes over the next few years and what happens to housing prices before I can decide whether I’d buy into this area again. Right now, I’ve put my money into CD’s and I don’t plan on buying ANY real estate for at least 5 years or so. I’ll adjust that timeline as I see conditions changing.
Also, there are a lot of really good people in Southwest County and I hope those that are on the edge either sell their houses, get out of bad loans, or both before it’s too late. One of my major concerns is that if housing prices really do fall 50% like I’m thinking they might, what socioeconomic group would move in here. Would it become another Moreno Valley? If that happens, I won’t even be renting here anymore!
ParticipantI’ve still got a lot to learn about macro-economics BUT wouldn’t #2 end up increasing long-term mortgage rates anyway since bond holders would require higher interest rates for holding dollar-denominated notes? Long term bond rates drive long term mortage rates as far as I know. That would still kill the housing market by driving up monthly mortgage payments. Any thoughts?
ParticipantI’ve still got a lot to learn about macro-economics BUT wouldn’t #2 end up increasing long-term mortgage rates anyway since bond holders would require higher interest rates for holding dollar-denominated notes? Long term bond rates drive long term mortage rates as far as I know. That would still kill the housing market by driving up monthly mortgage payments. Any thoughts?
ParticipantHere’s the link:
ParticipantMy wife and I live up in Temecula and recently did exactly what PowaySeller did – sold our house, put the money in CD’s, and we’re now renting a house. I actually like the house we’re renting better than the one we owned (this was an unexpected bonus). I completely agree with everything PowaySeller said and I would also add a few more reasons why I think real estate is overvalued in So Cal:
1) Go to Google and search on “peak oil”. I am convinced that energy (especially oil) prices are on a long term up-trend which will cause property values in outlying areas / areas with no public transportation to fall substantially as the cost of commuting continues to rise.
2) There are a LOT of people who overextended themselves with home equity loans and ARM’s on the hope that “when the value increases, I’ll just refinance”. When they all have to sell under duress or get foreclosed, this will start downward spiral in prices.
3) Much of the job growth in the last 5 years has been in the housing/construction/real estate/mortgage industries. These people buy houses, which increases their income, which allows them to buy more expensive houses. When this cycle reverses itself, it will drastically reduce demand.
4) The economy is not nearly as strong as Dubyah would have us believe. Most of the non-housing related jobs created in the last 5 years are either temporary jobs or low-pay service jobs that don’t pay enough to buy a shack in So Cal. We don’t make anything in this country anymore and we’re losing more and more industries to foreign countries every year. We are drowning in debt as a nation – government agencies (federal/state) as well as individuals/corporations. The debt levels have increased risk enormously. Not to mention all of the Social Security/pension/retiree health care issues on the horizon. The list goes on. We’re living in the last days of the Roman Empire and we’re overdue for a correction IMHO.ParticipantI just sold my house in Temecula and am now renting a similar house for about 1/2 of what it would cost to purchase it at current market prices. I put all of my tax-free profit in CD’s getting 5% interest – guaranteed – the interest will pay almost 1/2 my rent. I think the only logical reason one would buy a house at 2X the cost of renting is that they are expecting further appreciation and/or don’t want to be priced out of the market.
Another point: it seems to me that the people buying the large upscale houses in the Temecula Valley now are either (1)extended families with 3-4 wage earners or (2)investors who rent them out at a huge loss or (3) retired people moving from Orange County or San Diego who see Temecula prices as cheap.
There are all these 3000-4000 square foot houses going for 600K-700K and not much of a local job market that pays anywhere near enough to afford the housing. Gas prices and traffic jams no longer make it attractive to commute 100+ miles per day either. If you have 4 people workikng locally earning 30K-50K/year each, they can afford to 100% finance a 600K house and pay the $10K/year in property taxes as well. Or they can rent the same house for 1/2 the monthly cost and no risk. But owning a home is the american dream, so they choose to buy rather than rent. As long as there are enough of these people and they don’t get in over their heads, they can keep the housing market going. As for the investors…I haven’t quite figured out why there are soooooo many non-owner occupied houses around here. A lot of them are vacant – no one wants to rent them even at 1/2 the cost of owning. Things were getting too weird for me and I figured it was high time to cash in on what I feel is a once in a lifetime chance to make a a huge tax free profit. I don’t know what’s going to happen from here, but right now the only place I’d put my money is FDIC insured CD’s – period. I figure it’ll be 5+ years before I buy a house again, if ever. It’ll take a long time for all of the excesses of the market to work themselves out and I don’t want any part of the process!
-
AuthorPosts