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(former)FormerSanDiegan
ParticipantIt’s still a little too soon, but in my opinion the best bet in the land of REOs and short sales will be to buy from the homeowner who is competing against these foreclosures and short sales. The folks who still have enough equity and are taking advantage of the down market to move up or are moving out due to job/relocation. Based on my experience in the mid 1990’s those folks tend to make their house in mint condition and still have to price it within 5% of the REOs because of the competition. That’s where I would focus. Currently there are still too many sellers that are holding out. Once these folks capitulate, the situation I describe will become the norm.
ParticipantIt’s still a little too soon, but in my opinion the best bet in the land of REOs and short sales will be to buy from the homeowner who is competing against these foreclosures and short sales. The folks who still have enough equity and are taking advantage of the down market to move up or are moving out due to job/relocation. Based on my experience in the mid 1990’s those folks tend to make their house in mint condition and still have to price it within 5% of the REOs because of the competition. That’s where I would focus. Currently there are still too many sellers that are holding out. Once these folks capitulate, the situation I describe will become the norm.
ParticipantIt’s still a little too soon, but in my opinion the best bet in the land of REOs and short sales will be to buy from the homeowner who is competing against these foreclosures and short sales. The folks who still have enough equity and are taking advantage of the down market to move up or are moving out due to job/relocation. Based on my experience in the mid 1990’s those folks tend to make their house in mint condition and still have to price it within 5% of the REOs because of the competition. That’s where I would focus. Currently there are still too many sellers that are holding out. Once these folks capitulate, the situation I describe will become the norm.
ParticipantIt’s still a little too soon, but in my opinion the best bet in the land of REOs and short sales will be to buy from the homeowner who is competing against these foreclosures and short sales. The folks who still have enough equity and are taking advantage of the down market to move up or are moving out due to job/relocation. Based on my experience in the mid 1990’s those folks tend to make their house in mint condition and still have to price it within 5% of the REOs because of the competition. That’s where I would focus. Currently there are still too many sellers that are holding out. Once these folks capitulate, the situation I describe will become the norm.
Participantgdcox wrote : As a financial economist by background, I think the methodology of using static data from the past is suspect; especially in isolation. Much better to make a current dynamic comparison with the rental markets. As house prices fall this and possibly next year, there will come a point at which it is cheaper for people to buy on a mortgage than to rent and another point at which the rental yield on repossessed properties becomes irresistibly attractive for landlords. These two points may coincide in time of not. But either way, the bubble will have been eliminated by definition when landlord and renters are incentivized and act to buy en masse.
I have to agree 100% with gdcox with respect to these statements. By using current rents and current carrying costs you don’t have to worry about all the academic issues about whether higher interest rates or inflation were a factor or not in impacting historical price to income ratios. Those metrics are excellent for point out the bubble and tracking historical changes. BUT, the ultimate fundamental in my opinion is how rents relate to carrying costs on a property. If you look at prices, rents and carrying costs as an ongoing business concern, it is insightful.
SFRs in central San Diego currently rent for about 7% of the property value. If property values drop by 30% you are looking at 10% gross. If they dropped by 60% you’d be looking at 17.5 % gross.
Somewhere in there prices, rents and interest rates will result in situations where it makes sense as a business to own property.This calculation depends on prevailing rates on alternative investments, mortgage rates/availability, rents, and home prices.
My guess is that we will see these things line up to make owning property as a business at price points no lower than about 15% below current prices. Rents dropping more than a few percent and/or interest rates going above 7-8% would change this.
Participantgdcox wrote : As a financial economist by background, I think the methodology of using static data from the past is suspect; especially in isolation. Much better to make a current dynamic comparison with the rental markets. As house prices fall this and possibly next year, there will come a point at which it is cheaper for people to buy on a mortgage than to rent and another point at which the rental yield on repossessed properties becomes irresistibly attractive for landlords. These two points may coincide in time of not. But either way, the bubble will have been eliminated by definition when landlord and renters are incentivized and act to buy en masse.
I have to agree 100% with gdcox with respect to these statements. By using current rents and current carrying costs you don’t have to worry about all the academic issues about whether higher interest rates or inflation were a factor or not in impacting historical price to income ratios. Those metrics are excellent for point out the bubble and tracking historical changes. BUT, the ultimate fundamental in my opinion is how rents relate to carrying costs on a property. If you look at prices, rents and carrying costs as an ongoing business concern, it is insightful.
SFRs in central San Diego currently rent for about 7% of the property value. If property values drop by 30% you are looking at 10% gross. If they dropped by 60% you’d be looking at 17.5 % gross.
Somewhere in there prices, rents and interest rates will result in situations where it makes sense as a business to own property.This calculation depends on prevailing rates on alternative investments, mortgage rates/availability, rents, and home prices.
My guess is that we will see these things line up to make owning property as a business at price points no lower than about 15% below current prices. Rents dropping more than a few percent and/or interest rates going above 7-8% would change this.
Participantgdcox wrote : As a financial economist by background, I think the methodology of using static data from the past is suspect; especially in isolation. Much better to make a current dynamic comparison with the rental markets. As house prices fall this and possibly next year, there will come a point at which it is cheaper for people to buy on a mortgage than to rent and another point at which the rental yield on repossessed properties becomes irresistibly attractive for landlords. These two points may coincide in time of not. But either way, the bubble will have been eliminated by definition when landlord and renters are incentivized and act to buy en masse.
I have to agree 100% with gdcox with respect to these statements. By using current rents and current carrying costs you don’t have to worry about all the academic issues about whether higher interest rates or inflation were a factor or not in impacting historical price to income ratios. Those metrics are excellent for point out the bubble and tracking historical changes. BUT, the ultimate fundamental in my opinion is how rents relate to carrying costs on a property. If you look at prices, rents and carrying costs as an ongoing business concern, it is insightful.
SFRs in central San Diego currently rent for about 7% of the property value. If property values drop by 30% you are looking at 10% gross. If they dropped by 60% you’d be looking at 17.5 % gross.
Somewhere in there prices, rents and interest rates will result in situations where it makes sense as a business to own property.This calculation depends on prevailing rates on alternative investments, mortgage rates/availability, rents, and home prices.
My guess is that we will see these things line up to make owning property as a business at price points no lower than about 15% below current prices. Rents dropping more than a few percent and/or interest rates going above 7-8% would change this.
Participantgdcox wrote : As a financial economist by background, I think the methodology of using static data from the past is suspect; especially in isolation. Much better to make a current dynamic comparison with the rental markets. As house prices fall this and possibly next year, there will come a point at which it is cheaper for people to buy on a mortgage than to rent and another point at which the rental yield on repossessed properties becomes irresistibly attractive for landlords. These two points may coincide in time of not. But either way, the bubble will have been eliminated by definition when landlord and renters are incentivized and act to buy en masse.
I have to agree 100% with gdcox with respect to these statements. By using current rents and current carrying costs you don’t have to worry about all the academic issues about whether higher interest rates or inflation were a factor or not in impacting historical price to income ratios. Those metrics are excellent for point out the bubble and tracking historical changes. BUT, the ultimate fundamental in my opinion is how rents relate to carrying costs on a property. If you look at prices, rents and carrying costs as an ongoing business concern, it is insightful.
SFRs in central San Diego currently rent for about 7% of the property value. If property values drop by 30% you are looking at 10% gross. If they dropped by 60% you’d be looking at 17.5 % gross.
Somewhere in there prices, rents and interest rates will result in situations where it makes sense as a business to own property.This calculation depends on prevailing rates on alternative investments, mortgage rates/availability, rents, and home prices.
My guess is that we will see these things line up to make owning property as a business at price points no lower than about 15% below current prices. Rents dropping more than a few percent and/or interest rates going above 7-8% would change this.
Participantgdcox wrote : As a financial economist by background, I think the methodology of using static data from the past is suspect; especially in isolation. Much better to make a current dynamic comparison with the rental markets. As house prices fall this and possibly next year, there will come a point at which it is cheaper for people to buy on a mortgage than to rent and another point at which the rental yield on repossessed properties becomes irresistibly attractive for landlords. These two points may coincide in time of not. But either way, the bubble will have been eliminated by definition when landlord and renters are incentivized and act to buy en masse.
I have to agree 100% with gdcox with respect to these statements. By using current rents and current carrying costs you don’t have to worry about all the academic issues about whether higher interest rates or inflation were a factor or not in impacting historical price to income ratios. Those metrics are excellent for point out the bubble and tracking historical changes. BUT, the ultimate fundamental in my opinion is how rents relate to carrying costs on a property. If you look at prices, rents and carrying costs as an ongoing business concern, it is insightful.
SFRs in central San Diego currently rent for about 7% of the property value. If property values drop by 30% you are looking at 10% gross. If they dropped by 60% you’d be looking at 17.5 % gross.
Somewhere in there prices, rents and interest rates will result in situations where it makes sense as a business to own property.This calculation depends on prevailing rates on alternative investments, mortgage rates/availability, rents, and home prices.
My guess is that we will see these things line up to make owning property as a business at price points no lower than about 15% below current prices. Rents dropping more than a few percent and/or interest rates going above 7-8% would change this.
ParticipantWhat excellent timing for moving to San Diego. You have no rush, you can be choosy finding an appropriate neighborhood and house and you will have much inventory to choose from. Move, rent, start scouting areas, and run the numbers in the fall before you get serious. Good luck.
ParticipantWhat excellent timing for moving to San Diego. You have no rush, you can be choosy finding an appropriate neighborhood and house and you will have much inventory to choose from. Move, rent, start scouting areas, and run the numbers in the fall before you get serious. Good luck.
ParticipantWhat excellent timing for moving to San Diego. You have no rush, you can be choosy finding an appropriate neighborhood and house and you will have much inventory to choose from. Move, rent, start scouting areas, and run the numbers in the fall before you get serious. Good luck.
ParticipantWhat excellent timing for moving to San Diego. You have no rush, you can be choosy finding an appropriate neighborhood and house and you will have much inventory to choose from. Move, rent, start scouting areas, and run the numbers in the fall before you get serious. Good luck.
ParticipantWhat excellent timing for moving to San Diego. You have no rush, you can be choosy finding an appropriate neighborhood and house and you will have much inventory to choose from. Move, rent, start scouting areas, and run the numbers in the fall before you get serious. Good luck.
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