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November 27, 2006 at 11:21 AM in reply to: Any housing downturn will be limited to San Diego & Sacramento? #40699
(former)FormerSanDiegan
Participantavidsaver – Yep, I jumped out of the frying pan (SD) and into the fire (LA). Sales have definitely slowed in LA. Prices are have started to top out, much like SD about 1 year ago, a few months before widespread negative downturn in the price statistics.
In mid-2005, when houses started sitting on the market longer in SD (I was selling at the time), there were still bidding wars on the west side. Houses were selling for 5-10% over asking price in parts of LA as late as July-August 2005. The numbers also show LA lagging at least 10 months behind SD.
I believe that mortgage resets will likely hit all areas of southern California similarly, but may hit LA slightly later than SD because of the continued appreciation for a few moths after SD topped out. While I disagree with the assessment of 50% defaults on those loans, these resets will definitely further dampen the market. However, the wild card in all this is interest rates.
If rates are 2-3% higher than currently through 2007-2009, then the mortgage resets would be devastating. However, if we have more slowing of growth or recession, than rates could see some downside from here, and the effect of resets will not be as bad. Particularly if we see a reduction in rates of about 1%. However, prices will be dampened either way.
November 22, 2006 at 2:46 PM in reply to: Any housing downturn will be limited to San Diego & Sacramento? #40552Participantcooprider14 –
See Rich’s articles on the front page addressing the employment myth. They contributed to the downfall and may have made it worse, but the drops in employment started well after housing prices peaked in the last bubble.
I too live in LA. I’m on the WestSide, where there isn’t much room for another vehicle on the road, much less any significant SFR building. However, there are thousands of condo units going in, generally high-end Century City and rehabs of 4-plexes into 16+ unit buildings in West LA. This has suppressed the condo market here. Compared to Westside, there is tons of room to build in Burbank.
Otherwise, my area is eerily similar to what San Diego experienced 1 year ago. Not much movement on prices, still hanging in there, but inventory is up significantly and days on market is high. Many houses come off the market only to be re-listed within a month or so. (sound familiar).
In my opinion most of LA is about 1 year behind SD’s cycle. This should become obvious in the late Spring if it isn;t already. I don’t think we are as overpriced as SD, but it is close and LA will not be spared.
Participanttownhome appreciating more than 20% in the next five years ?
I’d put the odds at about 1%.ParticipantCars aren’t just past the peak of a speculative bubble of epic proportions, either.
This market has many facets and although the bulk of the market is not even half way there yet IMO, there may be some screaming bargains hidden in the nooks and crannies that represent reasonably fair value.
The whole bubble argument is based on fundamentals. If someone can purchase for about the same as renting in SD, then it is not a bubble situation in that instance , based on the funadamentals.
This doesn’t mean they won’t lose money, as things will likely over-correct to the downside.
ParticipantHas anyone ever looked at the sex offender maps (http://www.meganslaw.ca.gov). I was shocked by the overall density when I first looked at it a couple years ago. Downtown is pretty dense, but there are a lot of places in SD that are as densely offended as downtown (parts of Normal Heights,El Cajon, Oceanside and Escondido are fairly dense with these guys).
ParticipantNo, it’s not crazy to think about buying in the current conditions.
People do it on this board all the time, it’s just that the numbers do not yet seem to work out in favor of buying at this time. I think it’s worth reviewing the current prices, rates and rental comps about every three months.
At some point it will make sense to buy, so keep thinking about it.
ParticipantAs someone who has to calculate AMT every year and pay a little extra because of it … There is no “threshold” for AMT. It is simply a seaparate calculation that you must do and the taxpayer pays the higher of either AMT or their standard taxes.
For AMT calculations things that are excluded include the personal exemptions, property tax, state income tax, Home equity loans and amounts not used to purchase or remodel, and some other items. There is a large standard exemption for AMT (something like 50-60K for a couple).
You can get into the AMT if you make ~ 100K, live in a high state income tax state and have a bunch of children, for example because the exemption for each child is excluded for AMT purposes. A person in this circumstance is likely to pay AMT because they could be subject to little or no income tax under the standard tax code.
If you are a couple with no children making 250K and are renting you are likely not to be subject to AMT. Mainly because you are paying alot of taxes in the standard tax code.
A large mortgage actually helps with AMT, since home mortgage interest is deductible under AMT, (not including cash out or HELOCS used for other than home improvement).
You don’t get to deduct the property tax payment however.FB’s who would be affected most are not those who recently purchasedat the peak, but those who purchased previously and subsequently did large cash out loans or HELOCS.
November 18, 2006 at 9:22 AM in reply to: Should personal net worth include your primary residence? #40251ParticipantOr, more specifically :Should the equity in your personal residence count toward your net worth ?
It absolutely does (reasons below), minus expenses required to sell. However people should also consider their net worth minus personal residence when assessing their financial situation.
Reason #1 : If you do not count homne equity you can have the following situattion. Person A has a 50% LTV loan remaining on their million-dollar home. 500K in equity. They decide to take out a home equity loan for 500K so that they have 100% LTV. ALl of the sudden their net worth goes up by 500K in that situation. Does that make sense ? NO.
Reason #2: Powayseller decises to sell her house in which she has 250K in equity. When she sells her net worth goes up 250K if you previously excluded home equity. However, those funds are presumably for purchase of a house some time in the future. Either way the 250K of worth was under her control. It shoudl count.
ParticipantI never saw the Bgates posts, but this begs the quesiton.
How come somebody can post in with the moniker SDrealtor after someone else named sdrealtor was posting for months ?
But a Bgates can’t ?Is it because of the difference in Bgates’ opinions versus SDrealtor ?
Or did Bgates actually try to pass himself off as bgates ?ParticipantSo true John Maynard Keynes, so true. I believe he also said “In the very long run, we are all dead”
ParticipantMaybe I should offer my rental property as a lease option 🙂
ParticipantLast time net foreignn purchases swung negative after a prolonged positive period was in late 1998. It took another 18 months or so before it was peristently negative in spring 2000. Does this tell us what to expect now ?
ParticipantIs this called a “condo inversion” ?
ParticipantThese situations are typically not a good deal for the renter.
Hypothetical Example: Our friend Owen Tonzadough wants to buy a lease option. The gracious seller-landlord agress to let Owen rent the place for 1700 per month, plus $300 per month option to purchase. The entire $300 per month is applied to the down payment. The two parties agree to a price 5% above current marklet value. Other equivalent rentals in the area are going for 1850 per month. GOod deal ? Only if you exercise the option to buy, and the price is still a good one when the option comes due. Owners do these deals to get more than market rent.
I looked at one of these in the mid-90’s in Point Loma. The owner wanted slightly below then-current market rents plus an additional several hundred per month for the option to purchase. I also think there was a fixed payment up front (non-refundable deposit) that was part of the option to purchase. At that time, when prices were stagnant, he wanted to set the purchase price about 5% above the market.
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