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(former)FormerSanDiegan
ParticipantI can possibly see see banks doing this in very isolated cases. Maybe for loans they originated at the peak and held. As for expecting this type of activity to be widespread ??? I seriously doubt it.
ParticipantExcept for CONCHO’s suggestion that you wait until it’s cheaper to buy than rent, all the advice above looks sensible. I purchased a house in early 1996 in CLairemont. And even then, at the previous low, in a relatively blue collar neighborhood (if there is such a thing anymore) it was STILL more expensive to buy than rent. If you buy when it makes sense for YOU, both financially and personally, then it’s the right time to buy.
P.S. – When you apply for new jobs, don’t tell the prospective employer that you quit previous jobs because management were jerks.
ParticipantWill the value of the dollar bottom at some point and return to the mean ?
ParticipantNon-recourse loans only apply to the person’s primary residence, and only applies to acquisition debt (i.e. the loan used to initially purchase the property). The lender can go after the borrowers other assets to cover the debt if the property is investment property or if the borrower refinanced (no longer the acqusition loan. If the borrower takes a cahs-out re-fi, they put their other assets at risk. The law intends to protect those who have purchased to put a roof over their head. IMO, a majority of the speculators, flippers, and gamblers likely are not sitting on their original loans on their personal residence.
Participantan –
Agreed. Crappy condo conversions are likely already at 2003 prices. McDevelopment properties that went up in the last 5 years are already at 2004 prices. However, I have yet to see data that indicate to me that SFRs in established neighborhoods (e.g. central and central coastal) at those prices. At 2003 prices, many properties in these established neighborhoods would produce positive rental cash flow, so I don’t anticipate moves below that point. Then again, I’m only expecting the usual post-WWII business cycle recessions such as the early 1990’s or early 1980’s, not a ’30s -style depression.
ParticipantThat is why a drop to 2003 prices is not enough. 2003 prices were created on the back of teaser interest rates that have gone the way of the pumpkin. Until they return, there is no way that buyers can pay 2003 prices. That is the main reason I disagree with sdrealtor about a return to 2003 pricing. Pricing has to go down to a level where buyers can purchase a first time home paying no more than 40% of income with the current mortgage rates.
Prices going back to 2003 levels and pricing going to a level where buyers can afford a traditional mortgage at 40% of income are not necessarily mutually exclusive.
ParticipantIs there is a difference between Texas and California Real Estate ?
Maybe the structures are not much different, but the price per square foot of a lot in CA is much different than the price per square foot in Texas.
If your father had purchased a home in 1986 for 300K in CA it would have been different. Probably at least $700K different !
SO, yeah, I’d say that Texas and CA are different.
Participantqcomer – The concept to which you are referring to in statistics is called “stationarity”. In general terms this means that the statistical measures apply over a time frame (or set of samples) for which the system remained stable, with no fundamental underlying changes. If there are external forces which change the system, the previous statistics do not apply.
PS suggests that she wants to project future prices by only considering data prior to what was a fundamental underlying change to the system in 1997 (i.e. change in tax treratment of the sale of personal residences).
wiki “stationary process” for more insight.
Participantps – A lot to digest here, but I am confused or ignorant about the following :
lower interest rates can spur spending works only at the beginning of a credit cycle, not at the end.Can you explain the beginning of the credit cycle versus the end ?
Other types of cycles start at the point where the previous cycle ends. What is different about the beginning and end of the credit cycle. Or does this really only a half cycle to which you are referring ?
ParticipantJust say “200-250K in 1998 dollars” and you’ll take care of the issue. That’s where we’re headed.
That’s around 320-340K by my calculations in today’s dollars.
ParticipantNominal 1998/99 prices are not the mean. It’s the ratio of prices to incomes in 1998 that matter. I’m with poorgradstudent. You need to account for increase in income to come to the nominal price.
deadzone – Median income never buys a median house in SD. COnsider that the homeownership rate is 50-60% histornically in SD. Significantly below national averages. Since we have a large fraction of renters (more so in the past than now), I would suggest that median incomes are buying the bottom 20th percentile or so of homes, not the 50th percentile (median).
ParticipantPowayseller –
I don’t understand why something greater than 4% appreciation from the base year of 1997 unrealistic ?
I suggest you go to the Piggington home page and read the two primer articles and look at the charts. If you do so you will see that in 1997 home prices were about 30% below their mean value in terms of price to income ratio. If you believe in mean reversion it works both ways. If you do the math and assume incomes go up at about 3%, you’ll see that to go from 1997 to the same ratio as the previous peak results in about 7-8% appreciation. Not 4%.Maybe Jim added his 3% commission to a realistic 7% appreciation number to come up with 10%.
I also went back and computed the effective compounded increase in home prices in SD county from 1982 to each year from 1983 through 2003. The lowest number I got was an effective 3.8% return from 1982 to 1996, which was at a low in housing. The typical numbers ranges in the 5-6% range.
I suggest that 4% is too pessimistic (housing bear) and 10% is too optimistic (realtor). I’d say 7-8% from a market bottom (e.g. 1997)is realistic.
ParticipantRP is close to the coast ? HUH ?
Maybe it’s closer to the coast than Poway, but I wouldn’t call anything near the I-15 close to the coast.Now if you are off the 5 that’s close to the coast.
ParticipantJosh –
The quotes are the ads. The other comments are tongue-in-cheek comedy. -
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