Forum Replies Created
-
AuthorPosts
-
(former)FormerSanDiegan
ParticipantDrHB –
Median income went up 45% in the last 6 years in SD in this era of “no” wage growth ? That sounds pretty healthy to me.
If we assume the same wage growth over the next 6 years, I see that prices would only have to come down another 13% in nominal terms to meet 2000 price to income ratio.
Participantsdr – I’d be happy to buy more property at 20% off current prices at the bottom of the market. Perhaps I missed the point ?
I’d also be happy buying property at current prices 5 years from now, if that’s the bottom of the market.
I’d also be happy buying at 10% above today’s nominal prices in 5 years if that’s the bottom of the market.
Could you explain why anyone would be “very, very disappointed” by purchasing at the bottom of the market ?
ParticipantMy advice is to not sell your place. You’ve locked in your “rent” for as long as you want to stay there. Since you “could pay off the entire mortgage tomorrow” if you needed to you have plenty of other assets to ride out job losses, equity losses, etc. What would you do with the proceeds, anyway ?
I would consider powayseller’s outline of the price low a worst-than-worst-case scenario. Here’s why :
If the place would currently rent for 15K/year and the price dropped to 125K in 5 years. Assuming rents were flat over those 5 years, the property would yield 12% cash-on-cash. That’s ridiculous in today’s interest rate environment and would only make sense if rates were in the 10% range (for competing income investments). If rates are up in the 10% range, then that would mean inflation is much higher than current and that rents would be rising (with inflation) and not flat.If rates were in the 10% range you could take your external funds (that you “could” pay off the mortgage tomorrow with)and pay the mortgage with interest from a CD or other instrument, with some money left over to buy bread and water.
You are in “way under your head.” Stay the course.
The only fly in the ointment IMO is that when the time is right to buy a SFR, you won’t be able to get much out of your condo (condos leave the party early and arrive late as powayseller alluded), so you may have to rent it out for a couple years after you buy your SFR at future discount prices.
Plus, if we are wrong about a price plunge and values flatten out at 10-15% below peak prices you’ll do OK in that scenario as well. It’s about surviving/thriving across a range of unpredictable future scenarios. Your combination of low-rate loan, assets outside your property, and current monthly cost benefit versus renting puts you in position to survive and/or thrive in most reasonable scenarios.
ParticipantPeople will default. Whether it’s 1 million, 500 thousand, 1.47 million or 1.49 million, who cares ? They are going UP.
These are currently opinions anyway, whether they are Cagan’s, powaysellers’ or Kelley Bennett’s. Who cares if one or more of them misinterprets someone elses opinion. Opinions are like a$$hole$. Everybody has one.
Let’s watch the actual numbers come in and argue over when they have peaked instead of arguing over semantics on someone’s estimate of anothers’ opinion.
Participantjg – In the link you posted the rents fell about 1%. Unemployment at that time in So Cal was double digits (10-12%). Seems like it should have been much worse.
September 26, 2006 at 5:20 PM in reply to: When to sell your house(before, at, or after peak)? #36530ParticipantBuy your personal residence when it’s affordable to you and never sell.
ParticipantMaybe because it’s in the middle of nowhere, compressed up agiinst the mountains along with all the smog.
No, it’s the HOA dues of $912 per month.
At 7% that’s equal to about 156K in purchase power … almost the price of the house!
September 26, 2006 at 3:34 PM in reply to: Critique the analysis, not the person: professional behavior #36518ParticipantMaybe as a group we do not have paid agendas, but as a minimum we have biases and desires that things turn out in our favor. We read as much into incoming data as possible to support our view, and point out flaws in incoming data that go against our assumption. That’s human nature. It’s only when we reconsider our own biases that we move forward and learn.
When I say to my friend that rents are going to start dropping and my friend says, “You are on crack.” I don’t take it personally that he believes that I am partaking in the consumption of a highly addictive agent.
Instead I take that time to reconsider my position and determine whether the current vacancy rate of 1.8% might support my friend’s point of view. Whether or not my friend led me to the data, at least his reaction is enough to get me thinking, even if he is the one smoking crack.
ParticipantExcept for new construction cookie cutters it is not reasonable to think you can measure it to within 3%, especially for established neighborhoods (20+ years old).
How accurately can anyone assess the current market value of a property ?
Within +/- 3% ? Not likely.
Participant“Don’t take advise from anyone over 30”
A classic. Unfortunately, this was first recommended in the 1960’s by the boomers, who are now pushing 60. So the recommendation itself is to ignore those old fools who suggested it in the first place.
Manfred- None of this advice is for you, since you are already made. Except that maybe Geico CAN save you 15% off your auto insurance.
ParticipantPS – Re: rent data. Just use your rent as a proxy. A renter is much more in tune with price of rents than data services.
JG – The “noise” on the filter appears to be about +/- 5000 out of 180K or about 3%. TO avoid falling victim to noise, one would have to wait for a significant move in the prediction relative to the noise. E.G. 2x the noise level or 6%. One could reduce the noise by averaging, but would give up the look-ahead capability. How far ahead is the prediction ahead of prices, assuming I need a 6% move that is confirmed over more than 1 month ?
Anyway – I don;t think hitting the exact bottom is important. Getting in a little late (e.g. 1997-1999) would not have been too bad, would it ?
ParticipantHey, we closed on our first house in April 1996 and I used a different model.
Here it is:
My analysis : We bought because it was only about $200 per month (cheap car payement) more to buy a SFH in Clairemont compared to renting a townhome in Point Loma/OB. Much simpler model and it’s what the first-time buyer uses.Still, I love the work your doing with this type of analysis.
ParticipantObviously, “competing with the Joneses” was not factored in.
Anyway, If you’d have told me in 1987 that we would be ahead of Japan in global competitiveness 20 years from then, I would have called you crazy. Guess what ? We are ahead of Japan. Break out the champagne.
September 26, 2006 at 8:42 AM in reply to: Critique the analysis, not the person: professional behavior #36466ParticipantThen why do we pound on Daveid Lereah so much ?
Because he’s been wrong and behind the curve consistently.
I agree with Sduuuuude. If the messenger is wrong so many times it becomes part of the message and an objective evaluation of the message often does include “past performance”.
-
AuthorPosts
