[livinincali]

[quote=SD Realtor]
So absent of that event or “until that event happens” the San Diego housing market will move forward, driven by an excessive demand that has far outstripped supply. Prices have chunked forward and an equilibrium will be reached as the buyers pool will simply be reduced by many being priced out. Then we will level out and the inventory will catch up. We may see a modest dip but that is just the settling to the new equilibium and then a more subdued appreciation.

Now when the explosion happens…. wowsers it will be ugly. Unless the govt pulls their heads out of their ass and figures out we need to reduce spending and increase taxes and stop monetizing our debt.[/quote]

I tend to agree. We’ll see the number of sales start to drop before you see any dips in prices. Probably better to look at the lower end markets for signs that sales are slowing down. That will mean the investors and FHA buyers just can’t make it work financially anymore.

The fear of inflation and search for yield are significant driving factors in today’s market. There’s plenty of people hiding out in real estate as a safe haven that would probably rather be invested in something else. I honestly think investor speculators looking for yield are probably much weaker hands than traditional owner occupiers. It will be the perfect storm when rates rise. Not only will mortgage rates go up but at the same time those that were looking for yield are going to try to exit.

[livinincali]

Japan got down to 2.5%, of course that really didn’t help their home prices much.

[livinincali]

As long as it hangs on to $420 it’s probably a good buy. If it gets below $420 I could see the 200 day moving average at $365 come into play pretty quick.

[livinincali]

[quote=The-Shoveler]Deflation only helps people who have no debt, a constant fixed income (Retired mostly) or a very large bank account.
ie… not the majority of Americans or working people paying off debt.
Most DB pension plans have a fixed inflation adjustment cap (most are 2% some go up to 5%) I have never seen an unlimited one or at 8-10%.

Wages and everything except DB payouts.[/quote]

Why do you assume the powers that be want to help the bulk of Americans paying off debt? Why would you assume that this desired inflation 8-10% is going to show up in wages making debt payments easier? It’s only easier to pay off my debt if my income increases and my daily expenditures don’t increase as much. It might be worse rather than better.

Certainly we may end up in an highly inflationary environment but I certainly don’t think it’s going to be the savior. I think it will actually end up being worse than the deflationary path. In hyper inflation all debts are worthless. In deflation some debts still have value. Pretty much everybody’s retirement depends being able to collect on debts. Most wealth in this country is indeed somebody else’s debt.

[livinincali]

[quote=bearishgurl]
IF there is a RE bubble in the coming years with “investor actors,” it can’t crash. WHY? If one pays cash, how can they “crash?” A “cash buyer” doesn’t HAVE to sell unless it suits them. If values should decline again, these “investor-actors” will just continue to hold and rent these many thousands of properties out, which is 75% of the reason they are being bought up today. Meanwhile their REIT investors will have nice monthly or quarterly returns on their “investments.” :=]
[/quote]

I don’t think we’re in a bubble with regards to real estate, but I’d be willing to bet a lot of that hedge fund investor cash is really some kind of leverage debt. That’s what hedge funds do, they leverage investment dollars in order to produce better returns. Some investor in real estate is bound to over leverage them self and get in trouble. It always happens. The only question will be are they big enough to have an impact or not. In San Diego maybe not, Las Vegas or Phoenix it certainly seems possible.

The thing to worry about is when these investors decide to exit. They are going to liquidate quickly and there isn’t going to be any emotional attachment. They aren’t going to care if their bulk selling drive prices down in your hood. They just care if they can get their investment out and into something else that looks more appealing. They’ll even take a loss if it means they can chase the next hot money investment.

It’s going to suck if you have to compete with them when you want to sell.

[livinincali]

[quote=The-Shoveler]When the City of Los Angeles goes the whole house of cards falls IMO.
It’s the 800 pound gorilla,

Note, also I believe 8-10% inflation would make all this a non-event if it were to last over 5 years.

The pension short fall would be reduced to a small amount, (so would DB pensions as well).
[/quote]

How exactly would 8-10% inflation make this go away. Most defined benefit pension plans have a COLA associated with them that is based on CPI.

I guess your hope is that with 8-10% inflation you’ll end up with a corresponding 8-10% increase in wages which will drive a corresponding increase in tax revenues. Those tax revenues will now be sufficient to pay the pension shortfall but at the same time you’ve increased liability on the pension side. Why do we need 8-10% inflation? Why can’t we just go with the deflationary solution and default/reduce benefits?

This is the problem with most economic models and economists. They look for a solution to a problem by adjusting one variable and assuming everything else is going to stay the same. The thing is it doesn’t work like that. In a 10% inflation environment wages might only go up 5% while gas and food goes up 20%. It’s extremely tough to get uniform high inflation across the board. In your case it’s lets inflate wages and hold everything else constant.

[livinincali]

This is just another example of how can kicking coupled with over optimistic future assumptions gets you in trouble. In this case the biggest fighters against the bankruptcy are those holding general pension obligation bonds. You know those bonds that were going to be the savior of the pension system because you were going to borrow at 3% and make up your shortfall with a projected 8% return. Illinois has all kinds of these bonds outstanding. At least City of San Diego hasn’t gone down this path although I do believe Filner did mention this as a solution during the campaign.

It’s probably wise to assume that if you stand to get a public sector pension much above the median citizen’s income and/or free health care the day is probably coming when they are going to claw some of that back. I definitely wouldn’t count of being able to spend your defined benefit contribution for the rest of your life in full. The mathematical odds are stacked pretty high against you.

[livinincali]

[quote=mixxalot]Hi all,

I used to live in San Diego and have not been back in long time since moving up to the San Francisco/San Jose bay area in northern California. Have possible opportunity to move back to San Diego and work remote. How do San Diego real estate prices in Encinitas, PB, Point Loma and Del Mar compare to Palo Alto prices? Same or less?[/quote]

Probably less in most cases although there doesn’t seem to be much inventory to pick from.

[livinincali]

If your only goal is to drive home values up just make an HOA rule that nobody can sell their house for less than the last guy paid. That wouldn’t cost you anything. Yeah you might not be able to sell but you get cling to the fact that your home is still worth at least the 3 year old comp. Even better yet if somebody has to sell just subsidize the buyer with HOA funds so it looks like your house is actually worth more.

[livinincali]

[quote=moneymaker]Just inquired of US Bank as to getting rid of PMI. Canned response from them was if loan is less than 5 years old will need to have 75% equity. Time to look for another lender I guess. I don’t think that was in the original paper work![/quote]

75% equity or 75% Loan to value (LTV). 75% LTV makes some sense if you don’t refi with another bank. FHA is 78.0% LTV until the MIP goes away.

The days of taking out a second loan to avoid paying PMI on the primary are over as far as I know. You’ll probably have to refi at an 80% LTV based on the appraisal which may be slightly tough as some appraisers have been a little hesitant to increase values on this current upswing.

[livinincali]

[quote=bearishgurl]
He’s absolutely right. We supported the gens before us because that is what the SS (OASDI) “system” was in place for. Now it is our turn to be on the “receiving end,” except for one caveat. We boomers (male AND female) DID (involuntarily for decades) put substantial portions of our pay into it. A good portion of us actually maxed out our SS contributions to the maximum allowable by law. It is now our turn to collect (hopefully most or all of the “corpus” or principal) of our “contributions” back out … forget any potential “interest” we could have made on the money.

Suck it up and deal with it. We boomers did so why are Gen X/Y whining about this now?[/quote]

The older generation is reaping the benefit of having a lot of kids and the entry of women into the workforce. It’s not too hard to get a pretty nice benefit when you’ve got 4-5 people chipping in to support one person. Unfortunately the boomers didn’t have as many kids and there isn’t a big expansion of the workforce coming. You are going to have to make up for it in productivity gains which may or may not happen. Someone is going to take the hit and based on the current economic trends it’ probably going to be in the next 10 years and it’s probably going to heavily effect the boomers.

[livinincali]

[quote=The-Shoveler]You would think telling the EU and Russian’s to both pound sand would be the correct choice.

This is what happens when you give up your rights in exchange for being in the EU.

Not like people would stop coming to vacation or they could not write a better contract for the offshore rights,

What the heck maybe they plan to nationalize later anyway.[/quote]

I don’t think they need to tell the Russian’s to go pound sand. As far as I’m aware as of right now they could allow an orderly bankruptcy of their local banks, wipe out equity, junior bond holders and some senior bond holders and still honor the depositors. The problem is that entities like the ECB which aren’t allowed to take loses, hold some of the senior bonds that would be wiped out. This potentially would start a domino effect and the Euro would eventually fail. It’s the mountains of debt that is guaranteed by other debts that this crazy house of cards was built on. You default on a small part of that debt and everything falls apart. Realize that Lehman was smaller than Cyprus and you see where the trouble lies.

[livinincali]

[quote=SK in CV]
Yes, you are missing something. And so was I. The bank or whatever lender you used sold the debt to either one of the GSE, or in the private mortgage market. They, in turn, collateralized it, creating new debt. So both you and the buyer of your loan both owe the same money. Forty years ago, the bank loaned you the money and most often kept the loan. After thinking it through, its not that different. The bank mostly used depositors money, not equity, to make the loan. It’s slightly different, the bank did have some equity in the loan. But nowhere near 100%, so it partly resulted in doubling the amount of debt then too.[/quote]

There is certainly some aspect of a circular reference. For example say you have a defined benefit pension that is operated by CalPERS. Suppose also that you recently purchased a house and expect that sometime in the future you’ll use that pension to pay the mortgage each month. Suppose also that CalPRES holds loans issues by Freddie Mac which is the holder of your mortgage. In essence that mortgage payment you make each month is coming back around to pay you your pension. Of course that’s minus a bunch of fees and some interest spread.

There’s plenty of people that might hold a $500K mortgage at 3.5% and at the same time have $500K invested in corporate bonds at 6%. Obviously not everybody can win that arbitrage game but almost everybody tries to and for the most part it makes wall street rich and the few lucky ones. Everybody else would be better off paying down their debt as fast as possible but we’re all convinced that individually we’ll win at that game.

[livinincali]

[quote=SK in CV]livinincali…we must have been talking about two different bond bubbles. I was talking about valuation of government long-term bonds, which have been in a bull market for 30 years.

You’re apparently talking about the increase in debt over the last 60 years. It’s a concern. Not an emergency. I’m a bit confused by it though, what is the source? Not sure what GSE debt is doing in there. It would essentially be counting the same debt twice.[/quote]

The Fed Z1 is the source of the chart. Not really sure is we can consider GSE (which are the Freddie, Fannies, etc of the world) as being double counted in household debt or not.

[livinincali]

[quote=SK in CV]
I’ve heard predictions of the bond bubble popping for more than a decade now, maybe even two. It really can’t be called prescient when something is predicted for that long and it doesn’t happen.[/quote]

Alright, perhaps I should say debt bubble rather than bond bubble although most debt has been securitized as a bond these days. What does this total debt chart look like to you?

It could certainly get bigger before it pops but it most certainly will pop one way or another. Maybe we have a few more years. I don’t know, but it sure looks like a bubble to me.

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