[Raybyrnes]

Bugs,

I am not disputing that their are buyers that you described that are paying more of their income in housing. I am just providing an example of a couple that is not. So where there is one example there are more. It goes both ways.

[Raybyrnes]

sdcellar

Yeah their payment is changing but relative to their incomes they are not living any different. The increased payment is actually representative of a smaller amount than what they initially purchased their first place. They were stretching more at that time than they are now. Bottom line is that they bought at the right time they have good incomes and they can comfortably buy without worrying about whether or not this is the right or wrong time to buy. They have a 300k margin of safety. I think they are pretty safe.

[Raybyrnes]

Most of the people I know who bought are not looking to exit but simply looking to wratchet up. They bought a place for 250 and now are selling for 550. They have great jobs are 2 income households and have earned promotiong. That means that they can look at Del Sur and not sweat the price. They got on the elevator at the right time and have a different take on realestate. Additionally there payment are not changing that much by moving from one area to another and in their estimation the nicer areas, better school systems, additioal space make it a better long term propositon as they begin to have children.

For those who did not get in it is tough to find an entry point.

[Raybyrnes]

You may also want to check out buysiderealty.com. Same concept in terms of the rebate.

[Raybyrnes]

Could move what you have into California Tax Free Muni Bonds and start a new series of cash flows into index mutual funds. If you have enough cash The American Funds has a pretty good Mutual Fund for this. Need to have cash to avoid the sales charge.

Over the long term cash has not proven to be a great investment. But it can help you sleep at night. Personally I feel that if I am getting 5 % but the market is yielding 15% I feel as though I am losing 10% no different than if my actual portfolio had dropped by the same amount.

[Raybyrnes]

Last point of note. I’d be shocked if in 20 years a home in San Diego is not going to provide a better rate of return than 90% of the rest of the country. Go ahead and find a 3000 squae foot place in South Dakota and tell me who is better off in the long run. Additionally you have to do something with cash. It hasn’t typically shown to be a good investment over the long term. So keep your cash and if it helps you sleep well at night great. But don’t wake up bitter in the mourning when you find people who are half as smart and make half as much but had the courage to buy and accumulate assets that you were unwilling to take a risk on.

[Raybyrnes]

Wasn’t really luck JWM and to be fair it was not my property. It was my Dad’s. I looked at his house and saw a fully paid off mortgage, a run up in home price and a decelerating growth rate. Therefore the equity was dead money. I also knew that even if I was wrong the loans could be paid back in full with other investments and the monthly payments were a drop in the bucket. Therefore it wasn’t that risky a move. My father was never going to lose his home even if the value of the investment went to zero. Additionally this created a nice deduction. The challenge now is how to unravel the profits without triggering AMT. This is proving to be a challenge.

You are right debt is not an issue in my book provided I can find somthing that provides a better rate of return. This means being mindful of my debt service ratio. 0% credit cards are a pretty good option when you are earning 6 % in a money market accoun. Therefore if you do not accept them you are paying the different in lost opportunity cost. 3% student loans are a good bet whe you can arbitrage this. 5% fixed rate loans on 30 year mortgages where lenders will allow you to make interest only payments and the governemtn provides you with a tax deduction. This requires a little bit more work, a small amount of risk but I would hardly call this being lucky. It sort of seems like shooting a lay up. It is the easyy money. I just think it’s worth taking the time to pick it up. Other people prefere to watch Law and Order.

[Raybyrnes]

4plexowner

Tend to agree that the project on garnet is poor choice. As for spell check not relly worth my time for this type of blog. I am not drafting a memo to a corporation and refuse to start treating it as such.

Another point here is that 10 years ago your same arguments would have prevented the construction of San Elijo Hills, 4 S Ranch, Del Sur. Well they were built and people are paying 700K a pop. In 10 or 20 years we will see new area rebuilt. Prices then will probably be a whole lot higher then they are today.

[Raybyrnes]

Here is a simple experiment. Take any zip cose and any listing and zillow the comps in the area. Then start going down the list and figure out how many people made money and how many didn’t. The way I see it the majority of people are so far ahead that even with a 40% drop they are even. And most of these people can probably manage the payment becaue they bought wehn prices were much lower.

[Raybyrnes]

JWM

Once again on the attach. You are a simpleton. Credit has already been factored into all analasys. A year ago when I suggested doing a cash out refi and investing in the global markets you were similiarly critical. Since that point in time the portfolio I constructed is up almost 40%. If you’re a hack accountant who couldn’t make it as a CPA take it out on someone else. Anyone who understands basic economics is following an hour glass theory of social structure. Why is Nordstoms steaming ahead and Wal Mart is struggling. The middle is evaporating and what you are left with are those who have and those who don’t. Global liquidity might drive the market but the outcome is still rich and poor. Get a clue.

[Raybyrnes]

I’m saying that I drive around PB, Crown Point Blvd, La Jolla and not only is there a lot of constuction going on but there are a ton of homes that you look at and say that could be an incredible property for someone with the know how to do something with. Eventually proices will retreat and we will use the substitue principal. For a 1.5 million I can’t own what I wnat in La Jolla, but I could probably buy and renevate in PB.

Take a look at parts of Oceanside and it is incredible what they have constructed up there. People who are leaving San Diego are from the lower income status. People coming in have made their moneyd elsewhere. There are currently about 300 listing in La Jolla with interest lists of about 100K. People are eye balling the region.

What is the job base of Sedona Arizone. Not much yet the area has moe thqan its fair share of wealth coming in. Just my 2 cents.

[Raybyrnes]

Here is something to consider. Over the next 20 yers San Diego will continue to import high net worth individuals and area like La Jolla and Del Mar will continue to expand. We have already seen Encinitas and Carlsbad real estate benefit from what I will call the La Jolla effect. Drive around Pacific Beach and every plot of land has the ability to be a million dollar home for an good contractor. Eventually this will be the case. PB will become unaffordable for anyone other tha the super rich and people will move to the South or to the East. If one were to speculate I would say that Imperial beach would have long tem prospects aswell. Why? Because people who have money will continue to come here for the climate. And unless they open up the Mexican border, or figure out how to push back the Ocean you are goingto be challenged to increase the supply of homes on the coast.

[Raybyrnes]

JWM

I don’t have the data to dispute the validity of your three industries but I’ll ask if you can provide evidence that hospitality, government, civil service might not equally weight into the equasion.

If I drive around La Jolla, Carsbad, Carmnel Valley, Scripps Ranch, Poway, Ranch Bernardo etc I see nice cars. If I go to National City, El Cajon etc. I may not see the same cars.

I would venture to say that all those do nothing real estate jobs probably were doing something before they got into real estate. Real estate paid better so they transitioned. Now that it is not they more than likely will transion back to what they were doing before. For many in the real estate community they have jobs ans did Real Estate on the side.

[Raybyrnes]

Seems like all of these threads are leading to a common theme. The reason for not buying is job stability. This was the reason for the previous declines in Southern California housing. A couple things to point out about San Diego. We are a satellite city therefore our economic base is fairly diversified. By this I mean we are not in the same danger as Detroit when it comes to massive layoffs.

Foreclosure and NOD’s are not currently correlating to speculative miscalculations and interest rate resets but are rather a function of job losses, health, divorceetc.

Perhaps the interest rate resent and non conforming loans might push the market over the edge but at the same time the government seems to be sending signals that they are going to intervene to prevent this. This might simply means that dooms day may not come.

Last thing to consider is the fact that by many account San Diego is not that different form Orange County. Climate, Job base, income yet San Diego is selling at a relative discount to Orange County.

I am not suggesting that you run out and purchase now but rather stating some facts that need to be considered as part of the counter argument.

[Raybyrnes]

What if you reframed the question? Rather than thinking about this from the buyers standpoint consider the builder. If both the preferred lender rate and an outside lenders rate were the same it should not matter to you whether you use their lender or the outsidelender. But now imagine that the preferred lender has a buyer of the mortgage that is willing to pay a premium for that loan. They might then offer a small discount knowing that they are going to be very well paid on the backend because they have a good buyer for that mortgage.

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