[SD Realtor]

+3 for Allan….

[SD Realtor]

Just another union having fun in California.

http://online.wsj.com/article/SB10001424127887324463604579040781488196964.html?ru=yahoo?mod=yahoo_itp

[SD Realtor]

I know of a few other investors who have done well up there as well Flyer. Some are pulling in double digit cash flow and doing the pm themselves. Some are pulling in 8% and having a pm do all the work.

[SD Realtor]

Very well stated nsr and cdma. In the end it does sort itself out and I can promise it will not be a utopian ending where umpteen billion people on the planet all have the same resources.

[SD Realtor]

treehugger what you are seeing is perfectly normal and representative of a lot of the submarkets in SD right now. We had a market with no inventory that drove prices way up. More inventory comes on, more sellers feel confident that the momentum will carry their own homes to unrealistic sales prices. Inventory builds, some sellers pull the homes off the market, some reprice and the system comes to an equilibrium eventually.

Unfortunately some people confuse those mechanics with a tanking market. A tanking market is driven by an external force. If rates get super high then that can push the market down, if a huge wave of foreclosures and unemployment happens causing a glut of inventory and loss of confidence then that can as well.

I see none of that happening but I do see the market going through a normalization.

[SD Realtor]

Harvey flew to close to the vortex… someone throw him a line!

[SD Realtor]

Yeah… here we go again just blundering right along. This could have far worse ramifications then what happened in Libya. This is a bad move.

[SD Realtor]

Well AN I guess I stand corrected on the salary increases. Note however that the rate hikes really started in 79 and continued for about 5 years.

Anyways the biggest problem as I see it has to do with employment and quality jobs. The job growth in both quality and quantity of jobs was extraordinary in that time frame. Outsourcing was just barely starting. These days… well not so much. As your data shows a 19% increase from 2000-2010… pretty pathetic….

Finally what is not shown is the great deception. Although rates have not gone up much, cost of living has. We love to hear inflation is tame but over the past few years we have all been paying much higher prices for food, water and energy.

Anyways I will not digress on that stuff. Getting to your main point, yes buying in 2008 was not only great due to lower prices but mainly for lower rates. To me investors buying with cash were foolish. Saving a cash pile for the day when rates are high seems to make more sense. Then you have a bunch of properties leveraged at a low rate AND you have cash to buy high yielding bonds. Again, the only crux is that you have a lower valuation on that RE but if you are holding it for a rental, so what.

[SD Realtor]

Well AN I remember those days really well. There was an extreme tightening of the money supply which was the way Volker dealt with the inflation issues in the mid to late 70’s. I cannot say what wages were because I was still in school although I worked in the labs at school and we were paid well for not doing crap. I do not believe people were getting the kind of 10-15% raises that you wrote about although some will claim that they did. I don’t buy it or if it happened it was the exception and not the rule.

So yes what you said about being in the catbird seat for owners is true however we will absolutely see asset depreciation in those cases of high rates. The golden question is how much. Now if you will be holding the property anyway and have it as a rental then yes, You will be raking in monthly income while paying out on a 3.5 or 4% mortgage. Nice.

Yes there were golden opportunities not long ago. They may come back but I don’t really think they will unless they are accompanied by rate shock, not foreclosure shock. I guess we will see.

[SD Realtor]

FLU great posts.

AN good to see you.

Before I go on this post is for local San Diego housing. I think we will see inventory return to more normalized levels. I have seen a slowdown in buying activity compared to the frenzied levels we saw in the fall/winter/spring as predicted. Similarly we have seen the return of the “entitled seller” who feels justified in pricing his home above comps. That coupled with rising treasuries has been enough to push away buyers who were on the fringes of affording a home in the neighborhood they may have desired.

Investor activity to me will not change the market dynamic much. Those who were getting outbid by investors for the most part were in the lower end and even more affordable housing market along with a lot of investment grade condos. That inventory can be consumed by lower end owner occupant buyers who have suffered the most by being consistently outbid by investors. There are some exception cases but not the numbers many on this site claim.

I have already debunked the 30% cash buyers in Carmel Valley myth and showed that most of those purchases were the lowest end homes in CV which would be bought up by owner occupants if not for investors.

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I believe that the pace of the treasury yield curve will have a good deal to do with how we see things play out in the housing market. While pricing has risen much faster then it should have, and inventory is growing I don’t really see a bubble that will lead to a crash. I see a market that was driven by a staggering lack of inventory causing pricing to lurch forward. I believe we will now slow way down but not see a massive gain in inventory due to foreclosures, distress, and lots of unemployment.

I think the housing market is now acclimated to the new normal employment wise here in San Diego. We busted 2.9 on the yields this week and saw a small pullback Friday. (side note I have been in and out of TBT during the past few months and am kind of kicking myself for not getting back in Friday) so we have seen almost 130 basis points since May…. not freeking bad… however on a historical basis we are still in bouncing near the bottom of yields.

This economic recovery is and will continue to be different then those of the past. This one will be characterized by the new normal lack of quality jobs but with plenty of crappy menial jobs. However in San Diego that is not much as true so the housing market will be supported okay. At some point on the yield curve though, buyer supply will start to suffer. I believe we still have perhaps… 150 – 200 basis points. That puts us at around 5.5 – 6% 30 year fix. However even here it doesn’t get dicey. At 7-8% it gets dicey but I don’t see that happening until maybe year 3 or 4 of the presidency.

I don’t have much knowledge on price declines against mortgage rates though. It is dangerous to assume they will be substantial, but I do think there will be some effect.

Why?

Because there are plenty of people with money out there.

Now you get to 10% or more and yes I believe we see some good price declines.

Don’t know if it will ever happen though.

[SD Realtor]

BTW CAR I do agree with your points about the country being at the mercy of capital and all that, corruption, etc etc…. No argument there. Nothing fictional about that.

However there are literally billions of bodies on this planet available for labor and fewer and fewer that have capital. Thus the value of labor is what drives wages down. Not the needs of those willing to do the labor. If you guys want to place a higher value on labor then what it should be then so be it, I simply disagree.

[SD Realtor]

No way I am falling into that trap CAR.

Your Utopian society does not and never will exist. See you in the fiction section of the bookstore.

[SD Realtor]

Yes my post indeed was a response to one by Shoveler in this thread. Shoveler and I have debated on this same subject in previous threads.

[SD Realtor]

Yes and the moral is also not to take something out of context.

Here is my post which was a response to Shoveler.

“I believe the point of the article is that McDonalds or any other corporate entity will strive to keep labor costs a constant regardless of the wage scale in one way or another.

It is quite likely that a place like McDonalds could have already automated easily but chose not to because the cost may not make sense. Give them a nudge and they might.

It is all about net profit. McDonalds is an example that looses the wage scale battle. As NSR pointed out in his argument about the place in Colorado, paying those employees more makes sense because it saves the company money in the long run due to retention and employee training costs. Thus the company becomes more profitable by doing so. This is a valid argument and makes alot of sense.

If McDonalds can improve the bottom line by paying a guy 15 bucks to flip a burger then it will.

Employees are not entitled to anything. They don’t like the pay, they can quit and look for another job.”

At the end there is the infamouse entitled statement.

Now TAKEN IN CONTEXT is there any implication that I am saying the employees should not get payed his salary?

[SD Realtor]

Good job catching up with the rest of the board. As I said seems like nobody was confused but you understand it now so the plane can take off…

Ooops… I hope that doesn’t confuse people.

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