[SD Realtor]

I hear you FLU.

[SD Realtor]

Yes I remember the RTC liquidation quite well. There were those people who took advantage of them and there was the overwhelming majority of people who stayed on the sidelines and were scared.

There were also those who predicted there would be a solution similar to the RTC for our current bubble. This would have been fantastic… It should be intuitive to figure out why that didn’t happen.

See the main problem here is a somewhat innocent belief in how this all works. Try to understand, it is not a free market anymore. It stopped being a free market long ago. Those in control of the market have cornered themselves and the only way to keep a lid on it is to continue to manipulate it, subsidize it, and massage it for years if not decades until it can inflate its way back to the true value of the asset.

Like you, I do not believe that will happen. The big pop will happen when the bond market realizes that we will default on our debt and the charade will come falling down on everyone. I don’t know when that will happen but I do think it will. Unlike you I believe there is opportunity, there is ALWAYS opportunity. I don’t believe in waiting for it, but rather trying to build up so I can act when it comes.

Again, read what I said, not what you want to put in my mouth. I think rental opportunities are fantastic right now for cash flow… in San Diego? no. In other states yes? It doesn’t work for everyone though. There is no easy path to make money, to many people think there is.

My background is in engineering and logically the things that you say should happen should happen. What you fail to see is that there are much stronger forces in place that have not let it happen and they have only entrenched themselves further.

I still stand by my prediction for pricing for various types of property. Try to understand that is independent of whether you or jameswen or anyone else should buy.

Do you get it yet?

[SD Realtor]

Try to understand something once more okay? The argument is not for profits or not in the older ones, the argument is what will prices be for that type of rental stock. You maintain it will be down by 10%, I say it will be up a year from now for that particular stock.

Personally I find it hard to justify buying rental stock in San Diego, I would be purchasing out of state.

[SD Realtor]

akbar try considering rental stock in a complex like Mission Valley Plaza. Buying in overpriced newer complexes is how you lose money. Yes ridiculously overpriced stuff will depreciate. More common rental stock in older 70’s and 80’s complexes in Mission Valley has already moved up.

[SD Realtor]

Interest rates will increase sharply in the future.

The conundrum that every person with money has right now is should I spend my money or not? My answer would be yes I would spend money now to buy tangible assets however I would try to finance them at low rates as well.

You once more are making a mistake of me telling you to buy. I don’t do that. Just because I have bought does not mean you should buy. I am in a position to do so and have taken advantage of that. I am also preserving cash to take advantage of what will be extraordinary opportunities when interest rates to go high.

Make no mistake about it that when rates to go high, and they will someday, that prices will decrease, perhaps sharply. Show me a post where I have not maintained that thought. However you cannot also have a very high interest rate environment without accompanying costs for pretty much everything. High gas, high energy, high fuel, high rent, high food, high water, high everything prices… So your cash pile will suffer somewhat. However I do think keeping a cash pile is a good thing… personally I will be getting bonds when that happens. however the rentals will still be there, and even though they will be devalued, they will still be a fantastic income generator due to the fixed financing.

The best time to buy varies for everyone. It depends on their goals, finances and mostly personal situation. More often then not people are driven to buy because of pressure from one or the other spouse and because they want to start a family. Single people like you don’t have that problem. It is not a particularly good reason to buy but it is the way things work. Anyone who is going to buy better damn well know that interest rate shock is in our future. Well it has been in our future for how long? A decade? Will it happen this year, next year? next decade? I don’t know… however anyone that buys obviously should have a strategy that will cope with it.

[SD Realtor]

Actually if you read my posts back from when I started which was long before any of you ever joined this board, I was one of the most bearish people here.

Similarly, I regularly receive requests for evaluations of property, for opinions, for thoughts and none of this is solicited and these are not for clients of mine. Also when everyone was gleefully predicting the tsunami and how we would all get great affordable deals I was one of the few who warned about how this would not be the case due to interventions by the govt.

Again, try to read my comments carefully. I have not told anyone to buy. What I have been saying is to look for a continuation of what is a concerted effort to revive the market via good old fashion manipulation. This manipulation will be in the form of pushing further risk onto the taxpayer backed GSEs. Furthermore the timing of this effort is particularly ironic given it is an election year.

Yes a homeowner underwater with a 600k loan and a turd 450k home will soon be able to refi it for the full 600k. That loan will be backed by fannie mae. This is nothing short of fraud. An asset that is not worth 600k will be moved to a GSE and that 600k is insured by your tax dollars in an indirect manner. This also will remove this home from a potential buyers pool as a short sale or reo. This is market manipulation. This will happen on a larger scale. This is not a free market.

This will however goose the market. You can hide your head all you want. You can deny you missed a local bottom, it doesn’t matter to me… If you follow investment property closely you will see it has been moving over the past few years. Similarly where is the tsunami of homes? Markmax where are they at? Have you seen them?

How about you jameswenn? Do you really think the original poster would be idiotic enough to spend 500k on a condo in mission valley? This is not rental stock. Try to understand what rental stock really is ok? Have you been tracking the sales of true rental stock and watching as the prices have been going up?

If you don’t want to use valuable advice to your advantage that is fine. Why don’t we wait a year and look back on what I have said. How does that sound. If you haven’t been reading recommendations that the Fed has been giving regarding the GSEs, and what a hell of alot of other news has been with regards to changing the current model in order to stimulate things, then that is fine, keep your head buried and keep waiting for that mirage of a tsunami. Meanwhile myself and others will continue to purchase rentals and take advantage of the opportunities.

[SD Realtor]

Could it be that the Wall Street guys were also emboldened to run rampant because they also knew that the public sector relied heavily on investments in the crooked game that they were playing? Thus they knew well ahead of time that when the house of cards they built was going to fall, that the feds would have no choice but to bail them out because of these pension investments?

Thus the reality being that the public sector appetite for funding so far exceeded the taxpayer budget base that risky and unrealistic returns were needed on investments just to stay afloat?

Hmmmmmm

[SD Realtor]

You mean I don’t get a pension with my private sector job?

darn….

I am in the wrong sector!

[SD Realtor]

Are you saying that there were no budget problems in California before the real estate bubble? That declines in the quality of our public schools, state services, and other taxpayer supported programs only began with the bubble? Are you saying that the state has only within the past few years been fiscally unable to provide all these services for all these people didn’t fit in the budget?

[SD Realtor]

No way man. It is all Wall Streets fault.

Governments never make faulty projections nor do they ever overspend. Furthermore they are responsible for making sure that everyone has everything they need regardless of citizenship status or individual effort.

You guys better get with the program man!

[SD Realtor]

Agree with you bigtime on the stock market NOR…

[SD Realtor]

I think it depends on alot of things. I cannot say how much the prices will have increased by the time she is ready to buy, only that I think they will be higher. I wouldn’t be surprised to see a 5-7% increase. Another parameter will be what are interest rates when she wants to buy?

As for the rental property aspect of it, that is more of a quandry. If she is looking for cash flow then I am not a big fan of rental property purchases in San Diego. If she is looking for appreciation then yeah I guess it is okay. The only rentals I have left are ones that I bought as owner occupied and lived in and then grew out of but kept. So yes your point may have some merit. However it is hard to say what the landscape will be a year from now.

I think this will be a very interesting year.

[SD Realtor]

As I have posted before, I believe this will be a fairly phenomenal year with respect to the programs we will see implemented in order to stimulate the housing market. For better or worse it is a bit ironic that they will be implemented in an election year. We have already seen rumblings about them. Among them, and not limited to them I think they will include:

– A principal reduction program. This is not new and has already been in place. I believe we will see it ramp up.

– An investor incentive program for purchase of REO inventory for investment property. This could include a reduction in cap gains tax (cap gains from rental income for cash flowing properties?) as well as a shorter depreciation period (from the current one which is 27 years?)

– 100% financing offered by Fannie for new purchases (non recourse).

– Allowable Fannie refinancing for pretty much any and all properties at current market rates, (4.2%) REGARDLESS of what your property is worth and REGARDLESS of whether you are underwater or not. If you have a home worth 450k and you have a balance of 625k then you get a full 625k refi at current rates as long as you are current on your loan.

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I think these factors in conjunction with rock bottom rates will produce a fairly robust market overall with variances in cities nationally but mostly to the upside. These measures will also serve to keep inventory low and stimulate buyers who were on the fence as well as tenants. Additionally it will serve to slow down rent increases.

From the business side this will also continue the process of the public taking on more risk and reducing privatized loss of institutions and large investors holding assets that are underwater. The underwater homeowner refinances, the underwater assets are paid off at the full loan balance, and the taxpayers… I mean the gse takes on another turd.

What will be interesting is that I believe that no legislation will be needed for any of this. If there is any legislation needed and it becomes problematic then there will be executive directives and appointments that will push this through and do it fast.

How does this affect San Diego RE? I believe it will affect it in a positive way. I do think FLU has a very valid point about white collar employment and I do agree that sdr has a valid point about the diversity of the economy. I think that there will be fairly significant downsizing over the next decade at plenty of places… SAIC, HUGHES, TITAN and plenty of others. The commercial sector is strong though… not strong enough to soak all of the people up but strong.

The main point is the realization that it all hinges on housing. Pure and simple. The election doesn’t hinge on 1000 engineers losing jobs but does hinge of 3000 other people getting work in the construction sector, finance sector, and lower level sectors that thrive when housing heats up.

So to me…. any thoughts of housing going down for anything except high end homes are incorrect. The opportunity came and went quite awhile back. Next opportunity for that will not be until we see interest rates run and that is not gonna happen for awhile. That can has been and will continue to be kicked down a long long road.

[SD Realtor]

Mission Valley is for the most part considered rental property and like many other rental stocked areas has long since bottomed out. With few outlets available for decent returns that are fairly low risk there has been a lot of investor activity the past few years in stock like mission valley condos. Expect them the continue to appreciate modestly this year.

[SD Realtor]

I think the best way to accomplish your goals is to be upfront with the agents you use from the very beginning. Most good realtors have a variety of clients that have a wide range of needs. Some of them require alot of handholding and some do not due to experience or for other reasons. I think as long as you spell out your expectations then you should be okay. Don’t sign a representation agreement so that if you want to use someone else, then you are not bound. However being courteous and letting the agent know is fair and prevents them from doing work for a client who will not be using them in the future.

Getting an unbiased opinion can be challenging. Many times you get the buyers agents who tend to be overly optimistic about any property they show you. Similarly when you go on your own and deal with the listing agent directly it can be challenging to trust what they say. Sometimes buyers bring third parties like friends with them on showings just to have another set of eyes there.

Agents that focus on giving information rather then unbiased opinions are to me, the most helpful resources for clients. Now, more often then not, a client will ask for the agents opinion on the home, neighborhood, etc and in those cases it is helpful for the agent to pass that opinion on as it was solicited. As you already may have found, some agents may push hard for various neighborhoods based on the parameters you told them are important.

As for finding it difficult to view homes you like, it is typical for people to be quite disappointed with the inventory they have been looking at, especially at San Diego prices. Try not to burn out on it and don’t let it consume you. Don’t be afraid to take a break every now and then as well.

[Author]

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