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“Before this, have you ever heard of an industry seeking legislation for itself?”

I think the medical industry has them beat.
Not nice to impersonate a doctor, you know.

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You can add me to the list of people who are wealthier because of this site. I sold a property in August of 2005, which appears to be the peak month in my zip code. I was $300/month short on rent in vs. owning costs out. I was gonna hold until I read this site.

For those of you new to this site, you might consider it a “housing bubble” site. Well, it isn’t. It is a “housing analysis” site. Rich speaks objectively with data, which make the site great.

It just so happens the data today indicates we are in a bubble.

I fully expect to be reading this site a few years down the road when the data shows a different story and Rich is the only one saying to “buy” when everyone else is scared to. I’ll have my down payments ready.

Thanks Rich.

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Is there a counter point to the question – why are all these wealthy people taking out stupid loans? I agree, even wealthy people will take out mortgages, but they won’t take a zero-down ARM. They will at least put down 20% to avoid PMI and get a fixed rate in times of low interest.

I think the mix of loans we saw in the last two years make it very clear that the buyers are not low-income, cash-wealthy people. They are streeeeeetching to get in to a market they see growing out of control.

Rent is not a comparison to owning a home, but rental rates give some indication of “intrinsic value” and whether or not the intrinsic value of the area is changing.

Also, you can’t compare renting a small home with buying a large home. You have to compare the cost of renting a house and the cost of buying the same or identical house.

Has the value of owning a house really gone up that much more than renting a house? Come on! Really? I don’t see any logical explanation why the EXACT same house, which rented for 1500 4 years ago and 1900 now should cost twice as much to buy now as it did then.

I agree some people are passionate about this decline. I’m not one of them. I just trust the numbers and the analysis of good economists.

D

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$400,000,000 / 200 employees = $2,000,000 per employee for workers’ comp.

Seems just a tad high.

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I sold a rental house in Clairemont in August 2005.
I’m sure that I could not get that price in today’s market. I would say the market in the 92117 zip code has dropped 5% to 10% since then.

There were 11 houses TOTAL for sale in this zip code at some point in 2004 – I don’t remember when. There were 90 for sale in August when I sold. Not sure how many now – anyone? anyone?

The sold home is across the street from my home. We saw Realtors or appraisers drive by taking pictures of the house six months after the sale, trying to use it as a comp.

And I’m not just making that up. I swear, I’m not.

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Ya Got Me.

This is probably how stories like “there is a housing shortage in San Diego” get started.

As long as Rich doesn’t post “I made all this data up,” I’ll be fine.

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Regarding item #1:
If people with more cash were really causing prices to go up, we would be seeing more buyers make larger down payments and/or take out higher-quality, conforming loans.

Instead we see zero-down, neg-am, and ARMs. These are not the financial instruments of wealthy retired folk.

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Nice job putting together some thoughts.
Data supporting some of these claims would help your case significantly.

I think all of these are effects of the speculation, not causes for increased prices:

#1 Perhaps more low income people move out cuz they can’t afford to live here anymore.

Also, if this is true, wouldn’t rents go up as much as home prices?

#2 – If it has changed that much in the last 5 years (again – data?), this is another effect of high prices, not a cause. Plus, I think it is a California culture from way back. I remember when I was litttle (um – lets just say its more than 5 years ago) my parents would talk about how tragic it was that families in California had both parents working just to make ends meet. Data would prove me right or wrong.

#3 – Homes may have gotten larger, but lot sizes certainly haven’t. In fact, it seems the lots get smaller and the houses closer together. My 1950’s ranch in Clairemont boasts 25 feet between houses. I’ve been in Poway homes where you feel like you share a bathroom with your neighbor because the windows are 6 feet apart. The land hasn’t changed at all, yet it is really the driving cause of home price increases.

Oh – and if houses are getting so much bigger – wouldn’t rents go up as much as home prices?

#4 – As Rich said, I think many neighborhoods have turned up due to the speculation and HELOC ATM effect.

Um – if the place is so much nicer, wouldn’t rents go up as fast as home prices?

D

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I highly, highly recommend finding out what are these renting for. Let us know and we’ll help you with the math to understand better why you may or may not want to buy one.

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I would definitely say those are SIGNS of a slowdown?

Fascinating how economies work, isn’t it – all tied together like that? By monitoring Uhaul and Sign companies, we can perceive the future of real estate.

Nice detective work!

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Thanks – those were useful.

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Tax breaks on mortgage interest (less standard deduction) should go in there, too – left as an exercise for the reader, heh, heh.

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I’m a broken record on this point, but I have used it a few times in the past year to convince several friends not to buy condos – two of which have already dropped in price while the others haven’t appreciated at all.

Your friends really need to look at the cost of renting vs. the total cost of ownership over the next several years. Insted of worrying about the payment, look at total asset value – cash and equity at the end of 5 years.

In my ‘hood, you can rent a place for $2000 that would cost $600K to purchase.

Ditech tells me the monthly payment would be $3,794 on a fixed rate loan at 6.5% with nothing down. Add 1.25% for taxes (I think) => (600K * .0125 / 12) = $625/month.

Add another $50/month for insurance.

You might have some PMI in there also – call it $100/month, which is surely too low.

TOTAL PAYMENT: $4569.

This means, if you can afford a $4569 payment, you could rent for $2,000/mo and put $2569 per month into the bank. After five years, you would have put $154,000 into the bank. I’m to lazy to do the interest calc, but you would have more than $160K in the bank after five years !!!!!

This is $160,000 you won’t have if you buy and you could lose equity.

In 5 years you could put a down payment on a house at a lower price with a higher interest rate and be sitting pretty.

One of my friends was going to purchase a place in City Heights with a Principal and Interest Payment of $1900 per month. She pays $800/month to live in PB now. Thank god I stopped her.

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That’s a nice little analysis.

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> ” Builders try to make us believe if it weren’t for the environmentalists and government regulations, they could build affordable housing.?

I’m not a builder, but after doing my own general contracting on my house projects, I am convinced this is the case. A good unlicensed contractor (yes, they exist) costs about 60% of a licensed one and the detailed govt BS they have to deal with is staggering. Very difficult to appreciate until you have been through it.

Still, building costs don’t explain why in 1998 I purchased my house for $190,000 and could have built it for $90,000 ($75/sq ft*) while last year it could have sold for $650,000 and only cost $180,000 ($150/sq. ft*) to build.

*sq ft costs estimated (i.e. wild guess). Sale prices are based on good market knowledge.

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