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temeculaguy
ParticipantI think analysts are reading this post. Today, some group came out with a study that said the Inland Empire is the most overvalued place in California based on the rental/purchase price ratios and they expect it to decline faster than other areas.
http://www.dailybulletin.com/news/ci_5647599
Personally I am shopping for a specific area of South Temecula (Redhawk/Wolfcreek) and there is nothing below 390k similar to your house or under $1650 to rent so I would be tempted if that was down here for 325K.
I am with you on the gardner. There are no cardio benefits to pushing a gas powered mower and the gym has better scenery. Some of us have jobs or lives that don’t allow for one day a week during daylight hours to mow a lawn in order to keep the HOA from getting mad. I also started to pay for that pre sliced bread and the butter you don’t have to churn.
Participantsd realtor, despite the occassional attacks I’ve seen you and other R/E pros endure, I think your insight on this house has sold me on the need to use a professional like yourself in future transactions. If this guy was your client a year ago when he first listed I bet he would have walked away with a lot more cash in hand than he ever will the way he is doing it because he is trying to save money. I wonder what percentage of listing agents are honest with their clients or do they have to allow the delusional to think what they want knowing the next agent will tell them what they want to hear. Isn’t there a fee to list on the MLS, why would anyone do it for free? BTW, living in a house that is for sale sucks, why would anyone want to do it for a year?
Participantsd is right in saying that the value is what someone else will pay for it and the best basis is what someone else paid nearby for something similar. Don’t fret over the 800k prices, your ride is slowing coming to a full and complete stop, keep your hands and feet inside the car for your own safety (heard that at Magic Mountain last week and just knew it would apply to life somehow).
I hate replacement cost as a basis. I paid 190k for a house at the lowpoint of the last cycle. My insurance company (and confirmed by a second quote from another company) said that I needed to insure it for 270K for replacement cost. After I asked them if I could order one of the drinks they had been drinking they explained that building a single house is not as cost effective as building tract homes because the materials, subs, waste, plans, etc. all cost more when bulding a single house. So non-tract homes cannot use the same cost per sq.ft. as customs and large tracts cannot use small tract numbers. Lot size doesn’t work because many large lots have slopes and small lots have views in the same developments. As the former owner of a large lot with a slope, no thank you, I’ll pay more to have the smaller view lot and sit in a chair admiring the view rather than picking weeds on the hill every Saturday. Where the lot is located is far more important than the sq. ft. to many buyers.
April 9, 2007 at 11:09 PM in reply to: Getting married in September 2007. When should we buy? #49637ParticipantDeadzone is right. You can read all the graphs and talk to as many experts as you like but your situation is the true “canary in the coal mine.” When educated young professionals with decent jobs can’t buy a modest home in a modest area, there’s nowhere to go but down. It’s not like you are looking for a premium area or a coastal area. When the white collar workers can’t live in the blue collar neighborhoods the writing is on the walls. I don’t know your wife-to-be but my wife in 1991 just had to have that new house with the white washed oak cabinets. In Jan 1992 we closed escrow. I was upside down until 1998 and could have bought my exact house on another street in 1995 or 1996 for just over half of what I paid. At an auction of a repo (I was outbid by 17k in trying to aquire my first rental, damn those sealed bid fha repos). But she had to have it and just like any young husband, happy wife/happy life I thought. I have lots of excuses (I was young, there was no internet, I was raised in the 80’s and houses always went up in value as far back as I could remember). I even paid a retired couple to sit in line for three days so I could get the one I wanted when the phase was released. You aren’t going to get a big house in Carlsbad for 300k but you will get one in Mira Mesa for that. Rent Karate Kid at blockbuster and listen to Mr. Myagi, “patience grasshopper.”
ParticipantOne thing you need to consider is that after you get married, it is possible you may have children in the next few years (I don’t know your ages and life goals, so I’m guessing here). While your income will go up, could you make that mortgage of over 400k on your income alone? Would it be a 30yr fixed? In 1992 I bought a house for exactly 3x my income alone (wife worked at the time of purchase and made about the same)and by the time I had my first kid a few years later the debt on the house was 2x my income alone and I remember being pretty cash strapped when she decided to “take a year or two off work.”
Just something to consider, I feel terrible for those who are starting out in today’s market.
ParticipantThose apartments in 4s you speak of are what is called “mitigation housing.” It was always part of the 4s plan from the beginning and was required to get approval of the master plan. In the past they would put senior citizen housing to satisfy that requirement but I’m not sure they can get away with that now. The new Sheriff’s station is adjacent to that mitigation complex, which should comfort the community a little.
As far as developers being able to change directions and build smaller or cheaper homes, they certainly can. It all depends how far along they are and if it makes any sense. If the road and utils are already in, it will cost too much to change the lot size, plus there is a cost and hassle to get the county to modify the original plan and the screaming owners at public hearings, but make no mistake, it is never set in stone, especially if it is still raw land. In 1992 I lived across the street from finished lots and finished streets that sat empty for years (and I was fearful of what might end up there) but ultimately another company bought the land and actually built bigger houses, it’s whatever makes sense to the builder and what they think will sell, not the existing owners in a development. Understand that a bunch of small houses or a bunch of “non granite counter” houses pay more in property tax than vacant land and it makes a noisy segment of the population happy because it is affordable housing. NIMBY doesn’t work as well when the builders are losing money and the county is not collecting taxes while the schools are half empty. If it makes sense to change course, then change it will.
I agree with the other posters that the first tactic they use is to sell off to a different builder who will build out with lower quality but only if it makes financial sense to them. Want to know exactly what will happen, buy the last house built.
ParticipantWhere is your property located and what is it? Riverside is a big county and the market varies based on where it is within the county. Some of the areas in the county haven’t seen much of a drop yet so you may have to wait years for it to recover, some towns have just been hit with tons of notices of default so they will drop further in six months. Some markets have very low vacancy rates while others are flush with rentals so post some details and it will make it easier to give advice.
ParticipantBears, don’t throw in the towel just yet. The next year or two will tell the story, not the next month or two. The subprime problems will take even longer to trickle upward to the markets that most of us want to live in. Just remind yourself of the basics, all time high prices, no increase in high earning population (44k moved out of county replaced by immigrants and babies, 50% of the babies to non-citizens), normal increase in wages, declining wages and jobs for those in R/E related fields, increase in units, tighter lending standards, less “affordability lending products”, hell the only thing keeping this ship afloat is the short term memory of the money to be made and low interest rates. Give it time, this summer will be a doozy as the masses realize it and start heading for the exits, then in the fall the first batch of the repos will start showing up.
ParticipantI just recognized your screen name and realized you are a fellow Temeculan, SANDAG only covers San Diego but Temecula’s median household income is 78K, their stats are current as of Jan 07. There is a difference between Median Family Income and Median Household Income, household is higher and I don’t remember which one Rich used for his 5x and 7x examples so my examples may need to be adjusted. But i think you get the point of what a fundamental is.
I think I like the rent vs. buy formula mentioned above even better than Hh income because it truly lets you know if something is worth buying or renting because those are the two choices when you boil it all down.
ParticipantOne of the fundamentals you can figure out on your own for specific towns using some web data is median income to median housing price ratio. Rich and many other analysts consider median housing price at five times median income to be part of a dwonside or bust and seven times income to be the high side or a boom. If the median income (not the average but the guy in the middle with half making more and half making less) is 50k a year for a zip code, 250k for a house is a deal and 350k is a rip off because in the past it fluctuates between the two. You can go to SANDAG’s website and get estimates of median income by town, zip code, school boundaries, etc.
http://profilewarehouse.sandag.org/
find the place you want to live, look at the median income (the real dollars, not the inflation adjusted 1999 numbers) and multiply it by 5 and also by 7, that is the historical range for houses there. The trick is, you may need a real estate veteran for the area to determine the median house for that area if you are unfamiliar with it, communities vary incredibly by median sq ft and median lot size. On Sandag, choose “current estimates”, the most recent data is 2006, new data may become available soon but incomes don’t skyrocket. San Diego city is at 61k, Carlsbad at 90k, paying anything more than 420k for the average house in S.D. is as risky as paying more than 630k in Carlsbad both were multiplied 7 x earnings. Keep in mind if you are looking at the smallest or the biggest house the fundamentals support more or less, real estate has more factors than just median, it’s just a basis. I am not in the RE industry, but ultimately you may need a local RE pro to help you determine if something is above or below average just be wary of the hype and find someone who didn’t jump in the biz in the last few years. You should refine it to zip code or even elementary school boundaries. Using countywide numbers quoted in the papers are interesting but if you are looking at buying, get specific.
Income went up 33% in S.D. city but 38% in Carlsbad from 2000 to 2006, housing went up much more in both, therefore the price increase violated the fundamentals of economics and have always returned, usually overcorrecting and going below the price supported by the fundamentals temporarily, and that my friend is the time to buy. Unfortunately I have but an SDSU education and never got better than a B in an economics class, so I could easily be wrong.
March 31, 2007 at 4:57 PM in reply to: Free gas for a year with the purchase of this house in Murrieta #48842ParticipantThanks TemekuT, that explains the zillow sale but I still have to wonder what the bank/seller has been smoking if it didn’t sell in the 400’s in 2006 why they think it has a chance in the 500’s for 2007. I was hoping some of these must sell brown lawners would drive the market down, not up. Don’t they look at what is for sale in the same development and try to price it at/under or are they throwing darts at a board?
ParticipantDitto, Sell. I could never leave the sunshine state but if you figured out the fully amortized rate for a loan of 712k and you can’t afford it, then get out of it while you still can, if you still can. Interest only is just another word for renter with a locked sales price, we used to call that a lease option. In ten years you will owe the same amount you do today. If it were going up 10% a year, it would make sense but it’s going to be many years before that comes back and most think it will get worse over the next few years. I personally think you still have time to get out because the impact of the subprime implosion and tighter lending standards will hurt the bottom first and it will take time to trickle up to you. The only problem is we have always had up and down cycles, yet we have never had one where we were so exposed and out of whack with fundamentals.
ParticipantJust tell her that you cannot afford anything more than 300k and you don’t want to insult her with an offer that low, she can’t take offense to that. The other posters are correct in their assumption that she probably can’t sell it for that because she owes more, has cash flow troubles and will be letting some of her rentals go back to the banks. If she is in the new home industry she is losing money on her rentals and isn’t making much at work to cover it, she acts loaded because she used to be. You can also ask her if you can stay after the lease runs out until it sells. Ask for a 40% reduction in rent and agree to hire a cleaning lady to keep it nice for showings. Since you won’t have the comfort of a lease and you will have to deal with showings it isn’t worth full rent. She will want you to pay full price but that isn’t fair to you and her cost to have it empty will be astronomical and won’t be able to get a new renter, so you are her only chance at any cash flow. I’ve noticed some crazy bargains in rental houses because they are also for sale.
March 31, 2007 at 12:30 AM in reply to: Free gas for a year with the purchase of this house in Murrieta #48823ParticipantI’ve noticed some similar hijinks near my house. This house sat on the market forever at 450k and was eventually repo’d. I think the auction price listed in the paper was high 300’s or just about 400k. Zillow lists the sale at 109k and now with it’s completely dead landscaping it shows up on the mls for 517,900 how the hell did that happen? Maybe they read the zetimate of 517,899 and figured they’d mark it up a hundred bucks. The house is horrible and couldn’t be on a worse street with am gridlock in your front yard and it’s a hundred yards from a high school. Maybe someone with better access to databases can figure it out.
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