dogma
Premium
join:2002-08-15
Boulder City, NV
| So Cal housing bubble ready to pop?
I think this is it. At least over the next 18 Months. Inventories are going up slightly in L.A/O.C, but are shooting up in San Diego, Phoenix, Vegas, etc. Housing sales are down 10% in L.A., and look here
at the Orange County Register. A bunch of indicators that don't seem promising.
And these thoughts:
The same thing applies to this ‘liquidity bubble’ that manifested itself in the housing market by way of the mortgage business. You have a bunch of financial ‘novices’ getting mortgages over the last few years that allow them to ‘over extend’ a little bit so they can get into a house or condo (interest only, neg-am, option-ARM, stated loans, = funny money RE loans.). Many of these people were real ‘cool’ as their house shot up in value with little to no effort on their part. What's going to happen when all of these "funny-money" adjustable loan rates begin to actually adjust and jump up 1% beginning the end of this year? And the next? If values go down by 10% or more, the house can not be re-fi'd, most likely, the owners will be upside down.
Then there is this lunacy ya' just gotta see:
"great starter home for sale now" Now may be the time for a sale, at or about near the "top" of the market here, and relocate to area's like San Diego, where the values are going down?
Of course, to be honest, I thought the SoCal RE market had topped out 5 years ago. |
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CurtesyFlush
Bababooey, fafafooey, tatatoothy.
Premium
join:2002-08-23
Fontana, CA | That's a BS listing. The trees are wrong for Capistrano, as is the numerical address.
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Lex clavatoris designati rescindenda est. |
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Bill
Light Up The Halo
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join:2001-12-09
clubs:
1 edit | When I look at those trees, I picture somewhere very cold... |
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laserjobs
Premium
join:2004-05-02
Las Vegas, NV
 ·Cox HSI
| reply to dogma
IMHO San Diego is going underwater fast as far as I can see. Lots of vacant places and not a lot of people looking. As I remember, it takes around a year for the average person trying to sell to start reducing the sales price. I think we have until possibly September/October until the shit really starts to hit the fan or when the ARM's start adjusting. A good way to gauge the market will be by watching inventory levels, over 9 months of inventory and we are going to see a big correction in the market.
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nolancj
join:2002-06-30
Long Beach, CA
| reply to dogma
We'll see. Highly desireable areas (those near the beach and those areas with very good schools) are going to see the effects of this last. Phoenix, Las Vegas, San Diego, they're different than LA/OC.
I have many clients of mine in the mortgage industry (large brokers). Let's just say that 1 of them has laid off and cut back significant IT staff, and that no new projects are getting approved. Another didn't build up as hard and is maintaining status quo. Others are sort of waiting it out. Another one is in the mortgage info business (front end, back end of loans, also foreclosures, etc) They're bulking up big time in IT.
So, it's hard to say... CA is a crazy place, and you can't really compare it to Vegas or Phoenix. Hell, 1/2 of those homes have been bid up by speculators from CA pulling out equity in their homes to flip houses there. |
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ksw_92
join:2001-05-13
La Verne, CA
 ·Verizon FIOS
·RoadRunner Cable
 ·Verizon Online DSL
| reply to dogma
said by dogma  :Of course, to be honest, I thought the SoCal RE market had topped out 5 years ago. I thought that it'd top about 2 years ago but I was way wrong. The house I bought in '97 for 138k and sold in '03 for 280k could list for 515k now.
I don't think that the market will crash unless we go Gestopo on the those "who do the jobs that Americans won't do" (sudden supply surge riding on the heels of the south-bound sucking sound caused by a mass exodus). It should start tapering down in the next year or so. I'm seeing listing times jump for homes > 650k but stuff less than that is still going into escrow in 2 weeks or less at this point. All the easy money seems to have been made...
Eddies in the SoCal Financial Reality Distortion Field make it tough to decide when to get back on the bandwagon.
Who's Eddie and what's he doing in that field? |
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cactuscool
I Have Been Slimed
Premium
join:2002-07-21
Fullerton, CA
clubs:
| reply to dogma
I honestly don't think there is a real estate bubble in So Cal. Prices may drop some in some areas, but I think we will just see prices stabilize, and not increase as crazily as they have in the past few years.
I think it will take: A) a major cut in the So Cal job market, B) a whole bunch of people declaring bankruptcy and flooding the market with houses, or C) a really big earthquake to dramatically drive real estate prices down.
A) The job market in So Cal is pretty solid right now. High-tech engineering firms are firmly established in the area, and from what I understand, that sector is growing, especially the bio-engineering/pharmaceutical area. With everything going on in the Middle-East, I doubt we will see any major cuts in the defense contracts or budgets. Of course the entertainment industry is strong. The high-paying jobs are there.
B) In addition to the job market not really in danger of collapsing, the Fed has put a stop to interest rate hikes for the time being. That will help all the people who may be in jeopardy of having an unaffordable payment on their ARMs and probably save many people from having to declare bankruptcy.
C) Well, these can happen whenever, I guess.
I just don't see why the price of real estate will come crashing down.e
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dogma
Premium
join:2002-08-15
Boulder City, NV
| reply to laserjobs
said by laserjobs :IMHO San Diego is going underwater fast as far as I can see. ...A good way to gauge the market will be by watching inventory levels, over 9 months of inventory and we are going to see a big correction in the market. As for the SD inventory, in April 2004 there were 3,653 properties on the market.
Today, April 2006, it officially stands at 19,069, they are 181 homes away from breaking the all time record (1994) of 19,250. 22,174 will be the target inventory record if population increase is factored in from 1995 to 2006.
It's important to point out I have personally experienced the ugly side of a real estate cycle here in CA. In late 1989, I bought a house for $265K, with a "real" 20% down. In 1993, when I was "ushered" out, it sold at auction for $191K.
That pain never goes away. |
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HappyBunny
Hi. Cram It.
Premium
join:2001-06-23
Long Beach, CA | reply to dogma
said by dogma :"great starter home for sale now" Start er fire, that is. |
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HappyBunny
Hi. Cram It.
Premium
join:2001-06-23
Long Beach, CA | I pray it bursts--I want so much to buy a home and anywhere else, I would own one. I make enough for a nice little house in almost any part of the US, but not here. Even a condo is too much--they are starting at over 300,000 in Long Beach. |
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nolancj
join:2002-06-30
Long Beach, CA
| reply to dogma
Bunny .... you know the area I live in, it's crazy here right now, and inventory is only up SLIGHTLY, but it's still moving fast. There is a house on Roycroft just S of 2nd street we looked at. 900 sq ft, 3100 sq ft lot. Small little place, in good condition, mostly original, 2 TINY bedrooms. Decent little back yard, house is far up in front, so no front patio. And a 2 car garage.
Anyway, we looked at it in April '2004, it was listed for $715k. We ended up getting another house for about the same price because it was bigger, nicer rooms, nicer kitchen, nice front patio, and recently remodeled, on Pomona.
Anyway, that house just went on the market for $900k. And the cheapest house here in is a tear-down at $800k. Condos are $300k+ for a STUDIO.
When my parents first moved to Belmont Shore in the mid 80's, you could get a really nice place for about $125k.
So, even if "the bottom" does drop out, and let's say houses drop even 30%, that little house we looked at will still be over $600k. My aunt lived through the last one, her house in orange hills bought for about $300k, dropped to about $200k for 5 years in the mid-late 80's. That house today is worth over $1.3m. |
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dogma
Premium
join:2002-08-15
Boulder City, NV
| reply to HappyBunny
said by HappyBunny :--I want so much to buy a home Bun. Why? What is so important about owning your "own" home here? I imagine your SoCal salary would be less in other area's where housing and the overall cost of living is significantly less. So if you worked in some other area of the country, you may make less than here, however housing would be much more affordable.
Owning your own home here positives:
1. Potential tax benefits
2. You can fix it up the way you want.
3. Potential increase in value/equity
4. (I can't think of anything else, can you?)
The oppressive and risky mortgage you may need to get in order to get your foot into a "starter home" here now could outweigh any tax benefits.
Increase in value? Over the long haul yes. But why pay a premium now, continue to save, just wait 2-3 years and you will know the meaning of REO.
Find a nice apartment or rental house that suits your desires as best as possible.
Optionally, you may consider using your SoCal income, which is higher than most other area's, to buy income real estate in other parts of the country where cost are reasonable. Management would be the pain there, but you may purchase in a town where you have "peeps", and have them help manage it. In this scenario, you would get the same tax benefits.
You may think your buying a house, what you are really buying is a house note. |
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laserjobs
Premium
join:2004-05-02
Las Vegas, NV
·Cox HSI
| reply to dogma
There is a lot of pressure for people to buy homes right now. There is a mixture of social proof and fear of "missing out". Really reminds me of the stock market in 2000. Fortunately I am a contrarian, which has always served me well. Here is a word of advice, appreciation can not be guaranteed but cash flows almost always can. Wait until you can get your mortgage payments lower than your rent payments. Therefore you do not need to worry about appreciation because you are always paying less than rent.
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sholling
Premium
join:2002-02-13
Hemet, CA
| said by laserjobs :There is a lot of pressure for people to buy homes right now. There is a mixture of social proof and fear of "missing out". Really reminds me of the stock market in 2000. Fortunately I am a contrarian, which has always served me well. I agree with you about social pressure and the fear of missing out being two of the factors driving the housing market. The other factor driving the southern california market is that they just aren't making anymore land and the population is growing. IMHO the LA/OC market has about reached its peak and may even backslide 5-10% or so if interest rates go up. Long-term (10 years) the market will go up at least at the rate of inflation. On the other hand I think that there is still a little room in parts of the IE. Especially with the improving local job market.
said by laserjobs :Here is a word of advice, appreciation can not be guaranteed but cash flows almost always can. Wait until you can get your mortgage payments lower than your rent payments. Therefore you do not need to worry about appreciation because you are always paying less than rent. You will never get house payment lower than rent payments unless you can afford to put 30% or more down. And not many of us can save up $120,000 while making someone else's house payments for them! My advice is not to count on appreciation but instead to buy a home to live in long-term so you don't have to pay inflated rent when you retire. And hey if it's value does go up you can chalk that up as a bonus.
I'll use my home (it'll soon be for sale) as an example. The people that buy it (assuming 5% down) will have a $2,500 house payment (PITI) partly offset by $200/mo in tax savings. These townhomes rent for $1,500. Assuming rents continue to rise at 8% then that means in 6 years their house payment will be cheaper than rent. It also means that in 30 years they won't be eating cat food because they can't afford 4000/mo for rent. Their house will be paid off.
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"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
--FREDERIC BASTIAT--
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dogma
Premium
join:2002-08-15
Boulder City, NV
| said by sholling :I'll use my home (it'll soon be for sale) as an example. Why are you selling (if I may ask)? And where are you headed? Plan on buying again , moving out of the area (like I may do), or sitting on the sidelines and waiting for the crash, so you can buy back in low? |
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sholling
Premium
join:2002-02-13
Hemet, CA
| said by dogma :said by sholling :I'll use my home (it'll soon be for sale) as an example. Why are you selling (if I may ask)? And where are you headed? Plan on buying again , moving out of the area (like I may do), or sitting on the sidelines and waiting for the crash, so you can buy back in low? My father passed away and it was his wish that I move into his house in Hemet. It's very nice and it's paid for. Actually the only reason that I'm selling is the capital gains tax. If I were to rent it out and then sell it later I'd be writing a check to Uncle Sam for $30,000 plus the state's cut. Plus with income taxes on any rent I might break even after footing the bill for repairs and tenent damage. Once I have the money freed up I might look at 4-plexes or just drop it in a couple of 5% one year CDs.
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"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
--FREDERIC BASTIAT--
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dogma
Premium
join:2002-08-15
Boulder City, NV | Smart, very smart. |
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sholling
Premium
join:2002-02-13
Hemet, CA
| said by dogma :Smart, very smart. Depending on what you do you might consider that area. You can still pick up a 15-20 year old 1,400 sgft single family home for under $300k. There's also a bunch of commercial and industrial going in and labor is less expensive.
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"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
--FREDERIC BASTIAT--
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dogma
Premium
join:2002-08-15
Boulder City, NV
| Gee, you are right; 31035 Lakeview Ave E, Nuevo, CA 92567
(never heard of Nuevo), 1900s.f. house on 1 Acre sold last summer for $464K.
Here on Zillow
plus a bunch more there.
Unfortunately, I need to be 20min physically from one of my DC's. So looks like the desert for me. |
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cactuscool
I Have Been Slimed
Premium
join:2002-07-21
Fullerton, CA
clubs:
| reply to dogma
said by dogma :It's important to point out I have personally experienced the ugly side of a real estate cycle here in CA. In late 1989, I bought a house for $265K, with a "real" 20% down. In 1993, when I was "ushered" out, it sold at auction for $191K. That sucks that that happened to you. Prices did come tumbling down in the 90's.
Correct me if I'm wrong: Wasn't that due in a large part to a lot of defense spending cuts? I seem to remember large defense contracts moving out of So Cal. Many aerospace engineering firms closing or moving, and the Long Beach Naval base closing. The huge decrease in defense spending had many people being laid off or moving out to other areas. Consequently many homes were dumped on the market at the same time, and the job market was terrible.
I don't really see that happening again.
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My tummy feels funny... |
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