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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 | Re: So Cal housing bubble ready to pop? 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
Premium,VIP
join:2001-12-09
clubs:
1 edit | Re: So Cal housing bubble ready to pop? 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
| 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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dogma
Premium
join:2002-08-15
Boulder City, NV
| Re: So Cal housing bubble ready to pop? 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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cactuscool
I Have Been Slimed
Premium
join:2002-07-21
Fullerton, CA
clubs:
| Re: So Cal housing bubble ready to pop? 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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dogma
Premium
join:2002-08-15
Boulder City, NV
| Re: So Cal housing bubble ready to pop? said by cactuscool :Correct me if I'm wrong: Wasn't that due in a large part to a lot of defense spending cuts? ... I don't really see that happening again. As I remember it, vividly BTW, there was a recession in most of the U.S. during the late '80's, but didn't affect California until Early 1990's. Yes, there was a exodus of Aerospace/defense jobs, but not necessarily "cuts". Many operators simply moved elsewhere, and took jobs with them.
Also, it's important to understand this was the tail end of a real estate market rise led by the "Savings & Loan" debacle. Credit was loose, and many new, marginally qualified buyers got into the market, pushing up the price (supply/demand)from 1984 until 1989.
I see the same thing now. Then it was called "creative financing", now it's normal financing; negative amortizing, interest only, zero% down payment loans...again to marginally qualified buyers.
Three dynamics are at play now As more properties (inventory) come on the market;
1. Interest rates will rise (as we see already)
2. Credit restrictions will tighten, cutting potential buyers out of the market
3. Values will tumble. ~heres why:
Lets say there is a neighborhood where 5 homes are for sale. 4 homes are owned by recent buyers, and one home is owned by someone who has been in for 15 years. This person bought in at $300K, but now it's worth $900K...but because of the competition, he's happy with $800K and sells quickly, thus lowering the comparables, forcing everyone else to lower their prices since banks now begin to devalue the neighborhood. The chain reaction begins. All South.
I have seen it before first hand, and I am pretty sure I am seeing it again. | |
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jig
join:2001-01-05
Hacienda Heights, CA
| Re: So Cal housing bubble ready to pop? it only works that way if there aren't buyers willing to buy. i don't think demand has slipped that much. i could see a correction looming, but not a free fall. and i don't think the correction will be that scary.
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
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sholling
Premium
join:2002-02-13
Hemet, CA
2 edits | said by dogma :said by cactuscool :Correct me if I'm wrong: Wasn't that due in a large part to a lot of defense spending cuts? ... I don't really see that happening again. As I remember it, vividly BTW, there was a recession in most of the U.S. during the late '80's, but didn't affect California until Early 1990's. Yes, there was a exodus of Aerospace/defense jobs, but not necessarily "cuts". Many operators simply moved elsewhere, and took jobs with them. I'm old enough to remember those times. I lived them. The California recession of the mid-70's was brought upon primarily by huge post Vietnam defense cuts. Housing was not effected but as an out of work 19y/o defense-plant tool & die maker (a very highly trained machinist) I wound up living on stove-top stuffing M-F and treated myself to mac and cheese on the weekends. I had $48/week in unemployment (rent was $40/wk) and the gas pumps were manned by downsized engineers.
Next came the carter years. I scored a mid-level tool & die gig at less than market rate - $3.50 an hour (a $1 cut from my last job) with a horrible company, and paid $200/mo in rent while inflation hit double digits and raises were unknown. My former employer rescued me with a good job and a $1.25 extra.
In 1983 I bought into a tight housing market and got in way over my head with creative financing (I'm now a fanatic believer in straight up financing - and reading each and every line of a contract from cover to cover) but back then I didn't know any better. I bought an Anaheim 4bd 2bth pool home for $94,000 on $11/hr at 15% interest. With the huge interest rates of the time and balloon payment I had to sell after 3 years for $95k. Even with a 90's crash it's only worth $553k on today's market - per www.zillow.com. I learned to read contracts and take my time to make a decision (the agent brought a dozen buyers and gave me 5 minutes to sign - yup I was early 20's and dumb).
I watched the property crash of the early 90's. A close friend sold at market (175k) and through a brilliant combination of luck and fast talking picked up buy a $400k (1st, 2nd & 3rd) foreclosure for the $225 1st. Today it's worth well over $1M.
My whole point (illustrating both dogma and my arguments) is that all that maters in the end is time. Over 5 years any investment can lose money, but over 30 most quality investments will make you money.
To me it's almost a sure thing investment over 30 years - with the only kicker being the question of LA being nuked by terrorists or not. Another reason to buy away from downtown.
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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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nolancj
join:2002-06-30
Long Beach, CA
| Re: So Cal housing bubble ready to pop? said by cactuscool :In 1983 I bought into a tight housing market and got in way over my head with creative financing (I'm now a fanatic believer in straight up financing - and reading each and every line of a contract from cover to cover) but back then I didn't know any better. I bought an Anaheim 4bd 2bth pool home for $94,000 on $11/hr at 15% interest. With the huge interest rates of the time and balloon payment I had to sell after 3 years for $95k. Even with a 90's crash it's only worth $553k on today's market That's a 9.3% ARR. Not bad at all for that house. Not taking into account taxes, improvements, etc. Still, considering that your house payment would have only been about $1100/mo on that place.
Anyway, it's all timing.
And to all those naysayers: It's worse to be out of a market than to try and time a market and miss the rises. This goes for ANY investment. ANY. You cannot time markets.
The difference with property is it's REAL, it is LIMITED, and people need a place to LIVE. Just watch, any sharp decline will be short-lived. The speculators will jump back in because the prices go low and drive prices higher. Money is CHEAP today. Look at that 15% interest rate! You can get a 30yr jumbo at just over 6 today. THings are VERY different in SoCal than the 80s.
Overvalued? Maybe. A housing crash that will drive prices down 20-40%? Forget it. Maybe a massive earthquake could cause that or some other major catastrophe. | |
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dogma
Premium
join:2002-08-15
Boulder City, NV
| Re: So Cal housing bubble ready to pop? said by nolancj :Just watch, any sharp decline will be short-lived. The speculators will jump back in because the prices go low and drive prices higher. Money is CHEAP today. Look at that 15% interest rate! You can get a 30yr jumbo at just over 6 today. THings are VERY different in SoCal than the 80s. Overvalued? Maybe. A housing crash that will drive prices down 20-40%? Forget it. Maybe a massive earthquake could cause that or some other major catastrophe. First, a jumbo loan (over $417K) for 30 years fixed is
6.5 - 7.000% today (6.5 just means higher points for the loan). With these requirements:
•single-family, owner-occupied primary residence
•loan-to-value ratio of 80% (20% down payment).
•Applicant must provide full income documentation
•Taxes and Insurance will be escrowed by Mortgage holder.
•There will be no subordinate (second lien) financing.
•Fees may be subject to change if the information provided changes prior to closing.
•Fees above do not include pre-paid items such as Interim Interest, Taxes or Insurance (if they are currently escrowed by Mortgage holder).
•You have excellent credit (720+ FICO).
•You have sufficient income and liquid assets to qualify.
So, for a $525K home,that's $105K [+$11K closing] down payment and Est. Monthly Payment (at 6.5% fixed) : $2,654.69 + taxes ($433)+ insurance($80)= $3167/Mo.
Income must be at least $8100/mo or $97.2/yr.
If you don't come to the table with all of the above, expect 8%+ or get steered to a adjustable.
Second, you are correct, money is cheap compared to the early 80's, but prices are expensive. When I bought that house back in 1989, the Realtor that sold it to me basically said the same thing about how California property would never go down 20%...and it went down 30%. Guess I had bad timing.
said by nolancj :Anyway, it's all timing. And to all those naysayers: It's worse to be out of a market than to try and time a market and miss the rises. This goes for ANY investment. ANY. You cannot time markets. The difference with property is it's REAL, it is LIMITED, and people need a place to LIVE. Property being "limited" is misleading. Yes, other than Kilauea, no new land is being made. But most land is still undeveloped. Take a road trip anywhere over 100 miles and there is plenty of land to build on.
Is it timing or not? I disagree, it's worse to be in a market that one can't afford. The buyer signs their name on a big bet if they are "hoping" they can afford it. | |
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jig
join:2001-01-05
Hacienda Heights, CA
| Re: So Cal housing bubble ready to pop? said by dogma :Property being "limited" is misleading. Yes, other than Kilauea, no new land is being made. But most land is still undeveloped. Take a road trip anywhere over 100 miles and there is plenty of land to build on. come on, now, you know he meant "desirable" property.
who wants to commute more than 100 miles a day?
home sales aren't being driven by people who can live just anywhere... let alone want to.
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
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sholling
Premium
join:2002-02-13
Hemet, CA
2 edits | said by dogma :Second, you are correct, money is cheap compared to the early 80's, but prices are expensive. When I bought that house back in 1989, the Realtor that sold it to me basically said the same thing about how California property would never go down 20%...and it went down 30%. Guess I had bad timing. How much is that home worth now compared to what you paid for it? Go ahead and zillow.com it.
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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
| Re: So Cal housing bubble ready to pop? Don't need to zillow it, heck i live 4 Blocks from it.
-Backstory: When I departed that house, it was at the bottom of the California RE market. Everybody was hurting. I found the home I live in now, a "better" home, that was a foreclosure. Got in for taking over the payments and a promise to pay $60K in 5 years. That was 12.5 years ago, and the value has gone up 500%.
The old house I bought in '89 at $265K, which fell to $193K in '92, is now worth $700K +/-.
Don't get me wrong. We all have to live somewhere. Owning a home is a great, if not the best long term investment...and I agree, loooong term.
This issue is we all have "investment windows". Meaning if we risk a commitment, we need to be able to really afford that risk for that period of time. ALL the risk need to be looked at. All the what if's.
said by sholling :
On top of that in 30 years you will be in the position of having no house payment or rent and paying just $40-50/month in property taxes while your too-smart-to buy friends are paying an adjusted for inflation $1500 for an apartment and eating cat food.
This is assuming they have no other investments. | |
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laserjobs
Premium
join:2004-05-02
Las Vegas, NV
·Cox HSI
| said by cactuscool :Money is CHEAP today. Look at that 15% interest rate! You can get a 30yr jumbo at just over 6 today. THings are VERY different in SoCal than the 80s. It is not the actual rate to be worried about it is the change in rates that will drive the market either up or down. The only reason real estate is at the price level today is because of the interest rates creating more affordability in the market. Now with the rate reversal what do you think will happen?
As humans we operate under a survival mechanism that if something is working then we keep doing it. So right now we have a fundamental change that is happening in economics that will change real estate values. Also we have people who think the values will increase at the same rate every year not looking at the fundamentals.
Investment is a game of logic not emotion. The combination of the fundamental economics and human judgement creates an interesting scenario. I predict a one year hold out of pricing completely non dependant on interest rates. This means the prices will lower at a slow rate as people hold out for the asking price. After the one year it creates a problem where most investors will not be able to hold on to the property and will start to lower the price creating a domino effect.
Now I also expect a bump either now or the next couple of months where some investors enter the market because the prices have lowered a bit. After the early speculators have exhausted their funds then we will see the inventory rise but not necessarily the prices lower significantly until we hit around one year after the turn (I am guessing early 2007 for the market to really start to decline).
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sholling
Premium
join:2002-02-13
Hemet, CA
2 edits | said by nolancj :And to all those naysayers: It's worse to be out of a market than to try and time a market and miss the rises. This goes for ANY investment. ANY. You cannot time markets. The difference with property is it's REAL, it is LIMITED, and people need a place to LIVE. For the last 3 years I've watched friends urge a young family to wait for the bubble to burst, and they've listened. Three years ago they could have bought a 20 minutes from work 1300sgft 3 bedroom 2-1/2 bath townhome in my tract for an affordable 160k-ish. Sadly they believed the naysayers and continue to pay $1,000/mo in rent for an 800sqft 2 bedroom 1 bath Pico Rivera home for their 3 kids - just slightly less than their house payment would have been. These homes are now going for $350-390k and they are now stuck being renters for life.
Now don't get me wrong, IMHO socal real estate has become a terrible short-term investment. While the flipping days are pretty much over I still think a home is the perfect long-term investment. Yes I agree that if you only plan on living in a place 5 years it's a crap shoot. Maybe it goes up 10-15%, maybe it goes down 10-15%. But if you are thinking 30 years like I do then look at it like this...Put 400,000 into 5% CDs and yes you'll make a sure thing $20k/yr, while paying out $18k in rent. That's a .5% return on your investment before taxes and a net loss after taxes. Over 30 years that 18K in rent will grow to at least $50k with inflation (the apt I rented in HB in 1976 for $225 now 30 years later rents for $1,500 so I'm being conservative) - that's a loss of 30k or a net loss of $35k/yr after taxes.
On top of that in 30 years you will be in the position of having no house payment or rent and paying just $40-50/month in property taxes while your too-smart-to buy friends are paying an adjusted for inflation $1500 for an apartment and eating cat food.
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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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laserjobs
Premium
join:2004-05-02
Las Vegas, NV
·Cox HSI
1 edit | Re: So Cal housing bubble ready to pop? said by sholling : For the last 3 years I've watched friends urge a young family to wait for the bubble to burst, and they've listened. Three years ago they could have bought a 20 minutes from work 1300sgft 3 bedroom 2-1/2 bath townhome in my tract for an affordable 160k-ish. Sadly they believed the naysayers and continue to pay $1,000/mo in rent for an 800sqft 2 bedroom 1 bath Pico Rivera home for their 3 kids - just slightly less than their house payment would have been. These homes are now going for $350-390k and they are now stuck being renters for life. The fundamentals in the market were not changing at that point so how could a bubble burst? We now have the interest rates moving upwards creating a change in fundamentals, this is how a bubble bursts. If interest rates stayed the same we would have a slow down in the market with a soft landing and prices staying around the same due to supply and demand created by affordability. Since the fed decided to put gas on the fire created on the tech crash by lowering interest rates we are in worse shape than before since we now have to stave off inflation by raising interest rates.
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nolancj
join:2002-06-30
Long Beach, CA
| 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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cactuscool
I Have Been Slimed
Premium
join:2002-07-21
Fullerton, CA
clubs:
| 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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My tummy feels funny... | |
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HappyBunny
Hi. Cram It.
Premium
join:2001-06-23
Long Beach, CA | 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 | Re: So Cal housing bubble ready to pop? 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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dogma
Premium
join:2002-08-15
Boulder City, NV
| Re: So Cal housing bubble ready to pop? 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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HappyBunny
Hi. Cram It.
Premium
join:2001-06-23
Long Beach, CA
·Charter Pipeline
| Re: So Cal housing bubble ready to pop? 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?)
Yes, I want to have something paid off when I retire. How am I going to continue my rent of $1400 a month (a house payment in most parts of the country) when I have a fixed income?
I will probably end up living in a shack on the beach in Mexico--where I will probably see most of my friends, as none of them can afford to buy a house either. | |
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sholling
Premium
join:2002-02-13
Hemet, CA
| Re: So Cal housing bubble ready to pop? said by HappyBunny :I will probably end up living in a shack on the beach in Mexico--where I will probably see most of my friends, as none of them can afford to buy a house either. Bunny, come join the 909 world and commute, or better yet find a job out here. One of my neighbors would be happy to sell you their 3 bedroom 2-1/2 bath 2 car garage single shared wall townhomes for $350-370k, I believe 2 units are currently on the market. See my math earlier in the thread...
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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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HappyBunny
Hi. Cram It.
Premium
join:2001-06-23
Long Beach, CA
·Charter Pipeline
| Re: So Cal housing bubble ready to pop? said by sholling :said by HappyBunny :I will probably end up living in a shack on the beach in Mexico--where I will probably see most of my friends, as none of them can afford to buy a house either. Bunny, come join the 909 world and commute, or better yet find a job out here. One of my neighbors would be happy to sell you their 3 bedroom 2-1/2 bath 2 car garage single shared wall townhomes for $350-370k, I believe 2 units are currently on the market. See my math earlier in the thread... Yeesh, I cant afford that! Almost $400,000 for a townhouse in the 909 and the privelege of a commute to Irvine?
If I had to go live in the IE, I would just go back to Ohio, where its all cheaper. | |
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CurtesyFlush
Bababooey, fafafooey, tatatoothy.
Premium
join:2002-08-23
Fontana, CA | Re: So Cal housing bubble ready to pop? If I had to move from the beach to the IE I'd kill myself.
Oh wait, that's exactly what I did. Goodbye cruel world....
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Lex clavatoris designati rescindenda est. | |
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sholling
Premium
join:2002-02-13
Hemet, CA
| said by HappyBunny :Yeesh, I cant afford that! Almost $400,000 for a townhouse in the 909 and the privelege of a commute to Irvine? If I had to go live in the IE, I would just go back to Ohio, where its all cheaper. Bunny, it's a not bad a drive down the 71 (they just widened it) to about a mile or two of 91 hell and then a 70mph run down the 241 to Irvine. It's probably a quicker commute than you put up with now, and you'll own your home. This is Chino, not BFE! It's lots nicer than most of Long Beach. Hey, I'm from the OC and you couldn't drag me back.
Besides it really is a great place to live. I'm really, really going to miss it. Where else in socal does the mayor and the city council publish their home phone numbers on the city website? The pace of life is a little slower, the school systems is pretty good, there's great shopping, we have Verizon FIOS super high speed internet, and real full sized parking spaces - plus friendly people. Ok, well that might be a problem, but you're from Ohio and have delt with friendly people before. 
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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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laserjobs
Premium
join:2004-05-02
Las Vegas, NV
·Cox HSI
| Re: So Cal housing bubble ready to pop? said by sholling :said by HappyBunny :Yeesh, I cant afford that! Almost $400,000 for a townhouse in the 909 and the privelege of a commute to Irvine? If I had to go live in the IE, I would just go back to Ohio, where its all cheaper. Bunny, it's a not bad a drive down the 71 (they just widened it) to about a mile or two of 91 hell and then a 70mph run down the 241 to Irvine. It's probably a quicker commute than you put up with now, and you'll own your home. This is Chino, not BFE! It's lots nicer than most of Long Beach. Hey, I'm from the OC and you couldn't drag me back. Besides it really is a great place to live. I'm really, really going to miss it. Where else in socal does the mayor and the city council publish their home phone numbers on the city website? The pace of life is a little slower, the school systems is pretty good, there's great shopping, we have Verizon FIOS super high speed internet, and real full sized parking spaces - plus friendly people. Ok, well that might be a problem, but you're from Ohio and have delt with friendly people before. Business getting slow sholling? 
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sholling
Premium
join:2002-02-13
Hemet, CA
| Re: So Cal housing bubble ready to pop? said by laserjobs :Business getting slow sholling? Actually mine won't go on the market until July or August and I'm no no rush. There are two units currently on the market - that's 1.5% of the neighborhood. Hardly a glut. I just happen to think highly of Bunny and (put on sappy music, sweater, and tennis shoes) would would love for her to be my neighbor...
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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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HappyBunny
Hi. Cram It.
Premium
join:2001-06-23
Long Beach, CA
·Charter Pipeline
| Re: So Cal housing bubble ready to pop? said by sholling :said by laserjobs :Business getting slow sholling? Actually mine won't go on the market until July or August and I'm no no rush. There are two units currently on the market - that's 1.5% of the neighborhood. Hardly a glut. I just happen to think highly of Bunny and (put on sappy music, sweater, and tennis shoes) would would love for her to be my neighbor... Awwww! HappyBun is blushing  I wish I could but I just cant afford that payment. | |
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CurtesyFlush
Bababooey, fafafooey, tatatoothy.
Premium
join:2002-08-23
Fontana, CA
| said by sholling :This is Chino, not Fontana!
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Lex clavatoris designati rescindenda est. | |
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dogma
Premium
join:2002-08-15
Boulder City, NV
| Bun, here is a quick exercise and reality check:
Lets say you can "afford" a $300,000 condo.
5% down = $15,000
P&I payment = $ 2,071/Mo.(Your Monthly Payment for 30 Years for an Interest Rate of 7.9 % on a Loan Amount of $285,000.00:)
Insurance payment = $60/Mo.
HOA fees = $200/Mo. (after all, it is a condo.)
Total per month: $2,331.00
Now you have a place to call your own, and you save about $6000/yr on your taxes with your new deduction (assuming you make $70K/yr).
--so you get a tax benefit of $500/mo, BUT you are paying out an EXTRA $500/Mo. for the privilege. Plus you just got off of $15K.
You are now "house broke" most likely. In that your bring home check, after all the garbage is taken out, is most likely in the area of $3500/Mo. - $2331 = $1169. Not much to live on. I'm guessing on your income, so you can play with the numbers.
Option 2: Save the extra $500/Mo you would be spending until the market drops 25% from its value now.
Whats that you say?? What if the market values keep going up forever? You will never own a home and you will need to move to Mexico and push a shopping cart full of bags around mumbling to yourself?? -NOT
Because if you SAVE that $500/mo + the $15,000 down payment, for the same 30 years as your mortgage payment...with the magic of compound interest (6%/yr) you will have:
$ 595,107.44. If you pay just a little attention, you should have (9%/yr) $1,143,195.67 in CASH.
There are many ways to skin a cat. | |
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tephie
Officially Clueless Since 1984
Premium
join:2001-02-07
Victorville, CA
| said by HappyBunny :If I had to go live in the IE, I would just go back to Ohio, where its all cheaper. Yeah me too. Actually that doesn't work either. Hubby's job is here, and the construction industry in Ohio isn't nearly as profitable as it is here. Plus, snow sucks.
Unfortunately for us, we are now being faced with either buying a house that may cost more than it's worth (long term) here in the desert, or moving and having to rent a house for a few more years. I'm leaning towards renting again, but we are pretty settled here. *headache*
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The child is grown, the dream is gone. I have become comfortably numb. | |
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nolancj
join:2002-06-30
Long Beach, CA
| 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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laserjobs
Premium
join:2004-05-02
Las Vegas, NV
·Cox HSI
| 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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jig
join:2001-01-05
Hacienda Heights, CA
| as far as the bubble bursting... it's still a matter of supply and demand, as others have already said, i guess. until the other people at your price point start moving out and aren't replaced, you won't find the prices dropping much. we might have the largest numbers leaving the state, but we also have the largest numbers entering... i'd love to see the breakdown on age. just guessing, those that are leaving are retirees cashing in and moving to arizona or new mexico.
property tax is going to be interesting. it's going to cause more than just a few bankruptcies/defaults. one thing that really bothers me.. with all this selling going on, why isn't there a HUGE influx of new property tax coming in? all i hear from sacramento is pissing about no money...
one thing that could help the market by dropping prices could be rumors of zoning laws changing to allow more vertical building. traffic is a part of that pressure, as is just general population glut. i had more of an inside line on what might be going on there in the past, right now the money involved in construction of high rise apartments is just too risky for too much work. much easier to just flip with minimal construction (remodel) and make more than a decent living wage. but when things steady, there could be some real movement towards more compact living inside the major city centers. santa monica proper might not rezone, but culver city and west la might. certainly any property up and down the 405... and that pressure relief might drop prices on some of the outlying cities.
still, even then, will more people move away than move to cal? doubtful.
by the way, how would a big earthquake drive general prices lower? i would think it would do the opposite. any house that would be habitable would be golden, same with any apartment building.
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
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nolancj
join:2002-06-30
Long Beach, CA
| SoCal is and has always been a tough rental market. There are some places in this country (Boston, NYC, SF) there rents are more in line with purchase payments. It just depends. But in SoCal, you really can't expect to pay 20% down on a house and make your loan payment + taxes + maintenance + etc on the rental income. In Boston, you can come really close. Mostly because of the influx of students each year (I have a friend who owns several properties there). | |
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jinjimbob
Troy Mcclure
join:2001-11-13 | A reason why the costs of buying a house are going up is that the costs of building a house are going up.
I don't see any bubble outside of NorCal/NYC. | |
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hopeflicker
Capitalism breeds greed
Premium
join:2003-04-03
Long Beach, CA
1 edit | Re: So Cal housing bubble ready to pop? said by jinjimbob :A reason why the costs of buying a house are going up is that the costs of building a house are going up. I don't see any bubble outside of NorCal/NYC. I dont think it's the costs are rising that much. I think it's DEMAND. How come we dont see the astronomical prices in places like Arizona or Nevada. What's the average cost of a NEW home there? what, maybe 3 to 5?
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sholling
Premium
join:2002-02-13
Hemet, CA
4 edits | Re: So Cal housing bubble ready to pop? said by hopeflicker :said by jinjimbob :A reason why the costs of buying a house are going up is that the costs of building a house are going up. I don't see any bubble outside of NorCal/NYC. I dont think it's the costs are rising that much. I think it's DEMAND. How come we dont see the astronomical prices in places like Arizona or Nevada. What's the average cost of a NEW home there? what, maybe 3 to 5? I spoke with a friend in the phoenix area and asked if the rumors of a burst bubble were for-real. She said that prices were still rising, like socal, the rate of price increases had dropped.
Anyway to answer your question - the reason is partly income. A seasoned mid-level network engineer that makes $60-70k in socal might make $35-40k in AZ. It's the same thing for other fields. Incomes and population growth do not support higher prices.
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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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jinjimbob
Troy Mcclure
join:2001-11-13
| said by hopeflicker :said by jinjimbob :A reason why the costs of buying a house are going up is that the costs of building a house are going up. I don't see any bubble outside of NorCal/NYC. I dont think it's the costs are rising that much. I think it's DEMAND. How come we dont see the astronomical prices in places like Arizona or Nevada. What's the average cost of a NEW home there? what, maybe 3 to 5? $300 to $500k, but the land is cheap.
Yep they, the labour costs, building material, and a big one is permit costs, school mitigation fees etc..
A building permit used to be so the building was built properly, but now they are part of a city income.
Look at your house insurance, mine went up 10% this year, costs more to replace the house. | |
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dogma
Premium
join:2002-08-15
Boulder City, NV
| Re: So Cal housing bubble ready to pop? Excellent link. Well supported facts.
said by this article :
Home prices have been driven to current levels not by fundamentals, but by ubiquitous optimism, a complete lack of risk avoidance, a staggering amount of debt accrual, low lending standards, an enormous increase in market participation, widespread misconceptions about what drives home prices, and an utter dependency on continued price gains. Southern California is experiencing a classic speculative bubble.
If prices were to permanently flatten out right now, given current wage growth, it would take over 16 years for home prices to get down to the historical average of 9 times income, and 23 years for prices to get down to the historical post-boom low point of 7.5 times income. Keep those figures in mind the next time someone tells you that home prices "will just flatten out for a while until incomes catch up."
A big bet if one buys in today. From the graph (with dogmas investment windows), things may not look Rosy for a while. | |
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jig
join:2001-01-05
Hacienda Heights, CA
| the last 3-5 posts are interesting, but i'm wondering how inflation fits in. it could be a pretty heavy handed equalizer in a reasonably short amount of time. and i'm not sure that graph takes inflation into account properly by (i think) seeming to assume it's factored out by dividing out income.
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
| supertbone
join:2002-04-04
Pleasant Grove, UT
| As a person who works for the collections division of a major national lender. We are preparing for some serious issue this summer when ARMs will be adjusted. We have been hiring like mad trying to deal with it. Beside ARMs, more people are falling behind in their mortgages than before. It is sad, some people may lose their homes.
In a personal note my co-worker who is trying to sell her condo is having trouble selling it as several people have backed out of escrow. Many new tracts are seeing that people are backing out of contracts for new houses. | |
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