Manny

Here is a start:

1005 Santa Queta, Solana Beach, CA 92075
Price: $1,097,000
20% down, at 7% fixed
Monthly payment is 7000$ (P&I, Tax, Insur). No upkeep, expenses included.

Comparable: http://sandiego.craigslist.org/nsd/apa/735170369.html
Rent 3500$

That my friends, is a what we call in layman terms, a financial mistake.
To each his own, however, buyer beware.. - Tue Jul 15 2008, 06:04

I can't believe you guys are making claims that there are homes in SD that offer positive cash flow.
Do me a favor, post one with a comparable rental from a site that we can verify.

This is the absolute worst moment possible to buy an investment property in this area. Rates are rising, home values are declining. And somehow, an investment with a 5 year time horizon is a good opportunity?

Please provide some data to substantiate your position. The data available from basic resources tells a completely different story. In fact, comparable rents in SD county, particularly coastal, are on average 1/2 comparable mortagages, after the 20% down payment!

The numbers tell what the numbers tell. - Mon Jul 14 2008, 02:19

Another comparison:

1005 Santa Queta, Solana Beach, CA 92075
Price: $1,097,000
20% down, at 7% fixed
Monthly payment is 7000$ (P&I, Tax, Insur). No upkeep, expenses included.

Comparable: http://sandiego.craigslist.org/nsd/apa/735170369.html
Rent 3500$

Interest rates are going to rise very shortly.
The SD/South OC markets are still largely inflated. The tax benefit for buying does not come close the additional 40,000$ anually you need to pay in home payments. At best you would get a 10K tax benefit, which in itself is an extremely liberal estimate. Additionally, with rising rates, you are taking substantial risk in the loss of the 220,000$ of equity which you used as a down payment.

I am not seeing any reason to buy. Personnally, I will be back in SD in Sep and renting on a 2 year lease near the beach. Anyone have a good rental list for Cardiff/del Mar? - Sun Jun 29 2008, 04:02

You guys hear the comments from the Middle East?

Production will not increase until the US Gov addresses the dollar valuation, which is one reason why oil is so expensive now. In fact, some of the major producers are threatening to cut production. No doubt about it, but rates must increase! Only way out this mess. Soon, housing will be the least of our worries.

Impact on short term mortgage rates (VAR loans)? = FED/Interest rates
Correct of low dollar valuation? = FED/Interest rates

I keep seeing people who ignore the fundamental macro-econ reasons behind the current state of housing. NOW is in fact a terrible time to buy, for the simple reason that interest rates will increase to correct the dollar/inflation within 6 months.

I believe we may see some minor improvement in the numbers, until rates begin to progress up. However, there is still significant pain to be felt in what will be round two of the housing crash. Hate to be the cynic, but this really looks like only the end of the 1st inning, not "the bottom." - Fri Jun 27 2008, 04:16

Completely out of touch..........

Take a look at this property.
961 Orma Drive, San Diego CA 92106

Apparently, in a 72hr clause so still accepting offers... Hurry, hurry.

Monthly mortgage, with PI, taxes, insurance ~ 10,000$
Comparable rent ~ 3500$

2001 sale price ~ 480,000$
2008 sale price ~ 1300000$

This market still has a ways to go... The fact that people are setting themselves up for financial disaster by making huge financial mistakes such as this tells me we are prob still mid down cycle. For debate sake, can someone convince me this is not a terrible buy? The only benefit I see for this purchase, is for the realtor's commision.

Due to location and current rates, I would pay up to 850K for this house . Anyone? - Sat Jun 21 2008, 01:07

Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5- year ARMs, e.g.) are pegged to shorter-term securities. So when bond yields drop, typically, conventional mortgage rates fall as well (see historical graph below). Conversely, when yields rise, so do mortgage rates. Why? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value.

1 Year MTA (12 mo TRAILING Ave used for short term ARMS) forecast. One of many short term indexes, just showing potential risk. Forecasted 1 Year ARM at .6PT listed next. Once again, this is not a rate forecast, but a depiction of risk vs impact on home prices. What will be the impact if rates are forced to increase by foreign creditors (dump reserves) or continued inflation, commodities bubble? How will it affect the Est recovery? Rates could really play havoc on housing, particularly in areas like Socal that are still considerably overvalued and at 10X or greater than med income for med price. Next 24 months will really tell. With these forclosure #'s mostly not hitting sales until spring, I am really skep on us being near a bottom. Reality is, this could be a prolonged downward trend until fundamentals improve.

May 2008 3.29
May 2009 2.95/4.54
May 2010 3.5 - 3.6/5.46
May 2011 3.8 - 4.0/6.0 *Est Recovery in housing*
May 2012 4.1 - 4.3/6.46
May 2013 4.3 - 4.6/6.84
May 2014 4.2 - 4.6/6.77
May 2015 4.5 - 4.9/7.23
May 2016 4.8 - 5.3/7.77
May 2017 5.0 - 5.6/8.15
May 2018 5.3 - 6.0/8.69 - Thu Jun 19 2008, 14:15

Oil/Fuel/Inflation/Dollar strength all directly affect market confidence. Market confidence is one of the fundamental driving forces behind a recovery in housing (Yes it is regional, even sub regional - I am directing my comments at Socal, which is still overpriced by 20% easy). Buyers will not equal sellers until they overwhelmingly believe that they will not jeopardize their savings, particularly in areas that require 100K + for a down payment on a starter home. The incredible volatility right now makes people nervous - It isn't doomsday, it's just a correction. The problem is, until buyers = sellers, prices will drop (once again, regionally speaking). If I lived in Memphis or OKC- I would be a buyer now since a temp loss of 30K equity means nothing to me over 10-15-20 years.

You are correct, the futures market for oil has added to the volaitility and overall correction. Futures are the rights to the inventory that have been stockpiled - a good thing long term, but just compounding the problem of inadequate production and price spikes short term. Once again, this directly affects market confidence of potential buyers. Interest rates help the situation which a lot of realtors point to, but the Fed has an overall ceiling on rate hikes - low rates make the dollar cheap - which makes up for the migration of manufacturing outside of the us and our loss of competitiveness. So there isn't much upside rate risk in reality - imo.

Trust me, I want to buy a home. I have averaged moves every 3 years since 1987. It gets old. The problem is, in the areas I want to live, I would need to spend 200K on a down payment, and then finance 800K (1.25-1.5% tax rate annual) to get into a house I can rent for 4K a month. It is very frustrating, but it is what it is. Some times you have to accept the facts, good or bad, and make the best decision from there. I am using the savings I have accumulated to own rental properties in the Euro zone with a 10 year time horizon. That way, If I get to the point where I have to just accept the facts that Socal is just too expensive - then I have the money to pay for what I want. But I wont until buyers = sellers, or the market is at a fair value.

No I'm not in the UK - I am where it is very hot and very sandy. It has been a long trip if you catch my drift, so if I sound offensive forgive me - just a product of this environment.

One benefit of this site, is you can weed the knowledgeable realtors out from the charlatans. Some of them I will contact in the next few months to establish a relationship, and hopefully, buy the right place at the right time. I think some of the realtors here need to take some marketing classes. You can not use the same sales strategy today you did 2 years ago. There are always people who need to buy/sell; but you need to modify your sales strategy to the current market conditions, and give potential buyers the confidence that you can navigate them to the best solution possible in this adverse environment. There is nothing worse than people who refuse to call reality for what it is - particularly when it is in their interest (and not in your interest) for them not to do so. That's what separates the pros and the amateurs - and what is great about this thread is that it makes it easy to pick them out. - Sun Jun 8 2008, 00:49

"Oil prices and gasoline are not as connected as posters imply. Economists (Business Week cover story) tell us it is the speculators, futures market that cause the pump prices to rise. "

Are you Nuts? They always say that! Ever trade stocks? That's exactly what they say when stocks tank---Hedge funds are manipulating it! Not really a POS, just the crooks trying to steal our money!!...

Two words for you, econ man from Bradley U:
Supply & Demand

Take a look at a map...Look west, see that big country with a billion people in it? And the second one further west? What the heck do you think the Chinese are doing in Africa? Looking for a shortcut to India? Buying designer handbags? Making friends by converting Muslims to Buddhists?

Production hasn't increased to keep up...Period.
Supply & Demand.

Amazing how the cheerleaders refuse to educate themselves on the underlying factors which make their business churn. Too busy saying buy buy buy. You better retake that course from 50yrs ago at Bradley U.

Ciao amigos - Sat Jun 7 2008, 10:59

I agree with you. If the trend remains, it will likely further pressure the McMansion tracts and stabilize/help condo/apartment communities near workcenters.

My main point, however, wasn't the long term implications. simply that a restoration of market confidence which is needed to decrease the exceptionally large inventory in housing will only be hurt by pressures in fuel, low dollar value etc..

I think the numbers for this summer are going to be very bad (decreasing market confidence scaring buyers), which makes the cheerleading squad's calls for the "bottom" seem premature. This isn't going to be a touch and go bottom, but a flat bottom until fundamentals get better. Just my opinion. - Sat Jun 7 2008, 06:11

Summer numbers..

How is a peak of 5.00$ a gallon going to help market confidence this summer? Markets are still in big trouble, as is the dollar. Until these shocks pass, I wouldn't expect too see much change to lower the housing inventory numbers..

I think if anything, these shocks will push the fence sitters to walk away..Talk aboua run of bad luck.

And if we go at it with Iran? All bets are off, 200$ a barrel easy. Imagine the effects on spending if we see 6-7$ at the pumps? Yikes! - Sat Jun 7 2008, 04:16

Quick Rent v Buy check, for middle of the road home in Carlsbad, CA.

Rent: 6564 Red Knot for 2850 a month (3Bd/2.5Bth 2500 sq ft)
Buy: 2420 Sacaba for 650,000 (3Bd/2Bth 2140 sq ft)

Run the numbers, take a look for yourself..The impact is more dramatic if you are willing to spend 4000-4500 on rent, It will put you in some cases in the 1.3 range.

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAP… - Fri Jun 6 2008, 01:07

The endless cheerleading squad of out of work realtors once again almost had me convinced...

http://money.cnn.com/2008/06/05/news/economy/foreclosure/ind…

You guys reminds me of this guy...

http://www.wanpela.com/holdouts/profiles/onoda.html - Thu Jun 5 2008, 13:02

May 8th print edition of the Economist..

The pain of America's housing bust varies enormously by region. Hardest hit have been the “bubble states”—California, Nevada and Florida, as well as parts of the industrial Midwest. The biggest uncertainty hanging over the economy is how red will things get.

The answer is not simple. For a start, it is hard to be sure just how much house prices have fallen. America has several house-price indices and they tell different stories. Widely cited, but least useful, are monthly figures showing median home prices produced by the National Association of Realtors (NAR). These indicate that median prices are down some 13% from their peak, but since these averages do not adjust for the mix of homes changing hands, which fluctuates from month to month, they are inevitably distorted.

Mr Bernanke's maps use figures from the Office of Federal Housing Enterprise Oversight (OFHEO). Its statistics have broad geographic reach and track repeat sales of the same house. The monthly national index suggests average prices have fallen only 3% from a peak in April 2007, and the quarterly figures are still positive (see left-hand chart). But OFHEO's figures include only houses financed by mortgages backed by the government-sponsored giants, Fannie Mae and Freddie Mac. By excluding subprime and jumbo loans, they leave out the top and bottom of the market—where prices rose fastest during the bubble and where the mortgage mess was most severe. Thus OFHEO's figures probably understate the scale of the housing mess, particularly in states such as California and Florida. Another set of indices, developed by Robert Shiller and Karl Case and produced by Standard & Poor's (S&P), a rating agency, includes all types of houses and, not surprisingly, show house prices rising faster during the boom and falling faster now. As of the fourth quarter of 2007, the S&P/Case-Shiller national index was down 10% from its peak, and an index of ten large cities had fallen by almost 16% by February. Although the Case-Shiller figures are not perfect—they miss many rural areas—they are a better gauge of price declines in big cities.


Assessing how much further house prices are likely to fall gets even trickier. One route is to look at market expectations: investors expect a further 20% drop, judging by the prices of futures contracts linked to the Case-Shiller 10 city index. But the futures market is small and illiquid and may overstate the possible declines.

The discrepancy between supply and demand suggests that prices could fall a lot more. By historical standards there is a huge glut of unsold homes on the market. The homeowner-vacancy rate—which includes all vacant homes for sale—has soared to a record level of 2.9%, which means that there are some 1.1m “excess” houses for sale compared with the average between 1985 and 2005. Although the inventory of new homes is falling as builders have slashed their production, the supply of homes for sale is being pushed up by foreclosures even as demand from new homeowners remains weak.

By most measures, prices are still above the levels implied by the fundamentals. Using a model that ties house prices to disposable incomes and long-term interest rates, analysts at Goldman Sachs reckon that the correction in national house prices is only halfway through. They expect an 18-20% correction overall, or another 11-13% decline from today's levels. But their models suggest that six states—Arizona, Florida, Virginia, Maryland, California and New Jersey, could see further price declines of 25% or more.

Optimists dispute this gloomy assessment, pointing out that some measures of housing affordability have dramatically improved. According to NAR figures, monthly payments on a typical house with a 30-year mortgage and 20% downpayment were 18.5% of the median family's income in February, down from almost 26% at the peak—and close to the historical average. But this measure of affordability is misleading, not least because credit standards have tightened so much. The latest survey of loan officers conducted by the Fed suggested on May 5th that 60% of banks tightened their lending standards for prime mortgages in the first three months of 2007. And, as Michael Feroli of JPMorgan points out, the affordability gauge depends on what measure of home prices you look at. Use the Case-Shiller index, where the affordability of housing worsened sharply during the boom, and mortgage payments are still high in relation to incomes. - Fri May 9 2008, 09:11

OC buyer,

Your economic analysis on the scarcity of building materials due to a global market is backwards. Globalization makes the markets more competitive and thus lowers prices. Also, the scarcity of land helps the Coast (immediate coastline) but little else. Vegas has tons of land....Let's face it...this bubble was the result of steroid interest rate injections which inceased the competition between banks to create alternative loans. It was literally a feast for the wolves (thanks to no regulation). Now the food source has dried up. Period.....

So if rates stay the same for 5-7 years, why exactly won't prices come down? And why do some of you have a sense of urgency on rates increasing? I am not seeing it. - Sat Apr 26 2008, 09:27

Great discussion.

I was speaking to a friend of mine in OKC, about whether he should wait or buy. In his case, waiting for a potential further pullback mean't possibly saving himself 30-40K, since homes are still relatively inexpensive. My advice was if you see the house you can't live without, sacrifice the potential 40K to get it, since over the long run it's negligible. So my answer is it's all relative.

I have been watching Socal since I sold in 2004. A 250% return in 6 years seemed to me to be to good to be true. I am sure most of the realtors here know of Option Arms, since many of them pushed them to their clients pror to the tightening of the credit sector. Regional banks in the most speculative and volatile areas made their fortunes (and prop their ruins) on these loans. Bottom line is there is still a ton of bad debt out there, that needs to be worked out before we see a stabilized market (regional again). Take a look at this picture: http://static.seekingalpha.com/uploads/2008/4/23/map_of_misery.jpg

Look at California. Many of these are loans with toxic features. We still have another year until we see the effect of this on the financial markets; what happens if this shock is as bad as the sub-prime?.

A few other points to consider. Rent v Mortgage; Rate forecast (the same or lower in the future); and regional economies. I have a hard time understanding the realtors on here who argue that it is a time to buy based on a pullback from extreme prices and relatively low rates. Under that logic, why not wait? Mortgage rates will remain low, where is the threat of radical increase? America's only true remaining form of competitiveness is in its low rates, and low currency. Rates can't come up. So why buy now? Wait until the self cleaning oven finishes its cycle.

My disclosure is I am short DSL, QID, SKF and SRS, long with GLD and foreign currency. I am seeking a min 20% pullback over the next 24 months in 800K + housing in Socal, before I am a buyer. To buy now is to literally try and catch a falling knife. I have learned the hard way that although sometimes hard to resist, the risk far outweighs the reward. Do your homework. If you can take the paper loss, and ride it out then maybe its good time to buy, under your circumstances. However, if like me you wan't a good entry in an overvalued area, I would wait min until Spring 09, and see where we are at. The last people you should believe (no offence) on market timing is people whose salary depends on your commission. Don't want to be mean, just have to call it as it is. - Sat Apr 26 2008, 03:43

I am sorry, but the last poster is at best mistaken.

Look at a simple Rent vs Buy comparison:

1005 Santa Queta, Solana Beach, CA 92075
Price: $1,097,000
20% down, at 7% fixed
Monthly payment is 7000$ (P&I, Tax, Insur). No upkeep, expenses included.

Comparable: http://sandiego.craigslist.org/nsd/apa/735170369.html
Rent 3500$

Insurance rates are going to rise very shortly.
The SD/South OC markets are still largely inflated. The tax benefit for buying does not come close the additional 40,000$ anually you need to pay in home payments. At best you would get a 10K tax benefit, which in itself is an extremely liberal estimate.

Additionally, with rising rates, you are taking substantial risk in the loss of the 220,000$ of equity which you used as a down payment.

My advice, rent minimum 24 months. Bottom is still 24 months away, with a recovery 48 months if the economy stabilizes. - Sun Jun 29 2008, 03:57

What kind of premium do realtors usually place on list prices for homes that qualify? - Sun Jun 8 2008, 09:17

Actually, I am from San Clemente, CA. I am very familiar with the markets in Southern California, including CV. I have been watching property values closely since 2003. I sold my home at a 150% gain after purchasing it 6 years prior, in Aug of 2004. I began buying long term puts on homebuilders in winter 05, based on wildly out of touch valuations. They have proven to be very good investments. Read my other posts for my full disclosure.

I have no ulterior motive, other than calling it how I see it. I hate seeing military personnel make financial mistakes which cost them the money they honorably earn. I have been watching technical factors since 03, and I still believe that home prices in Socal are inflated. If you base your analysis solely on bids for foreclosures, that is your choice. My posting a link to patrick.net offers potential buyers, like me, a contrarian view to the frantic cheerleading squad of realtors who continually utilize this site to advertise. No offense, but my opinion is as valid as yours, and my difference of opinion does not make my motives ulterior. Your experience as a realtor for 20 years does not make you an expert, only a realtor for 20 years.

I am calling a 12-15% further decrease in home values for Socal through June 09, with a stabilized bottom in the 20-25% range. That is based off May08 values. Gaming rates imo opinion is stupid. The US is committed to relatively long term low rates, as that is where we generate our competitiveness. You guys act like the 1-1.5% rate increase you are calling and scaring people into believing will last forever. Hardly. Your analysis & arguments make no sense, but hey, that's the beauty of freedom of speech. Have a nice day sir. - Sun May 25 2008, 05:13

I have a question for Robert T. Boyer, Ph.d.

Why do you think that rising home prices would be a good thing?
And how is the long term interest rate picture the gamble?

Regards - Fri May 23 2008, 07:48

If you haven't noticed, these are all realtors answering your question. I would spend significant effort conducting due diligence on the current market conditions, particularly in the areas you specifically desire to live. You do not want to make a major financial mistake with an already stained credit rating since it could affect your husband's ability to obtain/maintain a security clearance. I would seriously consider renting for a year, and studying the market factors, before you make a decision. What you should not do, is rely on individuals who are not trained to offer financial advice for information on current market conditions. No offense to the realtors, but all of the individuals answering your question are here to generate business.-They are not a neutral source of information. - Fri May 23 2008, 07:40