Canary in the Coal Mine

User Forum Topic
Submitted by trex on June 5, 2022 - 5:40pm

I do not purport to have a crystal ball, but my wife held an open house today, and had almost ZERO activity, two agents, one potential buyer in 4 hours, no offers. Asking price is in conventional financing range, which I suspect has been hit hardest by the rate increase. UTC condo.

Submitted by gzz on June 6, 2022 - 5:54am.

My 92107 zip has an MLS inventory of 16, but 5 listings go pending (ie accept offers) so far in June.

Inventory could double and the market will still go up.

Submitted by XBoxBoy on June 6, 2022 - 7:19am.

Even though it is just a one off event, thanks for providing the account. Personally, I'm not surprised to see significant slowing, particularly in the condo market where the price is in the conventional financing range. The question remains will this continue and cascade into a crisis, or will it cause the market to level off, or will it be a short term situation. Since I don't have a crystal ball either I guess we'll have to wait and see.

Submitted by deadzone on June 6, 2022 - 9:01am.

This is just the start, interest rates continuing to climb. Condo market historically has been more volatile and investor driven so would expect Condos to slow/crash first.

Submitted by sdrealtor on June 6, 2022 - 9:20am.

Condo market up by me significantly stronger than sfr market at the moment. Virtually nothing under 800k. Just closed one 10% above asking, owner occupant, all cash. Yet again you don’t understand what’s going on

Submitted by gzz on June 6, 2022 - 9:22am.

Nominal GDP growth is running about 10%. Rents are growing far faster than that. Local wages I assume are growing somewhat in between.

SD Median income rose from 70,700 in 2016 to 87,200 in 2020, quite an increase when inflation was still very low. I don’t think BLS has anything newer than 2020.

Total wages paid in San Diego region increased by 14% YoY as of Q3-2021, the most recent release.

Submitted by gzz on June 6, 2022 - 9:33am.

So what is DZ’s investment thesis exactly? Short RE and lose about 7% if it merely is flat after inflation?

Profitless tech at 10-50 P/S ratio was an amazing short opportunity last year, but I don’t recall him mentioning it.

I added a second small RE short last month, BXP. Nothing wrong with BosWash and SF class A office towers, but I think WFH and urban crime are going to make them underperform and I want to hedge more.

Also still short SPG, the mall owner. They are well run, but in the wrong business.

Submitted by Coronita on June 6, 2022 - 10:28am.

hmm. Would you mind sharing details about the property. If there's a good property priced right, I might be interested...cash...

I wish I could say the same thing is true for 92126
https://www.redfin.com/zipcode/92126

The only thing on the market in the condo market is shit.

$450k for this 1/1: https://www.redfin.com/CA/San-Diego/1118...

$420k for this 1/1: https://www.redfin.com/CA/San-Diego/8656...

$550k for this 2/2: https://www.redfin.com/CA/San-Diego/8460...

$638k for this 2/2: https://www.redfin.com/CA/San-Diego/1080...

And that's the better part of town. There's also these shittier listings.

$425k for this 1/1: https://www.redfin.com/CA/San-Diego/1027...

$425k for this 1/1: https://www.redfin.com/CA/San-Diego/1027...

$420k for this 1/1 https://www.redfin.com/CA/San-Diego/1027...

$474k for this 1/1 https://www.redfin.com/CA/San-Diego/1002...

That's it

I wish prices would come down so I could buy more.

Submitted by deadzone on June 6, 2022 - 12:13pm.

sdrealtor wrote:
Condo market up by me significantly stronger than sfr market at the moment. Virtually nothing under 800k. Just closed one 10% above asking, owner occupant, all cash. Yet again you don’t understand what’s going on

All cash? Obviously an investor, someone has to be the bag holder when the market crashes.

Submitted by sdrealtor on June 6, 2022 - 12:30pm.

deadzone wrote:
sdrealtor wrote:
Condo market up by me significantly stronger than sfr market at the moment. Virtually nothing under 800k. Just closed one 10% above asking, owner occupant, all cash. Yet again you don’t understand what’s going on

All cash? Obviously an investor, someone has to be the bag holder when the market crashes.

Wrong again as always! Single mom teacher relocating from East Coast for her kid to finish high school and then enjoy living in a nice place as an empty nester. Some people bought houses, paid them off, saved for retirement and lived within their means instead of being a slacker

Submitted by Coronita on June 6, 2022 - 2:09pm.

deadzone wrote:
sdrealtor wrote:
Condo market up by me significantly stronger than sfr market at the moment. Virtually nothing under 800k. Just closed one 10% above asking, owner occupant, all cash. Yet again you don’t understand what’s going on

All cash? Obviously an investor, someone has to be the bag holder when the market crashes.

Where do you get your ASSumptions from? Someone buying at this level is most likely not an investor, because it won't pencil out as a rental. This is owner occupied mostly likely.

The astonishing baseless ASSumptions is just hysterical, because sorry to say this, it sort of demonstrates lack of financial common sense.

And theoretically, there is no bagholding if the person holds on to the property indefinitely...
Yes, some people have $800k cash. I know that's hard to understand, but there's plenty of people who do. Probably from the sale of a previous house or stocks or both. In that case, it's also not bagholding. Because whatever equity paper loss on this property was probably offset by the equity gain in the previous one, which you also don't understand.

Submitted by gzz on June 6, 2022 - 3:23pm.

Flu, the 2/2 for 550k would yield about 28k a year after HOA, ins and property tax, 5.1% yield on purchase price. That beats treasuries and CDs.

The condo’s rent will also go up with inflation. If you want that feature in a treasury, you’ll get a lower TIPS rate.

So not a bad deal for an investor IMO.

Submitted by deadzone on June 6, 2022 - 4:05pm.

Most cash deals are either investor, or to launder money.

Submitted by Coronita on June 6, 2022 - 5:57pm.

deadzone wrote:
Most cash deals are either investor, or to launder money.

Again, here you go again, making ASSumptions.
But in just this simple sentence, it also highlights, yet again, your gross ignorance on the things you comment about here.

In this particular case, probably because you never purchased a home before, you don't understand what "cash purchase" really means when used in the context of buying a home....

"Cash purchase" doesnt mean cold hard cash that one brings in a suitcase, "cash purchase" just means you are buying a house without a mortgage tied to that house.

The source of that cash could be from all sorts of sources. Even another loan secured by another property. For example, if I take my $600k cash out refi on one property to buy another property, that is recorded as a "cash purchase" at escrow since there's no loan on the property in question. There's plenty of real world reasons why a transaction would show up as a cash purchase. In the case of moving from a high cost area such as Bay Area down here, selling a $3million home up there and buying something comparable for $2million for a primary residence, that would be an example of a cash purchase. Or a parent could be buying a kid a home to live. You don't know

...And sdrealtor commented again and said it was owner occupied...

There's no funny business going on here.
Reading comprehension issue much?

So it's just asinine to assume most "cash purchase" is either investor or money laundered.. Makes no logical sense.. Where's your data again? Answer: it doesn't exist because like everything else, you just pulled that out of your ass...

Submitted by deadzone on June 6, 2022 - 8:22pm.

Coronita wrote:

For example, if I take my $600k cash out refi on one property to buy another property, that is recorded as a "cash purchase" at escrow since there's no loan on the property in question.

That sure sounds like an investment purchase to me.

Submitted by sdrealtor on June 6, 2022 - 9:02pm.

I have been invloved in many cash deals. I can only think of fuw that were investors. Most were as FLU said people moving down from more expensive homes or people that made lots of money in the business world. In many parts of the country where real estate is much cheaper they are even more common.

Three of my best friends bought homes in Florida this year for cash. One sold a large property in Vermont and bought his retirement home on a golf course in Boynton beach. Another sold his $1.2M second home there and bought a nicer one for $1.8M adding another $600K in cash both in Boca. The last could buy my whole my whole block for cash. He's got 6 houses and all were paid for in cash. He upgraed to a nicer house in Jupiter.

Did you really think people showed up with wheelbarrows of cash?

Submitted by Coronita on June 7, 2022 - 2:37am.

deadzone wrote:
Coronita wrote:

For example, if I take my $600k cash out refi on one property to buy another property, that is recorded as a "cash purchase" at escrow since there's no loan on the property in question.

That sure sounds like an investment purchase to me.

DZ, And here you go again. You you take only half of what someone writes out of context and completely ignore the other part in the same sentence, and redirect attention away from your gross ignorance of the things you don't understand that you comment.

I was specially addressing your absurd accusation that most purchases are either investments or money laundering transactions, specifically the "or money laundering" part.

deadzone wrote:

Most cash deals are either investor, or to launder money.

Where do you make this shit up? Post data instead of pulling it out of your ass all the time. You don't own a house, you don't work in real estate, you don't have access to purchase sales history and probably wouldn't even know how to get it, even if it was in public records. It's getting pretty ridiculous because even the basic concept of "cash purchase".. your post seems to suggest you literally thought it meant "bring cold cash to escrow"...which demonstrates just how grossly ignorant you are to things...Where the hell can you possibly be getting this data to back your ridiculous statements?

I'll post the full text of what I said...again...

Quote:

The source of that cash could be from all sorts of sources. Even another loan secured by another property. For example, if I take my $600k cash out refi on one property to buy another property, that is recorded as a "cash purchase" at escrow since there's no loan on the property in question. There's plenty of real world reasons why a transaction would show up as a cash purchase. In the case of moving from a high cost area such as Bay Area down here, selling a $3million home up there and buying something comparable for $2million for a primary residence, that would be an example of a cash purchase. Or a parent could be buying a kid a home to live. You don't know

...And sdrealtor commented again and said it was owner occupied...

Even when someone's complete text is right above your post, you still blatantly attempt to selectively misquote part of things out of context to support your ridiculously factless statements you make, IE "the money laundering" part that calls into question the entirety of what you said.

You won't admit it now, but you probably did think "cash purchase" literally meant bring cold cash to escrow...because that's where your "money laundering" statement came from. It probably was based on a business or industry you are familiar with that isn't as regulated where money laundering is widespread, maybe the jewelry trade business, i dont know.....but otherwise irrelevant to RE purchases, which undergoes much more scrutiny, which you most likely aren't aware of, because never bought a house and gone through escrow, and the plethora stack of documentation that goes back and forth in escrow..especially in present day CA...Yes, even when it is a loan-less (IE "cash" purchase) where cash funds can be easy traced back to their sources...Can't even imagine, what sort of hoops one would need to jump through if someone actually brought cold cash to escrow, lolol. You should try it one day, if you can...let us know how it goes...
....
....
...

Back to examples of legitimate owner occupied home purchases....lot's old people that are relative's friends have downsized post retirement and bought their homes with cash, equity from the previous sold house used to fund the new home purchase, and carry their property tax basis over to the new home under Prop 60/90 in CA.

Also, given that San Diego is in a really nice part of CA, away from LA and SF, some people buy a 2nd vacation home down here. A friend bought a condo for their kid that goes to UCSD and another one for themselves so they can visit down here, they did a cash our refinance on one of their other homes to fund both. These aren't rentals, because they don't want to deal with tenants. It's strictly for their kid and themselves when they are here.

Submitted by Coronita on June 7, 2022 - 7:47am.

gzz wrote:
Flu, the 2/2 for 550k would yield about 28k a year after HOA, ins and property tax, 5.1% yield on purchase price. That beats treasuries and CDs.

The condo’s rent will also go up with inflation. If you want that feature in a treasury, you’ll get a lower TIPS rate.

So not a bad deal for an investor IMO.

So people might be buying even with the possiblity that housing will depreciate, simply because they are diversifying away from higher risk speculation and trying to lock in some gains into something more tangible and predictable.

For instance (and I don't have data for this), quite possible folks that did do well gambling in bitcoin and crypto sold partly to get out and bought something in the physical world that is more tangible.

I think sdrealtor mentioned he ran into someone that moved out of his hood into a $3million+ house from his cypto trades he cashed in on. Probably laughing all the way to the crypto bank now.

Submitted by deadzone on June 7, 2022 - 7:47am.

Call it what you want, but I would consider most cases of people purchasing vacation homes etc. as investors.

And on to money laundering, what I am really referring to is all the cash purchases made by foreign buyers, (Chinese primarily, a lot of Mexican too in this area) who are investing in US assets to hide their money from their own governments, whether due to tax or other reasons. This is very common but impossible to quantify.

Submitted by Coronita on June 7, 2022 - 8:16am.

deadzone wrote:
Call it what you want, but I would consider most cases of people purchasing vacation homes etc. as investors.

And on to money laundering, what I am really referring to is all the cash purchases made by foreign buyers, (Chinese primarily, a lot of Mexican too in this area) who are investing in US assets to hide their money from their own governments, whether due to tax or other reasons. This is very common but impossible to quantify.

Yes, pulling shit out of your ass is often "impossible to quantify"....

Also, once again, you are selectively discarding part of things that don't fit into your ass pulling bullshit. See, now that you are saying vacation homes are investments, but you are not saying anything about retirees downsizing and relocations. See what I mean by you are extremely biased and have an axe to grind?

Why don't you put the data together in the last 90 days close, how many of those were purchased by foreign investors... Instead of that "impossible to quantify" bullshit coming out of your ass..

I know you can't do it, because you don't even know what the basics of "cash purchase" means. I seriously doubt you could do anything slightly more complicated like scraping public records to actually get data to back your "impossible to quantify" claim.

And before you get all defensive, like you always do, it's not a personal attack. It's just telling you that what you said has no merit and no basis and continues to add questions to your credibility , along with all the other ill-informed statements you made such as what "in-the-money" means or simply basic retirement planning apparently you are oblivious to.

Just admit it,your posts are a reflection of your axe grinding you have for missing out on real estate and stock market for the past 20+ years, and less so about your financial prowess or fact basis. You're a bitter dude that slept at the financial planning wheel for the past 20 years and seeing things get ahead of you. And you're hoping somehow miraculously a correction can bring people who did a lot more financial building than you have 20+years can some how be brought back down to your current predicament for not doing much the past 20 years.... which is highly unrealistic, given how much effort people put into those 20 years building their financial fortress that you neglected... you have 20+ years of catchup you need to makeup for and would need to take on considerable more risk than others that's already taken much smaller incremental risks over a 20 year period. and since you are so negative about everything, those are the larger risks you'll never take in order to catch up for the small steps you should have been taking the past 20+years that you also didn't do...

Sorry to be so blunt... Saw this magnet at a store in downtown. I'll send you one...

the truth, brothe truth, bro

Submitted by sdrealtor on June 7, 2022 - 9:02am.

deadzone wrote:
Call it what you want, but I would consider most cases of people purchasing vacation homes etc. as investors.

And on to money laundering, what I am really referring to is all the cash purchases made by foreign buyers, (Chinese primarily, a lot of Mexican too in this area) who are investing in US assets to hide their money from their own governments, whether due to tax or other reasons. This is very common but impossible to quantify.

Huh? My parents had a second home at the Jersey shore. I had a place in Palm Desert. My friends back east all have Shore houses and Florida houses. None are ever rented out. They are used to vacation. Now some friends are spending more than half time in Florida for tax reasons and easing into retirement. None of these places were ever investments. More tone deaf ignorance. The only thing we are investing in is our happiness
And not impossible to quantify those cash buyers. Most primary homes. Some international but a small player except in a small handful of spots here

Submitted by sdrealtor on June 7, 2022 - 10:00am.

Ok lets put this one to the test. Lets pick 4 zip codes and I'll do research on what cash buyers look like in each. I get to pick one, DZ picks one, FLU picks one and I'll throw out one wildcard to the piggs at large. If more than one other is submitted I'll pick the one I think is least like the others. Heading up to LA for a couple days so no rush but submit your choices.

My Pick will be 92009.

Submitted by utcsox on June 7, 2022 - 10:07am.

sdrealtor wrote:
Ok lets put this one to the test. Lets pick 4 zip codes and I'll do research on what cash buyers look like in each. I get to pick one, DZ picks one, FLU picks one and I'll throw out one wildcard to the piggs at large. If more than one other is submitted I'll pick the one I think is least like the others. Heading up to LA for a couple days so no rush but submit your choices.

My Pick will be 92009.

I pick 92122.

Submitted by Coronita on June 7, 2022 - 10:29am.

utcsox wrote:
sdrealtor wrote:
Ok lets put this one to the test. Lets pick 4 zip codes and I'll do research on what cash buyers look like in each. I get to pick one, DZ picks one, FLU picks one and I'll throw out one wildcard to the piggs at large. If more than one other is submitted I'll pick the one I think is least like the others. Heading up to LA for a couple days so no rush but submit your choices.

My Pick will be 92009.

I pick 92122.

92126 (mira mesa)
92130 (carmel valley)

ideally also split between attached an detached market.

92126 and 92130 I suspect have much more activity as investment and foreign buyers, but we will see to what extend. I don't think it's the majority.

Submitted by flyer on June 7, 2022 - 12:45pm.

Actually, dz, we, and many people we know have, for many years, had both investment and vacation properties (most purchased during the last downturn at "bargain" prices) in several locations around the country--all above board--some purchased all cash, others, not, so you'd really have to look at this on a case by case basis.

Submitted by Coronita on June 7, 2022 - 12:45pm.

flyer wrote:
Actually, dz, we, and many people we know have, for many years, had both investment and vacation properties (most purchased during the last downturn at "bargain" prices) in several locations--all above board--some purchased all cash, others, not, so you'd really have to look at this on a case by case basis.

You see, dz, rich people don't get hurt in a recession or pull back. These just buy a lot of assets that are unobtainable for people that still count on a paycheck. And they never need to sell, because they can take advantage of every single tax law governing inheritance, estates, and living trusts, life insurance, etc to avoid estate taxes...

Rich people also don't concentrate all their money in the stock market. In fact, because they are rich, there's no reason to take higher risk stock investments to go for double digit growth yoy. They can camp out in a 4% bond or fixed income and still live well if they have 8 or 9 figure net worth.

Submitted by sdrealtor on June 7, 2022 - 12:57pm.

Will defintely look at attached and detached seperately. Lets see what comes in as requests.

Submitted by flyer on June 7, 2022 - 1:01pm.

And, not just "rich people," dz. We also know a lot of people who, although they were not really in an optimum position to do so during The Great Recession, bet there would be a rebound, so they gathered all of the resources they had, and also invested. Of course, things could have gone either way, but, in retrospect, they are very glad they did.

Submitted by Coronita on June 7, 2022 - 1:08pm.

sdrealtor wrote:
Will defintely look at attached and detached seperately. Lets see what comes in as requests.

My gut feeling is
92122 La J/UTC will have a lot of cash and investors because of close proximity to UCSD

92126, more owner occupied with loan for SFH, more investor owned paid with cash for attached.

92130 more owner occupied for both sfh and attached, with or without loan.

Submitted by sdrealtor on June 7, 2022 - 1:08pm.

So I took a quick look at 92122. It looks like the cashiest market out there. Defintely want to dig into that one no matter what.

Submitted by Coronita on June 7, 2022 - 1:09pm.

flyer wrote:
And, not just "rich people," dz. We also know a lot of people who, although they were not really in an optimum position to do so during The Great Recession, bet there would be a rebound, so they gathered all of the resources they had, and also invested. Of course, things could have gone either way, but, in retrospect, they are very glad they did.

Yes, you see, flyer is basically saying the Great Recession was an opportunity of a lifetime....We aren't the only one saying it dz....

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