The Overinflated Fear of Being Priced Out of Housing

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Submitted by Cochon on June 14, 2016 - 9:31am

Robert Shiller wrote this piece in the nytimes that may be interesting for readers here:
http://www.nytimes.com/2016/06/12/upshot...

Being finally able to start considering a purchase, I share this (irrational?) fear too.

Submitted by mixxalot on June 14, 2016 - 11:12am.

Desperate house horny buyers will get slaughtered. I figure that I can save 500K in five years then retire overseas to a nice place like Thailand or Chile rather than pay over 1MM for a crapshack and be debt for 30 years.

Submitted by spdrun on June 14, 2016 - 12:27pm.

Nothing wrong /w being outside the US, but...

$500k cash buys you a very nice triplex or quad in many parts of the US. Live in one unit, take income off the other two. No mortgage, positive cash flow. If you live frugally (used car, etc) you could afford to basically do what you want, work part-time, travel a lot, and enjoy the shit out of life.

Interestingly, you could also pick up a duplex or triplex for $500k in the less nice parts of San Diego County and do the same thing. Or 3 condos, which would amount to similar/better cash flow.

e.g.
http://www.realtor.com/realestateandhome...

Submitted by FlyerInHi on June 14, 2016 - 12:38pm.

There a very few affordable multiplexes in SD.
Buying several condos in an HOA is not the same. But I do get your point.

I have a friend who owns a multiplex by the beach in St Pete, FL. It's like OB. Always fully rented.

The problem with minimalist living in USA is property taxes and maintenance. That alone is a nice upper middle class budget in many parts of the world. Minimalist living is USA makes you lower class. When abroad, you get more of an expat upscale lifestyle for the same amount.

Submitted by spdrun on June 14, 2016 - 1:35pm.

Condo bought for $160k in SD = $160/mo tax, $250/mo HOA, liability insurance $10/mo. Maintenance is chump change if you do the work yourself -- you can buy appliances off of CL or from Habitat for next to nothing and the HOA deals with the outside.

Rents for $1100/mo. About 5% net return. 5% return on $320k is $16,000/yr or $1333/mo. Doesn't seem like much, but it's taxed pretty low due to depreciation, deductions, etc.

If you live in another condo which costs you ~$420/mo to upkeep, pay $500/mo for health insurance, you still have something left over, enough for food if you cook for yourself.

Any job that you work at is basically going towards your car, clothes, recreation, travel, savings, etc. Pretty nice. If you really come to San Diego with $500k cash, you can be very happy for the rest of your life if you throw what's expected of you out the window.

EDIT: speaking of abroad, what are return rates on rental properties (condos, I guess, for non-citizens) in Mexico, in areas that are relatively safe and easily accessible from SD?

Submitted by FlyerInHi on June 14, 2016 - 2:22pm.

$160k condo in SD is kinda ghetto.
And 1/1 in Mira Mesa or North Park is hitting 300k now.

What's the point of living a working class life in an ugly apartment in SD? Abroad, you'd be a high status American

Submitted by spdrun on June 14, 2016 - 2:33pm.

Who cares about ghetto if you're renting it out? Tenants are just ATMs on the hoof. The only consideration in buying a rental are expenses, rent, and ease of finding tenants. No need for it to be a palace.

I don't see any 1/1 condos in 92126 over $225k, by the way. Anything approaching $300k is a 2/2.

Even 92104/92116 has some 1/1 inventory in the low 200s.

Submitted by FlyerInHi on June 14, 2016 - 2:49pm.

wasn't the point to live in a condo for minimal expenses, and rent out other condo?

If you live in a condo, you want a decent building. Those are indeed over $300 for 1/1. Very low inventory now.

Submitted by spdrun on June 14, 2016 - 3:02pm.

There are no 1/1 condos in 92126 even approaching $300k. Decent building or not. None above $225k.

92116 has plenty below $300k. 92104 is closest to $300k, but even there, $300k is more like 2/2 territory.

For $250k, you can live in OB...
http://www.sdlookup.com/MLS-160030522-43...

Of course my definition of decent building is likely different from yours. It basically consists of low HOA and well-maintained.

Submitted by scaredyclassic on June 14, 2016 - 3:04pm.

a nice van is pretty cheap. poop at Starbucks.

Submitted by FlyerInHi on June 14, 2016 - 3:31pm.

scaredyclassic wrote:
a nice van is pretty cheap. poop at Starbucks.

Haha. Is the San Diego weather worth it?

Submitted by joec on June 14, 2016 - 5:46pm.

mixxalot wrote:
Desperate house horny buyers will get slaughtered. I figure that I can save 500K in five years then retire overseas to a nice place like Thailand or Chile rather than pay over 1MM for a crapshack and be debt for 30 years.

This only works for single people with no kids...

I agree that if you can "fit in" in another lower cost, foreign country, that will certainly make your dollars last much much longer than here.

Some of my relatives left the US back to Asia since healthcare alone was a concern which can pretty much bankrupt anyone here.

If I was single/no kids, I'd probably try to move, but trying to find high paid work in a foreign country might not be that easy for most folks.

Submitted by mixxalot on June 14, 2016 - 7:00pm.

True. Well, as a single dude, I can do it. Really enjoyed my time in Chile and Uruguay. Safe, clean, modern and less expensive versions of San Diego.

Submitted by spdrun on June 14, 2016 - 8:03pm.

(1) Date/marry someone who's "internationally flexible" and who'd consider moving around the world with you. Or try to meet someone locally -- there.
(2) I'd assume $500k would go a long way in purchasing investment property in certain non-US places (depending on local rules), making the "high paying job" less needed.

Submitted by moneymaker on June 14, 2016 - 8:51pm.

The op's title gave me a little deja vu

Submitted by FlyerInHi on June 15, 2016 - 10:28am.

There are expectations to live up to when you live a abroad. As an American, you need money. If not, you lose the locals' respect and maybe your wife love also.

Sorry to say but money is essential. You don't need to be filthy rich, but no matter where you live, you need enough money so people look up to you and respect you. Otherwise, you live on the margin of society.

Also, living in San Diego in a cheap condo might suit you, but not a good way to find a gf/wife. No money, no honey applies wirh exceptions.

Joec has to live the lifestyle his wife wants. Otherwise, we've got problems.

Submitted by spdrun on June 15, 2016 - 10:39am.

If the dating market in San Diego is so fucked up that women won't date a guy with a condo in an OK area (92116, 92126) and two other rental condos because of where he lives, maybe it's best to leave San Diego. Or develop a personality that makes people want to date you.

Or date women from even less upscale areas ;)

Submitted by mixxalot on June 15, 2016 - 11:41am.

Or date foreign women and live overseas. Better quality of social and dating life by far. When I was in South America, I had model quality girlfriends compared to dead sausage fest Man Diego places.

Submitted by spdrun on June 15, 2016 - 12:01pm.

Or live in the US and date foreign-born women :) Not as if they're in such short supply in California (or NY). Maybe I've had bad experiences, but I've felt like white/Americans often turn dating into some sort of tedious head-game with too many rules.

Submitted by FlyerInHi on June 15, 2016 - 11:54am.

mixxalot wrote:
Or date foreign women and live overseas. Better quality of social and dating life by far. When I was in South America, I had model quality girlfriends compared to dead sausage fest Man Diego places.

That's because you are a high-status American when you're abroad. But if you live there a long time, and don't earn/spend much money, your status will erode until the locals laugh at you, and prohibit their daughters from seeing you. That happens a lot.

And is you marry abroad, people will start to wonder why you don't take your family to the glamorous lifestyle of America, or send your kids to international schools (read high tuition). You should expect to earn enough or have a high paying job that allows you to fly back and forth to the states during holiday. Can you afford travel expenses for a family of 4, or maybe 6, including your in-laws?

Submitted by spdrun on June 15, 2016 - 11:59am.

^^^ that's the stereotype. I know people who've moved out of the US and married locally, or moved out of the US with their spouse after marrying. They don't spend a hell of a lot of time in the US any more, especially since the US has made travel a royal PiTA.

There are people who are actually happy outside of the US, believe it or not.

Submitted by FlyerInHi on June 15, 2016 - 12:13pm.

Stereotypes form expectations.

But let me ask you spd, if you're an American living abroad, would you send your kids to local schools or would you, and especially your wife, want to send them to international schools (almost college tuition). Wouldn't your wife expect the kids to go to university in America. Better start saving money now.

Submitted by spdrun on June 15, 2016 - 2:36pm.

Local schools. Public, private, or Catholic depending on country. I wouldn't want them growing up surrounded by coked-up embassy brats in an international/American school.

University would depend on circumstance. e.g. medical school in many European countries is cheaper, shorter (it's combined undergrad and grad) and as good as school in the US.

I'd rather have them study in Poland than the US, for example.

Submitted by matt on June 15, 2016 - 6:55pm.

I met my Mexican wife at usd. Now we live in the UAE and hope to save enough to retire in Mexico possibly living off rental cash flows in San Diego.. The local American community school is almost 20k per child and a major factor in our finances which are getting chipped away at by the macro economic conditions. There's no coke to my knowledge.. Is it a good school - I would guess it's a 9 or 10 in San Diego. But the life experience and understanding America is not the center of the world is priceless. Missing the gorgeous San Diego weather right now ....

Submitted by FlyerInHi on June 16, 2016 - 11:06am.

matt wrote:
I met my Mexican wife at usd. Now we live in the UAE and hope to save enough to retire in Mexico possibly living off rental cash flows in San Diego.. The local American community school is almost 20k per child and a major factor in our finances which are getting chipped away at by the macro economic conditions. There's no coke to my knowledge.. Is it a good school - I would guess it's a 9 or 10 in San Diego. But the life experience and understanding America is not the center of the world is priceless. Missing the gorgeous San Diego weather right now ....

If you want to retire in Mexico, you might want to consider rental cash flows in Texas, Nevada, or elsewhere. The returns in SD are not good.

Submitted by outtamojo on June 22, 2016 - 10:41am.

fwiw, Lennar says land and labor shortages are preventing builders from accelerating buildout.

https://www.yahoo.com/finance/news/homeb...

Submitted by The-Shoveler on June 22, 2016 - 10:55am.

I would say that in SoCal at least, Land use restrictions and building codes (along with Labor shortages "seems Millennials are not crazy about building careers in construction").

We have zoned in housing shortages.

Submitted by FlyerInHi on June 22, 2016 - 11:49am.

The-Shoveler wrote:
I would say that in SoCal at least, Land use restrictions and building codes (along with Labor shortages "seems Millennials are not crazy about building careers in construction").

We have zoned in housing shortages.

Yes, I've been saying that all along.
Not good for young people and the long term health of the local economy. Not good for old people either because their kids are having to leave the state.

I wonder who many people here have adult kids who live within 1 hour's drive.

Submitted by spdrun on June 22, 2016 - 11:50am.

If the old people who stay eventually move out of state to be closer to their kids, who have put down roots, their houses might end up on the market. This is a good thing for the young that will stay. And the cycle continues...

Submitted by FlyerInHi on June 22, 2016 - 12:01pm.

spdrun wrote:
If the old people who stay eventually move out of state to be closer to their kids, who have put down roots, their houses might end up on the market. This is a good thing for the young that will stay. And the cycle continues...

Yes and that's why the demographics are changing as big cities across the country become more cosmopolitan.

Submitted by outtamojo on June 22, 2016 - 12:26pm.

I don't know about others but I am hoarding. I almost sold one of my rentals this year but decided I better just hang on to it in case my kids start looking out of state in the future.

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