Prediction: San Diego market goes up 8%+ over the next year

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Submitted by gzz on July 11, 2016 - 10:04pm

Unemployment low

Rates at record lows

Stock Market at/near record high

New Construction Low

Rents beating inflation year after year

State and local govs staffing up after long period of cuts and hiring freezes

Spillover from the even hotter LA/SF markets

I am trying to think of a single bearish factor here, but I am at a loss. Problems with the Navy/Qualcomm I am not aware of?

Submitted by gzz on July 11, 2016 - 10:09pm.

OK I can think of one semi-bearish factor. Lending standards are still much tighter than during The Great Bubble of 00's.

Really though, that isn't saying much. That was a single crazy episode in US history. Overall, by any other historical period, lending standings are moderately loose.

Also, China is having a crazy housing bubble right now in all of its major cities, but lending standards there are extremely tight compared to ours. The standard down payment is 50%.

Submitted by Rich Toscano on July 11, 2016 - 10:25pm.

gzz wrote:

I am trying to think of a single bearish factor here, but I am at a loss.

Valuations!

Pretty good list overall though. And the valuation thing is offset to a good degree by low rates. (On that note, though... if record low rates figure into your one year forecast, that implies that rates still have to be here next year).

Anyway, seems like a reasonable overview... I just had to bite on the one bearish factor... ;-)

Submitted by deadzone on July 11, 2016 - 10:53pm.

Rich Toscano wrote:
gzz wrote:

I am trying to think of a single bearish factor here, but I am at a loss.

Valuations!

Pretty good list overall though. And the valuation thing is offset to a good degree by low rates. (On that note, though... if record low rates figure into your one year forecast, that implies that rates still have to be here next year).

Anyway, seems like a reasonable overview... I just had to bite on the one bearish factor... ;-)

well mathematically rates can't really get much lower than they currently are, so if you accept the reality that the low rates of ZIRP and it's side effects are the singular reason for the current asset bubble, stands to reason that upside is limited.

Other than that, sure dump all of your savings into stocks and real estate now, no better time to buy than when prices are historically high. That is certainly what the Fed wants you to do, that is their explicit policy.

Submitted by gzz on July 11, 2016 - 10:58pm.

if record low rates figure into your one year forecast, that implies that rates still have to be here next year

I've been thinking rates would drop all year, and will probably stay low or fall further.

This is mostly because they are so crazy low in Europe and Japan right now. Why not here? Why can the 10-year rate in Japan, Germany, France, Holland, UK, Switzerland and Denmark all go to 0 or even -0.5, but our rate stay above 1%?

I know the "official reasons" why US rates are higher: higher expected inflation, economic growth, and currency depreciation. The problem is that other US asset prices should also be lower if people are expecting a weak dollar, but they are not. US stocks are doing great and loved by foreigners, but our Treasuries simply are not loved as much. I also do not think there is much reason to think the dollar will weaken over the long term v. yen and euro.

Anyway, seems like a reasonable overview... I just had to bite on the one bearish factor... ;-)

OK, here's one more bearish factor: student debt is exploding and reducing the the ability of younger buyers to get credit or save down payments.

This is bearish, but I think looking at total private household debt shows that it is partly offset by other categories of debt going down compared to prior years. Mortgage and revolving household debt went down a lot in the recession and have not recovered. And if you go another step further, and consider low rates over the past five years, the monthly cost to service existing mortgage debt may be on the low side historically, and mortgage debt is by far the largest U.S. household debt.

Submitted by livinincali on July 12, 2016 - 6:35am.

Seems like the last couple of years 3/4 of whatever upside comes in the spring. I suppose if the economy is still doing well Jan 2017 then you might get a 8% pop. From the economic cycles were sort of due for a recession soon, but even if that occurs in the next year maybe it won't be felt in San Diego until later.

Submitted by The-Shoveler on July 12, 2016 - 8:01am.

I don't know about 8%, but I see two things feeding the housing market increases over the next few years IMO.

1) Demographics (largest bulge in population is now 25-26 years old).

2) The Gov has gotten serious about creating wage inflation over the next 5-6 years.

Submitted by spdrun on July 12, 2016 - 9:23am.

Let's hope livinincali is right and we get the recession we're overdue for. And how!

This being said: if you're going to put money into property, why not put it into a market that has a more favorable buy/rent ratio than San Diego? Somewhere that still has fucklosers aka foreclosures.

Submitted by FlyerInHi on July 12, 2016 - 10:48am.

The-Shoveler wrote:
I don't know about 8%, but I see two things feeding the housing market increases over the next few years IMO.

1) Demographics (largest bulge in population is now 25-26 years old).

2) The Gov has gotten serious about creating wage inflation over the next 5-6 years.

In coastal areas. For sure. We're not seeing a national situation like last time

You forgot not enough new construction.

Submitted by FlyerInHi on July 12, 2016 - 10:56am.

spdrun wrote:
Let's hope livinincali is right and we get the recession we're overdue for. And how!

What makes you think a recession should happen like clock work.

We are in a new normal. Maybe slower growth gives use double the period of continued growth.
Everything that tradional folks said about the deficit, the stimulus, interest rates, dollar value... since 2008 has be disproven. They have been wrong for nearly a decade now.

spdrun wrote:

This being said: if you're going to put money into property, why not put it into a market that has a more favorable buy/rent ratio than San Diego? Somewhere that still has fucklosers aka foreclosures.

Not too many of those places left. Plus they are far away from San Diego.

Submitted by spdrun on July 12, 2016 - 11:07am.

Um, most of the country has a more favorable buy/rent ratio and cheaper housing than San Diego. Average home price in the US is $188,000, whereas that's low-end in San Diego.

https://smartasset.com/mortgage/price-to...

As you know, Vegas has a ratio of 19 to San Diego's 30 and isn't that far away.

Submitted by FlyerInHi on July 12, 2016 - 11:10am.

spdrun wrote:
Um, most of the country has a more favorable buy/rent ratio and cheaper housing than San Diego. Average home price in the US is $188,000, whereas that's low-end in San Diego.

Yes. I meant foreclosure deals are getting rarer.

But if you live in SD, riverside or Las Vegas, maybe AZ are the farthest you could go. Unless you want to trust property manager all the time.

I was in lake Elsinore yesterday. Not cheap anymore. The inland empire has appreciated very nicely already.

Submitted by spdrun on July 12, 2016 - 11:22am.

Looking at sheriff's sales near where I grew up in NJ, there are 5x as many properties selling as there were two years ago. A lot of them go back to the bank for $100. Future REOs!!! YAY!

And Mel "The Skell" Watt's plan to write down loans only covers about 6,000 of the 240,000+ underwater loans in NJ. Beautiful.

NV, FL, NY, PA, and MD are also "good" states. LOL.

As far as managing long-distance, you don't need a property manager for a condo further away, if you're willing to go for a week when a tenant moves out, do some work, and get it rented.

Picking your tenants carefully so they're reasonably self-sufficient and reliable. Best tenants are self-employed and grad students. People who can be very reliable, but who other landlords might be hesitant to rent to. They know they'll have a harder time finding a different place, so they remain quiet as church mice, pay like good little tenants, and count themselves lucky not to be under a bridge.

Submitted by The-Shoveler on July 12, 2016 - 11:19am.

FlyerInHi wrote:

I was in lake Elsinore yesterday. Not cheap anymore. The inland empire has appreciated very nicely already.

People may laugh when I say Temecula is becoming a Job center, but that's why the you see sub-suburbs expanding.

Suburbs start having suburbs LOL.

Submitted by gzz on July 12, 2016 - 11:23am.

Worrying about price to rent ratios three years ago in the bay area would lead someone to rent rather than buy and miss big appreciation. It is simply one factor.

Submitted by spdrun on July 12, 2016 - 11:30am.

Does that mean they shouldn't worry now? Rents in the Bay Area are even straining finances for people who'd be wealthy in other cities. If there's little room for rents to increase, and the buy/rent ratio is already awful, at a certain point buying would no longer make sense.

Submitted by FlyerInHi on July 12, 2016 - 11:47am.

The-Shoveler wrote:
FlyerInHi wrote:

I was in lake Elsinore yesterday. Not cheap anymore. The inland empire has appreciated very nicely already.

People may laugh when I say Temecula is becoming a Job center, but that's why the you see sub-suburbs expanding.

Suburbs start having suburbs LOL.

True. The guy I visited works in temecula.
But there is a shift among millennials and professionals to the city.
The Washington post has a series on the car culture and urban geography.
I see a more city centric culture more like Canada once urban planners let go of parking space requirements.

https://www.washingtonpost.com/opinions/...

Submitted by FlyerInHi on July 12, 2016 - 2:29pm.

The-Shoveler wrote:

2) The Gov has gotten serious about creating wage inflation over the next 5-6 years.

What part of the government is serious? The easy answer would be to raise the min wage but even that is difficult.

Jamie Dimon is raising the wages of his employees. I think business executives are beginning to understand that higher wages at the bottom mean higher consumption.

Submitted by spdrun on July 12, 2016 - 2:35pm.

Consumption is another word for TB. We should consume less -- we already have all the toys we can handle. Why buy some overweight Chinese bike at Walmart for $200 when you can buy a used road bike on Craigslist for $100? Same goes for laptops and electronics. Dime a dozen used. The sooner the public learns to kick back and say "fuck you" to the sheepsumer ecahhhhhnamy, the better.

Submitted by The-Shoveler on July 12, 2016 - 3:25pm.

I am going to assume that you know California minimum wage is set to go to $15 by 2022 ($10.00 now).

This is what I think most people don't get about raising the minimum wage is it is NOT about minimum wage earners.
It's about people making at least $15 now, the point is to get those people to $28-$30 dollars per hour.

That's the real point of it.

Submitted by bearishgurl on July 12, 2016 - 3:33pm.

The-Shoveler wrote:
I am going to assume that you know California minimum wage is set to go to $15 by 2022 ($10.00 now).

This is what I think most people don't get about raising the minimum wage is it is NOT about minimum wage earners.
It's about people making at least $15 now, the point is to get those people to $28-$30 dollars per hour.

That's the real point of it.

Shoveler, I don't believe the minimum wage will ever hit $28-$30 hr . . . at least not in our lifetimes. "Those people" who are earning minimum wage now will need to get education and experience (relative to their education/training) behind them if they ever hope to make that much.

Submitted by The-Shoveler on July 12, 2016 - 3:36pm.

I don't think you read my post

but the Idea is that it is not about Minimum wage earners,

The Idea is to give the lower and lower middle a boost.

Less increments as you go up the ladder.

Submitted by spdrun on July 12, 2016 - 3:39pm.

If min is $10 and the middle earns $15, then if min is $15, middle will earn ~$22, assuming the spread remains the same.

Or it could just result in fewer jerbs as the jobs of burger-chain cashiers get replaced by a touchscreen. That's the best outcome, since touchscreens don't get all uppity and want to buy homes.

Submitted by The-Shoveler on July 12, 2016 - 3:44pm.

I don't think the middle is making $15 (probably closer to $30 currently in SoCal).

But the Ideal is the same get those people to $40-45

It's coming.

Submitted by FlyerInHi on July 12, 2016 - 3:46pm.

I don't really see serious government intervention in lifting wages or creating jobs through government action. Nothing in Washington, only action in some states and localities.

It's coming, how?

Submitted by The-Shoveler on July 12, 2016 - 3:49pm.

What happens in California tends to spread to the rest of the nation.

have patience

Submitted by FlyerInHi on July 12, 2016 - 3:54pm.

The-Shoveler wrote:
What happens in California tends to spread to the rest of the nation.

have patience

That's true but that just people wanting what we have. It's like catalytic converter and automobile anti-pollution first mandated in Cali and adopted as national standard. It took many decades, and it's not government getting serious.

Submitted by The-Shoveler on July 12, 2016 - 4:02pm.

LOL even Trump talks about raising the minimum wage.

It's gaining momentum

Two things I think we will see over the next term,

At least a $12 dollar Minimum wage.

and a single payer health care plan.
(well at least for those over 55).

Submitted by bearishgurl on July 12, 2016 - 4:37pm.

The-Shoveler wrote:
LOL even Trump talks about raising the minimum wage.

It's gaining momentum

Two things I think we will see over the next term,

At least a $12 dollar Minimum wage.

and a single payer health care plan.
(well at least for those over 55).

It's either this or repeal the Medicaid laws which provide for estate recovery on medical costs NOT related to long-term care.

OR, repeal Obamacare in its entirety and provide enticements for all the carriers to come back to the individual states and compete with one another.

I honestly don't think buying medical insurance to use across state lines (for everyday care, NOT emergency hospitalization) is a workable idea. There are too many regional variables making healthcare a completely different animal in different regions and states of the US. ESPecially for the over-55 set.

Like real estate, rendering healthcare is local. And the population of every region and even their micro-regions are a bit different from each other as is the cost of care. Each region needs to be priced accordingly or the carriers will lose money and leave, creating the same intractable mess we have now.

A person moving to a different locale should have to have their premium adjusted up or down by their current carrier (if they do business in the new locale). If they don't, the recent transplant should have a grace period of coverage to search for a new "local" healthplan.

Submitted by FlyerInHi on July 12, 2016 - 5:34pm.

Shoveler, Trump talked about wages being too high. I would not trust him or a Republican Congress to raise the minimum-wage. They could've done so years ago if they were serious.

Submitted by spdrun on July 12, 2016 - 5:41pm.

And that's a good thing. A jump from $7 and change to $15 is too high nationally. A compromise figure of $10-11 is about right to account for consumer prices.

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