State of the economy and affect on housing in S California

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Submitted by wallers on March 20, 2015 - 10:36am

Hi
Wondering if anyone has opinions about what is happening with our economy now and in the near future and price affect on the southern california housing market. I think looking at the health and future of our economy might be a better indicator of where the housing market will go??? Opinions on where we are at?

Our economy is stable. Things are booming. No problem.

Things will flatten out. Stock market and housing market can't stay at all time highs but won't crash.

We are in for it.

I don't know anything about economics or investing but hearing some pretty scary stuff. Do you believe it or do you believe the opposite or somewhere in between.

Things such as - QE screwing the economy and enriching investors and driving a "false market". Historically some are calling for a recession within the next few years. 4 trillion debt because of qe but nothing to show for it but investor run up. Rates need to rise at some point. Household incomes way out of whack with home prices. House market decline leads to serious economy issues. Same for stock market. Other economies having issues which will affect us. Inflation with the strong dollar affect overseas trade.

3 Stages of the home price decline. Do you believe this?
Josh Pollard formerly of Goldman.
Unless the calculus of history is a poor guide, there is a 60% chance that home values decline materially, in fact, the correction is already underway. This probability rises when new negative shocks emerges. The home price decline will be defined by 3 Stages:

Stage I: Hot to Cool: Active since Summer 2013*, Price growth is slides across the country as flippers lose money outright in the red-hot investor markets (NYC, San Francisco and Las Vegas); New home absorption rates - sales per community - are declining; investors slow their home purchases; total home sales decline year over year; developers lose pricing power, press outlets shift from positive to mixed about the health of the housing market.

Stage II: Demand to Supply: Small shocks convert demand pools into supply ripples. A first wave of investors begin trimming prices to get ahead of future declines; discounts increase to incentivize purchasers as purchasers increase their delays for better deals; developers reduce land budgets as cancellations tick up; major financial press outlets take a more negative tone toward housing lowering confidence overall.

Stage III: Deflation & Response: Falling home prices create a negative deflationary feedback loop that foreshadows a once-in-a-lifetime policy response. Deflationary economics take full hold; leveraged bets on real estate unwind in quarterly ripples due to the public reporting cycle & asset manager redemption schedules; willingness to lend shrinks; the broader consumer finally understands it is a bad time to buy a home, a shrinking housing market negatively impacts jobs causing recession; the estimated effects of never-before-seen public policy reactions determine when and where prices eventually trough.

Submitted by fun4vnay2 on March 21, 2015 - 8:56pm.

Different strokes for different people.
5 years back I thought I have a kind of permanent job in San Diego but with the flight of jobs from SD to low cost areas, this is no more the case.
Renting a home is not looked down any more.
Only reason I bought house is to build equity and I am glad I didn't pay heed to people in 2007/6 and bought in 2011.

The real estate in CA is very cyclical and I a sure there would be opportunities abound for the people who have the patience.

Do we have one ?

Submitted by wallers on March 21, 2015 - 11:36pm.

yep. I'm out. 3127 McKinley just listed. check the history. in my opinion wow.

Submitted by CA renter on March 22, 2015 - 12:50am.

wallers wrote:
yep. I'm out. 3127 McKinley just listed. check the history. in my opinion wow.

Crazy price for a house that size. It's also a bummer that the most recent owners took out the beautiful trees and painted over the previous colors, which matched better with the house. The house looked so much nicer in the previous listing, especially with the nice trees out front.

Submitted by CA renter on March 22, 2015 - 2:24am.

FWIW, I think Pollard is correct in his thinking. The question, of course, is how long until it washes out? If you're sitting in a rental for 10 years (or more), would you be okay with that?

Submitted by Balboa on March 22, 2015 - 7:45am.

wallers wrote:
yep. I'm out. 3127 McKinley just listed. check the history. in my opinion wow.

I love that the listing says it was remodeled ("remolded," actually) in 2012. That's before the current sellers owned it. So other than cut down trees and paint, they probably did exactly nothing to it. Also, it has exactly *one* great public school near by.

Not too far away, there is an under-700-sqft 2/2 on Myrtle that says "Photos were taken prior to owners moving in. Very little if anything was changed." But of course they are asking $120k more than they bought it for in 2012. It's been on 35 days now with no drops.

My friends are seeing the same types of things in 92117 and surrounding zips.

Submitted by fun4vnay2 on March 22, 2015 - 7:54am.

Crazy price with crazy appreciation..

Submitted by Jazzman on March 22, 2015 - 12:45pm.

wallers wrote:
ok thanks everyone! great info. I think I am going to rent and see how this all plays out.

From all the info here and everywhere generally speaking it seems prices will either remain somewhat the same/maybe a bit up for sometime and things will trudge along or go down. So financially it might be prudent to wait and see with minimal risk of a continued large price increase (buy now or be priced out forever!). Plus there is the possibility of staying calm and being rewarded for waiting for lower prices.

On the personal side I like being a homeowner. But if I can't get what I want perhaps than maybe it's not a great idea to buy anyways.

If I was in your shoes, I'd probably be doing the same. It's a huge commitment so you have to be comfortable with it.

Submitted by joec on March 22, 2015 - 2:01pm.

Another thing to factor in is what is your rental cost? I used to rent the cheapest crapholes I could find, but I wouldn't want to live there long term (area, neighbors, schools, etc...was single)

If you rent in a 3k/month place now and are ok with buying a 3k/month place, then buying is easier to stomach vs. renting in a 1k/month place and it costs you 2.5k/month to buy the place you want to live in longer term...

Kids and school districts make it harder to rent small/cheaper in general.

Doesn't sound like you have kids or a spouse so renting makes more sense for flexibility.

Submitted by scaredyclassic on March 22, 2015 - 2:06pm.

Jazzman wrote:
wallers wrote:
ok thanks everyone! great info. I think I am going to rent and see how this all plays out.

From all the info here and everywhere generally speaking it seems prices will either remain somewhat the same/maybe a bit up for sometime and things will trudge along or go down. So financially it might be prudent to wait and see with minimal risk of a continued large price increase (buy now or be priced out forever!). Plus there is the possibility of staying calm and being rewarded for waiting for lower prices.

On the personal side I like being a homeowner. But if I can't get what I want perhaps than maybe it's not a great idea to buy anyways.

If I was in your shoes, I'd probably be doing the same. It's a huge commitment so you have to be comfortable with it.

people who actually think about things are unlikely to ever be really comfortable.

Submitted by bearishgurl on March 22, 2015 - 2:33pm.

scaredyclassic wrote:
Jazzman wrote:
wallers wrote:
ok thanks everyone! great info. I think I am going to rent and see how this all plays out.

From all the info here and everywhere generally speaking it seems prices will either remain somewhat the same/maybe a bit up for sometime and things will trudge along or go down. So financially it might be prudent to wait and see with minimal risk of a continued large price increase (buy now or be priced out forever!). Plus there is the possibility of staying calm and being rewarded for waiting for lower prices.

On the personal side I like being a homeowner. But if I can't get what I want perhaps than maybe it's not a great idea to buy anyways.

If I was in your shoes, I'd probably be doing the same. It's a huge commitment so you have to be comfortable with it.

people who actually think about things are unlikely to ever be really comfortable.

Hahahahahaha, scaredy :=D. I well remember your months/years? of musings on here during your "overthinking" period before you finally purchased your current home.

I also remember all of Jazzman's musings during and after his failed search up and down the state for a suitable CA retirement home. As I recall, 90% of his search occurred at the very bottom of the market (2010-2011?). As far as he's told us, he still hasn't purchased a CA home and I'm unclear if he still wants to. In any case, that train has long ago left the station.

Submitted by wallers on March 22, 2015 - 5:36pm.

But that train might be circling back to the station or at least part way. One never knows. Anyways, I agree also with the comments about over thinking things because it would just be a lot of frustration. Now that I have made the decision I basically am going to put this to rest and move on with rest of my life. If I start seeing some headlines about the housing market moving the other way cause the fed has to pay the piper then I will perk back up. But for now I am going to live and let live. And yes, single with no kids and lots of savings. thanks for the therapy. I will post a follow up in a year/two/three/four or more... who knows!

Submitted by fun4vnay2 on March 22, 2015 - 6:01pm.

Since you have lot of money for cash down, I'd say invest in some good relatively safe place to get you 4-5% return.

In couple of years, when and if the interest rates hit high, I am sure the prices would come down

Real estate prices in CA are cyclical in general and if anyone says otherwise, please look at the history.

Of course no one knows the future..

Submitted by wallers on March 22, 2015 - 8:00pm.

yep that's the other issue. I know nothing about getting 4-5% and my money is just sitting at .08 money market right now. i guess that's a whole other thread.
probably look into that here in the next several weeks because just doing nothing will hurt in the end.

Submitted by scaredyclassic on March 22, 2015 - 8:44pm.

At the very least get .9 to 1 perc. In an Amex personal savings acct. Linked to yr. Checking

Submitted by bearishgurl on March 22, 2015 - 9:31pm.

I just got a snail mail offer of 1.2% on a 12-month CD at Synchrony Bank (NJ). $2K minimum; offer code CCD19. They are FDIC insured to $250K.

Submitted by bearishgurl on March 22, 2015 - 9:36pm.

rockingtime wrote:
Since you have lot of money for cash down, I'd say invest in some good relatively safe place to get you 4-5% return....

Uuh, maybe I'm ignorant but can you make some suggestions in this regard?

Submitted by scaredyclassic on March 22, 2015 - 9:42pm.

This opportunity is no longer avsilable, also Immoral, now illegal and evil, but Thomas Jefferson's journals say he was getting a 4 percent return on his slaves through births.

http://www.smithsonianmag.com/history/th...

Submitted by Coronita on March 23, 2015 - 7:05am.

Make a big error on your 1040 tax this year so that you overpay. At the end of next year, file a 1040X amended return. Get your money back + receive your 2% return on your money you loaned to the IRS. Probably beats most short term CD's.

Just kidding...Sort of.

Submitted by fun4vnay2 on March 23, 2015 - 7:34am.

Cash in chase investment account and their conservative model pay almost 4-5%/year, their moderate model pays almost 7%/year.
The money is liquid.
One can always argue there are better options but I am not aware of any. I chose chase as I bank with them primarily.

Submitted by bearishgurl on March 23, 2015 - 9:03am.

rockingtime wrote:
Cash in chase investment account and their conservative model pay almost 4-5%/year, their moderate model pays almost 7%/year.
The money is liquid.
One can always argue there are better options but I am not aware of any. I chose chase as I bank with them primarily.

Is that with the JP Morgan Private Bank? I'm somewhat familiar with their conservative model.

I'll check into that, rockingtime. You can pm me if you wish with more info. Thanks.

Submitted by jeff303 on March 23, 2015 - 10:13am.

rockingtime wrote:
Cash in chase investment account and their conservative model pay almost 4-5%/year, their moderate model pays almost 7%/year.
The money is liquid.
One can always argue there are better options but I am not aware of any. I chose chase as I bank with them primarily.

What's the minimum investment?

Submitted by wallers on March 23, 2015 - 10:23am.

rockingtime wrote:
Cash in chase investment account and their conservative model pay almost 4-5%/year, their moderate model pays almost 7%/year.
The money is liquid.
One can always argue there are better options but I am not aware of any. I chose chase as I bank with them primarily.

Yes would like more info on that as well if possible.

Submitted by FlyerInHi on March 23, 2015 - 11:18am.

scaredyclassic wrote:
This opportunity is no longer avsilable, also Immoral, now illegal and evil, but Thomas Jefferson's journals say he was getting a 4 percent return on his slaves through births.

http://www.smithsonianmag.com/history/th...

Put all your money in negroes. The return he was talking about was the resale value. Plus he got free services.
It was sound advice at the time.

Submitted by fun4vnay2 on March 23, 2015 - 11:42am.

Guys,

I'd advise to to do a quick stop at chase bank
I guess minimum was $45K or so.

Thanks

Submitted by Jazzman on March 23, 2015 - 3:57pm.

bearishgurl wrote:

Hahahahahaha, scaredy :=D. I well remember your months/years? of musings on here during your "overthinking" period before you finally purchased your current home.

I also remember all of Jazzman's musings during and after his failed search up and down the state for a suitable CA retirement home. As I recall, 90% of his search occurred at the very bottom of the market (2010-2011?). As far as he's told us, he still hasn't purchased a CA home and I'm unclear if he still wants to. In any case, that train has long ago left the station.

Ah! BG is back. Not sure the train ever arrived. I'm not looking in CA for the time being, thanks, but I'll be sure you let Realtors (including you) know, if ever that changes.

Submitted by paramount on March 23, 2015 - 10:33pm.

This is the year of the Shemittah...

Submitted by FormerSanDiegan on March 24, 2015 - 10:36am.

rockingtime wrote:
Since you have lot of money for cash down, I'd say invest in some good relatively safe place to get you 4-5% return.

In couple of years, when and if the interest rates hit high, I am sure the prices would come down

Real estate prices in CA are cyclical in general and if anyone says otherwise, please look at the history.

Of course no one knows the future..

If you look at the history of housing prices and interest rates you will note that the periods of interest rates increasing (notably mid 1960s to 1980, for example) coincided with home price increases.

SO, higher rates does not necessarily equate to lower prices. In fact, historically it has been the other way around. Higher interest rates generally track over the long run with higher inflation.

Submitted by fun4vnay2 on March 24, 2015 - 11:08am.

Yeah, you are right about the historical fact.
I am one of the least educated person about data and facts.

I report/act on what I observe at the ground level.
I knew in 2007/8 that this much housing prices in sd is not sustainable as wages are not supportable. I waited till 2011 to buy.

I feel the same now. I feel all this is bubble. But I've been wrong before :-)
The high paying wages are not really growing. Job uncertainty is there/increased.

SD may have seen big job growth but how many of these jobs are paying $150K ?

I feel that a decently earning ( ~$100K/year ) middle class family can't really live here ...

Submitted by The-Shoveler on March 24, 2015 - 11:23am.

"I feel that a decently earning ( ~$100K/year ) middle class family can't really live here .."

IMO it's just that SD has grown up and become more like L.A.

A middle class family can make it in L.A. (or SD) they just have to commute 35-45 miles to work like they have in L.A. for the last 35 or so years.

Submitted by utcsox on March 24, 2015 - 7:38pm.

rockingtime wrote:

I feel that a decently earning ( ~$100K/year ) middle class family can't really live here ...

You shall read this link and see how you can make $60k a year and save enough money for a down payment.

http://piggington.com/budget_fictional_c...

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