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 Jazzman on March 25, 2015 - 1:05am.

FormerSanDiegan wrote:
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.

It may be difficult to show a direct relationship. Some argue rising rates first impact demand, but supply and demand then influences price. A more recent debate focusses on the effect that prolonged periods of monetary easing has on the housing market. These researchers seem to have found a corelation:

An exogenous 100 bps decrease in the short rate results in about a 50 bps decrease in the long rate on impact, and an increase in mortgage loans to GDP of about 0.5 percentage points. Yet the effect of the initial shock keeps building over time, and by year four there is about a 3 percentage point increase in the ratio of mortgage loans to GDP.In light of the response of long-term rates and mortgage lending, one might expect house prices to increase in response to an exogenous decline in interest rates. The bottom-right panel shows that this is indeed the case. A fall of the short rate of 1 percentage point builds up over time and leads to a 4% increase of the house price-to-income ratio after four years. (Or alternatively, an exogenous increase results in a sizeable decline instead.) Various robustness checks and sample splits further strengthen our core result that monetary policy has indeed a powerful influence on households’ willingness to take bets on the house. https://agenda.weforum.org/2015/02/what-...

Interest rates have been declining consistently for many years. In the last 20 years, the 30 year fixed rate mortgage has halved. House prices in San Diego, on the other hand, have increased 180% over the same period. So while price and interest rate indices mat not track each other precisely, there is more than coincidence at play here. And it's probably not without good reason that imminent central bank tightening has everyone on tenterhooks.

Submitted by poorgradstudent on March 25, 2015 - 12:15pm.

Job growth is always a lagging economic indicator. We're in the late stages of what I like to call the "Obama Boom", when Joe Six Pack finally starts to get his share of the growth.

"calling for a recesssion in the next few years" is like calling for rain sometime in the next few months. It's such a big window it's basically guaranteed to be true, and gives you zero information on if you should pack your umbrella today or not.

Those of us who closely watched this most recent bubble learned first hand that while markets are somewhat predictable, government actions can be all over the board. Predicting a specific policy response is kind of a fool's errand.

I think this is where it all then comes back to fundamentals. Fundamentally San Diego county real estate is probably slightly overpriced right now. Someone looking to buy a home or investment property should tread very carefully. But rents arguably can support current prices in most areas. There's still an untapped resevior of millenial basement dwellers who are bound to emerge sooner or later and prop up the rental market.

These sort of grand predictions can attract attention, but are often pure speculation.

Submitted by wallers on March 25, 2015 - 5:08pm.

Just fyi today from my realtor. I should buy!

I just wanted to update you on the Felton Home.
Seller received 5 offers and will be in escrow this week.

Agent didn't disclose if they are over the list price yet but I assume they have gotten at least $515K offers.

I know that you are a bit discourage about the market in the metro area but more and more people want to live here and they are driving up the prices.

Best Wishes,

Submitted by FlyerInHi on March 25, 2015 - 6:22pm.

poorgradstudent wrote:
Job growth is always a lagging economic indicator. We're in the late stages of what I like to call the "Obama Boom", when Joe Six Pack finally starts to get his share of the growth.

"calling for a recesssion in the next few years" is like calling for rain sometime in the next few months. It's such a big window it's basically guaranteed to be true, and gives you zero information on if you should pack your umbrella today or not.

Those of us who closely watched this most recent bubble learned first hand that while markets are somewhat predictable, government actions can be all over the board. Predicting a specific policy response is kind of a fool's errand.

I think this is where it all then comes back to fundamentals. Fundamentally San Diego county real estate is probably slightly overpriced right now. Someone looking to buy a home or investment property should tread very carefully. But rents arguably can support current prices in most areas. There's still an untapped resevior of millenial basement dwellers who are bound to emerge sooner or later and prop up the rental market.

These sort of grand predictions can attract attention, but are often pure speculation.

I like your writing. Very measured and accurate.

Submitted by XBoxBoy on March 25, 2015 - 6:44pm.

While reading The Economist last week I ran across this statistic:

The Economist wrote:
Last year authorities in the Houston metropolitan area, with a population of 6.2m, issued permits to build 64,000 homes. The entire state of California, with a population of 39m, issued just 83,000.

Now I don't know what everyone else makes of that but my sense is that we simply aren't building enough new housing in California, and thus housing prices are gonna go up. Plain and simple.

XboxBoy

Submitted by Balboa on March 25, 2015 - 6:55pm.

wallers wrote:
Just fyi today from my realtor. I should buy!

I just wanted to update you on the Felton Home.
Seller received 5 offers and will be in escrow this week.

Agent didn't disclose if they are over the list price yet but I assume they have gotten at least $515K offers.

I know that you are a bit discourage about the market in the metro area but more and more people want to live here and they are driving up the prices.

Best Wishes,

I looked that place. I actually really liked it, but I couldn't talk myself into paying that much to continue share a bathroom. The seller lived there on her own -- must have been nice!

Submitted by CA renter on April 1, 2015 - 11:36pm.

Jazzman wrote:
FormerSanDiegan wrote:
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.

It may be difficult to show a direct relationship. Some argue rising rates first impact demand, but supply and demand then influences price. A more recent debate focusses on the effect that prolonged periods of monetary easing has on the housing market. These researchers seem to have found a corelation:

An exogenous 100 bps decrease in the short rate results in about a 50 bps decrease in the long rate on impact, and an increase in mortgage loans to GDP of about 0.5 percentage points. Yet the effect of the initial shock keeps building over time, and by year four there is about a 3 percentage point increase in the ratio of mortgage loans to GDP.In light of the response of long-term rates and mortgage lending, one might expect house prices to increase in response to an exogenous decline in interest rates. The bottom-right panel shows that this is indeed the case. A fall of the short rate of 1 percentage point builds up over time and leads to a 4% increase of the house price-to-income ratio after four years. (Or alternatively, an exogenous increase results in a sizeable decline instead.) Various robustness checks and sample splits further strengthen our core result that monetary policy has indeed a powerful influence on households’ willingness to take bets on the house. https://agenda.weforum.org/2015/02/what-...

Interest rates have been declining consistently for many years. In the last 20 years, the 30 year fixed rate mortgage has halved. House prices in San Diego, on the other hand, have increased 180% over the same period. So while price and interest rate indices mat not track each other precisely, there is more than coincidence at play here. And it's probably not without good reason that imminent central bank tightening has everyone on tenterhooks.

During the 70s and 80s, we had the Baby Boomers entering their peak buying years. At the same time, women were entering the workforce en masse, increasing the amount that people were willing to pay for housing (and other purchases). Nixon also took us off the gold standard in the early 70s. All of these things would certainly affect housing prices, and were likely the cause of most of the inflation during that time...and it was that dramatic and rapid rise in inflation that caused the Fed to increase interest rates they way they did in order to cool things off.

Higher interest rates do not cause housing prices to rise. All else being equal, they will cause housing prices to fall commensurately. Most people buy based on the PITI payment; interest rates can affect monthly payments dramatically. Note that when the Fed wanted to slow/stop the decline in housing prices and other assets, they dropped rates to zero. They are, in fact, causing people to pay more for assets than they would pay if interest rates were normalized.

Submitted by fun4vnay2 on April 3, 2015 - 10:49am.

I agree and believe from my common man/sense perspective that a rising interest rate would decrease the prices of the homes as most of the people buy based on monthly payments..

Submitted by Balboa on April 3, 2015 - 6:30pm.

I also agree with CA renter. I'm currently renting, but have a pretty good nest egg. If interest rates increased enough to push down prices, I think I'd be okay buying at the higher interest rate because I would be able to make a substantial down payment and have the prospect of eventually refinancing.

What I'm wondering is, who sells their house when high rates have depressed prices and the house in question is financed at a record low interest rate? Will inventory be limited sellers who are desperate or lucky?

Seems like it could be years before that's a relevant question, I guess. a quarter percent bump by the Fed every so often doesn't seem likely to do much to prices...

Submitted by SD Realtor on April 4, 2015 - 9:15pm.

It is a really difficult question to answer. Interest rates relative to price is also something that we do not have much data on. Certainly the rates we saw in the late 70s and early 80s would have a substantial impact on prices. However when we had those rates in the early 80's there was no real estate catastrophe in San Diego. Yes it was affected but not in an "end of the world" sort of way.

Given the pricing we have now I am not sure how the market will react. No doubt that if we are in a situation where mortgage rates are at 7 or 8% I believe we will see a definite decrease in the number of buyers.

How about sellers?

I think there are several dependencies that while subtle can be overlooked. Think about the following factors...

- Homeowners locked into low rate 30 year or even 15 year mortgages.
- Is there wage inflation?
- Are there accompanying factors that also are going up? Rents? Cost of fuel, food, etc?

These factors may play a much greater role then the reduction of buyers in the pool. One can make a case that it may be easier and financially beneficial to not sell and either rent the property out, (especially if rents are high which is the case in high interest rate environments) or just sit tight. While the asset (home) may be depreciating, it is being serviced using a low interest rate vehicle at a time when the supply of money is very tight. Why sell?

So...

I guess my point is that one can make an argument in either direction as to what happens when (not if) rates go up again... or perhaps we are a big version of Japan and we sit with low rates for 20 or 30 years. Hey we have done it for more then 10.

It is a tough call to make.

Submitted by CA renter on April 4, 2015 - 11:23pm.

Definitely a tough call. No doubt that sellers who bought when prices were lower and then refinanced using these lower rates are in a pretty good place for as long as rents stay high and other investments look overbought.

There are a lot of variables. I just like to point out that looking at the 70s and 80s as indicative of how the housing market should fare if rates rise isn't necessarily a good idea because there were other factors at play during those years. Of course, there may be entirely different factors in the future that could affect the housing market in a similar way, but we just can't know until we're deeper into it.

Submitted by an on April 4, 2015 - 11:27pm.

SD Realtor, I totally agree. Those of us who locked in at this low rate, why sell when rate rise? Especially if rate rise above the current mortgage rate. If anything, I would drag that out as long as possible, since my money would be earning a higher interest rate than the bank is charging me.
If rent and income rises, why would you sell when your monthly cost to rent a similar place would be higher than your mortgage and your take home pay would make servicing that mortgage even easier.
I think the only way we'll see lower price is if we have job loss and declining income. I.E. if we see deflation, not inflation. You won't see rate rising with deflation.

Submitted by CA renter on April 5, 2015 - 11:18am.

AN wrote:
SD Realtor, I totally agree. Those of us who locked in at this low rate, why sell when rate rise? Especially if rate rise above the current mortgage rate. If anything, I would drag that out as long as possible, since my money would be earning a higher interest rate than the bank is charging me.
If rent and income rises, why would you sell when your monthly cost to rent a similar place would be higher than your mortgage and your take home pay would make servicing that mortgage even easier.
I think the only way we'll see lower price is if we have job loss and declining income. I.E. if we see deflation, not inflation. You won't see rate rising with deflation.

Depends on why deflation is happening. Look at the PIIGS, for example, or even the U.S. when the financial crisis was coming to a head. Rates went up drastically until the central banks of the world intervened together.

What happens when/if central banks run out of ammunition? We're already at ZIRP and with each successive QE intervention, the effects become smaller and smaller.

Submitted by an on April 5, 2015 - 2:30pm.

CA renter wrote:
Depends on why deflation is happening. Look at the PIIGS, for example, or even the U.S. when the financial crisis was coming to a head. Rates went up drastically until the central banks of the world intervened together.

What happens when/if central banks run out of ammunition? We're already at ZIRP and with each successive QE intervention, the effects become smaller and smaller.


Interest rate is something the central banks set they only raise rates when there's inflation. Your example about when happened in the US when financial crisis was coming is a prime example. When the data show that there is negative growth/recession, they dropped rate. They only raised rates when the data was still showing growth/inflation. Tell me, what did they do in 2008-2009?
As for PIIGS, that's a different scenario, because PIIGS is only part of the EU and the European central bank have more to worry about than just PIIGS. That's like saying, a few states w/in the US is seeing recession, do you think the Fed will lower rate?

Submitted by joec on April 5, 2015 - 6:48pm.

I think using PIIGS is a bad example and a different beast because all those counties don't control their own currency and have to answer to Germany.

Had to quickly look up as I didn't care for PIIGS, but (Portugal, Italy, Ireland, Greece and Spain) you can see all those are old EU countries with a ton of problems like massive youth unemployment, no fiscal policy (Greece now), high unemployment, yadda yadda yadda...

I've said many times, the fed would raise rates ONLY to get off zero, and even then, they are being so slow about it. The problem with current renters and I can understand their bitterness is that if rates are low for say 20-30 years, you've pretty much "used up" 20 or 30 prime years of your life. Japan is still stuck at lower rates (off 0 I think now). For all we know, if rates go up, people who have locked in will just rent places out. With such small inventory, rents will probably go up. Also, they may get more aggressive with longer term loans like 40 years, (100 years in Japan I hear) like what they are doing with car loans so payment may stay the same, but housing prices just don't move much.

If you enjoy renting, that's all great and good, if you hate rent increases (why we bought actually) and like a known housing payment on a commodity you MUST have to live in, then buying is such a load off your head.

You can always look for investment properties if you want to after your primary residence, but people should really (much easier for families) just live within their means in terms of a house and don't see it as an investment. It's just shelter and after 30 years, maybe it will be cheap shelter at that point. Much harder for the single folks here I think since you can tell from the posts how their mindset is very different from people who worry about a family/pets/etc...

SD Realtor, did you purchase a place yet? I don't think I've seen a note here after following this place for almost 10 years, you've mentioned buying yet.

Also, for people renting, be cautious of your own renter bias just assuming things will collapse or go down. Similar to what AN said, a lot of buyers (even poor me) would try to hold on to our homes if we're already at a much lower rate or our payments are significantly lower than comparable rents.

Submitted by EconProf on April 5, 2015 - 7:56pm.

All this may be irrelevant if interest rates don't go up after all. Forecasters have been predicting interest rate increases for so long now and have been wrong. Tonight in premarket trading the 10-year bond is down to 1.83%.
At the beginning of 2014 it was at 3% and all predictions were for it to go to 4% by the end of 2014. Instead, it went down to 2%. At the beginning of 2015 most predictions were for it to go up throughout the year. Instead, it is falling, and I don't see it above 2% at year end.
The reason is primarily a weak economy. The latest figures on a whole slew of economic indicators are pointing to a nearly flat economy this year: job creation, wage stagnation, weak exports due to a strong dollar, the rest of the world flat or in recession, weak consumer spending despite the gift of plummeting oil prices (thank you, fracking) to our family budgets, the list of bad news so far in 2015 goes on. Some economists say we are already in a recession.
The weak economy will convince the Fed to not take the punch bowl away for quite some time.

Submitted by CA renter on April 5, 2015 - 10:04pm.

joec wrote:
I think using PIIGS is a bad example and a different beast because all those counties don't control their own currency and have to answer to Germany.

Had to quickly look up as I didn't care for PIIGS, but (Portugal, Italy, Ireland, Greece and Spain) you can see all those are old EU countries with a ton of problems like massive youth unemployment, no fiscal policy (Greece now), high unemployment, yadda yadda yadda...

I've said many times, the fed would raise rates ONLY to get off zero, and even then, they are being so slow about it. The problem with current renters and I can understand their bitterness is that if rates are low for say 20-30 years, you've pretty much "used up" 20 or 30 prime years of your life. Japan is still stuck at lower rates (off 0 I think now). For all we know, if rates go up, people who have locked in will just rent places out. With such small inventory, rents will probably go up. Also, they may get more aggressive with longer term loans like 40 years, (100 years in Japan I hear) like what they are doing with car loans so payment may stay the same, but housing prices just don't move much.

If you enjoy renting, that's all great and good, if you hate rent increases (why we bought actually) and like a known housing payment on a commodity you MUST have to live in, then buying is such a load off your head.

You can always look for investment properties if you want to after your primary residence, but people should really (much easier for families) just live within their means in terms of a house and don't see it as an investment. It's just shelter and after 30 years, maybe it will be cheap shelter at that point. Much harder for the single folks here I think since you can tell from the posts how their mindset is very different from people who worry about a family/pets/etc...

SD Realtor, did you purchase a place yet? I don't think I've seen a note here after following this place for almost 10 years, you've mentioned buying yet.

Also, for people renting, be cautious of your own renter bias just assuming things will collapse or go down. Similar to what AN said, a lot of buyers (even poor me) would try to hold on to our homes if we're already at a much lower rate or our payments are significantly lower than comparable rents.

Agree about those countries not controlling their own currencies. Just pointing out that interest rates can go up during deflationary times. Of course, if people start to question the value of our currency, that's another story... I've long said that we should avoid stepping into Japan's shoes. I certainly don't want to trade places with them, but fear that we are going there.

The portions of your post that I've bolded, above, are spot on. This is largely why we wanted to buy, as well. It's largely psychological, but when you have a family, stability is #1. It's not a matter of whether or not a house is a good investment; some of us just want to settle into a home.

Submitted by masayako on April 6, 2015 - 10:07pm.

I can't do Market Timing, so I just keep investing with what I can afford. Last time I checked, 2008 was the best investment time in my lifetime. I gained much during that period. Looking back, as my brother-in-law said: "it takes steel balls to buy stocks in 2008." I'm glad I did.

I can't predict the future, but here's my educated guess. SD housing price will go up/down/sideways depend on each local neighborhood & availability. From what I see, sellers are not desperately try to sell and buyers are not desperately try to buy at all cost. The housing market won't crash in the short term. Lending industries are not misbehaving like they did back in 2003-2007. So, I don't see it crashing yet.

State of the economy:
Stocks are going up. Lots of folks with lots of funds to invest. I don't see huge growth coming. Things are not cheap. I am holding and buying more when opportunities arise. No one can time the market, I'm just a boring buy & hold long term investor, so it doesn't bother me too much what comes the next 5 years down the road. In fact, I hope for a correction so I can buy more at a cheaper price.

There will always be wars, recession, corrections, deficits, gold bugs, threats of U.S. going bankrupt etc.. Sure... in the end, S&P on average is still up 5-7% every year. Sit tight, save a little more, consume a little less and everything will be fine.

Submitted by fun4vnay2 on April 7, 2015 - 12:59pm.

I think the wildcard is interest rate
Right now, the govt is propping up a lot of prices here n there by keeping rates low.
Not sure how do you differentiate crash Vs correction. But as we all agree, a correction is coming both in stock market and housing market.
I see a lot of people dis-agreeing saying "this time is different" but history has taught us otherwise.

A correction is due, the reasons may not be the same. So each time is indeed different.

Submitted by CA renter on April 7, 2015 - 7:47pm.

Agreed, rockingtime.

Submitted by joec on April 7, 2015 - 7:52pm.

rockingtime wrote:
I think the wildcard is interest rate
Right now, the govt is propping up a lot of prices here n there by keeping rates low.
Not sure how do you differentiate crash Vs correction. But as we all agree, a correction is coming both in stock market and housing market.
I see a lot of people dis-agreeing saying "this time is different" but history has taught us otherwise.

A correction is due, the reasons may not be the same. So each time is indeed different.

The problem is every government has low interest rates with Europe (Germany) well in the negatives now (you pay them money to have your money in their bank)...

Another problem I see is they can extend this game far longer than most of us will care or be alive. Japan has been low for near 30 years now (80s?) and if the US or Europe does this, do you really care you "got in" at the best prices?

If rates don't change for a long time, you may be dead before you can even enjoy a home.

In the end, buy if you need to and if not, just rent and accept that

Unlike stocks, since you have to live in a place, I say save enough to not put much stress on your budget and buy a place to live (small if you are single to keep cost closer to rent) and don't worry about where housing will head. While you wait, take advantage of the tax benefits (if possible) and save a war chest for any collapse (if any)...IMO, no collapse is happening anytime soon.

Submitted by fun4vnay2 on April 8, 2015 - 12:34pm.

Thanks Joec,
It is important for me to keep a tab on general people's opinion as this gives me an entry point to market: be it stock or housing.

I invested a bunch in stock and in housing in 2011 when every one said not to do so... I think I did decently good.

I am looking for more opportunities like this.

This time, it may not be interest rates, something different....

We'd see..

Submitted by bearishgurl on April 8, 2015 - 1:34pm.

Whether the residential RE market in CA is currently holding its own or increasing in value is entirely local ... on a micro-level.

I've been "saving" SFR listings online located in Napa, Sonoma and Mendocino counties since about mid-January 2015.

I just visited my "saved" listings today and had to delete all 14 of them which were "withdrawn" from the market just day(s) or week(s) after listing. The majority of these were last purchased in 2007 (the sellers obviously didn't feel they could even get within $20K of what they paid in 2007), not even taking into account the costs of selling.

I'm finding that there are a lot of would-be sellers out there "testing" the market this spring.

Only one actually sold, a listing in Rohnert Park, a relatively "close-in" city in Sonoma County (not rural or semi-rural as are most of the areas I'm interested in). It sold for $2K more than asking price in less than 60 days (incl escrow period).

Yes, the closer-in bay area counties are "on fire" and thus devoid of listings which last more than 3 days but that is not the case everywhere in CA.

My spot checks in LA County show that SFR listings seem to be disappearing fast everywhere ... at all price points. Even heavy fixers in "working-class" areas are selling fast there! Condos seem to be taking twice as long to sell as SFRs but do sell nonetheless. Except for just a handful of small cities which still have too many current short-sale and FC listings, the distressed inventory seems to have been cleared out of LA County. Some zip codes and micro areas in LA County are every bit as "hot" as the bay area right now ... market wise.

LA County has next to zero "community facilities districts" (areas with MR) and far fewer neighborhoods with HOAs than does San Diego County as it is far more well-established. Thus, it never had degree the distress that SD, RIV and San Bern Counties did (Orange Co to a much lesser degree). Most of LA County's residential distress appears to me to have resulted from homeowners taking out subprime cash-out refis and HELOCs during the "easy-lending" era ... much moreso than homebuyers who simply bought at the wrong time.

Even in SD County, there are still small pockets all over the county which still have too many current "distressed" listings dragging down local asking prices (and likely future sold comps). Would-be sellers would be better off waiting to list if at all possible if their properties are located in any of these micro-areas, IMO.

In all cases, I don't think interest rates, the state of the economy or perception of future water availability have a damn thing to do with anything, especially in CA coastal counties. It's obvious to me that when a listing closes escrow 10-20 days after being first listed, it was an all-cash sale.

Submitted by fun4vnay2 on April 8, 2015 - 5:17pm.

Just curious, How do you define coastal california ?

Would whole of SD be qualified as coastal ?

For my perspective, everything is cyclical and nothing keeps going up for ever. This gives us opportunity.

A lot of people tried to convince me otherwise about SD real estate in 2007, I disagreed with them and bought in 2011.
The first house I bought in 2001, I sold it in 2007ish..

I am sure, my current house valuation would come down with due time

My guess: Wages are going to be stagnant at best which would affect the housing prices as well.

Submitted by bearishgurl on April 8, 2015 - 6:11pm.

rockingtime wrote:
Just curious, How do you define coastal california ?

Would whole of SD be qualified as coastal ?

For my perspective, everything is cyclical and nothing keeps going up for ever. This gives us opportunity.

A lot of people tried to convince me otherwise about SD real estate in 2007, I disagreed with them and bought in 2011.
The first house I bought in 2001, I sold it in 2007ish..

I am sure, my current house valuation would come down with due time

My guess: Wages are going to be stagnant at best which would affect the housing prices as well.

Yes, in relation to inland CA counties, SD County is considered "coastal." However, the TRUE CA "coastal market" is within 2-3 miles from the coast, IMO, given varying land elevations creating coastal views showing whitewater. The "coastal market" is also located on the western side of major geographical boundaries such as freeways and RR tracks. A property with a "peek' view of blue water which is located several miles inland from the ocean isn't really considered to be in located in a true "coastal market." But ALL coastal CA counties have more temperate weather than inland counties and thus their RE prices reflect that.

Consider the vast pricing differences between LA County and it's neighboring county to the east, San Bernardino County. Even similarly-sized houses on the LA side of the county line are worth nearly 2x as much as those on the other side of the county line (SB County).

There are good reasons for this, not the least of which is much better zoning (less "mixed use" zoning) and less density in the part of LA County bordering SB and RIV Counties. Many inland CA counties and micro-areas within those counties where the land is cheaper still have a lot of mixed-use zoning on the books which lowers the value of ALL surrounding properties. (Part of unincorporated Spring Valley is a good example of mixed-use zoning in SD County.)

In 2007, SD County's residential RE market had already started to come down a little in price but did not really hit bottom until the last quarter of 2009.

By the last quarter of 2010, the market was already beginning to rise in some (not all) areas. This wholly depended upon the level of distress in the micro area. By 2011, many "coastal" micro markets had already bounced back or were beginning to.

I DO still think there is opportunity out there today .... for CASH buyers who have the ability and access to tools to do a lot of DIY.

I do not believe stagnant wages (or even an "employee's market") affect RE values in well-established areas of coastal counties. This phenomenon MAY affect home values in newer tracts which are adjacent to white-collar suburban or exurban job centers. It does NOT affect values in the most desirable, most established urban/coastal areas of coastal CA counties because a very large portion of the sales occurring within them are all-cash sales and another portion of those sales are buyers using a >50% downpayment. In these markets, the typical buyer is NOT Joe Q. Workerbee, his spouse and 2.3 minor kids.

In rural/semi-rural coastal CA counties, the bulk of the residential sales there are all-cash sales. There aren't any high-paying white-collar jobs within commuting distance of those towns/small cities (except maybe local govmt jobs). Thus, the bulk of the buyers in these markets today are "retirees" or second-home buyers.

RT, if you're depending on "stagant wages" for your next CA RE buying "opportunity," you'll need to choose your shopping parameters very carefully, imho.

Submitted by joec on April 8, 2015 - 6:54pm.

rockingtime wrote:
Just curious, How do you define coastal california ?

Would whole of SD be qualified as coastal ?

For my perspective, everything is cyclical and nothing keeps going up for ever. This gives us opportunity.

A lot of people tried to convince me otherwise about SD real estate in 2007, I disagreed with them and bought in 2011.
The first house I bought in 2001, I sold it in 2007ish..

I am sure, my current house valuation would come down with due time

My guess: Wages are going to be stagnant at best which would affect the housing prices as well.

I don't know. You seem to be set that things have to go down.

Again, I can say it can "eventually" go down too, but if it happens in 20-30 years, who cares? I'm probably dead already.

As Rich has posted, we are no where near any bubble levels of the 2005s and the stock market is near all time highs. This means like you and I'm sure many of the posters here, many have TONS of cash sitting on the sidelines not sure what to do about it.

I don't know who or what they were disagreeing with you in 2007, but 2011 probably actually missed some of the upside in some areas. A lot of people here (you can see their posts) bought in 2009 and 2010 (we did in 2009).

As I've mentioned before, in some areas, wages for "those" people are not stagnant. They may get more of their income from stock options or stocks in general. People buying 600-1 mil homes aren't making "middle class" household salaries I don't think.

You also have foreign buyers. I don't buy the collapse I read here due IMO, to rents. Rents are way too high in the areas I watch for housing prices to collapse. Add in low interest rates for people who bought those homes, low investment options in other areas, and you have most people not willing to sell for less than what they paid IF THE RENTS easily cover their holding cost.

As posted, supply still seems rather lowish from what I'm seeing.

All this is due to me only looking at areas I'd personally wouldn't mind living in (1-2 miles from beach, CV...etc...)

No condos, east or south side as you lose the "asian" buyer I feel in those markets. Asians love real estate and you can tell from simply going to 1 new development opening in Carmel Valley. Last time I went to one, there were hundreds of people.

You bought in 2011 and I doubt any of us would "miss" things if it truly crash. Other than a nuke or something like wars, I don't see any easy opportunities.

Submitted by fun4vnay2 on April 12, 2015 - 10:02am.

I think a correction/may-be-not-crash is due in SD at least. This correction stands true for both real estate and stocks.

I can see everyone trying to desperately prop up the prices here with all the means they have.

For me, it'd be interesting to see how would it play out because each time is different and we all have out own binders ON.

I won't be surprised if my own house go down below for what I bought.

Submitted by joec on April 13, 2015 - 6:49pm.

I think that'd be true if the general public even liked this stock market at all. This is the most hated stock market rally in the history of stock markets I believe and until that changes, everyone still thinks it's going to collapse meaning it will probably continue to rocket higher.

At near 0% everywhere else, people have no where else to put their money so they put it in stock and hope/pray...poor people don't invest in the market because they don't have money...

I hear China jumped up like 100% in one year now? because the guvment is looking to do some stimulus there now?

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