patrick.net

With interest rates where they are right now, you might already be late for the spring buying season, it's going to be crazy with super low inventory and even lower rates. I would say that if you don't have a specific place in mind, I would wait till the fall.

Unlike bay area, San Diego county only went up 4.8% last year so it's not too much considering a huge move down in rates. If the rates move as much down this year as they did last year, we will end the year with 30 year mortgage rates below 3%. It seems unlikely.

it's still not a bad time to buy mainly because of low rates which will likely go up soon without more bad news from Europe.

one year ago i advised people to buy and i was accused of being a shill and a realtor. HA HA HA. the huge opportunity they lost to their inflated ego ("prices will go in the direction i want because i'm awesome like that"). in the meantime my house went up 12% since then.

jazz music says

Also some very smart observers see the beginnings of a financial collapse which will implode in slow motion starting quietly any day now and by 2017 becoming deflation unbearable to all but the most financially fortified people who are not depending on employment.

Please provide some links. Would love to understand their reasoning.

If you are going to buy, buy west of I-5. I recommend Encinitas.

Interesting question, the prices are sky high, interest rates will never be lower.

Is this another case of activity is made at the margins?

indigenous says

Interesting question, the prices are sky high, interest rates will never be lower.

I wouldn't worry about int. rates and they absolutely can go lower. It is very possible with some odds and probability they will not get much above 3.85-4.25 this RE season unless the Fed raises rates. Then what ever is in the pipeline will exhaust itself before RE prices go down. There is as high if not higher probability they may reach 2.65. (no time table)

http://www.mortgage-x.com/x/ratesweekly.asp

So then what about the prices going up or down? Seems to me that there is a dearth of buyers (domestic), IOW prices can't get much higher? So the prices will go down,

Then there is the Patrick book on the housing trap...

indigenous says

So the prices will go down

That's what I expect. There is some possibility that they could test a bit higher before the trip down over the next couple of years. Last year there were many sellers right out the gate willing to take realized loss of about 60-75% of the 25-40% cost above fundamental recovery prices and was looking for the rest to be bought up by the buyer. I saw lots of rentals re-rented because it didn't happen. Prices are more likely to test lower until fundamentals and prices come to a meeting of the mind.

Buying now unless it's the home of your homes is probably not a good idea, because you are in essence chasing prices higher for them likely to backwash in your face. At the same time don't wait for prices to be cut in half because that is not likely to happen. The more apt scenario is that prices will test to some degree the lows depending on location of 2011-2012. Now is the time for price discovery, planning and being ready to buy near those lows if you can find the property to buy.

Graybox says

Buying now unless it's the home of your homes is probably not a good idea, because you are in essence chasing prices higher for them likely to backwash in your face. At the same time don't wait for prices to be cut in half because that is not likely to happen. The more apt scenario is that prices will test to some degree the lows depending on location of 2011-2012. Now is the time for price discovery, planning and being ready to buy near those lows if you can find the property to buy.

Good answer, albeit the Yellin put has a lot to do with this...

This weeks int. rate 30yr FRM weekly avg. 3.63% down .03 bps. from 3.66%
http://www.mortgage-x.com/x/ratesweekly.asp

If you have a pension you probably have a government job, and those are very stable. It's not a bad time to buy I think if you are in a stable place. In our area (LA) prices dropped lately.

Of course you should consider all the decisions related to buying a house. It is never cheap to own, renting in CA is generally much cheaper. If you are getting into a fixer upper to save money, make sure you have a lot of time and spare budget left for fixing, and make sure plumbing and electrical are in good shape. Most flips out there is just new paint and carpet, they don't actually fix the important stuff.

Kristopher says

I’ve been very fortunate to find a great job and kept a low overhead which has allowed me to save quite a bit over the last 4 years.

Kristopher says

ideally purchase a $425k-ish complete fixer upper with 20% down and fix it up from there.

That sounds very familiar - it's what I did. I'm in the thick of the "fix it up from there" phase. I'd do it again, but I can tell you that it is disheartening to go from being able to save significant amounts of money and have significant amounts of free time to saving 0 (or going further into debt) and having absolutely no free time. I think it will be worth it in the end (we will have a house much nicer than we would have been able to buy otherwise), but it has been a slog. A lot will depend on how much fixing up it needs (ours needed a bit of everything and a lot of some things), and how quickly you plan to get it done.

I can't speak to current market conditions or trajectories in SD..I feel like we almost missed the boat buying in early 2013 Denver...couldn't afford anything we'd want at this point.

Same situation here; relocating to SD from Kansas, absolutely floored by the housing prices. I really want to own and have the independence it allows, and could afford something in the upper 300's to low 400's, but am worried about getting stuck with an albatross if the market tumbles in the next few years. Can someone explain why this city is so ridiculously expensive? What industry is propping up these almost speculative housing prices?

would it be prudent to pay down debt on a mortgage for a house in another state and just rent here until prices come down? I see very mixed signals about future prices; everyone says they're irrationally high, but that they won't start to drop until the Feds raise interest rates. Who knows when that'll be...

alecesne says

Same situation here; relocating to SD from Kansas, absolutely floored by the housing prices. I really want to own and have the independence it allows, and could afford something in the upper 300's to low 400's, but am worried about getting stuck with an albatross if the market tumbles in the next few years. Can someone explain why this city is so ridiculously expensive?

Welcome to California......the land where nothing makes sense.

Kristopher says

Buy a house now or wait?

Since when is this site about housing?

Strategist said: We have a severe shortage.
That's one way to look at it. Or, we have a lot of Prop 13 grubstakers with empty bedrooms.

EBGuy says

Strategist said: We have a severe shortage.

That's one way to look at it. Or, we have a lot of Prop 13 grubstakers with empty bedrooms.

We purchased a new home, but instead of selling our old home which has a property tax rate well below 0.5%, we decided to rent it out. Proposition 13, and my expectations of another phase of price jumps in the next 2 years were the reasons. :)
Empty rooms make for good income from AirBNB, if you can tolerate strangers in your home.

Strategist said: Empty rooms make for good income from AirBNB, if you can tolerate strangers in your home.
Which would be fine, if you had to rent out said rooms to pay market rate real estate taxes.

You're becoming a real Ducky letting out the old place. Whenever I have land baron dreams my wife whispers "Hayward fault" in my ear.

alecesne says

Can someone explain why this city is so ridiculously expensive?

why don't you make a comparative list between SD and Kansas... mystery solved.

alecesne says

What industry is propping up these almost speculative housing prices?

lots of people around the world want to live in coastal california. there are attorneys, doctors/bio-med/pharma, sales executives, business owners/executives, senior managers, senior technical experts, engineers, university admins and professors, real estate developers, people in the entertainment and pro sports industries, wealthy people with vacation homes, etc... so take 1 man in one of these positions and 1 woman in one of these positions and marry them up - that's a lot of capacity to own housing debt, especially if they first bought a home back in 2002 or prior.

When one decides to buy a shack they must overpay.
It's the American Way.

landtof says

why don't you make a comparative list between SD and Kansas... mystery solved.

To clarify, its not that San Diego is more expensive than Lawrence Kansas that I find surprising; the economic back stop of the deep water port, tourism, and military base gives the city a lot to build on; but rather its the high cost relative to local earnings. The Bay Area has tech driving its housing prices up, what is the engine propping up real estate here? For Kansas there are fewer high-paying jobs, and in general less economic stratification which makes things decent but not particularly competitive. I used to live in Menlo Park, but at least there, I knew why people were paying such a premium for the land, here it still seems like a stretch-

I thought I'd update since this thread was bumped yesterday. I still haven't purchased a home and still live in the same beach cottage where my rent has increased $25/month since last posting which equates to about a 1.9% increase. Not too bad all things considered.

I've continued to furiously save and am now near $200k in savings. I'll probably give it another 1.5 years and likely purchase at that time with around $250k saved I figure. I personally believe that we are heading into a recession, whether that will impact housing in San Diego I can't say. If prices came down even 15% I would be overjoyed. That would take us back to late 2013 pricing in San Diego.

I am in my mid-late 20's and am so far ahead of my peers it's incredible. I work in a profession that typically pays 80,000+ to start and attracts people my age. I sometimes wonder what they intend to do since at these prices a decent home would be 7.5x income and nearly all of them have minimal savings.

Housing is related to income and interest rate. Since interest rate is lowest price is high , but economy was crap so housing went down.

As ppl get jobs, they want to buy, and interest rate goes up to balance it. So as interest keeps going up, price will go up little till 2020.
2020, they will start lowering. Interest rate, and mellinials starts purchasing, prices shoot up.

So don't expect much higher prices for few yrs as long as interest rate keeps going up.

Kristopher says

I�ve watched single family home prices climb and climb over the last few years as i�ve been saving and am starting to get worried that they will never come back down to what I consider �affordable� levels.

Did you ever read Patrick's original post that launched this site? Or to put it another way, were you alive between 2002 - 2008? Wait for the next crash, it's not far off. Then you can pick from falling home prices rather than rising ones.

The reason we aren't going to see a huge crash like in 2007 again is that the buyer profile is too strong from this last cycle. 30% or more cash buyers for the last 5 years.

epitaph says

The reason we aren't going to see a huge crash like in 2007 again is that the buyer profile is too strong from this last cycle. 30% or more cash buyers for the last 5 years.

( Now) that is perfectly said

No debt to debt leverage on non capacity owning debt

1/3rd of the cycle is cash

50% bought by the RIch

Best home buyer profile I have ever seen in my life

We go back to basics on housing cycles

Late cycle lending low down payment FHA home buyers at at the most risk,

Pool of those buyers late cycle is very low too

Strategist says

Tight underwriting vs silly underwriting in 2006

true story. i think now they're just "doing their jobs" vs. auto-approve previously.

landtof says

Strategist says

Tight underwriting vs silly underwriting in 2006

true story. i think now they're just "doing their jobs" vs. auto-approve previously.

They are doing their job a bit too tightly. My daughter....real case scenario:
Condo worth $480K.
Free and clear
Debt free
800 FICO
2.5 year stable job with a major company, after graduation. She is 24.
They only gave her an equity line of $50K, because she had a limited credit history even though her FICO was 800.
I would call it reverse madness.
Hey @Logan Mohtashami are you reading this? What's the excuse?

Strategist says

She is 24.

For pete sake she is 24 and has a 50K Home equity line ;-)

2nd lien are based on the capacity to pay extracted out all the debt to income ratio for the full amount

Tight Lending Is a Myth

Logan Mohtashami says

Strategist says

She is 24.

For pete sake she is 24 and has a 50K Home equity line ;-)

2nd lien are based on the capacity to pay extracted out all the debt to income ratio for the full amount

Tight Lending Is a Myth

It's a first. The home was purchased with cash. It's a pathetic 11% LTV, and they were being nice.
The myth is.........?????

Strategist says

It's a first. The home was purchased with cash. It's a pathetic 11% LTV, and they were being nice.

The myth is.........?????

Look at what you're presenting

Tight Lending Thesis based on a 24 year old owning a home Free and Clear and only allowed a 50K H.E Line

She doesn't make enough money yet to take on more, they max out capacity debt taking now

Logan Mohtashami says

Strategist says

It's a first. The home was purchased with cash. It's a pathetic 11% LTV, and they were being nice.


The myth is.........?????

Look at what you're presenting

Tight Lending Thesis based on a 24 year old owning a home Free and Clear and only allowed a 50K H.E Line

She doesn't make enough money yet to take on more, they max out capacity debt taking now

Nope. She applied for $250K. Her debt ratios are perfectly fine. She has zero debt.
Try again.

Strategist says

Nope. She applied for $250K. Her debt ratios are perfectly fine. She has zero debt.

Try again.

She has a Property Tax and Insurance cost right off the bat, she has liability payments right there

Yes they all say, this time it's different.

It certainly looks that way.

But doesn't it look that way all the time?

My bet is that it will eventually crash.

Otherwise all the poor personal trainers, cleaning people, massage therapist, dog walkers that the aristocracy rely on will have to live under the bridge. While for example Placerville, Ca is a pretty nice and affordable place to live.

Something we all don't even think about will make it happen.

Logan Mohtashami says

Strategist says

Nope. She applied for $250K. Her debt ratios are perfectly fine. She has zero debt.


Try again.

She has a Property Tax and Insurance cost right off the bat, she has liability payments right there

Nope. They calculated all that based on $250K. Her income is $72K+
Try again.

Strategist says

Nope. They calculated all that based on $250K. Her income is $72K+

Try again.

Wait we are talking about 250K in debt?

I hate to break this to you but 250K debt is never going to happen with 72K

Again, look what you're resorting to calling tight?

A non traditional loan aspect

This is why the tight lending crew will be wrong for another century,

We don't lend debt to non capacity owners in general ever again, it's never ever coming back

Logan Mohtashami says

We don't lend debt to non capacity owners

What exactly is a "non capacity owner"? Apparently google doesn't know either. The only hit is to someone's twitter feed with one of your posts on it.