| My thoughts on the SoCal market |
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sam1000
Full Member
Cash: $ 21.05
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Joined: 28 Jul 2005
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| My thoughts on the SoCal market |
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If I had one word to describe the market here I would use "Insanity"! In the past few years there has been a rush to buy Real Estate by people thinking they need to get into the market before they are priced out forever. Because of this mentality, you have buyers doing whatever it takes including taking ridiculous types of mortgages to get into a home with the hope that skyrocketing rates of home appreciation will continue for a good while. Unfortunately, most of these people are very short sighted. They want to get into a home NOW, it's the instant gratification thing. They don't think about how they are going to afford their mortgages if the variables change tommorow and they are definitely changing.
My opinion is that it pays to wait right now. There are 3 possible scenarios and ONLY three and in all three scenarios it pays to wait.
The first is that there is an outright crash.
Second, the bubble can deflate slowly similar to the early 90s and there is a small yearly depreciation, perhaps 5%/yr over the next 5 years, most likely in my opinion as inventories rise and people start cashing out at the first signs of a decline, however I predict more of a 8-10%/yr decline. Remember that between 1990 - 2000 the net appreciation of Real Estate in SoCal was 0%.
Third is the market flatlines, IMO this is the least likely scenario because 5-yr appreciation has been 130% in this market and average income growth has been -3%, you read right negative 3%. The time period required for incomes to "catch up" to home prices is unrealistically long.
Since market affordability is already astronomically low and ARM and FRMs are going higher and higher each week there is simply no possibility to sustain further appreciation of the market based on any justifiable factors.
Last week Suze Orman gave factual data that home listings were up and homes are staying longer on the market.
Would welcome your thoughts on this too 
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Sat Nov 05, 2005 6:17 pm |
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Nismo
New Member
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Joined: 12 Oct 2005
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The prices have sky rocketed in the past 5 years in Socal. Even in the rural parts of the the state. My uncle bought a home in Hysperia around 8-6 years ago more or less for 80k. Now its worth a bit over 250k. Now if thats not an investment I dont know what is. He got that house for such a low price becauseof the location. For people that havent been to Hysperia, its pretty much a rural place at the time where it was under development. Now its a bit better but it still isnt L.A.
Now another scenerio involves my mother in law. She lives a city near Pasadena in a duplex. A gentleman went to the door and asked her if she would be willing to sell that peice of property for 1.2 milliion for a peice of land that is less then 1 acre big. Prices are high and I do hope that they go down when my wife and I decide to buy a house.
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Mon Nov 07, 2005 4:57 am |
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forexdaytrading
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Cash: $ 12.40
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Joined: 14 Jul 2005
Location: Miami, Florida, USA
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sam1000, beautiful post. You have summarized some of the crucial danger signs that point to a severe housing market decline or crash. SoCal will just get whacked harder.
There are many new real estate investors that have been participating in this market for only 5 to 8 years (the period of time when prices have increased parabolically in many areas of the US and in other countries). If you talk to these people, who are oblivious to historic norms, they act as if this relatively short period of time is normal. They take the price during this time and extrapolate it 1000 years into the future. This is scary stuff and most of these people are going to get caught with their pants down when interest rates start creeping up or when we run out of fools who continue to pay astronomical prices for real estate.
Most participants in any financial market rate the quality of an investment using an end-justifies-the-means mentality. For example, "My uncle Goobert bought a property 5 years ago for $100K. Now Billy Bob wants to buy it for $1 million. What an investment! I got'to get me some."
Check out this Japan boom-and-bust housing chart. What has happened in Japan (and the bearish real estate market that it is still enduring, can very easily happen in the US - very soon).
http://www.forex-day-trading.com/Graphics/japan-real-estate-bubble.gif
What goes up, must come down.
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Mon Nov 07, 2005 2:41 pm |
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paul80424
Contributing Member
Cash: $ 3.55
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Joined: 12 Sep 2005
Location: Littleton, Colorado
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| SoCal coming to Colorado |
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I am a Realtor in Denver. I have so many clients coming from SoCal. Many are cashing out because they feel the bubble is about to burst. They are coming to Colorado with cash falling out of their pockets. My clients are finding they can get a lot more house for the money. I would say 60% of my clients are coming from SoCal.
Paul Maynard
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Wed Nov 23, 2005 2:56 pm |
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LottomagicZ4941
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Joined: 02 Dec 2004
Location: Earth
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| Re: SoCal coming to Colorado |
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quote:
Originally posted by paul80424
I am a Realtor in Denver. I have so many clients coming from SoCal. Many are cashing out because they feel the bubble is about to burst. They are coming to Colorado with cash falling out of their pockets. My clients are finding they can get a lot more house for the money. I would say 60% of my clients are coming from SoCal.
Paul Maynard
Perhpas one of them can buy our rental unit.
I has been empty for months and months.
Well if they think the bubble is about to burst perhaps one will want to rent it:)
Painting it to a neutral color. A couple of renters ago they painted it and I liked it so we kept it. But we have been told going to a neutral color may help. Been told that some having a problem selling sell as soon as they go to the boring neutral.
Our rental is in Broomfield. A couple from FL was doing a rent to own option but his wife got a job to far away and they did not take the option to buy.
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Sat Dec 03, 2005 12:05 pm |
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