Posted by Robert Campbell on August 20, 2003 at 09:51:49:
Brent,
You make a good point. Family first. If I were in the same position, it’s a good bet I would bring my sick kids to the Emerergency Room too.
Robert Campbell
real estate forecast for California - Posted by adriana
Posted by adriana on August 17, 2003 at 23:37:27:
Hello all,
I am interested in purchasing a property in Southern California and rent my current one. However, with the market going up so drastically, I am quite concerned to invest in another property at this moment.
I know that it is quite hard to predict this crazy market, however, any opinion if the market will continue to go up, stabilizing or sliding down for the next 6 to 12 months?
Thank you,
Adriana
Re: real estate forecast for California - Posted by John V, FL
Posted by John V, FL on August 18, 2003 at 11:50:03:
I’d only buy a property at 8 to 10 times gross annual rents. Much of Southern California (unless way east)is priced at maybe 25-30 times annual rent. Good chance things return back much closer to the mean within 3-5 years. Anyone who says real estate always goes up is being naive. In the long run it is true and maybe someone can quote median national housing statistics but on a regional basis shifts can be dramatic in either direction. Colorado home prices are way down from a couple of years ago as an example. First property I ever bought in Florida was 20 years ago at the top of a cycle in my area. By the 1991 recession it was down 40%. Then Hurrican Andrew happened and since then it has more than tripled and I recently sold it for double what I paid initially. With areas like yours drive by the historic low interest rates and easy credit in a rolling depression it is frightening what could happend when things go the other way.
Re: real estate forecast for California - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 18, 2003 at 10:50:27:
Adriana–(CA)-------------------
Don’t pay attention to short-term market price fluctuations.
Whether you buy for long-term rental or for quick turn-over, don’t worry about price changes.
Just set criteria to buy and, if you can find properties that meet your criteria, buy. If not, don’t.
Good InvestingRon Starr****
Re: real estate forecast for California - Posted by Wai Chung
Posted by Wai Chung on August 18, 2003 at 03:14:09:
HI Adriana:
I am from southern California too. If you are interested with your local market, I recommend you go to to investment club of your area. You should be able to find it from tcinvestor . com or if you are in my area (SD), go to www.sdcia.com
good luck
-Wai Chung
*(check out the forum from SDCIA, you may find what the market trend in S. CA from Bruce Norris)
Re: real estate forecast for California - Posted by adriana
Posted by adriana on August 18, 2003 at 18:45:12:
John,
You exactly explained my point. I am afraid the market is too inflated to buy now. I could easily rent my current property and still make a little profit because the rental market is higher than my mortgage, however if I buy a property that is inflated now, I don’t know if in 1 or 2 years I would be able to rent it out and make a profit.
However, Ronald Starr has also a point. Set my price and start from there.
I am quite new to the RE investment and I need to be cautios, however I trully believe that RE is a very good investment; at the same time, I am thinking that the current market is overly priced, especially in SoCal.
Thank you all for your kind answers
Re: real estate forecast for California - Posted by Will G.
Posted by Will G. on August 18, 2003 at 19:26:52:
Ron, with high regard for your RE POV I dare say this however, let us not forget what helped fuel California?s rapid appreciation…Prop 13. It came circa 1978ish and coincidentally, is when the market began its phenomenal ascent upwards. With State fiscal collapse on the horizon, there is only one more pocket to pick (Homeowners). Taxes have to rise in order for our state to survive. We have already raised every other conceivable tax. Mr. Buffett has joined the Schwarzenegger camp and has already stated his view on raising California property taxes. If he gets his way, Californians can expect the worse as that may be the proverbial straw that breaks the camel’s back for the RE market. Mr. Buffett states that the taxes on his $500K Omaha, NE home are $14,401 while his $4 million Laguna Beach, CA home taxes are $2,264. With the average priced home in many parts of Ca is $400K, imagine what type of tax bill is in store for homeowners? For instance, if you were a phone company employee (ie. W. Nickersen) and lucky enough to have purchased your home in Santa Barbara for $200K and now it is worth 1.9 million, your monthly tax bill ($4,700) would be bigger than your mortgage payment. Or for more normal folks, your $500K home taxes are now over $15,000 per year. Ron, in this instance, do you still feel as though it makes no difference in the long run? I am usually in agreement but this time may be the exception. I welcome your reply.
Will G
Re: real estate forecast for California - Posted by adriana
Posted by adriana on August 18, 2003 at 10:12:23:
Wai,
thank you very much for your information.
The area of interest for me is SouthBay-Long Beach and surroundings.
Regards,
Adriana
Re: real estate forecast for California - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 18, 2003 at 19:52:18:
Will G–(CA?)--------------
Nice to talk to you. I enjoy a exchange of opinions and a sensible discussion of events.
Of course, I don’t have any magic way to predict the future. I certainly could be wrong.
It is possible that property prices will go do some over the next few years. However, I think that the fundamentals are in place to push up home prices in CA.
I work from two main factors, fundamentals, if you like. One is the projectioni of great increase of population in CA over the next 15 or 20 years. Not only will CA have the greatest growth in the number of people, but also the greatest RATE OF GROWTH of any state in the union. Now, if this projection is wrong, my predictions may be in error. But it is the best information I have to work with at this time.
That means greater demand for houses in CA, unless everybody starts doubling up with everbody else.
On the supply side, we see that the number of new housing units constructed over the past five to ten years, perhaps longer, has not matched the increased demand. There is no sign that the production of housing will accelerate greatly in the next five years.
So, with greater demand and lagging supply, I predict increased prices for CA homes over the next 10-20 years. There may be some pauses in there, even some declines depending upon the economic conditions. But I think the overall direction is up.
Now, I advocate two types of investing: holding rental properties for the long haul and quick resell for a profit. When you consider the “long haul,” think exit plan: die owning the properties. Then, what happens in price swings in the short haul is unimportant. You are not going to be selling for 20, 30 , 50, or more years. So you don’t pay any attention to the changes in price in the marketplace. As long as you can keep the properties fixed up and rented out, you will ride through downturns and just be happy about upturns.
If you do quick turn-over investing, you will be holding the property for maybe two to six months, hopefully no longer than that. If you are buying cheap enough, some decline in property values over that time should be minimal. At the depths of the mid-1990s depression in CA, houses in LA were selling for 25 and 30% below their peak prices before the depression. However, it took about three years for this decline to occur. So, I would expect that the decline in value in four or five months to be about 3 or 4%, not too serious a matter if you have bought for at least 20% below market value.
You are right, there is some turmoil in the political arena and the state budget deficit is extreme. However, there are a lot of other things that are happening, too. If you make your investment decisions based on the popular press and TV and radio information, you may easily go astray, in my view.
There is always something going on. There are always a lot of different factors moving things around. Some pushing for increased housing prices, some pushing for decreased housing prices. The cumulative effect of them changes housing prices, in the short term. However, I still believe that the major issue is demand and supply. A simple analysis, but, I think powerful. Remember, I didn’t say that the CA demand for housing would be going up at the national average rate. I said that it will the the HIGHEST RATE IN THE NATION. When you are dealing with extreme factors like that, they have strong effects.
I enjoy a good argument. And I am prepared to change my views. This is how I see things now.
Good InvestingRon Starr**
Change is good? - Posted by Will G (SD-CA)
Posted by Will G (SD-CA) on August 18, 2003 at 20:39:02:
Ron, I am happy to see that you are open to change you opinions. Although I saw the article in the last 24 hours I could not find it and its supporting material but I believe that your first premise of increased population growth in our lovely state may not be accurate. In the article (again, which I cannot locate) states that California?s net out migration is the strongest now than it has been in over 10 years and that with the possibility of an added tax, will send the levels to never before seen numbers. That said, the only calm in the storm is that the outgoing numbers are offset by the rise in incoming lower skilled immigrants, many of which are illegal. If you can agree with that statement then, two things could happen, first the demand for housing as a function of demand will decrease (fewer homebuyers). Secondly, the types of homes in demand will shift downward to reflect the purchasing power of the new immigrants and lastly I agree that your point about “doubling up” has merit. I do not see any change in the supply side of the equation but the demand side added with taxation could prove negative in the short run. Outside of two to three years, we cannot truly predict what effect all of these changes will be (No reflection on Mr. Campbell). I too enjoy a difference of opinion.
Will G (San Diego)
Re: Change is good? - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 19, 2003 at 24:35:27:
Will G–(CA)--------------
I saw that article. What it said is that if you look at movement between states only, more people are moving out of CA than moving in. However, if you include those immigrating from other countries and the population growth through new births, the population is increasing strongly. Some of the immigrants come first to CA, then move out to other states.
So, it may be hard to know if those moving out have higher incomes and thus create more demand for owner-occupied housing than those moving in. Some of those moving out are the recent immigrants. Also some of those moving out are younger people who cannot afford to buy houses in CA. Thus, it is not clear to me that those left behind will provide less demand for housing than those who have left.
There will be changes, you betcha. The direction overall, however, is, I believe, upward pressure on house prices.
Good Investing and Good CogitatingRon Starr******
Re: Change is good? - Posted by John V, FL
Posted by John V, FL on August 18, 2003 at 22:22:40:
Willie, the more I look at this the more I realize these home prices have to go down. My brother lost a 100k IT job and now is interviewing for jobs that pay half that much. Much higher interest rates and real estate taxes coupled with huge debt in place and a declining way of life for many middle and uppper middle income people could be devasting once the greed turns to fear. Who will be able to afford those homes with the added realization it will not make them rich quick like it did during the up cycle. Just hope prices do not crash quickly to mess up this slow economic recovery in our rolling depression. Ron Starr’s fundamental forecast remind me of the top of tech in 1999, commercial real estate in 1988 and gold in 1980 to name three other bubbles. Seems they always get everyone in at the top.
Re: Change is good? - Posted by Robert Campbell
Posted by Robert Campbell on August 19, 2003 at 24:48:21:
Ron, where exactly did you read that article about in-migration vs. out-migration in California?
Thanks.
Robert Campbell
Re: Change is good? - Posted by Matt (Ontario)
Posted by Matt (Ontario) on August 19, 2003 at 04:37:03:
I think we should go even deeper and question the reason WHY the population is increasing first. Is it because of jobs? Now ask the question, what type of jobs? High income, middle income, or low income. If it?s low income then invest in low income rentals. If its middle income then rehabs, lease options, etc, etc. It all comes down to the investment strategy and the NEEDS of the incoming population doesn?t it? If its middle income then it will drive residential housing up.
Re: Change is good? - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 19, 2003 at 07:46:53:
Robert Campbell–(CA)----------------
I believe it was the Sunday, August 10, San Francisco Chronicle. It is possible that it was the Oakland Tribune of that date.
Good Investing********Ron Starr*************
Re: Change is good? - Posted by Bryan-SactoCA
Posted by Bryan-SactoCA on August 19, 2003 at 15:42:19:
I think that most of the population increase is from illegal immigrants who are desperate to escape the failed economies of Latin America. They risk their lives to sneak across the border thinking that the streets are paved with gold in El Norte. When they can’t find a job, they’re stuck since they can’t go back. So they go on welfare and actually cost us money. So the population is increasing dramatically at the level of the very poor and destitute. The population of the destitute is increasing a lot faster than the number of low skill jobs. Since housing is expensive most of these immigrants sleep 20 to a house or on the streets. So there’s no economic gain.
Finally!!! - Posted by Wayne-NC
Posted by Wayne-NC on August 19, 2003 at 18:10:22:
Somebody who know what they are talking about! Yes, population increases but it is not necessary a good thing. There are only 2 kinds of people, ones who contribute more than they cost society and those that cost more than they contribute. Sounds like an accounting equation. When Liabilities “outweigh” the assets what happens? Taxes rise to subsidize it. Good luck with the Ca budget.
Re: Change is good? - Posted by Cee (MD)
Posted by Cee (MD) on August 19, 2003 at 16:34:26:
FYI: Illegal immigrants are not entitled to welfare benefits. They take the less-skilled, back-breaking jobs that are shunned by citizens. Those are very hard working folks who add more than they take away from our economy.
Re: Finally!!! - Posted by Bryan-SactoCA
Posted by Bryan-SactoCA on August 19, 2003 at 21:57:22:
You see, the population is increasing, but in the wrong sectors of society. The middle class-those who have historically paid the most taxes-is shrinking. The numbers of poor people are steadily increasing. The poor pay fewer taxes, either because they earn little or take some form of welfare or both. There are very few rich people (millionaires and above) being created, and those who do have wealth know how to shield it from the tax man. So the population is growing in a way that lessens tax revenue and increases the burden on government. The poor also buy fewer big ticket items-such as houses. That means that the increasing numbers of newly poor trying desperately to succeed in CRE have fewer customers. The rich always move to countries where they can have a free ride, like Monaco or the Cayman Islands, so any attempt to raise their taxes will send them all fleeing for greener pastures while the tax base shrinks. I think that the West is collapsing because capitalism is no longer viable. Look at the Muslims, they want no part of capitalism or Western society, they all want to live like the Taliban. I think that they’ll win eventually.
You’ve Got To Be Kidding!! - Posted by Wayne-NC
Posted by Wayne-NC on August 19, 2003 at 18:04:37:
Myths run abound! When do illegals pay income tax? How do they get mortgages? How did this work get done before they arrived? How many kids do they have after they arrive and who pays for it? Where does the money go after they earn it? Local economy? I don’t think so. It is sent back to help the rest who did not make the trip. How do I know? I see it all the time! It is a net loss if you do your checks and balances.