Posted by Robert Campbell on January 25, 2005 at 20:48:05:
Randy,
Thank you for the details. I was part of that same real estate crash myself, except in San Diego.
From my personal experience, you’re numbers are realistic.
Yes, I believe there are going to be some great buying opportunities in 2005-2010. I believe foreclosures are likely to rise by over 1000% during the time period, for the reasons you cite.
Robert Campbell
To Sell or not to Sell-Southern CA - Posted by Leo
Posted by Leo on January 22, 2005 at 09:50:31:
I have a nice home/rental property in what was once known as a ‘bedroom’ community of Southern California (Menifee). I have been renting it out for the past 4 years and watching the equity grow quite nicely. I have also noticed realestate is starting to flatten out. A house that sold in a few hours is now taking a couple of months and sellers are no longer getting top dollar. My kanumdrum is that I lived in CA for about 20 years and over time have seen housing prices climb. Should I weather the storm (meaning dealing with renters and downtime from occupancy) and look at this as a long term investment or is this a good time to sell? Another note, this area is becomning less and les of a bedroom community and more and more people are moving to this area. This has it’s upside and downside. Lots of new construction and more updated modern homes to choose from…Any thoughts or suggestions? Thanks!
Re: To Sell or not to Sell-Southern CA - Posted by Mark (SDCA)
Posted by Mark (SDCA) on January 24, 2005 at 10:30:28:
Based on your comments so far, I would agree with David. I too am seeing the signs of a flattening real estate market- longer days on the market etc.
But I am not anticipating anything like a market crash. If you look at the pattern of RE prices out here, you will say they go up very steeply then plateau then go up steeply again. Add to that, that real estate prices are traditionally sticky (many homeowners tend to take their property off the market rather than lower the price).
It doesn’t sound like you have a need for the money so I would let it ride on the rental.
Mark
Re: To Sell or not to Sell-Southern CA - Posted by David Krulac
Posted by David Krulac on January 22, 2005 at 22:07:00:
In general, I would fall on the hold side and here’s why:
CA population continues to grow and will as long as the sun shines, the weather is mild, CA does not fall into the ocean, and influx of people from south of the border, pacific rim and cold northeast and midwest all go to CA.
new construction at higher prices will always pull up the lower priced older houses.
unless there is a major problem with the house or a major problem with the location that dictates sell and get out, why shoot the golden calf.
perhaps you should read “Buy and Hold” by David Schumacher, a SoCal investor who made millions in SoCal residential property, by basically buying good stuff and keeping it forever.
Probably the happiest day in a rental house owners life is when that mortgage is paid off. The huge jump in money in your pocket makes all the hasles seem so much smaller.
Re: To Sell or not to Sell-Southern CA - Posted by Bob
Posted by Bob on January 22, 2005 at 20:22:58:
Hi Leo,
I too live in Socal, don’t know where Menifee is, but you need to have a plan. If you have a better investment than sell, but only if you can without taking a tax hit. Your long term plan should be cash flow, so if you can wait and have your renters pay off all you rentals then you would have permanent cash flow. I would rather have 100K in positive cash flow than 1 million cash in the bank…BOB
Re: To Sell or not to Sell-Southern CA - Posted by Robert Campbell
Posted by Robert Campbell on January 24, 2005 at 11:50:53:
Mark,
>>>>>If you look at the pattern of RE prices out here, you will say they go up very steeply then plateau then go up steeply again.
Can you provide evidence for your claim?
Thank you.
Robert Campbell
Re: To Sell or not to Sell-Southern CA - Posted by Leo
Posted by Leo on January 23, 2005 at 08:27:05:
Thanks David. Some good advice! Where can I find the book you recommended? Amazon? Now for another question, if I hang onto this house how or should I use the equity in it to re invest in additional properties?
Re: To Sell or not to Sell-Southern CA - Posted by Leo
Posted by Leo on January 23, 2005 at 08:35:19:
Bob. This is some good advise. My only plan at this point is taking the equity and looking for new construction and flipping the property. I have never done this before, however I just bought a condo in the burbs of Chicago for my primary residence. The upside to this is that the value of my condo has increased about $30K over the last 15 months, the downside is that I see the investors that did buy are not selling their properties very quickly. Most of them are FSBO and not on a MLS, which might be the problem. I don’t have the skills to buy rehabs and thought this would be a better way to go. Any suggestions?
Re: To Sell or not to Sell-Southern CA - Posted by Mark (SDCA)
Posted by Mark (SDCA) on January 26, 2005 at 11:47:39:
Here are a couple of papers that show graphs detailing the stair step pattern of housing prices. The peaks are successively higher and the valleys are succesively higher as well. one of these is from WA state which also exhibits the same price pattern.
http://www.researchcouncil.org/Reports/1998/Housing/housing.pdf
As an aside, I DO actually agree that the big danger to SoCal housing prices is the current financing out there (no down payment, adjustible rate financing etc).
Lot of downside… - Posted by randyOH
Posted by randyOH on January 24, 2005 at 13:43:26:
Robert,
I live in OC and I think the downside to this market could be as much as 50%. During the last down cycle here, prices dropped around 20 to 30% in general. I know of one condo complex where the prices peaked out at 135k in 1992. By 1997 they were selling for 80k. That is a 40% drop.
And here is the scary part: the market today is much more overpriced than it was in 1989. The affordability factor is now 13% here in OC and that is with the lowest mortgage rates in 40 years. Another scary thing is the types of mortgages people are using to buy these overpriced houses. No downpayments and adjustable mortgages with extremely low starter rates. A lot of these mortgage payments are going to double or triple in two or three years.
But the good thing about this is that there should be a lot of very good foreclosure deals available in about five years.
Randy
Lot of downside… - Posted by randyOH
Posted by randyOH on January 24, 2005 at 13:39:40:
Robert,
I live in OC and I think the downside to this market could be as much as 50%. During the last down cycle here, prices dropped around 20 to 30% in general. I know of one condo complex where the prices peaked out at 135k in 1992. By 1997 they were selling for 80k. That is a 40% drop.
And here is the scary part: the market today is much more overpriced than it was in 1989. The affordability factor is now 13% here in OC and that is with the lowest mortgage rates in 40 years. Another scary thing is the types of mortgages people are using to buy these overpriced houses. No downpayments and adjustable mortgages with extremely low starter rates. A lot of these mortgage payments are going to double or triple in two or three years.
But the good thing about this is that there should be a lot of very good foreclosure deals available in about five years.
Randy
here’s what I would do… - Posted by David Krulac
Posted by David Krulac on January 23, 2005 at 12:38:27:
amazon $16.96
if you can refi or second mortgage and still have posiitve cash flow, I would buy another investment property, but that’s just me.
Re: To Sell or not to Sell-Southern CA - Posted by Robert Campbell
Posted by Robert Campbell on January 26, 2005 at 19:20:37:
Mark,
While I will always listen to anyone’s opinion on a matter, I find that the evidence you present to support claim to be uncompelling.
Thank you for taking the time.
Robert Campbell