California real estate - buying time yet?

[Purrybonker]

I've been hanging out in California a lot since I decided to "not work" for a few years. Trying to decide where/when I want to buy a place so I can drive the Porsche somewhere for a break on Vancouver rainy days.

Tried Palm Springs/Desert a few times - Ok, but I don't golf and there seems to be little else. Summers would be a killer. But property prices are compelling.

Spent a couple of weeks in "boutique-ish" hotels in Weho and Beverly Hills (the Thomson Pavilion/Bondst were excellent as was the Chamberlain Hotel) - I think I could stand to have a condo around there somewhere. Lots of stuff/people to do and watch around those parts. Plus the beach in Santa Monica is within reach.

Also tried a week in Santa Monica - lots of reasons to have a place there, Ok beach, restaurants and shopping. Venice Beach for chuckles. Plus ya gotta love a place where you can hoist a drink with Angelina's dad. Close as I'll ever get to that....

I also noted Oak Valley (?), Oxnard and then Santa Barbara on my way back north. Santa Barbara is high on my list for further research, but I'm afraid it might be a bit isolated and maybe dull compared to LA environs. I do a lot of outdoor hiking/biking etc, but I like access to nightlife as well.

Any recommends on areas to consider? What has appeal and has been beat-up price wise already?

[Porsche-O-Phile]

You're kidding, right?



There are highly localized and isolated exceptions of course. If you happen to REALLY find a good deal, are somehow able to secure financing and have cash to spend (and have no worries about job loss or other loss of revenue with a very serious recession developing) your specific situation might lend itself to such a thing.

In general however, for 95% of the folks out there, I'd say RE is for absolute idiots right now. Especially here in CA.

There is a LONG way to fall yet. On the order of 30-40%. Maybe more.

[LakeCleElum]

If you like the outdoors, want a little night life and want cheaper real estate, head north to Redding......I've taken a spring m/c trip there every year since 1978, just got home and could tell some great "nightlife" stories from our group of 22 guys!

[Purrybonker]

No, not kidding, I hear that Sacramento has been getting creamed and is almost a poster-child like Miami for ill-advised real estate speculation. I'm just trying to get a feel for the coastal areas, keeping it LA and north to stay within a one-day drive of Vancouver.

I wouldn't be looking for financing or employment - just a place to use and possibly rent out as a short-term use - vacation property. The market surely has a ways to fall yet, but I'd like to have an idea where to look when the timing feels right.

[Purrybonker]

Redding? who'd a thought it. Yeehaw.

Time to fire up my Zillow...

[biosurfer1]

I always thought the right time to buy is when you find a house that you can afford and fits what you're looking for.

[Porsche-O-Phile]

If you can afford RE in California today you're in better shape than 99.9% of the population.

And by "afford" I mean exactly that - not "rationalize my way into it by using some sort of 'creative' loan product that will get me in the door but either not pay down my principal or stick me with an ARM time bomb".

That said, even if you CAN afford it (as in REALLY afford it) why would you want to tie up your money in a likely depreciating asset when you can put it elsewhere and get a better return? If you absolutely, positively MUST then I can see it (maybe) but OTOH I think the person that forces themselves into a situation where they HAVE to do anything is begging to get taken advantage of. That said, as a discretionary purchase housing doesn't look like a terribly good choice right now, but YMMV.

[biosurfer1]

You hit the nail on the head Phile, its WAY more of a question of if one can actually afford to buy a house.

I found a house in an area that I didn't think I could afford, but the price was way, way below the going rate around me. I'm sure it will still go down, but I'm not going anyhere for a long while so it makes little difference to me.

I'm not sure I agree with the "put it someplace else and get a better return" quote though. First off, I would still have to live someplace, which would require rent, and more of it since I have a lot of stuff and was renting a house already. The difference between what my rent was and my mortgage is now is around $400/month. I could have stayed renting, put the down payment into the stock market/mutual funds/bank account, none of witch have a great or guaranteed return themselves, and then added the $400/month saved into that account each month. Would that return have outpaced the return of putting the down payment and mortgage back into the house every month? I wont be able to answer that for a few years or until I sell.

In the meantime, I own my own house, don't pay someone elses mortgage, and can afford it, which is hard to put a price on....plus I'm happy

[speeder]

Hey Purry, if it's not too personal, what did you do for a living? Sounds like you are in a pretty good position financially, and not many middle-class people are right now.

Different people have widely varying ideas of what makes a good city to live in, (or even visit), the fact that you liked L.A. or West Hollywood makes me doubt that Redding would fit the bill for you. I don't know Redding, (logging town?), probably beautiful but MUCH slower in terms of urban attractions like culture and entertainment.

Feel free to contact me through this board next time you are in L.A. and I'd be happy to show you around.

[Don Ro]

Be closer to Vancouver...buy this lovely place on the peninsula in the SF Bay Area.
.
Rock-solid 1948 build on a subdividable 1/2 acre lot in desirable Menlo Park.
Dirt alone sold for between $76 - $105/sq.ft. over the past 3 years in this neighborhood.
Park your vehicles in your gated back yard.
Have a victory garden.
.
http://tours.tourfactory.com/tours/tour.asp?t=416104

.

[biosurfer1]

Holy crap! is that what homes go for over there!!

You can buy 3 houses, almost twice as big in Sacramento for that...sheesh, glad I didn't move to the Bay Area, I'd never be able to afford a house there

[Purrybonker]

Originally Posted by speeder

Feel free to contact me through this board next time you are in L.A. and I'd be happy to show you around.

Yeah - I might just do that. I had a pretty good run as a financial type in the oil industry and got lucky with some stock options as oil ran up ridiculously in the last few years. Now I'm just looking for fun, R & R.

How'd ya like the book BTW?

[speeder]

Originally Posted by Purrybonker

Yeah - I might just do that. I had a pretty good run as a financial type in the oil industry and got lucky with some stock options as oil ran up ridiculously in the last few years. Now I'm just looking for fun, R & R.

How'd ya like the book BTW?

Liked it. A lot of time went by before I got to it and to be honest, I had forgotten who gave it to me. Please do contact me when you are in L.A., I'd like to take you to dinner for giving me the book. I have opinions a-plenty about CA. RE as well.

[Zeke]

If you do the %'s on Phile's chart, you can see that the "adjustment" has done its severe trend. the first 15 years on the chart show approximately a 330% increase in value. The next 20 show a similar percentage of increase.

Fairly soon (year or two) it will be relatively flat. You will still lose money if you buy in the next 12 months, but not at the peak rate of drop, my prediction.

You apparently have no US taxable income, so the benefits don't apply. But they are a factor between owning and renting for an income earner once the bell curve slope widens out, even still declining. I suspect that has influenced Wayne to a certain degree.

Let's take my house for a walk thru this. At the high point, I may have fetched 675K. The houses have been determined to have lost 15% in the last 2 years. So, now it might be worth $575K. But, if I put it on the market, I'd have to price it realistically. That would be around 550.

I say it will go down to 500 in value over the next 2 years and then stabilize. If someone were to buy this house at, say, 525, they will lose 25K in equity before it goes flat. In the income bracket they would be in, they would be reducing their tax liability by roughly) 48K or real tax dollar savings of roughly 15K. Vs. not owning a house, that's only a 10K loss over the period. And, some equity would build in the house just thru the payments. Not much in the first score of months, but a small amount that further offsets the negative.

One just can's turn around a sell during these times or you'll be eaten alive by the loss and the commissions, not to mention loan points and other costs. Buy now, you stay put. So, if that fits the model, then it's an OK time to buy, not optimum. Optimum is not that far out as some people would think.

What do I think of the rest of the economy, purchase power and quality of life? I think we've seen the best days that will ever be seen.

Oh, and what have I made on the house in the last 10 years assuming I sell at a net of 500? 300%. Factor in what I invested as a down payment vs. cash out and I've made somewhere near 10,000 % in 10 years.

Any other investments match that?

[the]

Originally Posted by milt

Oh, and what have I made on the house in the last 10 years assuming I sell at a net of 500? 300%. Factor in what I invested as a down payment vs. cash out and I've made somewhere near 10,000 % in 10 years.

Any other investments match that?

You haven't spent a penny upgrading the house at all in 10 years?

Paid no property taxes?

Are you accurately factoring in ALL costs associated with owning the house in doing your calculation?

[the]

P.S. I'm not saying you haven't netted a large paper gain at this point. Just that as an "investment," houses are not usually very accurately calculated as far as gains. It's easy with something like a stock, because your cost basis is a set number.

The true cost basis for a house, though, is rarely calculated correctly, or even close. With a grossly understated cost basis, the gain is exaggerated.

[biosurfer1]

While I was researching whether I should buy or continue to rent, I came across a site that said the simple is is this: The correct answer is not only different for everyone, it is almost impossible to figure out.

With intangibles like good neighborhood, quality of life, feeling good about owning, etc... makes it hard to put a price on that. In addition, if you JUST look at cost of rent vs. mortgage, you have to factor in so many varibles, its hard to keep track of them all...property tax benefit, maintainence, appreciation, etc.

I just don't see how you could find a certian answer to the question...

[the]

For ex., I have a friend who bought a house in a nice area in So Cal around 10 years ago, for $500,000. At the peak the house would have been worth probably $1.2 million. Based on sales in his neighborhood, he'd be lucky to get $900 or so right now.

But he's spent at least $300K fixing it up. New front landscaping, new rear landscaping (at least $130K), new kitchen (at least $40K), new master bath and bed (same), new roof, several paint jobs, redoing the entire interior (crown moldings, wood floors, etc.). And lots of other smaller things that add up.

Yeah, that's probably a bit more than most would spend in 10 years. But still, at this point, if he sold, and paid a broker, he'd probably just about break even. And that is on a nice house, in a nice area, in So. Cal., owned for 10 years.

[JavaBrewer]

I agree with Wayne. If you can find the distress/bargain house today I'd jump on it. San Diego has been hit pretty hard with RE value loss. I have some friends that are looking to move into a better school district and are considering homes that are currently bank owned. Example prices are $550K for a house that sold for $725K in '06. Homes like those sell pretty fast though so you need to be qualified and ready to sign papers that day.

I somewhat agree with PoP that there's still room for decline but again it all depends on where you want to live. Some areas are going to continue to decline where others are going to flatten out. If you're holding out for a nice coastal home that sold for $750K to drop to $300K you're kidding yourself.

[Noah930]

Out of curiosity, does anyone have that link from a month or so ago that listed all the houses in various stages of foreclosure? Went back to the "More Bad News...RE" thread and couldn't find it.