Real estate - Is now the time to buy?

[Vipergrün]

Happy Friday all!

Due to one of those 'significant life events', I have been renting an apartment for the past 3.5 years. We recently sold our former joint house and I am in the position to buy something. Rents in this area are nutz, real estate seems to be solid, but not quite a frenzy state. While no one can predict the future, several people have suggested there will be a sharp downturn in the market. I am also seeing evidence, again, that the rise in interest rates is pricing people out of their current mortgages when their adjustable rates adjust....sounds way too familiar.

I am targeting a local beach community, where I'd think there would be less fluctuation.

I also do not know where I want to retire in 10 years, probably not CA.

Perhaps I just buy that Cayman S and sock the rest away and suck up the rent for a while?

What say ye?

TGIF!

[wildthing]

If you plan to stay for 10 years, sure. Also, how is the real estate market where you want to buy?

In my area the prices are crazy, so even if I wanted to sell my house and move to the same area, I'd be paying significantly more for a small increase in square footage.

[legion]

The downturn is coming, particularly in overheated markets like California. Just like last time, no one can anticipate exactly when. I'm always amazed at how a market can chug through price increases well past what seems rational or even possible. If you are in a position to be able to buy with higher interest rates, you will have your pick of nice properties.

[drcoastline]

Originally Posted by Vipergrün

Happy Friday all!

Due to one of those 'significant life events', I have been renting an apartment for the past 3.5 years. We recently sold our former joint house and I am in the position to buy something. Rents in this area are nutz, real estate seems to be solid, but not quite a frenzy state. While no one can predict the future, several people have suggested there will be a sharp downturn in the market. I am also seeing evidence, again, that the rise in interest rates is pricing people out of their current mortgages when their adjustable rates adjust....sounds way too familiar.

I am targeting a local beach community, where I'd think there would be less fluctuation.

I also do not know where I want to retire in 10 years, probably not CA.

Perhaps I just buy that Cayman S and sock the rest away and suck up the rent for a while?

What say ye?

TGIF!

The real time to buy was after the 2008 mess. There are ups and downs in any investment market. Stocks, bonds, real estate, etc. In general real estate has always shown an upside over a long period. So chances are even if you over pay now in time it will even out or go up. So long as you don't way over pay. It sounds familiar because it is familiar. Nothing changed after 2008 so it's the same old, same old.

In my opinion it is always better to own than rent. Based on what little information you put in your post I would suggest buying a multifamily property (three units or less) as opposed to a single. You get a place of your own and tenants help pay the bill. A three unit or less property is still a personal property as opposed to investment/commercial. So you get residential rates and you are legally allowed to discriminate so long as you live in the property. It is also much easier and faster to evict a tenant you don't like.

I would forego the Cayman it will loose value. Socking it away will earn you what? 1/3% in the bank? A piece of real estate even a single will at worst if bought right break even, probably will go up, offer tax incentives and could earn you a profit.

[kach22i]

I met up with my cousin in California last weekend, she came to visit Michigan for a wedding.

She said there is a real estate adjustment coming, best to rent for a year or two and see what happens.

My brother in Michigan said heck no, economy is booming nothing is going to stop it.

I cannot foresee California and Michigan not suffering the same fate, so someone is right, and someone is wrong.

I have seen some land prices on vacation and retirement property along Lake Michigan on the market for over a year get prices slashed in half, maybe they were trying to gouge the market and are desperate now. This was on vacant land, ready to go houses still moving briskly.

[vash]

i say you buy a place. no to the cayman.

no time like the present. i have friends that sold to avoid the bust..it was just like jumping off of a moving ship..as soon as they hit water, the ship moved away..never to be caught again.

[Zeke]

I my years I have seen several run ups and down turns. Now is an iffy time, for sure. The kinds of properties that take the biggest beating are condos and newly built tract housing along with really high end multi million dollar properties on questionable land (I call areas like Calabasas weak because they aren't attached to the beach or Beverly Hills, etc. — solid real estate). Add in local mountain communities where there are a lot of 2nd homes. I think you are correct in that older established beach communities will suffer least.

A good investment will always be rental properties and if I were in your position, I'd look for a fixer duplex or triplex in a nice neighborhood and live in one of the units. Getting a larger rental property is actually better but the living conditions within not so much. Buying near super heated markets driven by huge employment (like Amazon, etc.) might not be the best choice. They can move but the beach will always be at the beach.

Given your location I'm sure you've been looking at Oxnard/Ventura. You should look up how those cities fared during the last melt down. Also look at what types of properties fared the best.

Don't take advice from a forum unless it's a real estate forum for pros.

[MRM]

You cannot time the market. People are predicting a market correction/crash because the economy has been doing so well for so long they think it's time for a pull back. But markets and economies don't stop growing because they get old, they stop growing because they get out of balance and the fundamentals change. Even then, as the subjects of The Big Short can tell you, prices can defy gravity for far longer than you can anticipate. No one knows what the future will bring. There are no particular signs that we are on the edge of some big pull back, but no one knows. In the meantime the market could double before it crashes, or it could crash before doubling.

You buy or sell based on your personal circumstances and whether it makes sense to you. If you buy a house that you can afford that is a good value to you, you paid a fair price no matter what the market does after you buy it.

It sounds like you're at the stage in your life where owning does make sense. In ten years you can buy a new Cayman S with what you'll save in buying a house instead of a car today.

[pwd72s]

Well, it's a sure thing the Cayman will depreciate. A house might...

[Vipergrün]

If I bought a Cayman, it would be well depreciated already :--)

Thanks for the input so far! I will likely need to purchase a condo. Multi family units are out of my range. The area that takes a pounding (Oxnard/Channel Islands/Seabridge) are the ones with the mello-roos assessment, which is essentially an additional infrastructure tax of 300-400 bucks a month on top of property taxes and HOA fees. I'll stay away from those. I am seeing some price drops in the area already, other areas (houses in Camarillo) seem to be pretty hot. Trying to be patient, wait for the right place, then pounce.

[VincentVega]

You can sleep in your car, but cant drive your house to work

I really want a cayman too

[jwasbury]

I agree with "you can't time the market"

I think buying real estate makes sense so long as you are in for the longer term. Having some local knowledge and choosing a property that will weather down cycles better is also positive...sounds like you have that bit covered.

If this is your home (as opposed to a pure investment property), that changes the analysis in my mind. There is a return on your "investment" in the roof over your head that can't be measured quantitatively (IMO).

[legion]

Originally Posted by kach22i

I met up with my cousin in California last weekend, she came to visit Michigan for a wedding.

She said there is a real estate adjustment coming, best to rent for a year or two and see what happens.

My brother in Michigan said heck no, economy is booming nothing is going to stop it.

This is more historically typical. 2008 and its run-up was an anomaly in that most of the country was experiencing a gain in housing prices across the board. This was due to innovative (and risky) financing options being widely available. Most of the time, one local market is up while another is down. Michigan is doing well. California is slowing. Illinois is in the gutter.

[Jims5543]

I work in the industry.

Now is the time to sell, I think it will be a good time for sellers for the next 2 years.


As some have said, you cannot time the RE market. I tend to see things others do not before they do.

i.e. the 2008 crash, I saw it coming in 2007 and was panicked. In hindsight, if I looked closer at things in 2006 the signs were there too, I was just choosing to ignore them.

Right now, I see no signs of things slowing down in the RE world. New housing starts are probably going to hit some records over the next year or two.

The pace is akin to 2005 all over again, although the prices are not. I am amazed the interest rate hikes do not seem to be spooking buyers as well.

So for right now, I think you are buying close to the top of the market, in another year I feel like it is going to peak buy may bump higher 2 years out, just not as fast as we will see over the next year.

None of this applies to California, nothing makes sense there.


I think the next crash is going to be less secured loans, credit card and car loans are going to be a big player in the next downturn. I also think if the Fed does not stop this bipartisan crap and come up with a budget plan, our natl debt is going to be a big player too.


I would now like to turn the floor over to my friend Tabs who can furthe expound on this point....

[McLovin]

It's hard to time the market, I suppose, but real estate prices have historically been cyclical, and in a fairly normal cycle (7-10 years).

But outside of that, rising interest rates pretty much mathematically reduces real estate prices.

[Noah930]

I think a downturn is coming. Maybe in a year or two. I think I saw an article on how (in LA), home prices were up year-to-year, but the number single-family sales had dropped precipitously (like, by half). Is that a sign of impending doom? So that advice that Kach's cousin gave, to rent for another couple years, maybe isn't bad. But it's still not possible to time the market perfectly. FWIW, Zillow/Redfin says my home has actually decreased in value over the past month. First time in a long time I've seen anything like that. And like you mentioned, interest rates will likely continue to climb in the future (but how quickly is the question).

But if you're in the for the long(er) haul--if you're thinking of owning for 10 years or so--then fluctuations from year-to-year aren't a big deal. We bought our house in the Valley in 2009. The market continued to slide for another 2 years (wasn't surprised, but was tired of living in rentals so we bought anyway and locked in a low mortgage interest rate). Now, almost 9 years later, the home is worth maybe 1/3 more than our original purchase price.

After our recent heat wave here in SoCal, for fun I perused the usual real estate websites, in the same areas you've mentioned. Oxnard looks like the most affordable, from a beach-town perspective. I could trade my current Valley house for one of those trailer/manufactured homes at Point Dume/Zuma in Malibu; or I could trade my house for one of equivalent size a block away from the water in Oxnard. Looking at places like Camarillo or Oak Park, there are lots of places for sale. Lots more than the beach communities, at least. Much more of a buyer's market, if you go inland.

[LWJ]

I am VERY cautious on buying now. They said, if you can buy positive cash-flow, risk is far far less.

As mentioned earlier, a fixer duplex / triplex may be a good option.

I would not look to repeat an increase in appreciation. There is a concept called elasticity of demand. It says that pricing needs to stay within certain bounds of income.

Be conservative and you will make good decisions.

[vash]

Originally Posted by Noah930

But if you're in the for the long(er) haul--if you're thinking of owning for 10 years or so--then fluctuations from year-to-year aren't a big deal. We bought our house in the Valley in 2009. The market continued to slide for another 2 years (wasn't surprised, but was tired of living in rentals so we bought anyway and locked in a low mortgage interest rate). Now, almost 9 years later, the home is worth maybe 1/3 more than our original purchase price.

.

this is how i feel. my last home, my timing sucked (2008 - i think i caused that bubble to bust when i bought, my bad!) and it slid downwards a bit..but in the 10 years i owned it, overall; it really appreciated. it's like a jagged ratchet graph..sometimes it dips, but the overall the line is moving up. ignore the dips.

i hate rent..i rented for 3 months and the guy was raising rents around us. it was disheartening to watch the lower income folks freak. screw that.

[drcoastline]

Originally Posted by Vipergrün

If I bought a Cayman, it would be well depreciated already :--)

Thanks for the input so far! I will likely need to purchase a condo. Multi family units are out of my range. The area that takes a pounding (Oxnard/Channel Islands/Seabridge) are the ones with the mello-roos assessment, which is essentially an additional infrastructure tax of 300-400 bucks a month on top of property taxes and HOA fees. I'll stay away from those. I am seeing some price drops in the area already, other areas (houses in Camarillo) seem to be pretty hot. Trying to be patient, wait for the right place, then pounce.

Buying a condo is nearly as bad an investment as buying the Cayman. The only, let me repeat only up side to buying a condo is it is cheap to get into.

Keep in mind when buying a duplex or triplex you can add the income from the rental to your income allowing you to qualify for a higher priced property. Also if the adjustment does come, ARM's adjust high or the market turns South, people will loose their homes and need a place to rent. You can be picky and you can charge a premium.

[drcoastline]

Originally Posted by Noah930

I think a downturn is coming. Maybe in a year or two. I think I saw an article on how (in LA), home prices were up year-to-year, but the number single-family sales had dropped precipitously (like, by half). Is that a sign of impending doom? So that advice that Kach's cousin gave, to rent for another couple years, maybe isn't bad. But it's still not possible to time the market perfectly. FWIW, Zillow/Redfin says my home has actually decreased in value over the past month. First time in a long time I've seen anything like that. And like you mentioned, interest rates will likely continue to climb in the future (but how quickly is the question).

But if you're in the for the long(er) haul--if you're thinking of owning for 10 years or so--then fluctuations from year-to-year aren't a big deal. We bought our house in the Valley in 2009. The market continued to slide for another 2 years (wasn't surprised, but was tired of living in rentals so we bought anyway and locked in a low mortgage interest rate). Now, almost 9 years later, the home is worth maybe 1/3 more than our original purchase price.

After our recent heat wave here in SoCal, for fun I perused the usual real estate websites, in the same areas you've mentioned. Oxnard looks like the most affordable, from a beach-town perspective. I could trade my current Valley house for one of those trailer/manufactured homes at Point Dume/Zuma in Malibu; or I could trade my house for one of equivalent size a block away from the water in Oxnard. Looking at places like Camarillo or Oak Park, there are lots of places for sale. Lots more than the beach communities, at least. Much more of a buyer's market, if you go inland.

I was going to comment on Kach's post but this gets two with one stone. The part about single family home sales declining makes sense. Baby boomers are exiting the real estate market over all. The eldest of the boomers is already out of the real estate market. They already bought their retirement home/condo and their are relaxing. The generations behind us except Millennials aren't as large and over all those generations don't have the same desires we did or the generations before us. Buy a car, buy a home. A large portion of those behind us are quite content renting and letting someone else deal with managing a property and don't own cars they Uber or rent a car when they need one.

In general it is expected that around 2028 the residential real estate market as a whole should start to decrease in value. Why? The last of the baby boomers would have retired at that point the entire boomer generation is out of the real estate market. At the same time oldest of the boomers are dyeing off and their off spring are putting the properties on the market. There will be over supply and under demand.