Renters had a better month in February in SoCal with year-over-year rental costs for a primary residence rising 5.3%, down from the 6.7% annual increase they saw in February 2007, according to the latest CPI report. Annual rent cost increases haven’t been this low in the Los Angeles-Orange-Riverside county area since July 2003, when they were up 5%.
A separate CPI measure for what it would cost to rent your home rose 3.9% in the last 12 months, a huge decline from the 6.6% increase in February of last year. The overall housing index, which includes shelter, household fuels and utilities, furnishings and operations, was up a mere 2.9% on an annualized basis. In February 2007 it rose 5.7%.
Natural gas was the one big home-related cost that went up — 8.6% over the last 12 months. Last year, gas prices dropped at a 3.1% rate in Feburary.
Housing costs rose 0.4% over January. They were the biggest contributor to the SoCal CPI, which was up only 3.1% overall in the last 12 months, said Richard J. Holden, regional commissioner. It’s the lowest overall SoCal CPI increase since September. Housing makes up 46% of the CPI.
To read about the national CPI picture, CLICK HERE
jakepdu
i actually post 200 times here under 100 different names.
Look at Reuters today: Bear Stearns has to be bailed out by an option not used since the Great Depression. And as I discussed yesterday, such misery will be mixed with massive layoffs coming to OC courtesy of our state budget crisis, a crisis that is directly linked to this bubble implosion. Yet we have a pathetic fool on this blog crowing how he will raise rents 7%. Get your GED and stop spamming this blog with that garbage.
RENTS UP 5%
They even claim riverside is up 5 %
Beach communities will have more demand === 7% all day long !!
I read that reuters add on MSN board…….
We are not even close to that…..
Talk deflation with Rants,
No one else believes we are headed into the GREAT DEPRESSION
BLA blaa blaa DOOMSDAY bla bla bla DOOMSDAY bla bla
You want prices to colapse because you are a renter
who with your current job at McDonalds does not afford you a condo..
Let alone a SFH in prime OC
henry ford was ridiculed when he tried to build a his first car in detroit.
i guess the “fool” at that time were all reading the news saying that the horse and the carriage was the best way to go.
very few people in this blog has original thinking.
some are even paranoid like jake jeff pdu.
Chicken Little;
You nailed….
He is a renter…
Yo…. Mr little
I have been trying to ask you a question??
Did you start up a PMC for you income prop cash flow yet ??
Still no increase here. 20 months now and not even a peep. In fact, there are several 2bd/1ba apartments going in the $1300 range.
Be careful out their landlords, I wouldn’t get too greedy. No matter what inflation’s doing!
“Housing makes up 46% of the CPI.”
this is really all you need to know in regards to rents
interpret as you wish
scott a,
i do have pmc for my duplex.
students enrollments at csulb are up this year.
if your tenants are students from that university, i think it is safe to raise the rent.
Chicken Little:
Mine are 2 miles to CSULB
California State University Long Beach
My tenants in the 4 + 2 SFH are all students there
$850 a room about to become $900.00 a furnished room
Criterria for demand:
Near a college: Check
Near the ocean = 3.5 blocks: Check
look at how pathetic the attacks are here: oh, you must be a renter, as if that it is pejorative: on the contrary, I am a former homeowner who sold at the peak. I rent because idiots like scott a subsidize my housing by paying the mortgage and property tax while I wait out their demise.
shiny,
so you are another speculator who sold your primary home for a profit.
fine, there is nothing wrong with that.
i am on the record here to say that i bought last year and i am getting positive cash flow ever since.
my return on investment on 133k certainly exceed the 2% i was getting from a ca money fund.
for me, it was the right decision to buy when the herd was saying to each other that the end of the world was coming.
nbi,
you need to come back here more often.
we need people with original thinking like you.
anyone can copy and paste an article.
I’ve got great renters that pay on time and keep the house in great condition. I’m not about to raise the rent on them. I probably wouldn’t raise the rent on them unless everything was up 10% and even then I’d only raise the rent a bit. Great tenants have to be taken into consideration.
It would be fabulous if the attacks on this blog were minimized. Let’s bounce some different viewpoints off of one another. I don’t care if you rent or own, but you are always investing in RE for somebody. As long as you are comfortable with your own personal situation, that is truly all that matters.
Now, it would be great if we could discuss Wall St. over-reaction and literal panic these days. So many companies are undervalued. Yet, let’s just plow all of our cash into commodities and create yet ANOTHER bubble. It was never a housing bubble….more of a lending bubble. The lending drives housing, hence the current problem. Prices always stabilize yet trend upward on inflationary measures. When the credit markets come back, you will see a bit of a spike in housing values.
Shiny:
There you go calling names again…..
list of shame:
1) Idiot
2) Uneducated
3) Pathetic
4) Wanting me to fail
5) Go get your GED
6) You are illiterate
Reasons for selling your Primarry Residence:
1) You work a mimimum wage job and DONT need a tax break
2) You bought more house than you can afford
3) You bought wrong = bad financing
4) You believe that you “PR” is an investment.
WRONG WRONG WRONG WRONG
I have always said:
1) Buy as close to the national median average as possible
2) That way you “mortgage” would be about the same as OC RENT
3) So… a.. Condo in a bad part of town…..so what…sacrafice…..I did.
4) When the 30 Year fixed note is paid down and inline with rents, rent it out
5) Repeat the process
“When the credit markets come back, you will see a bit of a spike in housing values.”
What’s your guess about when this will actually happen. I keep reading bad news about credit markets.
Chicken Little:
You nailed it again…..
The only person I would respect…..
That sold their primarry residece at the peak or say 06…..
Would be the person who put…….$200K into GOLD
2% 5% or even 10% in the market is………
LOSING TO INFLATION
&
No tax break
Just plain DUMB
Jonas, I wish I knew. It is truly the pivotal problem with our nation’s economy. If housing were stable, gold and oil would not be at their current levels.
Chicken Little:
Speaking of…… TAX BREAKS…..
Property Management Company ==== Nice car you can write off……!!!!
O the benefits of home ownership & multiple home ownership !!
I take credit for shaming scotty into at least attempting to write English. But his crudely-written spiel is the same and will crash on the hard reality: real estate is rarely a good investment over the long haul. And we are in for a horrific long haul in OC. But whatever, go ahead and spam this blog with your trollish banter. I see an ocean of opportunity for your $ in Central Park West right here in the center of the universe (for Irvine). Be the first fool to step up and sign on the dotted line. Lennar’s future BK trustee will thank you.
Let us examine Scott A arguments.
First he does not refer to any data that can be checked.
He constantly refers to his situation but we cannot check his situation.
Most importantly one data point (an verified one) is only a starting point for investigation.
So if he thought that his rents going up was a trend , it would seem that he should produce information validating that the kind of property he is speaking of does indeed have that kind of rent increase. Otherwise all we know is that 5 properties somewhere are going up.
Not really useful informtion.
Now he could attempt to make a logical argument and he does. He suggest that riverside rents according to somewhat objective data are going up 5% per year. He then states that beach front property which he rightfully states is more attractive should go up seven percent per year. How he does this transformationis unclear.
However this logical argument could be considered. While renters are not bad people ( in the sense that they do other things besides rent that are very undesirable and that this is correlated with renting not low income) most people who rent are lower income all things being equal. They are thus much more likely to have financial problems all things being equal. If this is the case then one might conclude that it is quite possilbe that if there are big loss of jobs in OC
renters will suffer more than others. That would be renters near the beach also. One could make an argument I wont that renters near the beach are more likely than inland renters to be living on the edge.
What this means in general is that under economic stress renters will shift down in quality of rental. So since the beach is near the top in quality by Scotts logic it will be at the top of the shift. Thus his demand will go down faster than the less desirable areas in less he reduces his rents.
Now this argument is more subtle than what can be expressed in a song but if he was truly interested in informing people he would I think consider it.
Concerning commodities he is correct they have exploded in cost. If he bought gold a year ago he is up 50%. If he bought wheat a year ago he is up 500%. Would he then suggest that we should invest in wheat. Perhaps sell your house and buy wheat?
It would seem these are momentum arguments , the same as what caused the problem with housing.
It seems difficult to debate with Scott since he does not discuss things point by point nor does he give any data. I would then not consider him a credible source. Would I conclude that he thus has other undesirable characteristics. Not from the fact that he does not give data or that he trades on momentum.
But his writing style and poetry would not qualify him even for a job at the register.
Am I by this saying that the register is bad. Well only if you define bad as a paper which probably does not lead you early on to make wise real estate decisions. I could support this, but it would be a lot of work. I just make the statement as a starting point for someones research.
Message to Smiling Jon Lansner - Friday 11:50
I see that the Troll and his various plaything aliases are having wonderful little real estate conversations with themselves this morning. How nice. It’s the usual nut hourse cast of fictitious names such as Scott A, and Mulliganville, and Jonas, and Chicken Little - all of course the same person. But so quaint. Are we having fun today Sibil, talking to yourself over and over.
Changing the subject - Jon Lansner, on 3/12/08 you personally wrote the following concerning the List of 30+ Troll names I had compiled and posted :
“Jon Lansner Says” - YOUR BLOGGER: Please stop this. There is ZERO evidence of such a “conspiracy” … both sides of the debate deserve (AND WILL GET) a chance to be heard.
Having said what you said, you must know who the so called “other party” will be in this proposed debate. I’m just one party, known as Jeff from Seal Beach.
Question: Just who is the other party ? You must know or you wouln’t have voluntarily stated this. None of the rest of us have any clue who the Troll and his 30 to 50 aliases are, but evidently you know more than the rest of us. Maybe you said a little too much again, Jon.
Jon Lansner - how does did the Troll successfully acquire all the 30 to 50 ficticious blog names from the OC Register. Is it true that you actually facilitated the acquisition of these alias blog names in order to artificially generate as many blog comments as possible in order to impress the people at the OC Register where you work(ed). “Comments are King”, even if they are obtained fraudulently and in obtaining them, it degrades the reputation of the company you work(ed) for.
Inquiring minds what to know, Jon. Silence is always not golden.
YOUR BLOGGER: So let me get this straight. I create phony comments to impress my bosses? I must be busy! 40,000 comments in 2 years on this blog.
Don’t mistake commodity inflation for dollar deflation
the price increases in gold and oil are not as big of a deal in other currencies like the Euro
I’m not saying that commodity demand is not increasing around the globe….. however dollar deflation has been the culprit for a good portion of the run up in Gold and Oil.
You say commodity inflation I say asset deflation……
toMAYtoe….. toMAHtoe….
let’s call the whole thing off !
I sold my OC home in April 06, and moved to Ventura County. I definitely didn’t want to purchase another home considering the slowdown that was then occuring in SoCal housing. Values were already slipping. I bought my first house in 1987, and have always owned my primary residence, until last year. (I’ve never been so happy to be a renter in my life!) I’ve positioned myself to purchase another home once the current bubble has deflated and run it’s course. (I don’t agree with most of what Scott A posts here, but I will agree with him on the use of precious metals as the only true way to hedge the current economic conditions. In my case, the Euro has been a good hedge as well, but all good things in moderation.) As such, I’ve been closely watching the housing market, and rented a home in the interim.
In March/April of last year, it was difficult to find a top notch home for rent. Very few houses were available, and most that were had been rentals for a long time, and were not kept up to my standards. I ended up renting a really nice home in Moorpark ( Built 2002, 3300sq. ft., gated community, mountain view, large lot, granite, yada, yada, yada) The house I rented was for sale at the time, and I inquired with the realtor about rental possibilities. It had been on the market for 7 months (at $1.1 million - YHGTBKM!!!! No wonder.) The going rate for rent at the time was $1.10-$1.30 sq. ft. in the area. I offered $1.10/sq. ft. and it was accepted. This is a house I would consider purchasing once the current market correction has run it’s course.
What a difference a year makes! I just re-negotiated the rent for another year at $1.00/sq. ft., as rents in my area have dropped. There are FAR more houses available to rent now than there were a year ago. Primarily because nothing is selling! In my community, 7% of the homes are on the market. There are for sale signs that have been up since I moved in almost a year ago. Several came on the market, and were pulled off after 6 months. I know it’s not Orange County (actually, that’s why we like it here! OC became too crowded and congested for us.) but it’s another once hot SoCal area that has just stalled out. In areas like this, rents will have to drop, as an increasing supply of available houses means competition for quality tenants. Using a simplistic view, it’s classic supply and demand. It’s really more complicated than that, considering local factors and such. But, the bottom line is an increasing supply of homes, and an economic downturn that is reducing the ability of tenants to pay.
There is a nice complex in Lake Forest that I mentioned a couple of months back had started a $200 referral fee - surprising since they never needed to before. They just increased it to $400.
Times, they are a-changing.
Those who believe rents can be raised when values are plunging and the economy is hurting are delusional — but then we have a couple posters here that just might be, so I imagine we’ll continue to hear about it and continue to be told how foolish it is to rent.
My Mother-in-law owns income props by the beach here in San Clemente. She did not raise her rent this year and ,for the first time in 4 years,she has a vacancy and has had no qualified applicants. Her tenants that left rented a larger place closer to the beach,for less. Now she has to contemplate actually lowering the rent! Most of the time she has been able to find a nice Marine couple,but there is just too much available right now.
Mav,
The price of oil has gone from 60 in the summer to 110 now in dollars.
In Euros it has gone from 60/1.22 say to 110/1.55. That is from say 49 to say 70. So in six months we have seen a doubling and the Europeans have seen a 50%. So I don’t think inflation explains it.
Commodities trade on supply and demand we think. Well has demand gone up in the last six months or has supply gone down?
Well I dont have access to the data but guess what. Our president and vice president are oil guys. I think you knew that. So they might be a bit sympathetic to high prices. I do not know that.
Now you can either cut the supply from the cartel countries or you can have speculators increase the demand. Either way the price of oil goes up. Now again this is just the start for investigation. Now if you think prices are going to go up you might go get some gold and store it in your house or bank so you can cash it in for dollars and buy stuff.
But trying doing that with oil or wheat. So in general how are people going to use this stuff as a hedge against inflation. They have to store it. So as prices goes up there is a shift away from the commodities and then you have the stuff coming out your ears. Unless you can get the suppliers to cut back which is called a cartel. This is economics 201.
Now another way to store value is real estate although a house does depreciate and it does produce income. Since most people can’t pay cash for a house you have to rent the money. If the cost of renting the money is more than the rent you take in and the price is not going up fast enough you got problems.
Another way to store value is in corporations. These can have the same problems as houses.
A lot of choices to be made and the average, above average , and super above average person is usually not qualified to make them.
Thus they diversify into a basket of different instruments , do theirjob , and hope the government does theirs.
But I would guess that most of the people reading this blog (just a guess voted for Bush). And if you don’t think he had anything to do with the problems we are facing than i would question your ability to make tough financial decisions.
pdujake,
you can’t do math and you can’t do logic.
rental market are all local.
i can only speak for the duplex i own where i have 100% occupancy.
just because someone near your area is desperate for tenants does not mean i have the same problem.
you are seeing the world through your own colored fitler glass.
Perhaps Scott A can help you find renters. Apparently he has no probblem since he going to raise his rents. He also has left his email here multiple times so I am sure he would be glad to give it to you.
Further he has agreed to meet me any place any time and I sure he would do the same for u.
However consider this.
Scott gives a lot of rental advice. I question the logic of it.
His latest basic advice is for a starting investor to buy and live in a house even if you are in a bad neighborhood. Well ok so Scott does not seem to mind the safety of the neighborhood because he is probably a pretty tough guy. He likes the beach but I think that is out.
So where can a person who makes 70k a year with a 20% down payment live? How much will he qualify for in a loan? Would that be around 200k? So where does the person find the starter home for say 230k? And if he buys it in a rough neighborhood and those neighborhoods are going down in price and rent due to a recession, he wont be able to rent or sell for its worth. Basicly he has lost money.
So you might consider discussing that with Scott.
On the other hand if you know Mr. Peabody and have a way-back machine you could just turn the clock back to 1976 and buy a house. Then you are really set. Ask him if he has a way-back machine.
Jake:
That was cool……
You finally stoped calling me names and made a great post:
You want proof that rents are going up to
“Deam me a Creditable source” ??
OK…… NO PROBLEM
Big Bear Lake:
This is the only “web site” I have online:
See detail below for the other two Belmont props.
I bought this home in 2005
I carry the financing and my name is on all the bills
I sold a piece to my brother and his wife,
Since I already have my PMC=Tax breaks and tenant’s in LBC
I let them deal with the revolving door prop, start their own PMC= tax break
Now I just collect checks.
http://www.vrbo.com
Big Bear Lake
Hansel & Grettel
Rent was $100.00 a night with no mimimum
Rent is now $225. a night with 2 day minimum
Started day trading gold in 2004 @ $350.00 a troy ounce
Used gold to finance all those nice upgrades you see !!
However….for Belmont props I do not have a website:
I list property on Craigs list.
When I get a hit on the props
I sent the prospected tenant to….
http://www.myphotoalbum.com
There I have all the Pictures & Addresses
The prospected tenant can then drive by the property
If the person likes what they see….
I schedule a walk through
Leases in 2001
4+2 SFH $2,000.00
2+1 SFH $1,450. 00
Leases in 2008
4+2 SFH $3,600.00
2+1 SFH $2,400000
The only way I could verify this data….
Is to digg up my old leases….
White out the addressess and fax them to whom ??
BTW:
I would have no problem doing that.
You are right about one thing,
No newspaper would hire me !!!!
ahahahhahahahahah
My spelling sucks !!!!!
Chicken Little clearly is a person who understands math and logic.
It sounds like he has beautiful mind.
PDU,
Why don’t you post the address of the Lake Forest Complex. Then people who want to can check it out themselves. They can know that what you say is real or not.
Chicken Little logic that all markets are local means that decisions based on data are impossible. I think that is the logic of what he is saying. You cannot collect data on beach communities or Seal Beach or any other community. It is so local that u can only draw conclusions from his own complex which by the way he will not tell you were it was. But even if he did it would not help because you cannot draw conclusions about any other local market. His conclusion is that you cannot come to any conclusion but yet he knows rents are solid. I know that is hard to follow but that is because he is so knowledgable about logic and math.
jakepdu
do me a favor and check yourself into a mental hospital.
Well done TStaples.
The ‘market optimists’ who are still here in discussions in 3 months from now … would you kindly leave an “I admit it, the bear view on housing was correct in 08″ acknowledgement as your final sign-off before you go?
I’d actually be very interested in hearing the particular rationale that led you astray the most as well, whether it be:
“I mistakenly thought RE was local”
“I mistakenly thought the beach was immune”
“I mistakenly thought this was just about sub-prime, and that the sub-prime problem was solved quickly”
“I mistakenly thought a bump in the spring-time meant that the slide was done”
“I’m a realtor or a mortgage broker and thus am expected (even paid) to lie pretty often”
… on and on, whatever it was that fooled you, I’d be really interested in knowing.
No,Scott owns in that BEAUTIFUL beach community of Belmont Shore,in “Wrong Beach,CA”. I lived there for a couple of years(2003-2005) The beach is digusting and there a lot of shirless pretty boys posing in the beach parking lot while old nasty men cruise in their gold caddys looking to take one home for the afternoon. But I guess there is a plethora of wealthy CSULB students around,right?
Jake:
Condo in a ruff part of town….so…
Anahiem……Garden Grove……Fountain Valley… if possible.
And I agree prices are going to fall in 08 & 09
So DONT BUY YET MR. 1st TIME BUYER or RENTER who SOLD at Peak
BUY IN DECEMBER 2009 NO SOONER
Yes that is exactly what I would advise…
Did you ever venture to Long Beach in the last recession ??
After the mass Boing Lay offs………..
It was Snoop Doggy Dogg…..& his EAST SIDE LONG BEACH..CREW
Just 3 blocks East of my homes…
Down town was a ghost town……
Just bums and Trolls everywere…
No they actually have a “Relocation Program”
The ship the out to shelters to make way for Ocean Ave high rise condos
Staci:
See post to Jake:
You are right on both counts….
Most OC PEOPLE would never sacrafice to live there…..
There are a million CSULB students to choose from….
Sacrafice == Success in the long run…
But then again you want to rent:
In prime OC / San Clemente / Telega
So you are not willing to move your family & Kids to the city…..
That is why……..
I am… who I am…..
staci,
Please don’t insult nasty men in gold caddys. These are probably some mothers child.
Chicken Little,
Being a logician I wonder how you derived the “check into a mental hospital” line. Perhaps you are using your all local experience. Your insults remind me of some of the other posters on this blog. Do you have any contact with them by chance.
Do you consider your way of thinking or writing a real benefit in understanding why the United States Economy is facing the worst crisis since the great depression. Or have you not heard: the sky is pretty much falling. But maybe sky is all local and it will miss your complex. I thought you were making things up as usual, but now I have no doubt: you do have a complex!
The article did say “hike” didn’t it? And it is based on “facts”, isn’t it? All else is……speculation!
# chicken little Says:
pdujake,
you can’t do math and you can’t do logic.
rental market are all local.
i can only speak for the duplex i own where i have 100% occupancy.
just because someone near your area is desperate for tenants does not mean i have the same problem.
you are seeing the world through your own colored fitler glass.
—
Why do you feel the need to be so nasty?
All I did was point to a situation that I was aware of, a complex that had no vacancies and posted a $200 finders fee and now are offering $400.
This isn’t unusual. Look in the paper or check Craig’s list. It’s a different rental market than last year.
Scott A:
Could you be specific about what and where a person making 70k with kids could buy and how much it would cost and how they could budget that. I know they could do it if there parents give them say 50% down. Could you give an exact example. Suppose I got two kids and a w i f e and we make 70k. take it from there.
Sorry note to people: w i f e is a dirty word. But you knew that!
pdu,
If you are going to make reference to a public place please post it or you will be in the same boat as “THE BULL”
Clarification….a complex that PREVIOUSLY had no vacancy issues… now is offering incentives.
We can rent a house in a safe area in OC for less than 25% of our gross income. Yes,safety is a priority for us. We put a large portion of our income in a pre-tax account thru my husband’s work. We will be buying a house either next year or 2010,depending on the market. Not trying to start a pissing contest with you Scott,your comments about the joys of raising rents on the poor college kids are tiresome. Not everyone who rents is stupid and not everyone who owns is smart. And really,if your going to comment…it’s Talega with an A,not an E,and yes,it’s imploding and will be a great place to buy a brand new home from Standard Pacific in about 2 years…if that developer is still around.
Jake asks:
“Were should the 1st time buy look to buy when they only make $70 K.”
I would sacrafice……
Buy a start condo as close the national median as possible
Live in a 2+2 condo as close to the “Job hubs” as possible.
Nat median defined as $200K
Job hubs defined as:
1) Irvine
2) HB
3) Santa Ana
4) North OC / anahiem / Fullerton etc.
Put that prop on a Bi- Weekly Equity Eccellerator program and pay it down
So it will be rough going at first however……
In 5 to 10 years it WILL be inline with markets rents…
Rent it out & repeat the process
That is why I tell david poggi not to go to Murrietta / IE
Too far away from all the jobs…….Bottom line…that is americas worst commute !
Staci:
It’s all good about your plan in “Prime OC Talega”
You and your family will be living the OC life….living it well !!
Not what i would do…..REASON:
If you go to big on your 1st property…..
It ties you down === BIG NOTE & BIG BILLS == BIG DEBT
You will probably never own multiple properties with that strategy…..
jake, I think the answer to your question is fairly obvious. Your hypothetical 70k earner with a wife and kids is not going to be able to own in OC unless it’s either in a bad area or it’s a 1 br condo. He might be able to buy in the IE. That is the reality of the situation, and it’s nothing new. And it’s not unique to OC. He probably couldn’t live in the Bay area, or Seattle or Boca Raton, etc. He can’t buy a Mercedes, he can’t take a family vacation to Disney World. Your pretend guy shouldn’t take gottem married and had kids!! At least he could have rented a beach apt. from Scott A.
Scott A.
I think a person making 70k could afford a 200k house if he was careful. And it would make sense to be near job hub.
So give me an example of such a condo that is near? The median price home in OC is 515k. So where do you find that 200k home?
Being a property owner/landlord in a time of declining property values and hard economic times is not all good
The fact that it is a potential disaster escapes some here.
Education never comes cheaply.
Jake:
As I stated above:
You wont get a Sing Family Home in OC for that price = 200K
You will get a 2+2 Condo in the areas I described above.
If you dont go too big on the 1st one you are freed up to aquire more.
Find that condo in an area with NO MELLROOS & LOW HOA
So an older unit in NORTH OC
My w i f e and I are living in a 2+2 Condo ( she bought 2000 for 225K )
So I live by what I say
So I use myself as the example
We are sacraficing today… and waiting for tomorrow… to buy our Home.
PDU:
That post is in direct contrast with the “Title of this board”
Rents are up 5%……………………………………..YOY 2008…….
Just the facts please…………………….. not your oppinion………
pdujake
i have shown on this board that i am getting positive cash flow from my duplex in fv.
i am not going to waste my time explaining to you how and why again.
you are just too dumb for me to debate with.
jake-
I believe there are some condos in West Tustin/East Santa Ana that are in that price range, near the 5 freeway and fairly close to Irvine. It’s not the best area, but not the worst either. The complex looked clean. I checked out the area before I met my W I F E.
By the way, why did W I F E become a banned word on this blog? I had a post “held for moderation” yesterday due the use of this offensive word, and Jon still hasn’t approved it.
Jake and other 1st time buyers or current renters:
I bought my duplex first when i was single at age 26.
I had roomates……
Of course none of the OC Snobs…
Would ever stoop….. so low…… as to doing that !!
LOL
Chicken Little:
No use to debate with them…
Dont get into the name calling…..
Profits no-one…..
Some of you may remember when I mentioned the problem with the liquidity in the conventional mortgage market drying up.
Did anyone see this item from CNNMoney.com?
“March 14, 2008: 12:54 PM EDT
NEW YORK (CNNMoney.com) — The credit crunch has finally hit the traditional mortgage market.
Investors are now shunning mortgage-backed securities issued by government sponsored enterprises Fannie Mae and Freddie Mac, which have been critical in keeping the real estate market from completely falling apart. ”
Now with Bear Stearns not being able to get investors to buy their portfolios…
So SBD, why do you think all those buyers are going to turn into closed deals?
If Institutional Investors won’t buy the paper, there won’t be fresh money to lend to the recent buyers or the ones who follow them.
More roller-coaster fun in the RE marketplace!
So Scott,
It seems like you suggest that the 70k wage earner should look for a house near the median 200k near where the jobs are but you can’t give any examples and then u say
you bought a house when you where 26 and had roomates.
Ok what do we learn from this lesson that will help people making 70k with kids.
Is your answer dont have kids get a condo with roomates in a bad part of town wait 10 years and then rent it out. Maybe in another 10 years you’ll have three and then maybe you get married.
Nothing you say makes sense for the general public. Yes if you work 3 jobs and start at 26 it works. Is that your point. That people like you can succeed? Is America changed from the land of opportunity to the land of roommates?
bloggers slowly “weeding out” the bears
Jake:
Look at liar loans advice ( above ) on the same topic:
I am m a r r ied & I have two kids….
We live in a 2+2 condo……..
Just get bunk beds !!!
This is my last time explaining this to you……….
Liar Loan,
Ok just go to realtor.com and post a link to a few. Then we have evidence that all can check.
I can’t help but roll my eyes at the ‘he’s a renter comment’. I am a renter…and proud of it!
$1850 a month for a house that would list at $650K+….and maybe sell at $550K. (I say maybe, because with what is going on in the financial markets, and with the GSEs, financing may not be available a month from now unless you put down 35%.) My landlord owns about 10 houses….and has owned most of them since before the boom.
By my math, with a typical 5-7 year holding period, the house I am renting would have to come down to about $350K before it would make ANY sense to buy.
It is where I want to live….and to live there, it is a LOT cheaper to rent than to buy. It is a no brainer to me. Renting and proud of it. In fact, many of my home’owning’ friends who bought too late or redied and HELOC’d themselves are envious.
Oh and no comments about ‘never being able to afford a house’. I have $200K + income for the next two years in the bag, and close to $1/2M liquid assets. I think I could afford it pretty easy. I just choose not to buy.
“Some of you may remember when I mentioned the problem with the liquidity in the conventional mortgage market drying up.” - Marcia
Marcia,
Don’t you know that none of that matter! Prices can only fall 30%!
I have repeatedly stated that ones knowledge of a given RE market is useless in trying to predict what is going to happen. So many (bullish types) here think that they have seen it before, and this is great opportunity….this is a bottom…blah blah blah.
Well unless you are now 90 years old and lucid, you have NOT seen this before. What is going to happen to RE is 100% dependent on how the accelerating debt implosion crisis we are just starting plays out.
Creditors determine what RE price levels RE transactions occur at. If there are no creditors, there are no transactions….unless they are at price levels that people can cash out. In that case, there is a floor on RE prices….and it is probably about 100x monthly rent….or less than 1/3 of current prices in many CA markets.
As of yet, I have not had one bull even respond to my points about the underlying financial situation, and the tightening of credit. That is because all their predictions about market behavior are based on the underlying assumption that credit will be available. It is just a given in their mindset, because it is all they have ever known.
When you talk about dynamic self reinforcing systems (RE prices fall, more defaults, more RMBS losses, more bank writedowns, tighter credit….and finally RE prices falling further….) they literally can not understand the concept….so it is like trying to reason with a 1st grader.
BrantW,
Excellent post.
Bear Sterns is bailed out via a method that has not been used since the Great Depression….
…. yes the Great Depression….
well guess what it’s not over, this is just the first bank to fall into this dire liquidity scenario….
Furthermore the Fed financed this via JP Morgan…..??? Yikes……. sounds like some risky debt to me. It is quite possible Bear Sterns shares will be worth $0.00 in the near future. I guess that would not be too good for the other investment banks.
Housing is peanuts in this mess…. every single credit market is going to be effected…. consumer credit cards, student loans, auto loans, you name it.
Hunker Down.
Bear Stearns is the victim of a panic mentality, nothing more. What is missing in this discussion is the fact that your governent will continue its interventions when, where and as necessary. It should surprise no one when the GSE’s get the REALbacking of the full faith and credit of the US, and it should surprise no one when all the bad loans are bought by said government. Maybe they’ll take on the entire real estate indebtedness of US homeowners - and then forgive it! I know just how badly everyone here is wishing for the next Great Depression, which is absurdly shameful, but your government is not going to take it lying down. It is not called for and it will not happen.
Thougtful,
You act like those are good things….
Do you actually think there was not government intervention during the Great Depression……. and during the Japanese asset bubble?
mav Says:
“March 14th, 2008 at 6:58 pm
Do you actually think there was not government intervention during the Great Depression……. and during the Japanese asset bubble?”
My prediction: RE will not recover until the excesses of the last few years are wrung out of the system, and other productive sectors/bubbles will lead the recovery. In other words, government intervention is nothing but a handout to the elite few at the expense of taxpayers.
To whom it may concern (like everyone):
This is not a liquidity problem, this is a debt problem. We consume more than we produce. We have the knowledge to do something about this rather quickly but not the will. We will not use our resources for proper investment for general public does not understand it and the business community does not want the competition. Example we have a national program of renewable energy sources. On a large scale it could be cost effective. To everyone in America it sounds like “communism”. Now bailing out all the home owners, that does not sound like “communism”. So citizens are naive and business is cynical.
Given this environment it will be buisness as usual. That means we will not really be able to openly discuss solutions. So those in power will do what the powerful want and the citizens understand. This will mean reacting crisis after crisis in an acceptable fashion. That is a string of federal bailouts.
Considering that this will not cut consumption and debt it will mean that the government slowly goes bankrupt. This means that the government will not be able to pay its bills. So it will bail itself out with loans which means printing money. This process will go on for years as we adapt to a more productive economy. Over this time period it is not at all clear how these policies will effect the relative value of assets, but all nominal values will eventually go up.
Once all nominal values go up the government can pay its bills. This however may mean that your pension is kind of worthless. It may mean that when you cash in your gold you have a hefty tax bill. It may mean when you cash in any assest you have a heft tax bill.
The only way we can avoid this is if we can rub our shoes together and get the factories we moved over seas to come back to our country. Then we could produce what we consume. Other than that or some dramatic intervention to make us produce more like the energy intervention we will end up with belt tightening thru inflation. But who gets what and how assets will be relatively priced is really hard to guess.
Thats ugly but thats accurate.
Where is Jeff from Seal Beach and his police patrol? Oh, that is right…not a lot of Bulls in here today, so he must feel good about this blog currently. What a shame as Sigh uses him and Bubble boy for his personal punching bag each time they show their gloom and doom heads.
thanks to the real men of genius- like mulligan
and his band of clueless and blind sheep-
our country is in the process of getting
its ultimate cummupence- payback for years
of arrogant live beyond your means lifestyles-
pie in the sky wealth creation out of
thin air by buying a house on borrowed
money- from foreign countrys none the less-
just sit back and watch them squirm as the
noose grows tighter around their necks
Marcia had this to say: “So SBD, why do you think all those buyers are going to turn into closed deals?
If Institutional Investors won’t buy the paper, there won’t be fresh money to lend to the recent buyers or the ones who follow them.”
You probably won’t accept or believe this, Marcia, but I’ll try anyway. Most of what you’re reading in the media is based on closed escrows of a month or two ago - it’s OLD news. The properties actually went INTO escrow in Nov./Dec..
What Steven Thomas recently gave, that Lansner excerpted, was days old information - not months old. The current news is that escrows are up over 50% in the last month plus.
More current news is that MOST bigger local lenders are making loans just fine - right now. Just with somewhat tighter guidelines - but not nearly as tough as back in September when the jumbos dried up completely.
More escrows are opening, and more escrows are starting to close. You can read about all that - in about 2 or 3 months - when the media gets the warmed over data. Just remember, you heard it here, first.
BrantW had these comments: “I have repeatedly stated that ones knowledge of a given RE market is useless in trying to predict what is going to happen. So many (bullish types) here think that they have seen it before, and this is great opportunity….this is a bottom…blah blah blah.”
Guess what B-Rant - I HAVE seen it before, and survived just fine thank you.
Brant also stated: “Well unless you are now 90 years old and lucid, you have NOT seen this before. What is going to happen to RE is 100% dependent on how the accelerating debt implosion crisis we are just starting plays out.”
I am not 90 yrs old, although I’m much closer than you. Most of the debt implosion crisis you think is just starting has already been substantially worked through, as it applies to homebuyers. What I’ve seen in the past ( like 16-18% interest rates in the early 80’s? ) makes today’s troubles look like first grader’s stuff.
Brant also stated: “Creditors determine what RE price levels RE transactions occur at. If there are no creditors, there are no transactions”
WRONG!!! Talk about not thinking outside of your cubicle. There are NUMEROUS alternatives to conventional institutional financing - you just have to get creative. Over the past 39 years I have purchased properties with AITD’s, with lease-options, with land contracts, and with seller carry-backs, and with NO money down, when financing was seemingly impossible to obtain.
In the past year there were two financial hiccups that each created a brief pause in the real estate market - first, last March, the sub-prime debacle, then in Sept, the jumbo loans dryup. ( That actually mucked up jumbos for 2 or 3 months, but has now been resolved.) Perhaps today’s happenings might cause a BRIEF blip on the radar of real estate, but it won’t last long.
I suppose I didn’t see Sept. of 01, either? I’ve already stated numerous times that I was in mid-escrow when that happened. Compared to that, today’s blip was a cakewalk. If YOU think it will amount to more, than I feel sorry for you.
Brant also said this: “unless they are at price levels that people can cash out. In that case, there is a floor on RE prices….and it is probably about 100x monthly rent….or less than 1/3 of current prices in many CA markets.”
What poppycock! Where do pull such ridiculous, first grade worthy numbers from? Your mouth should have a sign taped to it, saying “Please engage brain before using.”
sighburbirdbrain dude do you ever happen to-
maybe by accident- ever read or watch anything
that happens to occur outside of orange county?
“Most of the debt implosion crisis you think is just starting has already been substantially worked through, as it applies to homebuyers. What I’ve seen in the past ( like 16-18% interest rates in the early 80’s? ) makes today’s troubles look like first grader’s stuff.” - Sighburrdood
You say the 80’s were worse because you are thinking of the specifics of deals you were involved in. I am talking in the macro, with respect to the issues of systemic risk. Your rantings are the perfect example of someone who thinks they know it all because of their experience and success.
I know a guy like you. He happens to be in the lumber and automated truss and wall pre-fab business. He had close to zero debt 4 years ago. He was so sure that this boom was just the natural order of things that he embarked on a huge expansion. He levereged himself to the hilt, more than doubling the size of his facility and production yard. Now he will likely lose everything when he can’t sustain the debt he took on. He was very good at his business, yet he did not really understand the macro economics that were at play, and the fact that the boom was going to be stopped by debt saturation, rent arbitrage and debt service limits vs real income.
I think that you don’t know much about the system that fueled the credit growth engine. Instead of talking about the systemic issues that I bring up, you change the game, and try and make it relevant to you local market, and your experience in that market.
This debt implosion has barely started. Debt as a % of GDP is now over double what it was in the 80s (which you think were so bad), and if you do not think that is important, then you do not have a clue what I am talking about when I say that you have to have lived through the depression (or have read a lot about the economics of that time) to recognize what is happening.
Debt as a % of GDP (340% now) has not even fallen much yet from peak. Before this is done, it will likely fall to (200% or less of GDP). We have barely started. What do you think…we can just reverse course, carry on our merry way…and grow debt to 400% of GDP? 500%?
It is not just about mortgages. Corp debt, muni debt, credit cards, credit in general, the USD. To much leverage has been deployed, and deleveraging artificially drives down asset prices (just as leverage drove it up for years).
Do you know why the FED is bailing out BSC? If BSC goes down in an uncontrolled manner and they have to fire sale their assets due to margin calls, the resulting decline in asset values will likely result in ALL the big 5 IBs going under….because they will have to revalue THEIR books and take huge writedowns. The FED knows this. They are in the loop with respect to who BSC is a counterparty to, and who is a counterparty to BSC. Things have never been this dangerous. The 80’s were a childs game compared to what is going on now as far as systemic risk goes.
It is all a giant game or pretend. The financial sector has deployed so much leverage, and are so near the edge, that small changes in asset values can take them from solvent to insolvent…or vice versa. They are just hoping the whole game will reverse and they will be OK. It will not..and they will likely ALL end up being owned by foreigners, or nationalized.
“There are NUMEROUS alternatives to conventional institutional financing - you just have to get creative. Over the past 39 years I have purchased properties with AITD’s, with lease-options, with land contracts, and with seller carry-backs, and with NO money down, when financing was seemingly impossible to obtain”
OMG! THAT IS YOUR RESPONSE? Are you saying that 20 million Americans can solve this problem by employing these niche financing techniques? Again, you are thinking in the micro…and I am talking in the macro. When I say creditors determine prices, it was obvious that this was meant in the macro sense. That you did not understand that is mindboggling. That you think you could disprove by arguing the micro case out of context show that you really are not very smart.
You take a comment clearly meant to apply to overall credit availability, and it’s effect on overall price levels, and then try to disprove it by pointing to specific investments and deals you have personally done in the past. On net, if credit tightens, prices go down. It is happening right before your eyes, and it is going to get much worse.
Againk you simply prove my point. You have extensive experience in this game in the micro sense, and you are relying on those experiences to make judgements. But you totally dismiss the possibility (probability in my opinion) that the underlying credit machine, which has been in effect since the mid 70s (when Nixon closed the gold window) is now broken. You can see the trees better than most…but you can’t see the forest. You may play the game very well, but you fail to see that the leauge is going under.
Soros himself said we are at the end of the era of credit (which he sees as having started in the late 50s ala Bretton Woods).
I think that time will prove my view right. All we can do is wait as see.
Oh…and as for 100x rent….there are communities in the midwest where you can buy houses for that right now, and find good tenants to pay them off for you. Why is it so unthinkable that similar ratios could one day happen in sunny CA?
BrantW asked this preposterous question: “Oh…and as for 100x rent….there are communities in the midwest where you can buy houses for that right now, and find good tenants to pay them off for you. Why is it so unthinkable that similar ratios could one day happen in sunny CA?”
Do I REALLY have to point out to you that people are moving OUT of those states, and coming West? ( Like me, 40 years ago. I don’t even go back to visit. I’m a Californian now - probably longer than you have been.) Tell you what B-Rant, you call get a one way ticket to Detroit or Toledo really cheap, so you can easily go buy one of those “bargains”.
Like the Terminator, “You’ll be back!” ( And you will kiss the OC ground when you do return. I’d give you 6 months.)
Rants ( related to B-Rant? ) asked Sighburbirdbrain ( whoever THAT is.) Does he ever read or watch anything that happens outside of OC?
While I do, I don’t give that National or Worldly news as much credence as some people on this blog. ( Does the name NationalBubble ring a familiar note? )
Here are some excellent reasons why I don’t: ( Courtesy of the U.S. Bureau of Labor, California Employment Development Department, U.S. 2006 Census, DataQuick, Realfacts, California Department of Finance, Southern California Governments, Forbes.)
“Defaults and Foreclosures:
The media is great at announcing record foreclosures but, as the year ( 2007.) came to an end, the average monthly defaults were at 1,149; lenders only foreclosed on 347 of those homes. Homeowners in default emerge successfully 70% of the time by either refinancing their home or successfully selling it. Approximately 69% of the foreclosures were under $500,000 and almost 94% are under $750,000. The numbers may seem large but, when you realize that Orange County has 634,000 homeowners, the percentages become very, very small.
Incomes and Wealth:
Orange County has a median income of approximately $75,000, which is the 6th highest in the State. This is amazing when you consider how many workers earned less than $36,000 last year. The median income is really much higher, because more than 12% comes from investments, interest and capital gains - not wages and salary!
Merrill Lynch has 6 offices in Orange County with $24.2 billion under management. There are 42,120 families with $1 million to invest (excluding primary residences), and 11% of households have a net worth exceeding $1 million dollars. Orange County is home to 8 billionaires; ranks #3 in the U.S. with 116,517 millionaires; 67,729 earn more than $200,000; and 30% of households earn in excess of $100,000. In Orange County, 14% of our market is 2nd homes or income properties, and 22% of our properties have no loans!
Population and Employment:
Orange County’s population only grew by 23,000 in the past 12 months, but still ranks 2nd in the state with a total population of 3,098,000. This county is a net in-migration county; 16% of immigrants are Asian and 33% are Hispanic. The California Department of Finance predicts our population will grow to 4 million by 2050.
The counties work force has 1.57 million workers and ranks 5th in the NATION in the total number of jobs. The county’s unemployment rate is 4.3%, ranking it the 3rd lowest in the State. Income growth for ‘07 was 4.5%.
Housing and Rents:
Orange County is one of the most densely populated counties in the United States. Builders are phasing out the single family detached home, with very few being built after 2010. Planners are developing more clustered housing and vertical unit developments. This dynamic county ranks 3rd in the U.S. for apartments (due to the high median price of homes) and retail growth (solid economic prospects). OC ranks 4th in the U.S. in rental rate increases at 6.4%, due to strong demand verified by the high occupancy rate of 95.5%.
Source: U.S. Bureau of Labor, California Employment Development Department, U.S. 2006 Census, DataQuick, Realfacts, California Department of Finance, Southern California Governments, Forbes”
After living here for 40 years, I have come to know OC as God’s Country, a totally unique area, that people have continued to flock to, just like me, and that phenomenon is NOT going to change anytime soon. You want to talk about Detroit, you’re talking to the wrong person. I’ll opt for relevance every time.
You’re right about migration, Sigh. Those recent scare tactic stories about boomers cashing out was missing this fact: that will result in an inflow of boomer buyers here. The theory in those stories was that retirees will move to where the kids and grandkids are. Well, if G-Mom and G-Pop are California residents, chances are high that the kids and grandkids are HERE. If G-Mom and G-Pop are residents of Illinios, chances are at least medium that the kids and grandkids are HERE! What are the chances that G-Mom and G-Pop are California residents, and the kids and grandkids are in Illinois (and G-Mom and G-Pop would be willing to go there)? How about none, or if they do, they hightail it right back! Our climate is the best there is and will be a strong draw for a long time to come.
Man, You fools are getting schooled.
ShockG,
reading doods post might be educating to you…..
to me it’s a hilarious excercise in cramming 10 lbs of 2006 census data into a 5 lb bag
Hey Brant, good post. If he had tried the same thing here, presumably around UCI, he would have paid about $600k for a 4 bedroom. My rule of thumb for better rates financing, has been 25% down, or $150,000., leaving a loan balance of $450k.
At today’s 6.5%, plus 1.15 tax rate, plus insurance, we come up with a monthly payment of almost $3,600. If he rented to 4 students, the going rate for a bedroom sharing a bath, in OC ( source, the Pennysaver or the Register roommate ads.) is $800./mo for a regular room, and $1,000./mo for a master bedroom.
That, not counting for vacancies, which would probably occur when school isn’t in session, works out to a negative cash flow of less than $100./mo. Not bad. I personally wouldn’t that kind of scenario up, but it might make sense for the guy in Illinois.
I typically rent to families, not to fill up rooms with individuals, and my goal is to pay 25% down and have a break even. In the majority of cases that scenario has worked for me for over 20 years. As I’ve stated before, I cannot remember a vacancy lasting more than a month, and most have been for a week or two. I have been lucky, and feel blessed.
As for me not paying attention to the macro, the National, or the big picture, here’s something I posted in another thread:
In 40 years of living in Orange County - I came here from the East in fall of 68 - one thing has continually stood out. The OC is a truly unique area. Of course I can drive through some rough parts, but I have elected to avoid these in most of my years here.
OC is unbelievably resilient. When the defense industry left in the late 80’s, early 90’s, and the County went BK in the 90’s, the Bears on this blog would have had even more of a field day than they’re having now.
Now, over 95% of our businesses in So Cal employ less than 50 people! Think of our diversity! Phenomenal. Technology has blended us into so many different areas.
California ranks as the 5th most powerful nation in the world! There are only 4 other countries in the world that produce more goods & services than Cal! Orange County (as a nation) would rank 26th in the world!
I think that most of the people ( youngsters? ) posting negative stuff here have grown up in Orange County and have absolutely no clue as to how good we have it here. Having migrated from the East after spending most of my first 20+ years there and overseas, I CAN appreciate the difference between here - and say, Detroit.
I’m sure that it’s easy to read about National or World events or calamities and to juxtapose those calamaties locally, as well. As I have repeatedly stated, Orange County is God’s Country - it’s where the majority of the world would LOVE to live.
For a few years the only thing keeping me from coming out here was fear of not getting work. Finally, with the first snow of winter about to fall, I said to heck with it, packed all my worldly possessions into my Corvette and came out here with no job in place. I have NEVER regretted that decision.
Let me conclude with one simple concept. Orange County is among the last places in the world to be affected by negative things happening in the world. Additionally, Orange County is one of the FIRST places to recover from things that adversely affect the world.
I’m not saying to ignore the bad stuff that’s happening, or to be in denial about it, BUT you could try to take comfort that MOST other places are a LOT worse off. Smile, be happy.
Hey sigh,
Good points….. and I too came here over 40 years ago from the midwest…..HOWEVER, my friend, you overlook the one BIG FLY in the ointment: AFFORDABILITY.
IF you came here in 1968 you know ANYONE could buy a house.
Today OC is arguably among the most overpriced areas in the country and that is EXACTLY why prices are dropping and sales are almost stopped.
We have a ways to go before real estate computes — and by that I mean makes sense for investors and for a family looking for a place to raise their children.
Thoughtful says,
…..”Those recent scare tactic stories about boomers cashing out ……”
Those aren’t “scare stories”.
It’s just a sociological fact that at a certain age people marry, have children, and buy homes to raise their families.
The “boomers” are on the downside of that cycle and the numbers of youngsters following them is not nearly enough to create the demand that the massive numbers of boomers did in the recent past.
Nothing scary here. Just life. And verifiable numbers (age demographics).
There are not nearly as many young families looking to fill the suburban homes as there were 10 or 15 years ago……and yes, many of those boomers don’t want to live in a 4 or 5 bedroom home with a yard, maintenance, and bunch of little kids running wild in the neighborhood:)
pdu,
what is going to be even more commical is when the over leveraged boomers with high medical bills have to move back in with their kids to “take care of their grand kids”
ahhhhhh sociological speculation, it’s good comedy, but could end up being very true……. yikes let’s hope not