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Posted by on Oct 6, 2009 in Jim TV | 81 comments | Print Print

Hot All Over

It is very frustrating these days for buyers trying to make a sensible decision – the lower-end of every market has been hot, and multiple offers are the norm.  Just because the market is hot now doesn’t mean it will last, so let’s keep a close eye on it to see where it goes!

I’ll keep bringing the stories that I see, and if you think there are some worth noting, send them my way – I’m happy to take requests. 

Here’s a look at a couple of standard lower-to-mid range homes:

81 Comments

  1. sdcellar, . . . me too! You couldn’t have said it better.

  2. I know 2 people (myself and a close relative) seriously considering getting into real estate since we are sickened by our cash sitting around earning 1% or less. I’m still worried though who the h*ll will be left to buy once interest rates go up and the $8000 tax credit ends (don’t know when those 2 will be, but eventually they will both occur).

  3. What’s the saying – nothing price won’t fix?

    Sounds like these prices have been set realistically.

    When the higher end (carmel valley) starts seeing reasonable pricing, they too will have bidding wars. The ones that hit the market with good prices, get snatched up. The ones that hit the market with 2006 prices, linger…

    And until there are more organic sales, vs shorts and REOs – the market will continue to frustrate buyers.

  4. Blur – you have a good memory; you are correct on both year and school. Very nice summation of your thoughts. I’m right there with you, except I’m in no hurry to buy; I really like my rental house, as modest as it is. I’ve been following RE for so long that I think it’s now a habit more than anything else.

    One of my friends is looking at houses in San Marcos that are very similar (as in almost identical) to the ones in this video. He’s only submitted one offer thus far, but hasn’t run into any places that have more than 5 or 6 offers on the table. Maybe he needs a new realtor.

  5. Anybody think tax credit buyers are turning to condos in the last couple of weeks, just to lock in the credit. I’ve seen condo inventories in middle class areas (say Mira Mesa) drop quite a bit in the past 2 weeks, while housing inventory in the same area has been going up. Could these condo buyers be frustrated SFH bidders that want/need the credit to get into something? Is is possible these current condo buyers are reducing the future pool of buyers for the kind of homes displayed in this video. I’m sure there’s still quite a few buyers, but an unintended consequence of the tax credit could be shifting future Single Family Home buyers into current Condo buyers.

  6. We need more realtors making video walkthroughs like Jim. Says almost everything about a house without the hour spent yourself. Years from now everybody’s going to do this.

  7. livingincali: That’s a good point, I should lock in this tax credit before I lose it since I’m paying for it anyway. What can I get for $8k? I’ll probably be able to flip it for $15k in a few months, so I’m not too picky.

  8. I too have been worried and frustrated about sitting on cash that is earning less than 1%.

    But then I think about how the best strategy in a boat race when the wind starts blowing hard is to drop anchor and wait. You may not be moving forward, but at least you are not being blown back.

  9. I understand the frustration of those who are substantially in cash and not getting much return these days. Only time will tell if plowing that money into RE right now is a better move, financially speaking. If you throw $100K down on a $500K house that drops 10% in value in a year, you are now down 50% as opposed to being up 1%. But in the long run it may turn out to be a great investment.

    I am going to eventually be a move-up buyer but it is just a completely wacky market now. Way too many odd variables (that are probably not of the long-term variety) for me to make a move with any confidence that I would not suffer the evaporation of my hard-earned money. I am tracking the $750K-$1.25 mil range and there is no way I am sinking my dough into that market anytime soon. For me, the downside risk of losses far outweighs any upside I can see at this time.

    I’m from the school that says RE is always an investment. Too much of my money over my lifetime is going to be at stake to not think of it as such.

  10. Are the low interest rates and the tax credit, kind of like cash for clunkers, in that they pull buyers forward, creating a mini-bubble? I think there’s still way too many people in financial trouble for this to last. You can only inflate an economy with hot air for so long.

  11. I know 2 people (myself and a close relative) seriously considering getting into real estate since we are sickened by our cash sitting around earning 1% or less. I’m still worried though who the h*ll will be left to buy once interest rates go up and the $8000 tax credit ends (don’t know when those 2 will be, but eventually they will both occur).
    ————————

    And this is exactly what is making my very skeptical…

    So many of us are feeling squeezed out of cash, and the PTB are doing absolutely everything in their power to get the cash out of our hands, that my naturally cynical self is questioning the motives behind all the news and policy actions of late. Being skeptical and naturally contrarian, when everyone is trying to convince me to get out of my cash position, there’s a part of me that wants to hunker down with the cash and wait everything out.

    Indeed, if the currency collapses, what will happen to interest rates? I can see it going both ways — very low because too many dollars are flooding the market, and very high because we are trying to get people to fund our debt. High rates will absolutely decimate U.S.-based demand for housing. OTOH, a currency collapse opens the door for people in other countries with stronger currencies to come over here and buy up our land.

    This is the Grand Dilema of our times, IMHO. Those who get it right will win big, those who get it wrong may be ruined for life.

  12. Another unintended consequence of gubbermint actions – buyers are motivated to use high leverage to lower their risk to the uncertainty.

    But those using the big down payments are flying in the face of that argument, and makes you wonder if Haves could prevail?

  13. ‘Right now, the bulk of our (USD) money is earning .5% or less. I know many other people who are in the same boat.’

    For anyone earning less then 1% on your cash, I suggest you look around a bit. All of our accounts are over 1.7% FDIC, etc.

    At this point every little bit helps.

  14. Remind me how this turned out last time prices rose 20% in a month with multiple offers. It is incredibly scary that people are paying $60K more versus a few months ago to gains a $8K credit.

  15. The bottom in prices for many areas was 6 to 8 months ago but that is not to say good deals are gone! Jim is just showing people what is happening on the ground,and I must say HONESTLY at that.How many RE clerks will do that? He is the only one I have ever seen.He is not a clerk but a professional.many people complain they will never be able to buy their dream house but the fact is California RE is expensive and always will be so my advice is to buy a starter home at a good price,make extra payments for 10 years and build equity and the next cycle you can trade up!I fear many marginal buyers have already missed the best chance to get their foot in door and only want to complain about being a victim because they feel they deserve a 2800 sq MCMANSION when in reality they can only afford a 1200 sq foot starter.I grew up in 1200 sq ft starter in the SFV and my pops worked 2 jobs to raise 4 kids and send them to private school.people today are spoiled and think they deserve to live like people on TV.RANT OVER !!!

  16. Until we fix the job problem, the market will simply be specuvestors and people who are tired of renting.

  17. “What was that additional blog name you were considering… “DoubleBubbleInfo.Com”?…You gotta be feeling some serious deja vu these days
    tj & the bear | October 6th, 2009 at 6:24 pm ”

    EXACTLY! Gov’t is just re-inflating the bubble so the big players can slowly ease their way out of this and leave both the taxpayer and new buyers (mostly one and the same) holding the bag. Joe Public hasn’t learned a thing. I’ll rent and wait for this crap to collapse (when the gov’t is too broke to ‘fix’ it again). I came to Cali in 2005 and have fared far better by renting than anyone who bought around that same time, or even into 2007. And just when buying was looking like a better deal, the gov’t decides to ‘save’ everyone and keep reasonable prices out of reach. So a renter I will remain for now. Funny, the RE market will probably go to hell around 2012 when the world is supposed to end anyway. Sorry for the gloomy outlook, but this stuff is insane. Come on folks, it shouldn’t be this hard to [affordably] own a decent size house in a safe neighborhood, even in SoCal, when you have a modest-to-high average income and don’t live an extravagant lifestyle.

  18. If you have a modest to high income YOU CAN buy a home today,now explain decent size and safe!

  19. Oh, I guess I’d say… 5’3″~5’7″, 90-120lbs, 36C cups, with no boyfriend in sight?

  20. Hate to be the bearer of reality here, BSinOside, but the chances of a girl who is 5’3″ and 90 lbs, or 5’7″ and 120 lbs, having a 36C is pretty close to nil. That is, unless you don’t mind the bolt-ons. ;)

  21. End of thread. BSinOside wins.

  22. This is almost the exact same situation/environment where I bought in May. ’80s tract home street in Oceanside, stucco and tile, with close comps from $250K to $295K. I jumped in at $280K for a 1600 sq ft short sale with a large back yard with mature trees and landscaping. Except mine is single level w/ no pool which I consider pluses. I may not have caught the bottom but I figure close enough.

    And yes it is a HOT market. I lost out on many before that and it got to the point where I was monitoring the web several times a day and when I saw something I liked I’d call my realtor and look at it within a few hours. Mine had just fallen out of escrow that day when I made an offer.

  23. “Another unintended consequence of gubbermint actions – buyers are motivated to use high leverage to lower their risk to the uncertainty.

    But those using the big down payments are flying in the face of that argument, and makes you wonder if Haves could prevail?”

    Nice post JTR, it is hard to make the case all the cash buyers out there are dumb because they did get their cash in the first place. Of course, they could have sold at the peak but the point was they had the savvy to do so.

  24. Someone should really punish you for trying to pump this market like you’re doing.

    Maybe you’ll do a showing in the future and meet the buyer of your dreams… Careful Jimmy.

  25. Jim,

    Please don’t take my post above (or this one) personally, like I said I am not the most eloquent blog poster. I’m just trying to tell you what I see, and how that conflicts with what once attracted me to your site.

    To me, your early description in the next days video are a perfect example of how the focus around here has shifted from home buying to short term finance finance. What you described is the very essence of a bubble. No rationale for pricing, buyer frenzy, and the unspoken urgency for people to get in now. I’m sure at one point the tulip brokers were having a hard time finding merchandise for their buyers, too.

    In my opinion, in the past you offered more commentary on the intangibles, on neighborhoods, peculiarities of a particular house, and longer time horizon factors that as a newcomer to SD, I found refreshing and useful. The oceanside condo auction/head shop tour is a perfect example.

    What seemed to me to distinguish you from other realtors was that you kept the excitatory rhetoric relatively low, you didn’t openly fan the flames and play on emotions like the realtors who took me around NoCo in late 2007. They were crassly after a commission, and didn’t seem to care a whit how that affected my family or future prospects. [You may be too, but at least you try to hide it :-)]

    How about some information for “the rest of us,” the ones who still don’t have 20% down and are unwilling to rush into this crazy market? What SHOULD we be looking for? I’m not talking about buying price alone, but also the more intangible and durable components of home buying. Neighborhood, noise, future development, commute times, boring details like that that make a place a dream or a nightmare.

    You’ve been through a SD RE bubble before. Where did people get burned, what mistakes were made, what things have proven over time to have been good moves?

    Thanks.

  26. “Susie, that is MUST-SEE TV!” (JtR)

    Exactly! But I was sooo wondering if you would delete my “crazy” post, Jim. On further reflection, this should be mentioned in ALL your videos: “JtR’s videos: MUST-SEE TV!” Really, my check’s in the mail, right?

  27. “I’ll have one of whatever Susie had please.” ~ Genius October 6th, 2009 at 9:48 pm ~ (In reference to my comment #31.)

    ROTFL, Genius! OT ~ Is there anyone who hasn’t seen Meg Ryan in the famous restaurant scene with Billy Crystal in “When Harry Met Sally”?
    http://www.youtube.com/watch?v=F-bsf2x-aeE

    First, I’ve finally gotten some more sleep and am on my 2nd glass of OJ (my coffee) this morning. Thankfully, I’m much more sane today. I have learned an important lesson: I’m no longer college-age and easily able to go without sleep. Back then, I could stay up for 42 hours. Today? Nooo… But being a single parent (by widowhood), I find there just aren’t enough hours in a 24-hour period to get everything accomplished. Add a real estate search into the equation and forget about it.

    Facts about the Meg Ryan movie scene:
    (1) The lady at the end of that 2:52 minute scene is actually Rob Reiner’s mom. Rob was the director of the movie and said directing this scene was very uncomfortable for him (Captain Obvious why).
    (2) In an Oprah interview about 10 years after the movie’s release, Billy Crystal talked about this scene and how much fun he had. Meg Ryan was present (by remote). He told her what he had never admitted to her or anyone else before: “I intentionally flubbed my lines over and over just to watch you have to re-do this scene over and over.”(Meg cracked up.)

    Now on to real estate–so JtR doesn’t hit the delete button. Here’s my confession: IF I can find my last home, if I can find 30-year financing (I have no debt, stellar FICO and long credit history, and my 20% down payment in hand), and sign the closing papers and then be standing at my new home with keys in hand, I could utter Meg’s famous words from the “When Harry Met Sally” restaurant scene: “Yes! YES! YEEESSS!”.

    There I said it! Not just because this scene is my #1 favorite of any movie I’ve ever seen, but because those three words would portray my exact feelings at that very moment.

    The fact is I couldn’t care less if my next home turns out to be a great investment or not when it’s resold, or if the do-nothing Congress extends the $8,000 tax credit.

    Yep, there’s sure to be the usual homeowner headaches for me. And being a homeowner as a widow without the “best finish carpenter on the planet” along for the adventure will present personal challenges, but I’m ready. But there will also be the ecstatic feeling of knowing I’m finally “home” and am exactly where I’m suppose to be to move forward in my life. Simply priceless, I’d say!

    ETA: (You can delete my next question after you read it, Jim.) *Susie Pondering* Jim, would my re-enactment of Meg from this scene at the front door of my new home really be considered a “verbal real estate orgasm”? *Chuckle* Not that there’s anything wrong with that…

  28. Jim,

    You are spot on with the buyer frenzy. I’ve noticed myself that getting a reasonable priced (<$350,000) home in North Park, Normal Heights, and even City Heights has been really tough. Most properties on the market have loads of offers.

    From my experience in this market the buyers seem to be evenly split between Cash/Investor Offers, Conventional Financing, and FHA financing. The current market environment with low rates, high usage of FHA programs, and the uncertain macro-economic future of the USA, as well as the lowered purchase prices on the market are driving the buyers to buy.

    Plus in the future FHA may have to make some major changes to the way they do business, and that’s going to mean a more expensive FHA Loan.

    See: http://www.bloomberg.com/apps/news?pid=20601087&sid=aOmu318hOZr4

    There is no way that lending rates can remain at this level forever, but the economic recovery has to happen before the Fed can raise the rates. If rates go up too soon many more people will be forced into foreclosure. (Lots of Macro-economic reasons for keeping rates low right now actually)

    There are still so many people upside down on their properties meaning that the short sales and foreclosures are still happening, and going to trickle into the market a little at a time. I think there is going to be a slow/depressed market for years to come as people realize that the credit hit may be worth getting out of their overpriced homes.

    I think that it is always a good time to buy, if you are looking for your own home. Don’t panic when you see pricing rising, there is no way I can see this taking off like another bubble. I think this is just a pricing correction because prices went too far down. Don’t be in a hurry, as it seems like timing is just as important as purchase price.

    San Diego will always have a higher demand for housing simply because it’s a great place to live, perfect weather, diverse job opportunities, etc.

    Just my 2 cents.

  29. Who’s buying these houses? I’ll answer… Investors (foreign and domestic) who are trying to dump the dollar while it still has value. Property values are still depreciating; the decline of the dollar is just outpacing it, giving the perception that property values and are increasing.

  30. This is the result of excess liquidity due to loose monetary policy coupled with low interest and government policy to prop up home prices. It does not represent an economic recovery but more like an intentional bubble like the equities markets. However expect it to continue as the Fed, Treasury, and Congress double down on reckless policies designed to delay the reckoning. Meanwhile people on here honestly trying to buy homes sit caught in the crossfire unable to buy at what should be more like the home’s true value.

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