Worm brought up some valid concerns about our future, and how certain events could impact the real estate market. Anyone considering a move should seriously consider any and all potential hazards, so let’s examine. My comments are in italics:
1. The Fed quits buying mortgages at the end of March. Interest rates go up a half percent.
Buyers should tolerate up to 6%, with home pricing likely to reflect impact of rates over 6%, but not dollar-for-dollar (sellers slow to react).
2. Option Arm begin to hit the market. That will do wonder for comps.
Very few neg-ams in area (less than 10%), and we could use the extra inventory.
3. We go into a double dip recession this fall.
Local market weathered the first dip pretty well, and buyers are impatient.
4. China economy burst. That will take down all of Asia. Tall office building still being built in Shanghai with a current 50% vacancy.
The Chinese will have to learn to adjust all previous assumptions, just like in USA.
5. A blow up the the 60 trillion derivative market.
Will make for sexy headlines, but as long as there are mortgages, buyers will shrug it off. Fed to rescue.
6. Banks this time don’t get a bailout because the American people are mad about their conduct in the past year.
After all we’ve been through, we’re numb. Will the masses riot? Support a renegade politician? Not likely that a renegade could get traction due to media collusion with mainstream politicians.
7. Home prices continue to decline like they did in Japan for fifteen years.
I could name several areas that already have houses selling for more than what they were selling for 12-18 months ago.
8. Buyers go back to buying houses 3 to 4 times their yearly income.
Already there, due to more stringent underwriting guidelines and big down payments being utilized.
9. Banks acquired too much shadow inventory and have to put more houses on the market than the market can handle.
Very few REO properties currently, and gov’t programs stretching out timeline nicely.
10. Asteroid hitting earth.
Highly concentrated disasters will have big impact on that area only, hopefully not here!
This list is a start, but for every concern there are several possibilities of how it could turn out. Take a look at all options, and decide for yourself what course of action is within your comfort zone.
The general complaint/argument that the government is propping up the market will apply to the MBS-purchasing, and as they turn off the spigot over the next six months we’ll see the impact, if any. CR expects a mortgage rate increase of 3/8 to 1/2%, and I think buyers will live with mortgages under 6%. The loan-mod madness is here to stay, and will prolong the insanity, and while that may be infuriating, there’s not much you can do about it except not participate.
I’ve challenged CR early and often on his “no more than 50bps” call; a number of us over there consider that highly optimistic. Regardless, it must be noted that his statement is qualified as “relative to the 10 year Treasury”; we could very well see T’s move up all by themselves even as the spread between it and mortgage rates widen, in which case we could fly by 6%.
Great quote from Real Property Alpha about the behavior of the housing market…if you have kids you will relate:
“Today’s housing market, while resurgent in areas, looks to me like it has the kind of energy that an 8 year old would have after a can of Redbull. Sure, there’s a lot of noise and activity, but there’s no real solid foundation for that energy, and a nap is probably on the way at some point. The only question is whether we get to the nap with or without the temper tantrum and crying coming first.”
My concern is that California has too much debt.
tj,
I am with you on that, extreme volatility is expected. The mortgage companies are like gas station owners who bump the price immediately on bad news, whether warranted or not, so I think we’ll see spikes.
But they want to lend too, and I don’t think we’ll see the volume to support mortgage rates over 6%, and they’ll have to lower the greed.
I don’t think the US Government is going to come this far and let it go. The Fed will have to slip into the 10-year bond market with support.
California in debt? We are numb to that one, after all these years. No support anywhere for higher taxes though, so either the Fed bails us out, or we have to live with reduced services.
Home schooling, college for rich kids only, reduced healthcare, and potholes will be an inconvenience. But the fear they could generate would be more troublesome.
“The loan-mod madness is here to stay, and will prolong the insanity, and while that may be infuriating, there’s not much you can do about it except not participate.”
A couldn’t agree more.
As long as the banks are propped up with tax dollars (TARP). They won’t need to liquidate “assets”.
My own expectation is that the low end has bottomed and is rising slightly. Mid-range is still too high. Land is still too high. Development costs are still too high. Frankly, I’d still like to see the higher end take a huge hit because that will help bring down land costs, which is my interest. I don’t see local governments backing off on development costs as long as they are in fiscal crisis, so that means that the raw land cost has to come down.
My gut also says that locations with top tier schools will not drop much, if any. The demand for housing in top school districts is not going to go away, ever. I don’t think rates rising is going to slow down that demand one bit. In fact, I don’t think we will see any cooling until we get close to 7%. Remember, people still bought houses when the rate was 15%. What the rising interest rate will do is push pricing down.
But it’s all guesswork as long as the government is propping housing up. If all the support was removed, we would see a clearer picture of reality. Right now, we are just trying to fit pieces of a puzzle together while viewed through smoke and mirrors.
It strikes me that real estate in SD has been exceptionally volatile for what is a illiquid, non-mobile asset.
The 800 gorilla is the state of the CA economy and prop 13. Housing is about the only thing left to increase taxes on.
I know prop 13 is the 3rd rail of CA politics but still…
Californians would tolerate a bump to Prop 13, there are tweaks available. Besides, Howard Jarvis is dead, and there hasn’t been a real rabble-rouser since him. We thought Arnie had it in him, and look how that turned out.
Make the tax on new purchases 1.3%, instead of 1%, and let it raise 4% per year, instead of 2%. Those won’t rise at all for another year or two, and we’ll forget by then. Look how Mello-Roos is tolerated!
“Make the tax on new purchases 1.3%, instead of 1%, and let it raise 4% per year, instead of 2%.” (JtR)
That’s already happened here on the Central Coast, Jim. The tax rate was 1.1%, but then the do-nothing CA legislature/Governator took a percentage of property tax revenue back to Sacramento due to the small print of “emergency”. Then last fall, the county turned around and increased the rate on new home purchases to 1.35% with the 2009-10 property tax notices. The rate is capped at 3% per year in my county but previous bond measures have pushed it already to 4%.
Over a year ago, my landlords increased the rent by $150 month citing property tax increases as the reason for the increase. I called the County Assessor’s Office only to discover their taxes went up only $7/month. I spell that g-r-e-e-d!
I recently read that a major city in my county is about $20 million in debt. I heard from one of my City Council members that the city I live in is the only one in the county that isn’t in debt! Maybe it’s because the town is small, and anyone still has the ability to talk to the “politicians” who are actually our neighbors…
This whole CA fiscal meltdown has me looking for another place to live, but it makes me sad to leave as I was born here. Even with the lower home prices since the 2nd quarter of 2006, I just haven’t been impressed with what my hard-earned money can buy. The increasing property taxes–with no end in sight–make me even less enthusiastic to buy a home here. I just wish I could bottle up the usual 24/7 sunshine…
I tend to agree that there are some low-level tweeks to Prop 13 that would make sense. In addition to what Jim listed, I’d throw in that commercial properties are excluded and any change to ownership triggers a reset of the valuation. No more passing property around in the family or sliding it between company mergers on technicalities. A refinance would also trigger.
I don’t know that I’d compare it to Mello-Roos. With MR, you have a choice. Don’t want to pay it? Don’t buy in an area where it is required. Case closed. Property tax is not optional.
Hello Jim,
I live up LA and enjoy reading your blog and watching you videos. I have been waiting forever to buy a property up here and read a lot of different blogs – one in particular is http://www.doctorhousingbubble.com – just curious if you have ever read it and agree with his opinions. He strongly believes that things will continue to crash in our higher end markets (Westside and Beach Cities).
Some of the markets you follow sound similar to ours and you have commented that you have seen price increases – we to have seen increases in price, a lot.
The blog (www.doctorhousingbubble.com) is very confident things will correct and be inline with buyers incomes. He makes very convincing arguments and they are all true.
Thanks
I read him every day, I’m a long-time subscriber. I like the guy, he puts in a herculean effort daily and I think all he gets out of it is the ad revenue. An impressive commitment to bubble examination.
He makes convincing arguments, but every day there is an assumtion inserted that spoils it for me. He says “prices will be in-line with incomes”, but I don’t think we can assume that, just because of history.
He also says the market will tank due to option-arms recasting, but then had this in one article: Like I stated before, I highly doubt that Wells or BofA are going to push to recast many of these loans since they are going to fold the minute they do it.
I agree 100%, and if that’s the case, then why keep harping on it as a reason the market will tank?
He is on the shadow inventory hunt too, like all of us, and he has great data/charts. But I think he’s still including all the NODs, and NOTs as guaranteed REOs that will someday flood the inventory. But the more time goes on, the more it looks like they will be kicked down the road and forgotten. CR has been reminding that the HAMP modders are on the default list until made permanent, so some of those will survive.
Add that the deed-in-lieu/renting of REOs program could slip a bunch of homes under the carpet for years. Kick in the short-sale program this year, suspend the recasts of option-arms, and keep rates low and the USG could end up looking like heros for engineering the softest landing possible, paid for on the backs of our kids. Or a new world order/currency washes away our all problems – except revolution.
Jim,
I value your experience as a realtor and are probably one of the best in the US, even better at serving clients than the high-profile ones on TV.
However, I think you’re not seeing the forest for the trees, at least if you think appreciation is anywhere in the future.
I believe that the best we can have given the current available knowledge is bumping along the “bottom” for another 5-10 years.
The past 30 years in California has had a magnificent tail-wind of 3 powerful factors:
1. Declining rates since 1980. It’s not about the absolute level, but the direction. Declining rates make prices go up. Flat rates make them flat, and rising rates make them go down.
2. Jobs Growth. California had a business-friendly environment for many years and a conservative (by today’s standards) base that no longer exists. Government spending has forced the hand to future austerity and/or higher taxes. Take some slices out of the average homeowner’s pie and they have less for homes.
3. Household Income Growth. People bought “more house than they could afford” and would be “house poor” for a few years. It was normal, and became ingrained into the conscience of the people here. However, in a few years, income would grow enough to bail anyone out of a poor decision, and they could weather a storm better. Most importantly, the growth of the 2-income family allowed households to have another worker waiting in the wings in case something bad happened. Since that safety net is all but exhausted, there’s noone else to send into the workforce unless we slow household formation and have grown children rejoining parents in homes to help pay for it. If this is the case, household growth may not come back for a long time. See Japan for a perfect example of how they have adapted. Global job competition has driven down wages and will continue to do so for at least another generation. This is the first generation (generation x) where we make less than our parents adjusted for inflation, and we’re going to be paying just as much taxes, if not more.
I’m optimistic on California, but coastal is still priced to perfection, and there are at least 2 major problems that you didn’t discuss:
1. There is the very real and present threat of a major earthquake. Most homeowners do not have a financial cushion to handle the vagaries of a broken house. Noone even factors it into the calculation… you can be pretty confident that anywhere in California will have major damage sometime during homeownership, and insurance is inadequate to cover it.
2. Cascading bubbles for the last 15 years. First it was tech. That brought a lot of jobs and income to the state. Then it was housing that brought those jobs and lots of malinvestment. Unless we get another bubble, how can we convice people to give more money to us Californians?
Sorry, but Worm gave you a couple of softball questions to hit out of the park… almost seems like a plant to me, but the cold hard reality is that there has never been as much uncertainty and so much risk in the housing markets as there is now. Anyone who thinks otherwise is either financially reckless or naiive beyond a rational person.
Please, don’t beat the buy drum just yet. Let’s see if we can solve our structural problems first, then when we can see the whites of their eyes, we can talk about “the new normal”.
Thanks,
Chuck
I don’t appreciate you putting words in my mouth.
I never said the a-word, and where did I say go buy a house?
I said right in the post that everyone should examine all the angles, and make a decision that suits their needs.
Want me to go through your assumptions?
1. In the late-1970s rates and prices went up, so you can’t say it’s impossible. Don’t tell me that you believe that Ben B. is going to keep his finger off the trigger after coming this far??
2. Increase in taxes? It won’t be much, if any. The state will fee us to death first. But does that automatically mean people will pay less for houses? Probably, but who is to say that there isn’t enough demand to keep it going in certain spots? There is evidence that the demand in hotter areas runs deep.
3. Household growth? Deed-in-lieu or short sales for years ahead by those households who can’t hack it. I don’t like it, but will apparently have to live with it. If people can’t figure out a way to keep their house, then surrender it, but the way the game is rigged, it’ll stretch out for years. The longer, the softer.
4. Are you telling me that the bear argument includes earthquakes as a main concern? OK, but San Diego doesn’t have the San Andreas coming through. (And I did address it in the #10)
5. We are going to live without bubbles – it’s been that way the last few years.
I have seen the whites of their eyes – I’m on the street every day. Buyers are sick of putting their life on hold because the government thinks bailouts are a good thing. Today I’m pointing out the other side of how people see it, so you can see, what I see. But instead of taking a look, you lecture me.
Buyers are sick of putting their life on hold because the government thinks bailouts are a good thing. Today I’m pointing out the other side of how people see it, so you can see, what I see.
This is how I feel, and the reality is this is as affordable as housing’s been (combination of price and interest rates) in San Diego for over a decade. According to Piggington, we have been bouncing around at the most affordable housing ever for San Diego since the 70’s. Maybe not at the beach, but in good areas of SD with good schools you can get a SFR with 20% down and have your PITI be equal to or a bit less than rent. This is before any of the tax benefits of buying a house.
This doesn’t mean appreciation in the next few years, or every part of San Diego County is affordable, or every house listed on the MLS is priced right. This doesn’t mean that rents can’t go down, or California won’t melt down, or the banks release all of their NODs/NOTs at the same time or an earthquake won’t destroy San Diego.
IMO it wasn’t a bad business environment or high taxes in California that was driving people away. It was the absolutely insane housing prices for a period of time where nothing was affordable without a crazy loan. I think that California getting back to far more affordable housing than 4-5 years ago will help the business environment here.
Too many headwinds to get optimistic: rising interest rates, falling rents, high structural unemployment, large and growing shadow inventory, rising state income taxes, rising federal income taxes, stagnant to declining real wages, excess global labor, rising global labor competitiveness, emegration of people and companies out of CA, deleveraging consumer, demographic drag with pending baby boomer retirements. Also, lower government services means fewer and less compensated government employees/private contractors – I think they buy homes too.
Over the last 30 years, most of these factors were going in the opposite direction, which benefited real estate prices and consumer expectations towards the asset class. It takes time (and pain) for these expectations to normalize. Finally, Bernake is not here to save Southern California real estate. Once the national market begins to stabalize (its already overcorrected in most markets), the support can be withdrawn and S. Cal will be left to fight on its own.
Further tax increases in the midst of such dire economic circumstances and unemployment is not the way to go, IMHO. Why don’t we instead discuss the idea of limiting the size and scope of government spending, getting the government out of the business of real estate and the propping up of prices, and actually reducing taxes to help stimulate business? Simply calling for tax increases (sales, property, Mello Roos, or otherwise) is too easy and is just another way for us to kick the can and prolong the inevitable, IMHO.
Jobs, jobs, jobs. After that we can discuss what color we want on the front door.
Anyway, ignoring that 800lb gorilla, there is an asteroid that keeps me up. As part of California’s Federal bailout package the Federal judge in charge of the reorganization suspends Prop 13. We will all be Mello-Roos then.
Wow, I think this is the liveliest discussion out here I’ve seen in a few weeks! For the record, I’m putting my chips in with the guys that are pulling for the declining prices because I, too have been waiting to buy a house. I think this summer will go surprisingly well, though, much to my chagrin. Particularly because the wife is looking for something in 92130. I am…..not.
I guess my biggest question about CV is what will happen to those wonderful public schools when the government is forced to cut the budget for the entire public school system this summmer, and possibly every year for the next 5 years to meet our projected ongoing budget problems?
Wow, that’s a run-on sentence – ain’t it? Anyhow, if your belief is that the schools in 92130 are one of the big factors driving prices (let’s face it- it’s not the big back yards) what does the future look like if the funding for those schools is drying up?
Jobs? They are a-plenty for CV buyers, or they just have dough (15% paid all-cash in the last survey). The number of sales have declined, are declining, and it puts pressure on both sides when potential sellers can just live for free.
But the defaulters are few in 92130.
According to city-data, there are 11,000+ houses in CV, and there are 75 on the auction list. Spread those out over the next six months and you wouldn’t even notice.
IMO the bigger threat are the baby boomers growing old and needing to scale down. I keep seeing original owners listing their houses for sale after 10-20 years, and I need to quantify how many.
Heres the deal. Each one of those worries is legitimate to some degree. The problem is we have little idea as to when, if ever, some of those will bear fruit.
Timing is the real issue here. If your #1 worry is shadow inventory, how long are you willing to wait for the “tsunami”? 5 years? 10? 15? Also, if you wait that long and it doesnt meet your expectations, how bitter will you be? Put another way, if buying is your objective, when, if ever, are you willing to say f it, and get on with your life?
For some of you, the answer is, those sorts of worries will always be in the back of my mind. Know how to solve that? RENT!!! Thats right, there is nothing wrong with renting. People in europe do it all the time and they are not in any way unhappy. Just recognize for your own sake that you just dont have the ability to put those worries away and be happy with your decision to rent – possibly forever. Again, nothing wrong with that.
However, for the rest of you, I recommend you set a date certain where if worry X hasnt happened, its time to go shopping. For me that date is 8/1/2011. I set it 1.5 years ago, and do not plan to deviate from it (I could always find another “reason” not to move forward on that date, but that really defeats the whole purpose of setting one).
Of course, you always need to have your financial house in order, but once it is, try setting a date certain where either the worry happens or it doesnt and its time to move on.
Schools?
You could pass the hat in CV and make up any deficiency, or home school. I see many people who don’t have to work in 92130, but maybe I’m just lucky. When I see 66 closed sales and 200+ people still waiting to buy at Manzanita Trail, it sure seems like there is lots of affluence to go around.
Jim,
I’m sorry if it seemed as though I were lecturing you. That was not my intent, and I don’t think you need the lecture.
I believe buyers without knowledge of history and current perspective do need it. The sickening part of the bubble was not so much the rapid appreciation or “being priced out forever”, but that this fearwas parrotted again and again by so many agents (I’m not including you in this characterization, I don’t know what you told your clients in 2004-2006).
I was only trying to provide real counterpoint to the seemingly very optimistic opinions expressed above.
I reread your discussion, and I still see that this seems very positive at a time when we face our biggest challenges in the history of our country and state. There are some real structural problems here in California. Go to some other parts of America, and many do not have these specific problems. Many of those are going to get the jobs growth before SoCal and San Diego are.
I love Socal. I’ve had opportunities to leave, and like many I’ve stayed because I find it better, but we’ve had many, if not all of our brilliant friends leave for what they perceive as greener pastures.
All of my analysis above could be wrong. I admit that, but so should we all admit that we cannot predict the future; however the most likely view is a deteriorating housing market over the next 2-10 years. I also think that both jobs and incomes matter. It values us little if all we can create are retail and light-manufacturing jobs. We need real wealth-building jobs to drive the housing market.
You are most correct that at the current supply, the demand is not satiated. Where that leads us to 6 months or 6 years down the road is very unclear. Unfortunately, someone who buys a house now, often cannot flip it in 6 months and may be holding a steeply depreciating asset compared with other opportunities. I still believe that timing is everything.
Aren’t we in the advanced stage of bubblenomics by now Chuck? There aren’t any CV buyers that haven’t heard about the bubble.
They are trying to grapple with it, and here’s what I think the bottom line is for most.
They are willing to live with the risk of their value going down another 10% or so, in exchange for getting on with their life. If they thought there was more threat, they probably would wait.
I don’t know anybody who thinks we’ve rebounded, and it’s all clearing sailing ahead. All have grave concerns, they just aren’t letting outside factors control their life any longer.
Those on the outside looking in should consider these facts, because they are facts.
I think Robert Shiller is the best forecaster, because he says he doesn’t know for sure what’s going to happen, because he sees things he can’t explain, like his index going up for 10 months in a row. He is willing to keep an open mind.
I don’t know what is going to happen either, but I’m willing to put it all on the table and let each individual decide for themselves what risk they can live with. Those who want and need a home to live in are considering many more complexities than pure investment value, and nobody I know is thinking of flipping houses. They plan to live in it for the duration.
I closed sales with 55 sellers, and 10 buyers in the 2004-2006 era.
I don’t know that I buy the affluent argument so much. I mean, that argument’s clearly not working for RSF. And if I told you that I lived in a home that had a 200 sq ft backyard and when you look out either side of the house you see that you’re 5 feet away from the walls on your neighbor’s house, how affluent would you think I was?
When I talk to my friends who have recently bought homes in CV, all of them say ‘Sage Canyon School District’. So, look, you’re a realtor, how ‘bou we get you ask your customers what’s driving them to look at homes in CV and let us know they say?
I normally delete wise-acre comments like that, but I’ll let you go with a warning.
Everything I say here is based on my experience in the field, interacting with participants.
And if I told you that I lived in a home that had a 200 sq ft backyard and when you look out either side of the house you see that you’re 5 feet away from the walls on your neighbor’s house, how affluent would you think I was?
I probably shouldn’t respond, but it all depends on where you live. If you told me that you lived in Manhattan, I’d think you’d have a lot of money. The second point is that not everyone wants or desires a big yard. I know people that prefer no or little yard so they don’t have to take care of it. Give them enough room to have a BBQ and 10 people outside and that’s enough.
I prefer a big yard, but I also don’t project my desires onto people I don’t know.
Dawg, I believe that the CA State Controller recently resigned after a long review of finances and options. He said something about having overturned every rock and there is no way for the state of CA to declare bankruptcy. If a way is found, it will be precedent setting and I’d bet that every proposition will be either overturned or suspended. CA voters need to stop voting themselves unfunded benefits and that’s a fact.
The drive for a CA State Constitutional Convention has failed because nobody in the legislature wants to give up their goodies…or power. Something has to give soon. What will be the show to watch is what happens when the crisis truly comes to a head – even a bailout is only going to kick the can down the road. At some point, a process has to be found to nullify all propositions and contracts, including labor union. Whatever model is used for California, will be the same model used when it is the Federal Government’s turn.
So far, nobody has the political stones to do what must be done: nullify the propositions, scrap the proposition system all together, redistrict that state by retired judges, nullify the union contracts and reduce benefits to the poor/illegal. Frankly, I don’t think raising taxes is an option, the voters have been pretty clear on that topic across the board. Government needs to learn to live within its means just like the rest of us do.
Jim,
I think you’re correct on all counts and it sucks because the current market is artificial, backed by government support. It’s incredibly frustrating for saver types that work for their money to see the deadbeats skate past.
“Fair” means nothing anymore I use the terms incentive and/or disincentive to describe what’s going on.
If we give deadbeats an environment to do well in there will be larger and larger numbers of deadbeats because there’s an incentive to cheat the system.
If we punish savers by creating a disincentive with a government propped up real estate market less and less people will save.
Letting bankers use Tax dollars to stay in business was the biggest mistake we’ve ever done in American history. The repercussions will be felt for generations. But, at least the boomers won’t lose any equity. Retiring on a sunny island on the backs of their childern’s effort/wages.
I’m not being a wise-(acre)! I know 3 people who have all bought homes in Carmel Valley in the past year, and every single one of them has cited the wonderful school district as the reason they bought their homes. It’s like they’re robots who have the response programmed into them. That doesn’t give me warm fuzzies about buying a home in CV.
I’m simply recounting what I know about the people who I know who have bought in CV. They don’t says things like ‘Its close to the beach’ or ‘The crime rate is low’ or anything like that.
And when we go to their houses, there’s zero privacy outside, and all of them have kids that would love to have a 1/2 acre to roam around in. I guess what I’m trying to get at is why is CV so much better than, say 4S Ranch or Sorrento Valley?
Great discussion everyone–I completely agree with Jordan T in post #16. The buying opportunity IS out there. Let’s face it, noone has a crystal ball–the housing future of North County it is ALL speculation, the past, however, is NOT–one thing for certain, as far as Price and Rates are concerned, today is a MUCH better time to buy that the last 5-7 years (except maybe CV). Other buyers see this opportunity–that is one reason there is such short supply and multiple offer situations.
I’m simply recounting what I know about the people who I know who have bought in CV. They don’t says things like ‘Its close to the beach’ or ‘The crime rate is low’ or anything like that.
They say the schools, because that’s the specific reason why they picked CV and not other parts of San Diego. Other areas may meet all of their other criteria, but schools are important enough to pay the extra cash to get into CV. I guess you could just ask your friends why else besides schools they picked CV so we don’t have to guess. They may not care about the small yards because they figure they’ll use community parks instead.
I guess what I’m trying to get at is why is CV so much better than, say 4S Ranch or Sorrento Valley?
Sorrento Valley is a small area, and I’m betting your friends would live there if they found a house. Unfortunately there are only 7 houses on the MLS in all of Sorrento Valley. Pickings are slim there. 4S ranch is a quite a bit further east and further north. 4S ranch is a longer commute, hotter in the summer and further away from the beach.
Rob Dawg, I am not proposing higher taxes as the solution to our problems, by any means. Trust me. I guess I don’t trust that the political class will make the right choices here. The administration has been pretty clear about their intentions, and CA politicians are so in the tank with public employee unions that I fear they will not make the rational choice but the political expedient one. We’ll see if voters change the political calculus.
This is being a wise-acre:
So, look, you’re a realtor, how ‘bou we get you ask your customers what’s driving them to look at homes in CV and let us know they say?
To add to the other reasons given to buy in CV, there is safety in numbers too.
When potential buyers see their CV friends and family enjoy a relative detachment from the real estate negativity, they think it might be the one place they can minimize risk.
Then they go out and try to buy a house, and realize that it takes a monumental effort and plenty of luck just to buy a house in CV, let alone get a deal.
To succeed gives CV buyers the extra benefit mentally of achieving something that many are failing at. They want to win, and when they do, it feels good. People want that feeling.
Regarding what will happen to CV schools if funding is cut- you could put a sock puppet in every class room and the kids over there will still do just fine.
It seems to me that when doom and gloomers post on the internet, they rarely get challenged, but when the optimists go public, the level of criticism and vitriol is huge.
Sure, California has its current budget problems, but the fear and loathing is getting out of hand IMHO. A 40 billion or so budget deficit does seem huge, but not so much when you compare it to a Gross State Product of nearly 2 trillion. So the “crises” seems mostly political, not fundamentally economic. These things tend to work themselves out eventually.
If the Carmel Valley School system is going under, then the implicit argument seems to be that every community in California is headed to financial ruin. Maybe, but I don’t think that is a high probability.
A lot of folks here are critical of almost every propery on JTRs videos and seem to think they are entitled to get superior near perfect properties without any warts with traditional conventional financing at prices reflecting little or no competition but the system is preventing that from happening. Maybe it could happen, but those folks should also look at past cycles in California and realize that this is probably the exception and not the rule. California Real Estate has always been more volatile then other areas.
There are landlords who very much appreciate the renters waiting for that bottom in real estate.
“Bernake is not here to save Southern California real estate. Once the national market begins to stabalize (its already overcorrected in most markets), the support can be withdrawn and S. Cal will be left to fight on its own.”
Very well said. Americans are tired of being in recession, and consumer confidence can be helped if the Fed starts behaving like we’re out. Nationally, people are starting to think “bottom.” If you’re waiting it out in SoCal, you’ve got to hang your hat on the idea that the handouts, bailouts, and money printing will stop at some point. The banks won’t take $0 cash flow on properties forever, either. The rug could get pulled out from CA real estate.
But CV will be one of the last to fall if at all. We’re 3 years into this downturn and I expected to be much further along by now. Sellers have equity and buyers have big down payments. Just because I don’t like all this doesn’t make it untrue. There are many reasons to live in CV – schools are just one. There’s plenty of houses in prime Carlsbad with no yard where you can also high five your neighbor or have their children peer into your master bedroom from their yard. If you’re willing to overpay, might as well do it in CV.
Death and taxes – everything else is unknown. You can place your bets in many different ways, or you can sit on the sideline and have bets placed for you (currency risks, etc).
We now have entire new communities filling with people actually planning on living there long term – and they are mostly bringing 20-100% down. And there are literally hundreds of people waiting to do the same at every new development and REO/SS in the nicer parts of town.
I personally find it somewhat comforting knowing the majority of people buying today in these areas fit that profile.
Jordan – I don’t refute that one bit – my comments are just a carry-along to posts #20 and #23. My feeling is that the public schools in CV are an important factor to home prices in CV and I’m simply wondering what would happen to the home prices in CV if state funding for public schools dries up and the quality of those schools drops? I believe it will impact prices negatively.
On the other issues, heat, commute, etc, I don’t deny that these are issues for people buying homes. What I’m trying to get to is whether or not it’s enough of an impact to make this number of people want to live in CV so badly. I’m justing getting the feeling that there’s some fad-iness involved in the CV market. So, I’m trying to come up with solid, long-term reasons that CV homes are worth their current price?
Joe, I personally don’t think funding has a whole lot to do with school quality. Quality comes from the students and their parents. Stock a school with kids that have been raised to value education as the means to raise their standard of living and parents who re-enforce that ideal at every turn and you will have a top performing school no matter what the budget. Parents who value education want to live near other parents who value education. Their collective efforts make for students who excel.
So, I think response #35 is more of what I’d expected hear back. It sounds like there’s some herd-mentality-ish-ness, no? That’s the sort of thing that makes me leary of the home prices in CV. I guess what I’m trying to say is that in what I’ve seen in my 37 years with price/asset/internet/whatever bubbles, groupthink is what seems to drive the expansion of the buuble beyond where it should be. I don’t know if this is an expansion that maybe took rest of a bit and then kept going or if this is a new one following on the old one, but I know it presents financial risks that should be a little unsettling.
My feeling is that the public schools in CV are an important factor to home prices in CV and I’m simply wondering what would happen to the home prices in CV if state funding for public schools dries up and the quality of those schools drops?
Even with reduced funding, my guess is that CV would pass bonds to make up the difference. The quality of the CV schools also does not lie in the funding. It’s because a lot of parents move there for the good schools, showing they are more involved than the average parents. These are the type of parents that make good students out of their kids.
I agree that if the quality of the schools drops then the prices would likely come down, but I swear that’s almost a law of housing. However, I think that the quality of the schools would have to go down relative to San Diego. My guess is that if school quality goes down, it goes down less for CV than other areas increasing the delta between it and other areas. Typically, poorer areas are impacted more by budget cuts than more affluent areas.
So, I’m trying to come up with solid, long-term reasons that CV homes are worth their current price?
Close to the beach, close to the San Diego tech jobs, nice houses and great schools are all solid long-term reasons why CV housing is worth a lot of money. Some of those reasons could change, but close to the beach shouldn’t That’s not to say it won’t come down in price, just that there’s a justification for why CV will be more expensive than other tracts of housing with nice schools. How many of those are as close to the beach and the tech jobs as CV?
ArtEclectic,
Certainly agree with that being the case as far as education goes. I just think that with the money you’d save buying a home in a less expensive area than CV, you can send your kids to private school where you can find the same level of commitment from other parents and take some of some potential financial risks off the table.
Most people I know simplify the decision process down to:
Have Job
Have Money
Need a roof over the family’s head
Buy house!
Hi Jim,
Hope you’re not mad at me, don’t want to be on anyone’s hit list.
Perhaps I could have just shut my mouth.
I don’t really mind if anyone buys a house. I think they should do it if it makes them feel good. But, they should do it with their money that they earned or invested. It should not come from an overleveraged bank that is just going to go from bailout to bailout, and then when the FDIC takes it over, we get to backstop them and also give principal reductions paid for by John Q. Taxpayer. That stuff is for the birds.
However, doesn’t it seem a bit suspect when lots of buyers are using FHA financing to hedge their bets? Just asking… Should we all be sponsoring this madness, hoping that people will actually pay their bills when it’s proven that they won’t if push comes to shove?
Now I don’t even really have a problem with FHA loans… I think they’re great for many buyers, I just think they should have impeccable credit, not “the new subprime” as a vehicle for speculation, and put more down. The REAL problem was HELOC and 2nd Trustees. This is the stuff that keeps me ticked off 4-6 years later. So many homes I have looked at were bought at non-bubble prices only to have the equity siphoned off to purchase Hummers, Plasmas, trips to the Spearmint Rhino, Botox, Implants, or Vacations, the most shallow kind of spending. We could have invested that money to compete on the world stage. We could have built factories. We could all be driving electric cars. We could have developed biosciences. We could have cured cancer, alzheimers, or even adult lazy eye. We could have solved world hunger, or stopped Al Gore. Almost anything would have been better than the way we spent it.
Whatever happened to the American dream of starting a small business? It became some kind of perverted game to buy the biggest house possible instead, that was the way to succeed. I don’t like it one bit because there’s no future in it.
I’m glad I live in one of the sunniest places in the world. When I think about the waste and stupidity, it makes me sad. If I had taken that job with Microsoft back in ’98 in Redmond, I would blown my brains out by now.
Chuck
PS, sorry again if I distracted the conversation.
Joe,
Good thought, we had the same one – but watch yourself on the private schools though.
My oldest went to Cathedral, thinking a brand-new Catholic HS in the middle of vaunted CV would be an excellent education. But there are a few old teachers from Uni there who mail it in (one or two every semester).
Chuck,
I’m not mad, I’m tired and bored of hearing people on this blog regurgitate the same old crap over and over again (as you just did again).
Can we move on please?
FHA? In that last CV count of 40 closings, one was FHA, and 39 had 20% down or more. That’s the stuff I want to talk about – how that is happening consistently for 1+ years now.
While we’re talking about taxation….
SACRAMENTO, Calif. (AP) — Half of California voters prefer closing the state’s projected $20 billion deficit by cutting spending rather than raising taxes, according to a Field Poll released Tuesday.
Nearly 30 percent favor an equal mix of cuts and tax increases, while just 13 percent favor closing the gap solely or mostly through tax hikes.
The Field Poll also found that most voters believe fundamental changes to the state constitution are not necessary if lawmakers are more willing to compromise. Seventy-five percent of likely voters supported that opinion, compared with 20 percent who believed the state is in need of fundamental changes.
Voters backed up that sentiment by rejecting, 47 percent to 43 percent, the idea of letting the Legislature approve the state budget with a simple majority vote. Currently, it takes two-thirds majorities in the Assembly and Senate to pass budget bills and tax increases.
Kingside, no one is talking doom and gloom, that’s a strawman. We are just making observations and it doesn’t seem unreasonable to consider higher tax rates on the wealthy as a probable event. So I agree that things will work themselves out eventually like you say, but I ask you this, will higher taxes on the wealthy 1) reduce discretionary income or 2) increase discretionary income? Will higher taxes on business 1) increase capital formation and jobs or 2) decrease capital formation and jobs? Add to this the announced roll back of the Bush tax cuts next year, and it becomes clear that these policies should be a headwind on high end S. Cal. home prices.
Finally, this is just one of the headwinds I mentioned. What I was trying to say in my post is that coastal S.Cal real estate is above normal fundamentals, and these fundamentals were observed over a period that benefited from several positive underlying trends. Many of these trends are now reversing, so at a minimum we should get back to these historical fundamentals and a good case can be made that we will eventually run right past them.
Does this mean you shouldn’t buy? Not at all. But I think we should take a step back and look at the big picture rather than arriving at broad conclusions based on the behavior of a small pool of buyers aggressively bidding on a small pool of inventory over a relatively short observation period.
And thank you for renting your homes to us below fair value. We really appreciate the subsidy 😉
Jim: A million thanks for all your objective, analytical hard work and insight that you selflessly and unconditionally share.
I have no problem with this, and agree about taking a step back:
But I think we should take a step back and look at the big picture rather than arriving at broad conclusions based on the behavior of a small pool of buyers aggressively bidding on a small pool of inventory over a relatively short observation period.
But you ignore this behavior and dismiss it, instead of considering it as a curiousity if nothing else, let alone try to learn something from it.
“Half of California voters prefer closing the state’s projected $20 billion deficit by cutting spending rather than raising taxes, according to a Field Poll released Tuesday.”
Now that is good news! Maybe California has hope after all. I wonder what the results would be if they specified higher taxes on high income earners only (“higher taxes on thee but not me”). The class warfare tactic has worked in the past, but I’m crossing my fingers that voters will push this aside this time and focus on the real problem in Sacramento.
Jim,
It is a curious phenomenon. Why are people so crazy to buy a house? Do they know something we don’t? Is it different this time?
I’m reminded of 2 different investing styles.
Technical analysis looks at the behaviour of a small pool of buyers/sellers over a relatively short observation period and extrapolates conclusions from it. This is an excellent trading method, but one must remain nimble to changing conditions.
Fundamental analysis looks at the company, management, regulatory risks, and other macro factors which might push a security in some direction. This is better for a longer-term hold.
Are we saying that technically, housing in North SD county is bullish, while the fundamental analysis says only that the outlook is cloudy with medium-term risk to the downside? Or, do you see short-term risk to the downside, and upside likely over the long-run?
What’s your read, Jim?
Jim, I really appreciate the perspective, and I’m not dismissing it at all. I think the same can be said the other way around, where people take your observations and arrive at hard headed conclusions while ignoring the elephant in the room. I was just pointing out the elephant. Again, I respect what you do and appreciate the effort you put in to maintaining this site with no clear short-term benefit to you. Consider me as deferred revenue on your balance sheet.
by the way, I was Anon #50.
Chuck,
The current frenzy has NOTHING to do with investing. Guys are trying to make their wife happy. End of story.
I’ll add that the market would be substantially hotter if we had fully-competant agents at work. The inexperience, combined with arrogance, is a major hurdle to more sales – they can’t/won’t get out of the way.
On the drive to work, I heard two radio PR pieces / commercials on how we can’t cut the school budgets using some pretty aggressive scare tactics about kids not getting into college. The PR horde is out in force protecting their turf and budget in the state. This doesn’t bode well
Also I travel out of state for work. There is a growing anti-CA sentiment in other parts of this country. Any bailout of CA will be very very hard to pull off I think.
I understand that people are tired of waiting for SD real estate to fall. But outside of fed-supported low mortgage rates and limited supply, what are the real fundamentals for a stabilizing market in SD?
For those who were here in the early 1990s and the defense industry move, what were the catalysts for a stabilizing housing market?
Price – it fixes everything.
“The Field Poll also found that most voters believe fundamental changes to the state constitution are not necessary if lawmakers are more willing to compromise. Seventy-five percent of likely voters supported that opinion, compared with 20 percent who believed the state is in need of fundamental changes.”
What is hilarious about this is that these are the same voters who voted for unfunded spending mandates. You can’t vote for an unfunded spending mandate and then turn around tell government to cut spending. Because of the mandates, that gov’t is limited in where they can cut. The only big items on the table now are union contracts and health services for illegals. Gov’t has said we can’t cut services and the unions aren’t budging. Thus we have a budget stalemate.
“Guys are trying to make their wife happy. End of story.”
Well, that is the best, albeit the only decent, argument for a bull market I’ve heard in recent memory.
It’s where the “winning” comes from – the ladies are competitive about their nests, and are anxious to settle. It helps that their family and friends (particularly mother and sisters) have the same wants/needs.
Art Eclectic,
‘You can’t vote for an unfunded spending mandate and then turn around tell government to cut spending.’
You can if you realize that the state budget is a game of pac-man (different groups running around and gobbling up funds) and you’ve got to get yours.
lol
“I understand that people are tired of waiting for SD real estate to fall. But outside of fed-supported low mortgage rates and limited supply, what are the real fundamentals for a stabilizing market in SD?”
Certain people who apparently have a lot of money want to live here.
It’s where the “winning” comes from – the ladies are competitive about their nests, and are anxious to settle. It helps that their family and friends (particularly mother and sisters) have the same wants/needs.
It’s also hard to say no when monthly payments for a 30-year fixed loan with 20% down are the cheapest they’ve been in SD since the 70’s relative to incomes. I know I’ve been harping on this, but I feel the real reason people are buying is because they can find houses that are affordable to them, which wasn’t the case for 5-6 years in SD.
Here’s why I decided to buy a house.
1. I took a look at the rental market where I wanted to live and realized that a 20% down 30-year fixed PITI was less than rent.
2. I found a house I’d be happy with for 30 years if needed.
3. Some help from my wife’s parents sweetened the pot.
4. Combination of 1 and 3 make it hard to win an argument with my wife over why we shouldn’t buy. The arguments are now based more on speculation into the future, instead of a “PITI is double the prevailing rent argument”
5. Happy wife = happy life and you can’t take the money with you in the end.
I could have added more argument to my list. They were just off the top of my head. I read financial writers three or four hours a day.
It still comes down to jobs. What will the California economy do to attract new jobs.
I have not sold my Mission Beach property. I have probably taken at least a $500,000 hit so far. Bought July 1982 paying 14% interest. But I did hold my Moms house for two years empty and sold at the top in 2005.
There were a lot of people who caught the knive in Japan two or three years after the top in housing.
San Diego housing during the 1930’s went down 59% between 1929 till 1934. Then it went up 64% in one year. Then back down 20% over the next five years.
So be careful and hopefully I will be wrong. Because with the governments huge debts. We could be back in high inflation and high interest rates in a couple of years. Which means that anybody who makes it thru the falling prices the next two years could be back to today prices in 4-5 years.
This so reminds me of the early days of the internet & the chat room discussions regarding real estate in coastal california.
Around 1995-1996, as the bubble wound down and more and more bears became bullish, there was a sizeable – intelligent – minority that were convinced, and I mean CONVINCED that prices “had much further to fall”. These guys would continue to throw out a laundry list of concerns all of which could in theory lead to “another leg down” as they say.
Of course, we all know what happened to prices after 1996. I often wonder what happened to these guys? I do know that one of them continued to rent til the day he died in 2007, convinced it was all a “dead cat bounce” and why houses must “return to fundamentals”.
Fascinating discussion. From my own perspective, much of San Diego County is the most affordable it has been in 10-12 years (if you can find a house you like.)
The higher-end neighborhoods are still out of whack and I think they will fall some over the next 4-5 years. I wouldn’t buy right now where I rent (Solana Beach west of 5.)
The question is, do I want to continue renting for 4 more years, or buy a house in one of those farther-away neighborhoods where the bottom has already fallen out? Jim already knows my answer…I’m scouting a couple short sales I can afford and pay off quickly…but not anywhere near the coast.
-Erica
Regarding those CV stats: People are now buying homes with substantially their own coin – imagine that!
Nice to see.
I won’t add any more conjecture to the levitation on the high end. But I chose to buy a low/mid range house in Oceanside in June ’09 because I felt, based on data like Case-Shiller, and Jim’s volumes of video and data, that the area had sufficiently bottomed with prices 50+% off peak, and roughly in line with income and rental fundamentals. I felt I had very little to risk buying a north county coastal, single level, with big yard, at $180/sq ft. And even then I was (am) mentally prepared for an additional 10% hit in the near term.
Good calls Erica and osidebuyer.
For many people, buying well within their means and getting on with life is the right call. Most buyers in CV are probably on the 4th or 5th house. For those looking for a first house on a tight budget their are many nice choices in SD.
@Joe #31 — three people already told you it was the schools. You refuse to accept this. I’ll be the fourth person and hopefully, you will recognize that for some people, schools rank high in their priority list.
Our other criteria, not in any specific order: proximity to work (Sorrento Valley), high concentration of employers in the area given our career choices/education, relative low crime rate, climate (yes, there is a difference), newer builds which reflect recent building regulations…
we are willing to pay the extra CV premium for all the above.
the half acre lot is way down in our list. so is the 100 feet of space between neighbor’s walls and ours.
fyi, it was not my first house and I could afford more. I’m extremely conservative and wanted to buy something I was confident wouldn’t depreciate significantly, even with the jobs/economy continuing as is or worsening.
O-Side Buyer–Good mentality–that reminds me of the old saying: “You can that the top 10% and the bottom 10%, I’ll take the 80% in the middle!”
Sorry–should have been “You can HAVE the top…”
There’s actually a small slice of 92130 that goes to Poway schools instead of San Dieguito schools. Those homes are just as big and just as new, but go for less than the rest of CV. Makes a good case for schools being the primary attraction.
“I could name several areas that already have houses selling for more than what they were selling for 12-18 months ago.”
Jim, I think that’s a result of inelastic demand for those properties, be it for the view, the neighborhood, schools, being close to the financial district, etc. I think a Japan scenario is very likely, if not here already. Discounting interest rates, home values can only rise as fast as wages.
Jim – What’s the record # of comments on a real estate related post….this one is looking strong!
But they want to lend too, and I don’t think we’ll see the volume to support mortgage rates over 6%, and they’ll have to lower the greed.
I don’t think we’ll see the volume either, but IMHO it’ll be the housing prices that’ll come down to compensate, not the rates.
I think Jim is onto a big issue — namely that there are many buyers who, as long as they feel secure about their financial picture, are willing to jump in a buy a house they like and are not that concerned about another 10% to 15% drop in price over the next few years. This will moderate what I think will be another smaller leg down.
However, I do think we are not quite yet at the bottom. First, history has told me that we are never at a bottom until everyone thinks they can’t see the bottom. Second, the Fed, contrary to everyone’s belief (or RE agents belief — sorry Jim you are repeating what I hear from agents up here) will not jump back in unless we see another 20% sharp decline over a 6 month period and that decline destabilizes the banks (if all it does is make current homeonwers upset, the fed won’t care).
Why? First they care only about the banks. Second, as CR has clearly showed existing RE really does not impact the economy — only new construction does. Third, if they feel national prices are stabilizing, they won’t care about CA (see comment #38). And finally, the world market will eventually force their hand, unless of course we all want run away inflation. You are seeing this with Greece and Spain and I’ll bet the Euro will have a hard time hanging on — and the Fed definitely will value the dollar over the value of your home. And don’t forget at some point (and I am not talking 10 years but 5) the fed will have to sell all those MBS they bought unless we want 10% plus inflation. So those who think the Fed is not being honest when they say theya are done in my view really have not studied monetary policy and history.
I also don’t think the Fed really cares the level of price declines, just the pace. They would be very happy, I feel to see a slow correction that takes 5 years. So I think we might see another 10% to 15% down over the next 3 years in So Cal (depends on hood and these are in real not nominal terms) and Nor Cal (SF) which is about a year behind another 15% to 20% down. But that will be it and every area will bottom at a different time.
And don’t forget someone owns these mortgages — the free rent will end or the pension payments will end so the question is who wins. Will the seniors who will be upset when pension payments continue to shrink (or stop) vote differently, or will they be so apathetic and let the free renters win.
Now the Dems I do think want to save your house price — elections are due — but I think the Dems have already cooked their chances by not focusing on the only issue that matters right now to an electorate — jobs. Come November, we will see another leg down and no resolve in Washington to continue to kick the can down the road.
I’d take the epic number of comments as a sign that people aren’t bored or put off by macro discussion.
Jim, the number of comments on this topic is a good signal indicating the interest in CV area.
The number of bearish comments also might be a good contrarian indicator. This reminds me of a phone call I had last February when a buddy of mine was convinced that the S&P 500 was going to the 300-400 range.
clearfund,
Jim’s blog entries have had a few triple digit response counts. Can’t recall the exact topics but emotions can run high around here.
Regarding the jobs issue, I have been pretty surprised about how having solid employment can get trumped by a deep-seated need to own. I know a couple where the gal has a mediocre paying govt gig and the guy has been unemployed for a few stretches the past two years. Every time he finds a job they start putting offers in on homes, then they take a break when his job goes away. He just started working again and they are right back to putting offers in. I watch this in amazement. They are on a mission to buy something.
Regarding CV, there are always people that will be willing to pay a premium to live in what they would consider to be the “it” area. What is clear is that values in most good surrounding zips have not held up nearly as well, so more than anything I am curious to see what happens to CV if the disparity between it and other good zips continues to grow. I’d guess that at some point the gap could grow so great that it could not be ignored by anyone except for the most rabid CV fan. I know people that feel such a way about 92037, they wouldn’t live anywhere else no matter the discrepancy. Most people though do have breaking point.
I have been a RE bear since March 2003 when we pulled out of buying a house in east Carmel Valley. I continued my bear stance even while my friends laughed at me. “Jeeman, the sun tax will make every house worth a million in San Diego.”
We kept renting and cranking our careers…and our wages go to a point where we started looking in LJ and Del Mar, instead of Carmel Valley. We wanted the perfect house, but were ready to settle for a deal on a less than perfect house. We kept seeing delusional sellers pricing their RE at 50%-75% above 2004 prices. Insane. But at times, we’d see closings with ocean views and a decent house for 20% off of asking. The market is soft for some sellers.
We expanded our search to RSF, but were extremely picky because we wanted the Covenant schools only. We found motivated sellers, bargained hard and were ready to walk, and eventually struck a deal at less than their early 2002 purchase after 7 counter-offers. Using an inflation calculator, we bought slightly above the 1997 sale price, inflation adjusted. This would not include the new roof, and the new guest house that was built since that time.
I’m still a RE bear, but I believe you can find a good deal if you find the right sellers who aren’t delusional. If you hold to the fundamentals, then fine, but that doesn’t mean that the current market won’t be mispriced. Real estate isn’t an efficient market. Some guy who is hurting and couldn’t sell for 2 years might be willing to go as low as you want to buy for.
And yes, schools matter. When it’s your child who will either grow up to be a CEO or a meth-addicted gardner because you wanted to go cheap on a house, you will view real estate differently. We’ll buy the generic food to afford our house if he grows up to be successful and happy.
Oh, and even with our 1997-inflation-adjusted price, I realized that we could be in a deflationary spiral and we could lose another 20% on our purchase. We were ok with that. We had already talked down from the asking price around 20%, because we didn’t want to lose 40% on our purchase :-). Set a price in mind, and stick to it.
I’m sure your kids’ teachers will be thrilled to know you’re counting on them to make sure your kids don’t turn out to be meth-heads, rather than doing the raising yourself.