The Home Less Millennials: In 1981 the Median age of a Home Buyer was 31 and Today it is 47
Pre-Covid our cohort of Millennials in California were already living at home in dramatically large numbers. The total was 2.3 million Millennial adults were living at home with mom and dad because they were unable to afford high rents, let alone purchase an overpriced crap shack built during World War II with popcorn ceilings and horrid looking carpet. Flippers think that a little bit of lipstick on the pig is enough to charge $1 million for a piece of junk. It should come as no surprise that Millennials are struggling even more during the pandemic. The bulk of job losses have come from industries where young people dominate. So it is no surprise that the median age of a home buyer went from 31 in 1981 to a whopping 47 today. All of a sudden many of the new buyers are looking like the Taco Tuesday baby boomers that rail against Millennials for not affording a home when they went to college during a time when college was affordable enough to pay with a paper route. Of course many of these older Americans couldn’t program their way out of a paper bag yet rant on social media platforms built by Millennials.
The older home buyers of America
This chart is incredibly telling of the story of home buying in America:
We are basically sacrificing the young at the expense of older Americans. How so? Just look at the average age of our politicians. Many of them can barely get around technology without their younger handlers in the background posting for them and they are increasing the country debt load to a point where this will saddle our kids and younger Americans for a generation to come. But if it isn’t obvious in 2020, many Americans are entitled “Karens†ready to flip out at Old Navy because they are being inconvenienced when our parents and grand parents fought in World Wars where they risked their lives (many did not want to go but did and many never came back). They are probably spinning in their graves watching what is unfolding.
You see this sense of entitlement with housing as well. Tax policy has favored those that got in early at the expense of younger generations. Yet that is changing. In places like California, you already see strides being taken to roll back Prop 13. Why in the world should there be government welfare for homeowners and not renters? This is like giving someone a tax break to buy Google stock over Apple stock. It is a simple preference. Yet this is changing and Millennials understand and see how the game is rigged.
The chart above is incredibly telling showing that the median age of a homebuyer went from 31 in 1981 to 47 today. That is nuts. Normally, home buying was tied to a time of settling down and starting a family. 47 is on the old side to start a family. But given the current structure of the market we are favoring a rentier corporate welfare culture that penalizes work at the expense of gathered and accumulated wealth. Case and point? There are plenty of jobs open in essential jobs that put you at the front lines of the virus. Yet look at the pay. However, we have Wall Street traders and other speculators bidding up Kodak or Hertz, with blatant front running and manipulation and these are the companies we favor with tax breaks? It really reflects the deep issues in our system of financial welfare and somehow beating down the working class and making them feel guilty for not working hard enough.
The massive increase in age for buying a home is also stalling out other industries that rely on this growth. Think of towns that build out retail centers – do we really need those anymore? Many people are now getting comfortable working from home, shopping online, and ordering food to be delivered. Commercial real estate is getting smashed right now. You see the insane debacle of WeWork – not exactly a good company for the current time.
So commercial real estate is getting smashed because there is less demand. So what happens? Prices and rents come down! Incomes are smashed for younger Americans yet somehow people think real estate is going to stay inflated in price? The inflation in real estate right now is tied to all of the tax breaks and welfare we create around it – interest deduction, insurance breaks, and essentially low mortgage rates thanks to Papa Fed. All of this is artificial however. It must hurt with the level of cognitive dissonance some have when they talk about “communism†and “socialism†yet are totally fine with socialism to the next level on home buying.
So we are seeing mega crony capitalism today. The older age in home buyers is a reflection of throwing younger Americans under the bus. A bill is coming due and the massive strife in our system shows that older Americans are nothing like the Silent Generation. We truly are living the Taco Tuesday baby boomer wave of Karens and Kens and maybe in a few years, the median age of buying a home will be well into the 50s.
Millennials are slated to be the next big wave of home buyers in the system yet that is not materializing. The economy just saw its worst quarterly contraction ever. Yet somehow home values are going to stay disconnected from market fundamentals. Well if bankrupt companies can increase by triple digits purely on speculation, why can’t housing stay inflated a bit longer?
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269 Responses to “The Home Less Millennials: In 1981 the Median age of a Home Buyer was 31 and Today it is 47”
Doc, I agree with your assessment, except the support for removing Prop 13. That is the essence of communism – bring down everyone to the same EQUAL level of misery.
A more intelligent and beneficial approach would be to charge the new people who buy homes the same low taxes they charge those people who bought 50 years ago. Now, that would help the young people to keep more of what they work for. Every city has a Board of Equalization who can help assess similar properties at the same value. For the same value, charge the same property tax. Even better, cap all property taxes at a certain amount – i.e. $1,500/year. In many first world countries, that would be the top of the scale. If the government would become more frugal, that would be plenty to meed the need for which the government exist. You can not say the Switzerland does not have good schools, good firefighter departments, good police departments, etc. all with very low property taxes. If they can do it, CA can do it, too. Now, I understand that CA will no longer be able to support sanctuary cities, open borders for millions coming from Central and South America.
If the young people will be smart, they will fight against policies which enslave them with high taxes to support the politicians agendas and fight at the same time for low taxes. The cost of living and prices will also be more affordable for rents (to save money for downpayment), RE prices (to buy) and property taxes (to be able to keep what you buy) – less people means less demand.
Property taxes are not based on income; they are Wealth Taxes. The “elites” these days talk louder and louder about “wealth taxes” for billionaires. That is how they made palatable income taxes for the top 1% in 1913 when FED and IRS were created. They start with the richest and then they extend that to all; at the same time they create loopholes for the richest. Property taxes are a slow form of nationalization. The faster you increase them, the faster you confiscate the wealth of what people worked for and already paid taxes on.
Instead of bringing other people down, why not creating the conditions that all should have opportunities?!?…
A history lesson from the person who thought Democrats were in control of congress when George W. Bush invaded Iraq in 2003? I think you should go study history more and stop making it up. The USA government has been paying out benefits to veterans and others since the founding of the nation. Your weird fantasy that all government benefits are communism and should be cut off has never existed in this nation and never will.
I agree. It’s hard to remember what it was like in California. We left and never look back.
All of this doesn’t even mention that property tax shouldn’t even exist!! You have to have property rights: buy a house, pay it off and it’s all yours. If you don’t pay prop. taxes, it can be taken away from you.
Please don’t tell me property taxes help schools and roads. No amount of money will fix common core and in California, no amount of money in the state ever fixes the 5 or any road. Potholes everywhere….
Housing stays inflated as long as Uncle Sugar underwrites ” conforming ” loans . Last I checked, these loans require a fog-the-mirror FICO, a job/income and a paltry 3% down. Jumbo loans ( non-conforming ) are getting much harder to get. Not a good time to be selling the old McMansion.
Apple had a blowout quarter. Stock is at an ATH.
Similar with the tech company I work for. Q3 is going to be strong. The order book is filled.
As far as housing goes, the doctor says:
“ Yet somehow home values are going to stay disconnected from market fundamentals. Well if bankrupt companies can increase by triple digits purely on speculation, why can’t housing stay inflated a bit longer? â€
The market fundamentals are available inventory, interest rates and demand.
Millennials are the biggest group buying homes today.
Inventory in 08 was 115k available homes in SoCal. 40k in 2019 and 30k today.
We have no inventory….
Interest rates are at 3% ish for 30years conventional loans.
Low wage earners losing their job due to Covid has nothing to do with home buying.
Those people were renters before the crisis and they will be renters after the crisis.
If you are a renter trying to get your downpayment together, consider dollar cost averaging into bitcoin and other crypto’s. The next bull run is coming. Mark my words.
I agree, the fundamentals have changed with respect to the last housing collapse. The banks worked to make sure housing was in, as they put it, “strong hands” and the Fed is buying up the MBS’s. If the Fed can’t stand it, no one can. Is the market being manipulated? Of course, because if it wasn’t we’d already be in a recession. As long as rates stay low along with inventory I believe prices will remain high till the citrus is under control and then it will go higher when the economy swings back full force in a year or so, give or take…
“we’d already be in a recession”
That ship has sailed. We entered recessionary territory about three months ago.
Very good article by Logan Motashami. It makes sense that the housing market remains strong!
https://grow.acorns.com/why-housing-prices-are-rising-during-coronavirus/?__source=sharebar%7Cfacebook&par=sharebar
The problem is NOT Prop 13. The notion that renters don’t benefit from Prop 13 ‘welfare’ is, for a lack of a better word, stupid. Renters complain now about high rents, let’s see their reaction when their rents are through the roof if P13 was eliminated.
EVERYONE benefits from P13. Owners, renters, residential, commercial. Everyone. Well except for those who want to move from renter to owner. If this wasn’t simply a case of projecting by those who don’t have what they want and when they want it, I might give a hoot.
I purchased in 2011 after the market had fallen 40%. NEVER once in the preceding
10 years did I feel like a victim to a rigged system. On the contrary, I saved saved saved, knowing at some point I would purchase…somewhere. Lucky for me, the crash happened and I was able to buy in the same neighborhood that I was renting in when prices bottomed.
On second thought, maybe I’m wrong. Let’s take away the certainty Prop 13 provides and give the current crop of homeseekers what they want…lol
Prop 13 is just “rent control” for homeowners, which we all know doesn’t work well.
And the homes were not built during WWII. They were built after the war. There were severe restrictions on using materials for anything but the immediate war effort.
OC Native,
I’m inspired by your “save, save, save” message. How long did you save? Did you invest your money in the stock market while continuing to save or did your money sit in a bank account?
What advice do you have for others who are preparing for the real estate crash that will most likely occur next year, 2021?
Thank you
If Prop 13 was eliminated, housing prices would drop overnight. Market would be flooded with baby boomers selling their homes. It does not protect renters lol. You act like landlords charge less because their costs are less. Ridiculous. They charge what they can get and what the rental market will afford them.
That’s not true. Property prices would not drop over night.
Rents would go higher as landlords would pass on the higher taxes to renters.
Sadly, giving the government more money is a waste…..governments work in an inefficient Way in most cases
M: Property prices would not drop over night.
Not only did you say that, if Prop 13 were eliminated, property prices would drop.
You claimed that eliminating Prop 13 would lower property taxes for recent homeowners, due to an averaging of property taxes between recent and longtime homeowners.
An (alleged) inheritance does not change one’s opinions on a dozen unrelated matters, especially not overnight. Only trolls flip all opinions overnight.
Yeah, I remember (maybe 1-2years ago).
I was wrong. Prop13 needs to stay. Voting for more taxes doesn’t help anyone.
Prop13 will increase rents. Who cares what i sad as a “bearâ€.
I don’t. What’s important is to keep prop13. A huge benefits for homeowners and renters!
M is right. The landlord always passes his increases on to the renter. That is how it works.
M: Yeah, I remember (maybe 1-2years ago).
Not “maybe” 1-2 years ago. THIS YEAR you were still attacking Prop 13.
On January 31 you wrote: “there is an incredible amount of inventory on the market and much, much more to come. Just obvious that sales and prices fall accordingly.
Most houses sit for 6-8month and end up not selling. The market hit the breaks and came to a full stop.
Boomers need to start paying their fair share. They barely pay any property taxes.”
Here’s the thread: http://www.doctorhousingbubble.com/the-cure-to-the-housing-shortage-may-be-retirement-homes-the-coming-tsunami-of-homes-over-the-next-decade-may-come-from-an-unlikely-source/
Huh! Interesting! Seemed longer ago. Yeah, forget what I said back then. Prop13 is the best thing since sliced bread! I understand this now – being a homeowner!
M, you said that if you ever bought a home, you’d want Prop 13 repealed, because that would lower your property taxes.
Your said that repealing Prop 13 would level property taxes — raising it for longtime homeowners, but lowering it for recent homeowners.
If you sincerely believed what you said, then your (alleged) home purchase would have spurred you to even more emphatically demand an end to Prop 13.
🤣
Anything millennial said forget about it.
I changed my mind. Listen to M
So according to M there is a relation between tax and rent? That’s a weird thought. What a renter can afford is completely independent of tax. Owners are going to max out their profit in any circumstance, and although the net profit goes down with tax, the optimal rent (optimal in terms of height * good occupancy rate) is again independent of tax.
Correct. Higher Property taxes hurt us all and doesn’t help anyone.
A landlord Passes higher property taxes on to the renter.
A homeowner has less disposable cash when taxes increase.
Some renters might love paying higher rent, those renters should vote for higher taxes.
A retired friend purchased his house in the 1970’s and rents it out now. His current property taxes for a 700K house is about $2400/year or $200/month. He charges $4K/month in rent.
His neighbor with a near identical floorplan purchased his house a few years ago and his property taxes are $600/month. They both charge 4K/month rent.
Why would rents go up if my friend had to pay $600/month in property taxes?
Unrelated to your fair point, who is the idiot paying $4K rent for $700K house? That’s not the parity I am seeing in the market. Rent should be below $3K for 700K house. No in CA? Very high HOA?
I love how you know everyone’s life story Bob. You are full of crap and just making things up. If you don’t think rents will go up when taxes go up, you are a fool.
Yes, I have a lot of older friends who are doing very well thanks to Prop 13. I feel sorry for Millennials like M.
My point is that the rent charged will always be at market rates. The long-time Prop 13 owners charge market rates no matter if they have super-low taxes or have a fully paid-off house.
Some may give a better rate to a long-time renter if they take care of the rental and fix little things without constantly bothering the landlord.
If a lower tax rate was applied to the true assessed value of the house, then my friend would pay more and the neighbor would pay less. The rents could fall in this case. The total collected property taxes would be the same. It would be fair.
The tax rate or assessed value increases should be limited to inflation increases. Grandma will be OK because her Social Security check is also increasing at this rate.
You feel sorry because millennials like me who buy homes have to pay higher property taxes?
Don’t tell sorry. At least the property taxes remain stable. Also, property taxes might Seem high now but get inflated away over time. In 20years it will seem very cheap 🙂
The best time to buy a single family house was yesterday. The second best time is today. You can’t go wrong long term.
Yes I have many older friends and co-workers who have retired and are either early Boomers or late Silent Generation.
They have a great gig. They bought rentals in the late 70’s/early 80’s that are now worth millions. Paid them off with rental income so have no house payments, are locked in with Prop 13 with $100-$200/month property taxes They have no expenses other than insurance and maintenance and charge $3K-$4K per month market rate rents to Millennials. And they since it is a business, they can deduct all of the property taxes and expenses on their Federal taxes (Unlike homeowners).
M is right! Buy a rental now and you can be like them in 30 years!
“My point is that the rent charged will always be at market rates. ”
Bob,
You are incorrect for most multi-family units now that there is statewide rent control.
Getting rid of prop 13 will crush most mom and pop landlords, if you wanted it to be fair , they should get rid of both prop 13 and statewide rent control, or leave both in place.
Ha!
CA has a feeble attempt at rent control.
Prop 13 increases are capped at 2% per year.
CA rent control is capped at:
The law limits rent increases to 5% each year plus inflation.
Today, at 2-3% inflation the rental increase cap is around 8%.
So the landlord sees a 2% increase in property taxes while the tenant sees an 8% increase in rent?
Tell me why Prop 13 is fair?
Bob, these past few years, Santa Monica has been limiting rent control to 1% increase per year.
Local governments are empowered to enact their own rent control ordinances, and some do. Berkley is also famous for its onerous rent control laws.
I pay $1,600 a month in rent for a $1 million house thanks to prop 13. Prop 13 helps the people renting houses from long term owners. It would cost me more than double what I pay in rent to buy the house I’m renting. It doesn’t make sense for me to buy.
It sounds like your landlord is leaving a lot of money on the table.
JR,
You must be a great tenant for the landlord to give you such a good deal on rent.
This is the same argument M used before he was visited by the Ghosts of Housing Future.
It is a good argument until.
1) The current owner can’t resist cashing out on that $1M gain and retiring in style.
2) The current owner passes away into the Great California Sunset and their kids either sell or raise the rent to market rates.
Either way, it could be a sudden drastic increase in rent or an end of the lease and eviction at a time when buying a house and market rents are at an all-time high.
Enjoy it while you can and be like Old Millennial and wait for a crash. (Or wait for a sad tragic event and inherit a house and a boatload of cash from a Boomer).
Like I told Our Millennial last year.
1) Make sure you send your landlord a fruit basket every week so they stay healthy
2) Drive and schedule your landlord’s medical checkups to make sure they catch anything serious early.
Who knows, if you do these simple steps, you may keep your cheap rent for decades and as a bonus, added to your landlord’s will.
In my opinion if Nixon did not take us off the gold standard or if the FED did not meddle with devaluing our currency Prop 13 might have never happened. However, i suspect someone would have created a form of it later on depending on the circumstances. Isn’t all the housing policies a reaction to government/FED and house speculation anyways? Just seems if all things remain equal all these housing/finance policies are reactions/complaints by the housing industry not being fair for everyone. There is never a silver lining in all of this as there will never be a perfect system as long as people meddle with it.
First off, “Karens” is a deliberately offensive term. It is a slur on an entire group that is racial, sexual and generational. Shame on you Dr HB.
Second, Fannie Mae and Freddie Mac weren’t my idea. The biggest supporters in Congress of these programs were Democrats. Republicans can be swayed by industry lobbyists, and the RE industry foolishly believes that cheap money for purchasing houses is a long term benefit. The popping of the first housing bubble was proof that this idea is full of holes. But here we are doubling down on it. I do not know if this time, we will get another temporary deflation, or massive stagflation. I’d hedge my bets on this.
Karen and Ken is most appropriate. Shame on you.
Ken goes with Barbie.
Double shame on you.
Not just “millennials:… but if you’re creeping up to age 50, you’d be considered “Gen X”. Many of us are established with good careers and cannot get a leg-up:
2003 – great job lost to market crash.Could not find work for a couple years. Hustled odd jobs. Went into debt.
2008 – finally saving again, with great job? Market crash. Couldn’t find work for over three years, had to start new career, got in a Union
2017 – landlord decides to flip rental we lived in for ten years. Sixty days to vacate, couldn’t find a place to live, (Lots of airbnbs though!). Landed in a friend’s 400sf apt. Been saving for a house.
2020 – find a great non-profit to help us buy our first home. Took years to dial in debt, (freelance) bank paperwork, finances. Credit report at 830. We were at the underwriter and COVID hit Lost jobs (AGAIN!), lender pulled the plug.
And so here we are… now we might have to spend the money we saved for a house on LIFE. If that’s the case, we are LUCKY to have savings. But again, we are not buying a house and how trying to get a bigger rental to sit out a pandemic in. But – we don’t have jobs and people don’t want to rent to us despite our stellar credit and enough money to live off of for another couple years, (we don’t spend on stupid crap because ‘starving’ has become “old hat” at this time). Here we go again…
Not complaining. Just telling our story as we get crunched through the cookie monster housing market of LA. We are the “lucky” ones.
RNTA: That sucks. I can sort of commiserate with you. My wife and I bought a condo in 2009. In 2013, we needed a bigger place because of a kid (rented out the condo, and we rented ourselves). We were too stupid to buy at the time because we were too picky and the baby was a lot of work. We never bought a place for ourselves because prices kept rising (there’ll be another recession any time we kept thinking). So here we are, still renting 7 years after what was supposed to be a very temporary rental in 2013.
Wife just lost her job due to lack of workflow, so here we go again renting until we see that perfect combination of slightly lower house prices and being gainfully employed. The really crappy thing now is that one of us almost has to not work because of child care (no physical schooling for the foreseeable future). It’s going to be rough.
Like you, I’m not complaining so much as sharing our circumstance and our mistakes. Thankfully we have plenty of cash on hand to live many years in a worst-case scenario, but it’s not how we envisioned our future. Oh well, live (hopefully!) and learn.
Good luck to you both this time around.
“The really crappy thing now is that one of us almost has to not work because of child care (no physical schooling for the foreseeable future). It’s going to be rough.”
I imagine this to be a common issue in HCOL places like SoCal. How much of an effect will it have on the demand for homes? “Low inventory” only exists in relation to the demand. Schools opening and staying open seems pretty fantastical to me.
Vaccine, we need you now…
I guess we are lucky that we didn’t get to have kids because of The Great Recession? Yeah, that’s a thing too. The kid-window closed while we were living on $100 a week. I cannot imagine having to deal with what the universe has thrown at all of us – with kids. I’m sending you guys extra power there!
But hey! At least those with jobs/money can keep living their luxurious lifestyles – while just buying up any real estate that an average middle class income can afford. I am starting to feel like being in LA – even with our dream jobs, pension, etc – is becoming too much of a bummer. The culture has changed so much that I’ve fallen out of love with the city.
I guess that we will be all-the-wiser; again. At least we aren’t screaming at grocery workers in viral videos, amIright?
All the best to you guys. From where I sit? I don’t know if we’ll ever be homeowners in the city where we work.
My personal opinion is that Los Angeles is a horrible place to even visit for a day, much less live. After my wife graduated and was looking for a job, I told her the only place I wouldn’t consider living was Los Angeles. Pollution, traffic and anger abound beyond anything I’ve experienced elsewhere.
My point is, there are greener pastures (in and out of CA). Maybe you’ll find one that suits you?
In a dozen years of reading the Dr., this is one of the best. Socialized profits for the financial class and free market shock economics for the working class.
And yes prop. 13 is a blight that only an self congratulating turd would promote as good. It gutted public education and keeps people in homes they cant afford while inflating the market.
Only stupid avarice would support something so systemically vile.
“Socialized losses” due to Government diktat? HARDLY.
New York STATE is deadly serious about “rentier classes” not just New York City and for good reason: you can always raise the rent no matter the state of any economy and indeed one must raise the rent in any particularly bad collapse such as this. I will sell my gold at the right price though!
20 billion US Buckys sounds good to me BUT I WANT CASH.
YOU WANT YOUR NON NUKE SOCIETY OUT THAT WAY NO PROBLEM.
Everything else is just like Clint Eastwood said: PAINT IT RED TOWNIE.
New York STATE is deadly serious about “rentier classes†not just New York City and for good reason: you can always raise the rent no matter the state of any economy …
No, you can’t always raise the rent in New York City, due to strict rent control and rent stabilization laws.
Santa Monica’s Rent Control Board often allows only 2% annual increases in rent, and more recently only allowed landlords a 1% annual increase in rent. Well below the rate of inflation.
And they recently extended the Covid-19 eviction moratorium by another few months, in response to Newson’s second shutdown.
Expect even more pro-tenant laws as tenants increase as a percentage of voters.
Prop 13 was designed to keep grandma and grandpa in their houses after they retired and now live on a fixed income (social security) with fixed inflation adjusted increases… but SMART investors have taken advantage of this social policy and SMART investors will do well despite the policy change. Only grandma and grandpa will be thrown under the bus when their property tax rises faster than their social security tax.
Prop 13 is not the enemy, INFLATION is the enemy. The government should target an inflation rate of 0%, but they aim for 2% Inflation Rate so that your income rises and your TAXES rises with it to give compounded government raises. INFLATION exists so that the general masses who are bad at math cannot estimate the true value and costs of things like houses. That way investors who CAN calculate the true value and costs of things can buy cheap and sell expensive things (houses) from the general public.
I disagree that Prop 13 is not part of the problem. It has created situations where two homeowners with homes valued at the same amount can be paying vastly different property taxes which is simply unfair. Secondly, it encourages absentee ownership which artificially decreases inventory and decreases the value of the neighborhood when absentee owners only maintain their houses at the absolute minimum level required to continue renting it.
Hello Doctor,
The chart you based your article upon shows the median age of ALL “US Homebuyers.”
Could you please explain how Kali’s Prop 13 managed to dictate the median buyer age in the other 49 states?
Casper
Please look up Dunning-Kruger, please.
Tbone
Casper Shipp it is easy math:
Take this list of hypothetical median home buyer ages: 29, 30, 33, 47, 47, 47, 47, 47, 49
47 is the median.
California is the largest state by population by far. So, if there are a lot of 47 year olds (or older) that are first time home buyers in CA that would push the median for all home buyers in the US up.
This statistic seems highly plausible to me, and I’m sure it would be even more extreme if you were to adjust for all the kids who get money from someone else (parents, grandparents, etc.) for a down payment. If you remove those the vast majority of buyers would be senior citizens.
Eric Post has it correct.
“Prop 13 is just “rent control†for homeowners, which we all know doesn’t work well.”
It is the worst rent control imaginable.
Rent control typically caps increases to the inflation rate. The Republicans who wrote Prop 13 capped the tax increases to 2% while inflation was at 12%. Even fixed income Social Security recipients made out like bandits because SS increases with inflation. Schools and services suffered because the income from taxes was so far below inflation.
You typically cannot pass your rent controlled apartment to your kids, grandkids, great-grandkids. Prop 13 allows you to build a feudal dynasty for all of your heirs forever. Heirs inherit the tax rate.
Prop 13 would be fair if the tax rate increase was capped at the inflation/Social Security increase. Also, this is the US and not some feudal aristocracy. You should not be able to inherit tax rates.
However, Flyover has it correct that property taxes must have some limit. Before Prop 13, the CA tax property tax rate was at 3% while home prices were rising above inflation rates. Government spending should be limited to inflation rates plus some factor for population increases. Colorado does this.
You typically cannot pass your rent controlled apartment to your kids, grandkids, great-grandkids.
You can in New York City, where you have dynasties of renters.
As tenants increase as a percentage of voters, expect more pro-tenant laws in California as well.
Correct. Both NY rent control and Prop 13 are both truly horrible. Except Prop 13 tax increases are capped at 2%. NY rent increases are capped at inflation.
Prop 13 is worse than NY rent control.
Bob: NY rent increases are capped at inflation.
NYC rent increases are capped to whatever the state legislature decides. They might say they’re using this or that metric. But that “objective” metric is influenced by tenant lobbying.
Furthermore, rent control hasn’t lowered rents for new tenants. Many legacy tenants barely live in their apartments. They keep it sublet most of them time, often illegally, at market rates.
My late father, a NYC landlord, occasionally hired a private investigator to see if longterm tenants were actually living in his rent stabilized apartments. An investigator once gathered evidence that the tenant had actually moved to New England. My father was very happy, since the evidence in court helped evict the tenant.
His building had been converted to co-op by then. A “non-eviction conversion,” which means that tenants can choose to buy their apartment, or stay as tenants. But if they don’t buy at the time of conversion, then once they leave or are evicted, the landlord can sell the unit as a co-op.
Another time, he was fined by the city, because an inspector determined that the tenant had illegally divided the unit (with curtains) and sublet portions of the apartment. This is apparently a common practice among Chinese immigrants.
Such is the life of a NYC landlord.
Here is a chart of the S&P Index Real Estate component compared to the whole S&P 500 and GLD (gold ETF):
https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Index&symb=XX%3ASPXEREUP&x=43&y=20&time=12&startdate=7%2F4%2F2007&enddate=8%2F3%2F2020&freq=2&compidx=aaaaa%3A0&comptemptext=GLD%2C+%24SPX&comp=GLD%2C+%24SPX&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=64&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=13
Note how RE sector has lagged the total index and crashed harder this spring. Notice how GLD shrugged off the virus crisis, with the low carrying costs of gold in a near zero rate environment. The RE stock index does not mirror the sales of existing housing, but would have an effect on new supply I would think. Maybe a leading indicator?
Thanks for posting! I love charts like this. Construction never really took off during this cycle, maybe that’s why? Or they weren’t as greedy about buying back their own shares? I subscribe to an investing firm that is bullish on REITs now though.
Here is a chart of the S&P RE Sector, the S&P and iShares Home Construction ETF (ITB):
https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Index&symb=XX%3ASPXEREUP&time=12&startdate=7%2F4%2F2007&enddate=8%2F3%2F2020&freq=2&compidx=aaaaa%3A0&comptemptext=ITB%2C%24SPX&comp=ITB%2C%24SPX&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=64&style=320&size=4&x=49&y=15&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=13
Note that the home construction ETF is much more volatile than the RE Sector or the whole S&P 500. You could make some serious money if you knew when to get on and off this rollercoaster ride.
This link gives the 46 components of this index:
https://www.ishares.com/us/products/239512/ishares-us-home-construction-etf
Actually, after I posted that I went and found the components of this index, and most are not homebuilders. It’s a pretty good model for a wide variety of real estate investments.
See here:
https://www.barchart.com/stocks/indices/sp-sector/real-estate
If the sector is a good buy or a falling knife, I cannot say exactly.
I’d be for repealing prop 13 is it was written in a way that the landlords that have benefitted from low taxes for years get caught up with a fair tax bill. Own a Santa Monica property for 50 years and paying $2000/year tax while your new neighbor is paying a $20000/year tax? Yep its time you pay up buddy. That’s not “socialism” thats called being fair.
As for RE, the forecast is looking stagnant price wise for the foreseeable future. If interest rate moves down to 2% you’ll see some price action upwards. If it shoots up to 4% obviously downward price action. Cost to build is still kinda high but once inflation takes full swing, it should bring REAL (not nominal) prices down to a level that makes building lucrative. I’m a civil engineer by trade and I mainly specialize in large scale transportation projects but I’m going to be self teaching land development in the next few years and getting into the building boom that I will bet my life will happen by mid decade. SFH and MF only. I wont touch a commercial project unless its a weed dispensary or a cultivation facility 🥴🤣 Until then I’m watching from the sidelines!
Where is the building boom going to be? Palmdale/Lancaster? Inland empire? OC and LA are otherwise already built!
I think the bldg boom WILL be in LA and OC.
it will be changes in zoning to allow high density such as this project which was once a radio station owned by Cumulus and now it is 1,000 apartments. Once Whole Foods moves in, then ‘there goes the neighborhood’ 🙂
https://cumulusdistrict.com/
Look at other countries regarding the building boom/zoning.
Skyscraper next to skyscraper. High density living in tiny apartments.
You think we have bad traffic now? Have you been to major cities in other countries?
Not saying this can happen over night but if we start replacing SFH’s with skyscrapers it will happen over time.
No one is going to build or want to live in high density housing post-pandemic.
@Post Pandemic
Very foolish assumptin. High density housing doesn’t mean you’re sharing bathrooms and kitchens in tiny 200 SF studios jam packed with 10 other people.
@Responder
You know those giant malls and expansive parking lots with spider webs on them? You’re not going to believe what’s going to happen to those! This gives me a great idea…maybe i should invest in demo contacting too! Get paid twice on the same project 😎
Prop 13 was designed to keep retirees in their houses after they retired and now live on a fixed income (social security) with fixed inflation adjusted increases… but SMART investors have taken advantage of prop 13 and SMART investors will do well after prop 13 is removed. Only certain retired old people will be thrown under the bus when their property tax rises faster than their social security income. But that is no problem, let them work until they are 90 or until they die – whichever comes first.
Prop 13 is not the enemy, INFLATION is the enemy. The government should target an inflation rate of 0%, but they aim for 2% Inflation Rate so that your income rises and your TAXES rises with it to give compounded government raises. INFLATION exists so that the general masses who are bad at math cannot estimate the true value and costs of things like houses. That way investors who CAN calculate the true value and costs of things can buy cheap and sell expensive things (houses) from the general public.
Exactly, prop 13 is not the enemy.
Also, do you really want to force grandma out of her house because she can’t afford the taxes??? If prop13 falls we are all fu****
Rents will go up and people on retirement may face hardships.
In Texas, folks over 65 can opt out of property tax until they’re dead (then their estate pays it with interest). Does California have anything like that to protect grandma?
Nah, Prop 13 is wrong. However, market-price-based property taxes are wrong too, which is what Prop 13 was trying to fix in a bastardized way. Property taxes from 30 years ago paid for expenses 30 years ago, not for today. Taxes should be equally levied based on needs of today.
The old “keep grandma in her house” is total nonsense. Prop 13 is a bonanza for corporations, investors, landlords, etc. Rather than complain and bellyache, why not just profit from it. The key is owning a home for the LONG TERM and you too will benefit from Prop 13. Not rocket science we are dealing with here.
Me and my siblings inherited our parents home which was given to them by my mothers parents. last sold 1955 for $16K.
Todays value about $3M. our prop 13 tax base is $2800 per year.
Whoever buys that house when we sell it will pay approx 10 times the taxes.
Prop 13 didn’t end with just the folks who had a house when the proposition came into effect. Someone who bought a house eight years ago when things crashed benefits from it, too, even though he may have spent $300k for the house instead of $30,000 or $3,000 that Mom and grandma paid. When that neighborhood hits $3 mil everyone will still complain that things aren’t fair.
Prop 13 sent shockwaves through CA government that they can’t just keep raising taxes and expect people to simply say OK. More laws like Prop 13 are needed to reign in these tax spending nimrods up in Sacramento. For starters, I’d push for school vouchers as a way to decimate the public school unions, and that’s just for starters. Never never do away with something that puts caps on how much these people can take.
Also, CA housing prices were rising fast before prop 13 and continued to rise fast after prop 13. What in the world makes anyone think prices will suddenly drop if prop 13 is repealed. There’s still is no where near enough units being built in this state as what’s needed. In fact, CA has been in a major deficit for decades. And, I can guarantee you, landlords will pass the expense on to the tenants.
LMAO, Tell Me Again How CA Real Estate is Doing So Great Again?-
From Socket Site in California. “With inventory levels in San Francisco having just hit recession-era levels, the number of homes on the market which have undergone at least one official price cut has ticked up another 20 percent in the absolute over the past two weeks to over 400. As such, there are now nearly 300 percent more reduced listings on the MLS than there were at the same time last year, over eight times (8x) more than there were in July of 2015, and the most reduced listings since the end of 2011.â€
Nothing to See Here, Move Along and Enjoy The Weather
Anecdotal I know.. but 4 of my old coworkers and friends have just purchased homes in the last month in Los Angeles area. Townhouse, home, and all for $700-$850K. Their ages range from 33-40. They all work in entertainment industry, or atleast 1 spouse does. I’m a 2011 los angeles home buyer… who is about refinance into a 20 year 2.5% mortgage. I don’t envy the current buyers though. I was nervous buying our home in 2011 for $395K. Now it feels like a steal where we are sitting on $400K in equity and refinancing the payment down to half what rent would cost. Amazing the difference 9 years makes.
I’m very cautious about any further gains in housing.. and i’m a little shocked so many of my friends are rushing to get into the market right now. Most are life event driven.. recent marriages and wanting to have kids. One of the biggest perks of buying in 2011 is my Prop 13 tax base is half what everyone buying a home today is. But even if that changes in the next few years and Prop 13 goes away… all the refinancing I’ve done will take the sting out of the monthly payment increase. Just hope the entertainment industry in Los Angeles comes back strong this fall or winter.. or recent homebuyers are in trouble.
Burbs,
Buying in 2011 was an absolute gift. On a monthly basis, it was one of the best times to buy socal RE EVER. Many people didn’t crunch the numbers and missed out big time. And here we are a decade later. Property values went straight up and owners paid down boatloads of principal with the lowest rates on record all while getting the Prop 13 gift. Renters saw rents skyrocket in the same time.
If home prices rise rapidly, Prop 13 limits your property tax increase to 2%/year. If home prices crater, you can have your home assessed at the cratered price. It may not be fair, but why not just accept the facts and profit from it. Doing anything otherwise is just swimming upstream against a powerful current.
“Be fearful when others are greedy. Be greedy when others are fearful.†-Warren Buffet
In 2011, millions had already lost their homes to foreclosure. Even though prices were stabilizing, fear was still strong.
Many thought on this blog even in 2012 that home prices would crash even harder (Jim Taylor).
In retrospect, as Lord Blankfein said, it was the best time to buy.
As General Motors stock plummeted in 2008, many said the same thing.
“As goes GM, so goes the Nation” is attributed to Charles Wilson, CEO of General Motors 1953.
In retrospect today, if you purchased a house in 2011 you have done very well. If you purchased GM stock, you lost everything in 2008.
Who knows what will happen next year?
My crystal ball is broken but I think I still have a little luck. I’ll need the luck.
Governments tax property in many ways other than “property taxes.” Prop 13 does not prevent increases on the following:
* Parcel Taxes. Taxes on the square footage of the land, rather than on the property’s assessed value. Seems every election, Santa Monicans vote for yet another parcel tax “for the children.”
* Transfer Taxes. Taxes that must be paid when a property is sold. Another way to make it more expensive to buy a house. Both Santa Monica and Culver City are planning to increase their cities’ transfer taxes, the issue to be on the November ballot.
* Capital Gains Taxes. Obama raised the top rate of the federal capital gains tax from 15% to 20%. California taxes capital gains like normal income.
Transfer and Capital Gains Taxes are only due upon the sale of a property. But new Parcel Taxes hit all homeowners, and hit them equally.
What about “School Bonds”? Aren’t they added on the property tax? In WA they have few of them added which almost double the regular property taxes.
I don’t think it’s done like that in California.
Parcel taxes often go to the schools. There’s always a “reason” given for this is that parcel tax.
But school bonds, like all bonds, are paid out of the general revenue.
47 and you get a 50 year loan on the over priced crap shack? Baby Boomers must be so happy they could stick to each other’s children. Remember growing up how all the kids were the supposed to be #1 in society? Apparently it was all a ruse.
k,
Anyone over 50 who goes out and gets a 30+ year mortgage at these rates should have their heads examined. That is a serious bet on massive inflation. A deflation would kill them. 15 year rates are rock bottom. My Millennial Daughter just re-fied at 15 years for way less than 3%. With me (Boomer), my kids and grandkids ARE #1. But there are plenty of Boomers peeing away they savings and equity. I won’t get a mortgage unless it is an investment property that can support the payment (hedged financing). Like you, I’m waiting for the right time.
The download from Redfin have been really SLOW for me these past couple of weeks.
Anyone else notice a severe slowdown in Redfin downloads?
Purchase application data is now 22% up year over year.
Very strong demand year in 2020. No way we see a crash this year.
2020 turned out to be a great year to buy. Prices didn’t skyrocket but interest rates went down to historic lows. Buying real estate is also an excellent inflation hedge.
Millie,
I’ll go one step further. Owning a primary residence in socal in a REQUIREMENT. Long term rental strategies here are nothing but financial suicide.
If you can comfortably afford the payment and plan on owning for the long term, go out and buy. Hoping, wishing, praying for a crash and putting your life on hold for an indefinite period all for an uncertain outcome is lunacy. The deck is stacked against renters in CA, accept the fact and do something about it.
You said if home prices drop you would buy an investment property. Why not buy one now if you are so bullish? This is not a dig. I seriously would like to know your thoughts. Thanks.
Thanks Butch,
Yes, if prices fall I will def buy an investment property. I keep looking for a fixer uppers. There is barely any inventory out there. I can take my time to select a good property as a rental but the issue is that decent properties are being bought up very quickly.
I am sure I will find the right object within the next year(s).
I will make sure to keep you all posted.
No, not this year thanks to forbearance. Hopefully employment will recover in time and we’ll have a vaccine sooner than later.
There is an old, yet very true saying that before you open your mouth (or write on a blog) they can only THINK that you are stupid.
1. Houses built during WWII – very few, and only where absolutely necessary for the war effort (eg, Los Alamos, NM).
2. Popcorn ceilings did not occur in any large numbers until the late 50’s and later during the “second house” boom for the boomer’s parents.
3. You are guilty of “Cherry picking” your data.
Median Age may have been 47, however AVERAGE first time home buyer age was 32.
It’s true that people don’t stay in homes as long as they used to. That inflates the average buyer age. Still, it’s quite a change.
P,
You are right! The house I grew up in was a modern from1950 and didn’t have popcorn ceilings. The ranch I live in now was built in 1962 and had them until we took them out. In WWII, my Dad spent some time at Sawtelle and some of the buildings there are from WWII, but that is a VA facility. Everything was for the war effort. This was one of Dr HB’s poorer efforts. There are a lot of Boomers moving to homes for retirement (often smaller), and a lot of Xers moving to a bigger place that skew the median.
Financial stress index remains below zero. Sry bears, no depression in sight!
You sound like Trump tweeting for his re-election. 😉
Market Running Out of Suckers- Homebuyers Step Back As Mortgage Rates Plunge To Record Lows
But, despite record low rates, potential homebuyers are becoming less active as total mortgage application volume fell 5.1% from the previous week according to the Mortgage Bankers Association’s seasonally adjusted index.
https://www.zerohedge.com/personal-finance/homebuyers-step-back-mortgage-rates-plunge-record-lows
Shit Storm Off the Coast, Enjoy the Weather.
ZeroHedge – the flagship of gloom and doom news.
https://loganmohtashami.com/2020/07/28/real-home-price-growth-still-stable/
Alright guys I’m back on my BS 🤣🤣
After giving up on acquiring properties and selling my homebuilding stocks/ETFs I saw a pretty golden opportunity on the one part of RE that i think is robust and is not letting up anytime soon: consumer mortgage finance.
Wednesday night I’m reading Quicken Loans is about to hit the stock market and slashed its IPO from 35 to 18 a share. I have always known that the mortgage market is strong and they aren’t going anywhere but didn’t know how to turn that into an investment opportunity until I got word that the nations largest mortgage financier is hitting the market. I set my TD app to auto buy at 19.05 thinking there’s no way I’ll actually get IPO price. Wake up the next day and all the shares I requested to buy we’re in my portfolio at 18! Two days later im up over 35%!! I invested half my gains this year so if it goes to zero i couldnt care less but this one’s doubling guaranteed! I just cant quit RE man its in my blood ðŸ˜ðŸ¤£
Congratulations!!
Pls give me a heads up next time you see such an opportunity…..I totally missed out on that!
Most definitely will but there is so much lag time between the time I comment and the time it posts so I’ll try! Just keep your eye on the ticker RKT and see where it goes for now!
Eviction moratorium extended and $400 additional unemployment benefits.
Sry depression bears
M: Eviction moratorium extended
Which eviction moratorium? I already reported on Santa Monica’s moratorium extension, and predicted more extensions to come, weeks and even months ago.
Indeed, for many years now, I’ve been predicting ever more tenant friendly laws. Their votes are increasing, so naturally, the laws will reflect that.
Which eviction moratorium extension are you talking about?
As for what this means for housing prices … I have no idea. We are entering increasingly chaotic, uncertain times.
It’s a drop from $600, but it’s something. Can’t wait to see the Dems try to block it and boost Trump’s popularity.
Read the details of the executive orders. Complete joke.
In other words, unemployed people just lost $800/month.
Not I, but neither do I buy individual stocks. You have a better chance with Bitcoin and cherry-picking stocks than gambling at Vegas, but owning the whole market and playing the long game gets most people more over time than those with your investing style. With that said, I hope you make out like bandit. A few do.
I recommend The Little Book of Common Sense Investing by Bogle.
Three articles in the OC Register on the economic impact of Corona virus. One is on the home ownership divide. Inland counties have a higher percentage of owners to renters than coastal counties. Sacramento shows a gain in home ownership, possibly because Bay area renters with good incomes were able to move there and work from home. We know that the tech companies are mostly willing to continue this post-Corona virus.
The second article is on Mom & Pop landlords. Eviction bans can eviscerate profits for small business landlords. The author proposes tax credits to alleviate the loss of income.
The third article is on renters moving back to relatives’ houses, and the problem facing renters who lease. The terms of the lease then become important. It is unlikely your lease has a pandemic provision. Rental insurance provisions also need to be read in detail. There are laws that a landlord must try to rent out a leased property right away. The author suggests being active in trying to find a new tenant for them and keeping track of whether or not the place is re-rented (nosy former neighbors can help). Subleasing is often banned or requires permission. And you may still be liable for damages. A substandard building can be a cause for breaking a lease, but the landlord gets time to make repairs. The article quotes Zillow that 2.7 million adults moved in with relatives in March and April, so this was not uncommon. They don’t state whether a large number left town or the state to do this.
Just wait until this crisis is over and the Fed needs to reel in all the inflation they created, and mortgage rates start rising longer term. Housing will be crushed because it’s not about where rates are historically, but where they are going relative to where they’ve been.
Hunker down and refinance at the lowest rates in recorded history.
If you are a daredevil, refinance in October before the election. Trump will continue to borrow to push them down until then. Who knows what will happen after the election with the winner.
Despite the low rates, I’ve been reading and hearing about refi bait and switches. ie 0ne week before closing, they need extra points or fees to close. A rate lock does not mean a fee lock and is contingent on the borrower having saintly status. A rate too good to be true, probably is.
Also, I have heard that some of the large lenders are taking over 2 months from the rate lock to the closing. The amount of refi applications and the inability to find an appraiser are the typical reasons that I have heard.
In Switzerland mortgage rates are below 1%. In Germany they are 1-2%.
Not saying this happens over night. But why would they go up in the US and go down in Europe?
I believe lower and lower rates are our future as well. Good for asset holders 🙂
You had better move fast on any refi.
Fannie Mae and Freddie Mac added a 0.5% fee to all new refi’s starting Sept 1st.
That killer 2.9% 30 year refi will now be effectively 3.4%.
Strangely, this fee only applies to refi’s and not to new loans.
The Fed will have to crank it up and lower rates another .5% to compensate.
https://www.marketwatch.com/story/refinancing-your-mortgage-will-cost-more-thanks-to-a-new-fee-from-fannie-mae-and-freddie-mac-2020-08-13
I got a pretty good rate. But I am Actively looking at the end of the year or beginning next year to refinance. Rates will go lower I believe.
Always something to do as a homeowner…..looking at solar at the moment….. And I want a pool.
Who else besides me has invested quite a bit of money in bitcoin and other crypto’s?
M,
A little too risky for me. My riskiest investment this year was a little in VXX, the VIX, index. I bailed out too soon due to fear. Bitcoin crashed over 50% in March. More than most of the volatile stocks. It is back now. For now.
Too many players in Crypto and very volatile. IMHO, Like investing in VXX, it is a gamble, not an investment since nobody knows who will win in the Crypto space or if anyone will win at all.
Put 5% of your portfolio in crypto and hold for the next bull run.
I put more in it as I am very bullish on crypto for the next couple years.
We’ll see
NYC extends eviction moratoriums until “end of the pandemic” — which could mean years: https://www.syracuse.com/coronavirus/2020/08/no-evictions-until-gov-cuomo-declares-end-to-covid-19-pandemic-new-law-says.html
I don’t know why M thinks tenant eviction moratoriums are bad for bears. Moratoriums mean that renting become cheaper (for free), and the value of rental properties plummet.
I expect more such moratoriums and extentions to spread across the U.S. There is no “pandemic.” There IS a calculated attempt to destroy the economy, create chaos, and tighten the control of the Deep State, Globalist, Neocons. But the whole thing might blow up in their faces. Troubled times ahead.
Excellent observation! That is what I call critical thinking.
“ value of rental properties plummet.â€
Fantastic! Wake me up when rental properties fall by 5%!
I am looking to buy my first investment property.
So far I haven’t seen prices come down in my area (SoCal, north county SD) at all.
I actually gave up on looking for an investment property for now.
Purchase application data is still 22% YoY.
No inventory and very low rates but high demand. Tough market.
S&P500 nears an all time high. Lol
I guess the depression bears no longer tell us this is a dead cat bounce 🤣
Just remember, the weather is really really nice- A report from the Los Angeles Times in California. “In downtown Los Angeles, rent for a 566-square-foot one-bedroom at the Eighth and Grand luxury apartments would have set you back at least $2,286 at the end of January, according to Zillow. As of Thursday, the same size unit at the building with a Whole Foods on the ground floor was advertised for as low as $1,771. A few blocks away, at another luxury building, monthly rent for the cheapest 1,284-square-foot, three-bedroom unit has come down $385, to $3,870. Walk a bit more and you’ll find more discounts, often with extra goodies such as two months’ free rent.â€
“The declines appear concentrated in the top end of the marketplace, according to multiple data sources, but there are signs rents are falling slightly on the lower end as well. ‘The pain is landing at the top,’ said Steve Basham, an analyst at CoStar.â€
“CoStar data show the largest rent declines in the Mid-Wilshire area and downtown, where rents have fallen 10% and 8%, respectively, since March. Those areas, which are more expensive than the city as a whole, have also seen a flood of new, luxury apartments. Estimates didn’t take into account the expiration of the $600 in additional weekly unemployment benefits. ‘It could be a pretty dramatic downturn in the coming months,’ CoStar analyst Basham said.â€
The North Bay Business Journal in California. “State and local governments that continue to allow renters in this pandemic era to delay payments are raising concerns among property owners and managers. Their looming question: If tenants don’t pay their rent to the landlords, how will property owners pay their mortgages? Some have already answered that question — by selling off properties.â€
“Keith Becker, general manager for DeDe’s Rentals and Property Management of Santa Rosa, said that of 500 tenants Becker’s company rents to, four have stopped paying, negotiating and communicating. Eleven renters are attempting to pay but have fallen short. The loss of tenant income has resulted in 12 units leaving the rental market. Eight units are on the market, and property owners plan to sell four.â€
“‘I can’t tell you we’re doing great. In the last three months, the number of properties rented have consistently flat-lined, and the clients are unsettled,’ he told the Business Journal.â€
“Property owner Jennifer Coleman knows the territory far too well. The Sonoma County landlord has sold two single-family homes and a townhouse to scale down the number of properties she rents. ‘It’s the draconian evolution of laws. I wanted to lighten my risk. It frightened me,’ said Coleman, who has rented her own space for 19 years. Owing debt is hard enough for a homeowner owning one house, much less multiple locations. ‘It’s a gamble, but this is my retirement,’ she said.â€
Nothing to see here, go outside and enjoy the shit storm coming to CA
Proposition 13 is not welfare for homeowners. Property taxes are theft by government bureaucrats most of whom are corrupt Democrat socialists in California. They steal from homeowners to pay off their cronies and to provide benefits to their illegal alien and welfare voter base.
The Real Estate crash of 2021 explained by Ken McElroy
Change my mind
https://www.youtube.com/watch?v=hF1H1qfW15Y&inf_contact_key=25abb629f342935523f081d58996ad4e680f8914173f9191b1c0223e68310bb1
My friend at Uhaul in Poway said all long-distance trucks have left California. Because of the truck shortage in California, rental rates are extremely high. One last jab from CA before you leave, I guess. Moving companies are also charging premiums, said another friend that moved to Phoenix last month.
Income instability will worsen over the next 1-2 years. Unemployed statistics are somewhat easy to track and are kinda accurate but employees are also facing cuts in pay, bonuses and hours. Not so easy to track that data.
Not looking good.
Reasonable. It depends on how employment (or more accurately, income) recovers by the time forbearance expires. He points out that even forbearance could be extended. I hadn’t considered that possibility because it’s lunacy to me. But, this is the federal government we’re talking about and neither party seems to care about future financial consequences. One of the commenters called it, “extend and pretend.”
Democrats, if they win control of Congress in November, will probably be eager to extend and even increase every benefit. All these handouts are starting to look like universal basic income.
Anyway, his shirt says “At some point, your timing is right.” 😉
Real Estate is doing great as long as the bank doesn’t require people who can’t afford it to make a payment on the home they bought. Yeah, great economy with it’s all time high stock market and 15% unemployment(mostly McJobs lost anyways). What next? Don’t require people to think in American and give the population an average IQ of of 160?
Bottom line is we need Rent Control and a Cap on Profits for Real Estate Investors. This is normal in more balanced Democratic societies and will happen here as well.
Sammy…Have you been feeding at the “Entitlement Trough ” again ? This is a REPUBLIC , not a democracy . You were promised 12 years of education for your primary education , and now you say somebody has to take care of you through entitlements such as rent control and a cap on profits for Real Estate investors. Just what have you risked it all on and taken the risk of success or failure ? True , Life isn’t fair , but if you are not willing to take a risk, you will never really succeed. You will just be another 60 year old person standing on the corner asking what just happened and when did it happen. In the meantime , I will be the guy you call to fix problems around the rental because you don’t know how to fix or repair anything. Just where will you be in 10 years, owning a house or home , or still renting from your evil landlord and still complaining about the rising rent. Renters who take weekend vacations and rent/lease fancy vehicles to impress their friends are the reason I can take extended vacations and be financially secure. The helping hand you are seeking is located at the end of your arm, do for yourself.
“Essential healthcare workers have plenty of jobs available but they expose them directly to the virus ”
Social LVN nurse here ( not a RN know it all Bob, there’s a difference) just took a job on a covid floor at a hospital for the experience and increase in pay…. whopping $28 hour! Over priced crap shack I still can’t afford here I don’t come! God bless America the greatest country in the world!!!!
Side note: boomers are the worst, most selfish, entitled generation of all….were waiting for the world to be a better place once you all die off….looks like the rest of the world is to….looks like covid is going to help speed that up.
Oh yeah the virus isn’t going away, there’s no cure for the flu guys. Get ready for flu season this winter guys….its gonna be worse than lost time and another shortage of supplies.
I apologize again for offending you, Nurse.
I thought you were an RN who earned enough to afford a house.
What is the difference between an RN and LVN?
2 years of college?
A solution for you seems obvious. It is not the Boomers fault you can’t go back to school for 2 more years. Is it?
whopping $28 hour! Over priced crap shack I still can’t afford here I don’t come!
You sound pretty entitled yourself.
were waiting for the world to be a better place once you all die off….looks like the rest of the world is to….looks like covid is going to help speed that up.
And you’re a nurse? With that attitude toward your patients, I’d say $28 an hour is way more than you deserve.
Pretty soon, the discussion on Prop 13 will become a mute point. The wealth tax advertised by the BIS (the central bank of central banks) for many years now, will land in CA first, due to its leaders who are all globalists in the pocket of BIS.
https://eastcountytoday.net/first-in-nation-wealth-tax-introduced-by-california-state-lawmakers/
That wealth tax will be assessed on any type of wealth you might have – precious metals, stock, bonds (IRA and 401K) on top of RE which had a wealth tax anyway – property taxes. Therefore, you’ll pay property taxes twice – as part of normal RE taxes plus as wealth tax. It looks that the communists became greedy – they are not happy to nationalize your property at a slow pace; they want to increase the speed of your nationalization.
Buy more RE in CA because the Democrats need more funds to support the illegals. The housing, medical, food stamps, judicial system and eduction (indoctrination) of millions of illegals from S. and Central America are not cheap. You should thank a democrat for open borders and sanctuary cities/ state. Isn’t that great Bob??!!!…At the same time the sanctuary cities are in place, the democrats no longer see the need to fund the police. Next time, when your house is burglarized, don’t call 911 – call your social worker or mayor; hopefully someone will answer your call and talk to you while your house is burglarized. If they leave you alive, make sure you lobby your democrat politician to give you permission to buy a gun for your protection (recognize your 2A right). Hopefully they will let you buy bullets, too – after all, Pelosi and Maxine are free to have them; maybe they will not be so selfish and let you have the same right in the spirit of EQUALITY that the communists profess.
0.4% on assets over $30 million. That affects about 30,000 people according to the article.
Prop 13 is still going to help millions of people. Relax man.
For now I am relaxed – I don’t live in CA and I don’t have over 30 millions. However, that is beside the point. My point is having a wealth tax on top of RE taxes.
That is how it starts to get maximum support. They don’t want to have everybody up in arms tomorrow. Are you familiar with the history of income taxes? They started in 1913 with 1% to convince most people to accept it. Once that was established, gradually they had everybody in bondage while the rich created loopholes for themselves. Don’t think for a second that they will not do the same with wealth taxes. Most people will say that it is OK because it doesn’t affect me. They are too stupid to realize that as the rich flee to other places (they are the most mobile), that upper limit will decrease gradually to the masses and the percentage will be increased gradually like the income tax to steal the wealth and pensions from most people. The same thing happened in France when they put a wealth tax on millionaires. Most flew to UK.
Mark my words. You will see what I explained above gradually affecting most people who are disciplined to produce, save and invest. Don’t be the frog that get boiled by gradual increase in temperature. Jump while there is time. Be ahead of the curve.
I agree with Flyover.
Property taxes are wealth taxes. If your house is appraised at a higher value and your income decreases or stays the same, you are forced by the government to sell.
Any rewrite of Prop 13 should limit this wealth tax increase to the inflation rate so any retiree surviving on SS, the increase is capped at the same rate as SS.
Income taxes and Sales tax are fairer since the individual controls how much tax they owe.
Wall Street Capitalists already impose a wealth tax on investments. If you look at your investment statements for mutual funds and index funds, you are charged a percent fee for your entire wealth in that fund. The percent fee is the same whether the fund manager makes money that year or loses money on the entire value your investment. That is not capitalism. That is very similar to a wealth tax and should be outlawed and switched to an incentive based % fee on the gains for your investment. If the fund manager loses money, you should not owe them anything.
Bob, yes, you are correct, but it was a communist democrat from CA who proposed it (always the democrats). Communists are in this nasty business of nationalizing your house, your business or whatever wealth you have after working for it your whole life and paid taxes for it. For me, communists and social democrats are the same, practicing the same theft from people who produce wealth. They do that for 2 reasons: to enrich themselves and to buy votes (using crumbs to get power) from low IQ voters.
The poser with the moniker “Nurse” is not a nurse at all. Normally people in
that profession do not have the maniacal sadistic attitude displayed in that post.
It’s probably someone working in the medical field but in a junior or assistant position.
Or just a troll. The grammar is another give away. “can’t afford here I don’t come”.
Again, nurses generally have more than an 8th grade education and can actually
speak and write in English. So what is this poser doing on an RE site ? Who knows.
Lonely maybe ? Certainly isn’t able to contribute to any RE discussions.
Prop 19 to limit Prop 13: https://www.dailybreeze.com/2020/07/04/proposition-19-is-latest-assault-on-taxpayers/
Prop 19 will …
1. Limit parents’ ability to pass on Prop 13/58 protections to their children. Children who inherit a house will have the valued reassessed to full market value, unless the house is their primary residence.
2. Increase portability of Prop 13 protections between counties (i.e., if you sell one home to buy another within California).
3. Money raised through Prop 19’s increased taxes will largely go to firefighters. This is to buy support from the firefighter unions for Prop 19.
4. California Association of Realtards supports Prop 19, as they think it will encourage more sales. Homewwners will be able to move while keeping their Prop 13 protections. And kids will not inherit those protections, thus giving them an incentive to sell rather than rent the house.
This is interesting.
In my opinion, 1 and 2 are fair and much needed.
1) Nobody should be able inherit a tax rate. The only exception of being a primary residence covers special needs kids who have been cared for their entire lives in a home.
2) This will allow people to move within CA without affecting their taxes. They can move to be closer to their children or for medical reasons without being adversely affected tax-wise.
3 is questionable. If CA receives a windfall in taxes, the purpose of these taxes should be directed by popular vote and not through union or corporate lobbying.
The Turd (Real Estate) is circling the Bowl (CA)- From Pacific San Diego in California. “Rent in San Diego County is down for the first time since the Great Recession. It is notable because rent hasn’t dropped in the county since the third quarter of 2010 and any talk of a reduction at the start of the year was unthinkable. Experts say the once-unstoppable rise in rents in San Diego County has been halted by large job losses, or income reductions, related to COVID-19 and a lack of people signing new leases in the region’s most-recently opened luxury buildings.â€
“Alan Nevin, real estate analyst at Xpera Group, said the actual rent price with special offers — sometimes called the ‘effective rent’ — is probably a better way to look at what is happening. He said many of the luxury buildings are offering one to two months of free rent. That way they don’t have to lower rents and then be prevented from raising them substantially later under statewide rent control passed in 2019. CoStar said the effective rent was closer to $1,830 a month in the second quarter.â€
“‘What they would rather do is have it free upfront so they can maintain their pro forma rents until things get better,’ Nevin said.â€
“Joshua Ohl, CoStar managing analyst, said some of the newest apartments are marketed with high rents because of gyms, pools and other features that had to be closed to prevent spreading the virus. ‘If all those things are closed, what are you paying for?’ Ohl said.â€
The SFist in California. “Nowadays, it’s somewhat common to spot sub-$1K Craigslist ads for single-room rentals in areas like the Lower Haight, Inner Sunset, and The Castro — all neighborhoods where you would be hard-pressed to find anything remotely close to that price before, pre-pandemic. For the first time in over a decade: San Francisco’s now home to both a renter’s and buyer’s market, with home prices steadily on the decline as the Bay Area’s real estate market continues reeling from lackluster business.â€
“The recent (and widely publicized) exodus event in San Francisco was highlighted by Zillow, showing that their real estate inventory for the city had a 96 percent year-over-year spike as unoccupied SF homes went on to the market in huge numbers, unlike any other metropolitan area mentioned in the study.â€
The Daily Mail on California. “Today, Los Angeles is a city on the brink. ‘For Sale’ signs are seemingly dotted on every suburban street as the middle classes, particularly those with families, flee for the safer suburbs, with many choosing to leave LA altogether. Danny O’Brien runs Watford Moving & Storage. ‘There is a mass exodus from Hollywood,’ he says. ‘And a lot of it is to do with politics.’ His business is booming. ‘August has already set records and we are only halfway through the month,’ he tells me. ‘People are getting out in droves.’â€
“Veteran publicist Ed Lozzi says: ‘People are taking losses on the sales of their homes to get out.’â€
Enjoy the Weather
Sounds like a ZeroHedge post.
Rents and home prices have fallen how much ? 10% so far.
First drops since 2010, whoop de doo.
I real worry is what happens when eviction moratoriums end. Plus on top of that is that the ekonomy IS still unraveling, just ask the CEOs as their revenue pipelines continue to show the light at the end of the tunnel is a train of pullback in consumer spending.
god help us.
Realist doesn’t have the financial means to buy a house so he dreams of a 70% crash. Lol
Sry, keep lying to yourself that the market will crash and you can buy a dream home or start investing in stocks and bitcoin. You will have a downpayment ready in no time.
I bought at the peak on Q1 and I couldn’t be happier….
Fresh from the press: home builder sentiment reaches record high.
Yep folks, the depression must be just around the corner.
In the meantime my stocks went up and we are close to an all time high on the SP500
For all non-perma/depression bears: no RE crash in sight.
“The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.” – Ronald Reagan
Oh boy, prices are up 9.6% YoY in California. So sorry perma depression bears!
And That Was Wiped Out by The New INCREASE in Taxes, LMAO Enjoy the Weather 🙂
Cherry picking again, M. Let me share more details with he group.
https://www.car.org/en/aboutus/mediacenter/newsreleases/2020releases/july2020sales
With home sales continuing to recover in July and sales of higher-priced properties bouncing back faster than the rest of the market, the statewide median price hit a new high after setting a record just in June. California’s median home price reached $666,320 in July, jumping 6.4 percent from June’s $626,170 and 9.6 percent from $607,990 in July 2019. The monthly price increase was higher than the historical average price change from June to July and, in fact, was the highest ever recorded for a June-to-July change.
A change in the mix of sales was one primary factor that pushed the median price higher in July, as sales of higher-priced properties continued to outpace sales of lower-priced homes.
Homes priced below $500,000, which made up 44 percent of total sales in the California market in June 2020, only comprised 40 percent of all sales in July 2020. Sales of million-dollar properties, on the other hand, increased in market share to 20.4 percent in the most recent month compared with 18.1 percent in June 2020.
Stronger sales of higher-priced properties continue to propel the statewide median home price, as those who tend to purchase more expensive homes are less impacted by the economic recession,†said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young.
To add more context:
The bears have been predicting a W or dead cat bounce. Aaaaand a RE crash.
Instead we got a nearly 10% increase!!!
The laughed at me for buying a house…..who is laughing now 🤣
Yes, a 10% increase due to a COVID frenzy, low interests rates, injection of FED funny money, pent up demand, peak buying season and unnaturally low inventory. Hope your constant regurgitation of cherry picked stats helps you sleep.
Cherry picked? I only really care about SoCal. Specifically San Diego.
I get a kick out how wrong all these bears were. Remember when they told us buyers we will lose a ton of money since they were sure as hell a depression is coming?
Quite the opposite, stocks and housing appreciated.
And even if RE crashes, so what? I might be my first investment property. Your house is just book value and we all know housing appreciates over the long term.
Crashes like on Q1 are gifts….huge buying opportunities….
M,
You only care about SD RE prices but mentioned the median home price for California.
“Oh boy, prices are up 9.6% YoY in California.”
True. The market in SoCal is extremely hot and all RE is local. Sometimes you will see me post positive news about all of California and the rest of the country though.
Real estate is kind of a hobby for me and I like to share good news about it.
Where the heck is this joker “nocrashinsight†who then changed his name to “big recession insight�
Haven’t heard from him in months. In q1 when I bought my house he celebrated that I bought at the peak….I can imagine his face NOW….California house prices went up nearly 10% year over year. 🤣
M: In q1 when I bought my house he celebrated that I bought at the peak….I can imagine his face NOW….California house prices went up nearly 10% year over year.
We already proved that you didn’t buy a house. 🤣
The timeline of your inheritance fable — learns of inheritance, clears probate, buys a house still under construction, moves in, finds tenant — within weeks — doesn’t make sense. 🤣 🤣 🤣 🤣 🤣
You’re not a bull. You were never a bear. You’re just a troll who plays a part.
Your fatal flaw is that you don’t know how to script a believable character arc (i.e., the time span over which a character grows or changes). You might be able to write parody. But not believable drama.
🤣
Wait what? You think I didn’t buy a house? Muhahahahaha
Proof???? Why don’t you send me your email and I show you some pics? 🙂
I would like to see the “proof†that I didn’t buy the house.
That is the dumbest thing I’ve ever heard. I got my loan docs for you and my title if you are interested 🙂
M’s Fantasy Timeline
Jan 31 — Still a bear. Advises against buying.
Feb 11 — Claims to have inherited money.
Feb 19 — Claims to have bought a house. (Fastest probate in history.)
April 16 — Discusses commute time from the new house, which is beautiful, brand new.
May 20 — Claims to have a tenant.
June 27 — Now claims he bought the house while it was under construction. House was so incomplete, he saw the materials that went into it.
Considering the short time between the inheritance, the purchase, and the move in, this was the fastest probate AND fastest construction in history.
Relevant quotes:
Millennial (Jan 31): “there is an incredible amount of inventory on the market and much, much more to come. Just obvious that sales and prices fall accordingly. … Boomers need to start paying their fair share. They barely pay any property taxes.”
————–
Millennial (Feb 11): “I inherited from a boomer. A lot. Thinking of buying property. ? I have a very nice house in mind.”
—————
Millennial (Feb 19): “Just signed. … Love it here already.”
—————
M: (April 16): “Commute to my tech job isnt bad (25min). … [house] is brand new, no headaches and it looks beautiful as you can imagine.”
—————-
M: (May 20): “My stranger [tenant] in the house knows she can’t have sleepovers or she will get a spanking. I do like she’s paying nearly a third of my mortgage …”
——————
Millennial (June 27): “… the top line materials were used. We watched it being built which is a cool experience itself.”
———-
Sources for the quotes:
http://www.doctorhousingbubble.com/the-cure-to-the-housing-shortage-may-be-retirement-homes-the-coming-tsunami-of-homes-over-the-next-decade-may-come-from-an-unlikely-source/
http://www.doctorhousingbubble.com/why-are-californians-moving-out-in-droves-to-texas-a-trend-that-goes-beyond-one-year-a-two-city-example/
http://www.doctorhousingbubble.com/the-forbearance-tsunami-4-7-million-mortgages-are-now-in-forbearance-with-an-unpaid-principal-of-1-trillion/
http://www.doctorhousingbubble.com/covid-19-and-the-impact-on-housing-socal-home-sales-hit-an-all-time-low-in-may-and-4-76-million-americans-are-now-actively-not-paying-their-mortgage/
Dude, you are confirming me! Thank you. Where do you see anything wrong with my timeline?
YouR mistake is that you think probate started when I first posted that I inherited money?
No buddy, probate started a looong time before my post. This isn’t a diary here buddy 🤣
I see absolutely nothing wrong with any of it. The only thing I could see is January still being a bear. I think I already made up my mind to buy by that time. Other than that I can confirm the timeline. Spot on!
August – M getting quotes for solar / dreams about a fiberglass pool
Monthly updates will follow to make it easier on son of landlord 🤣
Slight correction.
Feb 19 — Claims to have bought a house. (Fastest probate in history.)
Many people in CA have their money in a Living Trust and the Trustee specified in the will determines when the money will be dispersed to the heirs. Factually,seconds after the deceased has stopped breathing, the Trustee has access to all of the inheritance in a Living Trust. The Living Trust can include houses, bank accounts, etc.
Epic post! Please save this so you can post it in every thread.
#neverforget
Now that we’ve established that there’s no inheritance or house, everything about your alleged back story is suspect. You don’t sound like a married professional and homeowner in his 30s.
* There’s your constant gloating and goading of people. Gloating at the prospect of Boomers dying. Gloating over people losing their homes in a crash. Gloating about trespassing into your neighbor’s pool. Now that you’re an alleged bull, you gloat over people losing out by not buying. You sound too emotionally immature to be a married professional in his 30s.
* There’s your constant repetition. Whether bear or bull, you’re always posting the same boilerplate points, multiple times per thread. Compulsively replying to every comment with the same boilerplate. You sound like someone on the autism spectrum. Asperger Syndrome, perhaps?
* And for a married, professional with homeownership responsibilities, you sure have a lot of free time on your hands. I would think that a highly paid IT professional would have a demanding workload. A wife also normally wants a lot of her husband’s time. Acquiring and settling into a new home is also time-consuming. Yet you find so much free time to post the same comments, for new apparent reason, since you’ve allegedly already made your purchase and thus don’t need to be here.
I am sorry you hate it so much that I bought a house. 🤣
How about I invite you on having a beer in my backyard?
M: I am sorry you hate it so much that I bought a house.
Perhaps someday, when you actually buy a house, you won’t have time to troll so much. 🤣
“You sound like someone on the autism spectrum. Asperger Syndrome, perhaps?”
Many engineers and scientists have been classified as having mild forms of Aspergers. Including myself. I wouldn’t have had the focus to make it through engineering school without it. Both M and Son of a Landlord show these traits.
Asperger’s Characteristics
Intellectual or Artistic Interest.
Speech Differences.
Delayed Motor Development.
Poor Social Skills.
The Development of Harmful Psychological Problems.
Detail-oriented.
Persistence.
Not Socially-driven.
🤣 what has my brand new house to do with extra time? The only thing I really have to do is decide which solar company I use and what I will do in the backyard. The builder gives you 6 month to submit plans and then you can take your time to actually complete it.
Other than that I have plenty of time…..besides my day job which is 100% from home right now….you can do my tech job from anywhere. If I wouldn’t love being in my house so much I would probably travel and work on the fly.
M: YouR mistake is that you think probate started when I first posted that I inherited money? No buddy, probate started a looong time before my post.
Had that been so, you would not have been a fanatical bear even on January 31. You would either have changed your mind about buying when you learned of the inheritance, or remained a bear even after the money arrived.
M: The only thing I could see is January still being a bear. I think I already made up my mind to buy by that time.
Really? You decided to buy when you learned of your inheritance — “a looong time before my post” (as you now say) — yet you continued to pontificate against buying?
Do you see how that makes no sense?
Aaah that’s what you are so confused about.
Nah, the reality is, I was always meant to be a homeowner and bull. I just didn’t know it for a long time.
The money certainly made it easier to transition. I just couldn’t justify any longer not to buy a house. I am very grateful how it all played out.
The moral of my experience is: in places like socal, buy as soon as you can comfortably afford it. Forget market timing.
Look at all these “market timers†in Q1 that told me I bought the peak and will lose sooo much money. Now, in August, we know housing appreciated and SP500 and nasdaq are at all time highs…..exactly the opposite of what ALL these posters said. I used to be one of them…..I am so glad I changed! Buying this house was one of the best things I’ve ever done! Love every minute here. Love the floor plan and the neighbors, love that I don’t pay rent anymore, love that I get happy when I read bullish news about the housing market, Love that I will produce soon via solar panels and no longer pay sdge bills, etc etc
As an example of the introduction of the income tax, the Revenue Act of 1913 established a 1% tax on income above $3,000 per year; the tax affected approximately three percent of the population. The average income in 1913 was $1296.
If you convert 1913 dollars to dollars today using the highest measure of equivalence — how much was a dollar worth back then as a percentage of the overall economy, compared with today — $3,000 was worth more than $1 million.
So clearly, the income tax was designed at the start to be a tax on the wealthy, a way to “soak the rich.†It ALWAYS start like “soak the rich” and ends by soaking ALL producers, regardless of how much wealth they have. Initially they have to make it palatable. As the rich flee, you will be the new “rich” with a big target on your back. The truly rich are rich because they anticipate this and they always move faster than a government bureaucracy. They also don’t believe in propaganda, have critical thinking and they anticipate changes to flee in time. The same thing is happening now in many big cities like NY with rich moving out permanently. These types of wealth shifts were always happening in the history of humankind to run away from thieves pretending to be politicians (all for “greater good”). In the end, the government of CA will not collect more, they will collect less (higher % from a smaller pie), but they are too dumb to understand the obvious.
What’s sad is that CA already collects far more than enough already, but they squander it.
I couldn’t be happier with my house. Perma bears told me in Q1 I will lose a lot of money. 🤣 in reality, my house appreciated.
That’s the problem with perma bears, they never buy and wait for a big crash that never comes. In the meantime, the years go buy!
It’s been extremely hot and sdge has been sending out flex alerts. I need solar and a Tesla battery?! Jk, I think solar is enough for now. What did you guys buy? Panasonic, lg or sunpower panels? You like the Endphase microinverters?
Get those PV panels on your roof! It really offsets the AC, pool, jacuzzi, wine room, etc.
My monthly bill is low. Used to creep up on $500/mo.
Unfortunately unless you have some huge battery storage unit, you go dark like everyone else on a power outage…Remember you are never truly ‘off the grid’ as people like to think when you buy solar. If you are getting your electricity from a utility, they control the input and output electrical flows into the property….and they charge you dearly for the privilege of that ‘transmission’ cost…
Price contractions happen in all markets. Watch the last RE crash here:
https://www.ocregister.com/2020/08/13/how-california-home-prices-hit-record-high-despite-coronavirus/
Thanks for sharing that chart, Butch. The fluctuations are really interesting to watch. 2008 – 2012 was gut-wrenching. But that can’t happen again, right? Uncle Sam fixed it. 😉
V shape recovery complete. Maaan am I happy about buying real estate and stocks this year (mainly Q1). I predict higher asset prices for the rest of this year 🙂
Time to party!
OC Register columnist Lansner gives his explanation of how home prices in CA hit a new high in June of this year: 1) Low mortgage rates and 2) Motivated buyers who still had jobs.
Despite ups and downs which he chronicles in the article, the median home price in CA has gone up 221% since 1990. Buyer’s payments have dropped by7.5 over the last year, so by that measurement, the market is cheaper than it was a year ago (courtesy of the Fed).
I see this as a tale of haves and have nots. With a good job and good credit (and maybe a helping hand from older family members), the entry into the market has actually gotten easier. But at least half of Southern California’s people don’t have either.
Are home buyers going to catch a falling knife in 2020?
House prices will drop, we just down know the shape of the curve. It will depend on further bailouts and stimulus packages.
https://www.youtube.com/watch?v=BCSuNaZ_-Xk&inf_contact_key=0781ecdb2e50e4f797ddc8b219319091680f8914173f9191b1c0223e68310bb1
Click bait.
In 2007 you had 115k active listings in SoCal. Today it’s 26k.
Prices will go up. Interest rates won’t come up anytime soon. People still need a place to live. Unless covid starts killing of the millennial generation you won’t see demand drop anytime soon.
Yeah, I know, unemployment. Those waiters, stewardesses and other low wage workers weren’t buying homes before covid…..
But those people were buying homes in 2005-2006. Look at the debt profile of homeowners. Most homeowners pay less in PITI than renters….
Good luck with the RE crash thesis.
Must be all those low-wage workers that are delinquent on their mortgages:
https://www.msn.com/en-us/money/realestate/mortgage-delinquencies-surge-more-than-8percent-to-a-9-year-high-as-the-coronavirus-pandemic-hits-a-corner-of-the-housing-market/ar-BB1842A9
Yep, it’s going to depend on how long Uncle Sam can keep the band-aids on. It’s no good imagining only low wage workers have been affected. But, maybe employment will recover before forbearance ends. Maybe forbearance will be extended. Nobody knows; none of us.
The band-aids stay on till election. The FED doesn’t want to appear that he is interfering in the election. After that, all bets are off. Never forget the primary goal of the FED (banking cartel of the largest banks in US) – keep the dollar as international reserve currency. That is also the primary goal of the military (inflation and employment are secondary in importance for the FED). You can’t have an empire with a Zimbabwe type of currency. The empire comes first; you and I are of lesser priority. I suspect the interest is going to go up after elections and most of QE will stop or even reverse to QT. That, along with bankruptcies and foreclosures will become the norm regardless of who wins. That means contraction in money supply which in turn means elevated unemployment.
That is what I see as overall trend; it is hard to predict the amplitude because of too many other factors at play. Because the Iran war is high priority for the FED and military and because no president would do it in the first term (it would be political suicide), there is a high likelihood that TRUMP will be re-elected. Because he is not a likable person, the DNC had to come up with the worst of candidates to make sure they don’t inspire anyone to go out to vote. The most powerful forces don’t want a new president.
That is how it seems to me. Remains to be seen after November.
Interesting thoughts, Flyover. I’d sure like interest rates to go up. Uncle Sam is eroding my cash savings to help debt-lovers buy overpriced houses. That’s not right.
M’s story …
* February, “just signed” for a new house.
* Watches the house being built. House is still so incomplete, he sees the materials going into it, so he knows “top line materials were used.”
* April, already moved in.
This is not possible.
These days, because most subs are super, super busy, if you finish a house in one year after you get the permit, that means the contractor moved super fast. However, there is a long list of materials non existing in the market due to shortages (electrical parts, some sizes of lumber, etc.). It doesn’t matter the price. After people stayed at home for months, there are lots of things which were not produced. Even when a manufacturer wanted to open a plant, they could not get the workers back because they were paid the same or more staying home. In many places, cities no longer issued permits for construction, or for those with a permit, the cities no longer had inspectors because they had to stay home. Because of that, many places under construction stopped building. That explains somehow the shortage of new homes (just one of many reasons).
Absolut correct.
And yes I did see it being built. Just like all other houses in our track.
All phases are currently sold out until the release the last couple of phases.
Your timeline is spot on
What’s the name of your housing development in SD?
Harmony Grove in Escondido?
No, it’s not harmony grove.
Esco has some decent areas and land. That’s not where I live….I am closer to the coast.
He lives with his Mom. In the basement. In the back corner by the water heater. In Tulsa.
Ok, so what’s the name of the development then?
Ok, so why can’t you say the name of this mythical development that doesn’t exist? I don’t see any multi phase new construction developments anywhere in coastal SD. The only thing coastal is a couple small luxury build sites (10 homes). Please enlighten us.
I said I am closer to the coast than Escondido.
That doesn’t mean I am AT the coast. Pls don’t turn into son of landlord. There are many developments in this area. Search in north county.
SoCalGuy: Ok, so why can’t you say the name of this mythical development that doesn’t exist?
M’s mistake was that he shoots from the hip, without thinking. He claimed to buy his “new construction” home in February. For the next four months, he NEVER mentioned having watched it being built, UNTIL …
Rick (June 26): “New construction is generally cheaply made and shoddily put together. They are built by piece workers who make money in volume, hurrying through each house quickly, Using shoddy workmanship and Shoddy materials. (Half-inch drywall throughout)”
M (June 27): “Rick, thank you! I needed that laugh!
The house is in fantastic condition and the top line materials were used. We watched it being built which is a cool experience itself.
Don’t be jealous that you can only afford old crappy fixer crapshacks. My new house is top of the line with all the bells and whistles.we couldn’t be happier.”
M’s troll method involves always claiming to have come out on top, whatever the situation. Naturally, when Rick suggested that “new construction” wasn’t always the best, M’s knee-jerk response was to defend HIS “new construction” home by claiming that he watched it being constructed. M didn’t stop and think whether his NEW claim fit in with his previous mythical timeline.
ALSO notice that M claimed that his “new construction” house was “top of the line with all the bells and whistles.”
Wouldn’t that include solar panels?
He’s a troll.
Ok, fine north county. What’s the name of the development? You can’t say it because it will expose your BS story and building timeline.
Come on dude. Put a little bit more work in it. You’ll find it. Where is the fun if I just tell you where I live? Would you just tell me where you live? Exactly….
Latest news on Covid and Santa Monica multi units
Multifamily investment activity is starting to rebound in Santa Monica. After the initial shuttering of the economy due to the coronavirus pandemic sparked a near halt to investment activity, investors have begun to transact again in recent months—but the return to the fold has come slowly in the Santa Monica market.
“We have been seeing market activity tick upwards in the past few months as investors are beginning to find some footing in our new reality. Volume is certainly down significantly from 2019 levels,†Kimberly Stepp, a principal at Stepp Commercial, tells GlobeSt.com. “To illustrate: in the first half of this year, multifamily property transaction volume in West Los Angeles and Santa Monica was approximately $126.8 million as compared to $205.6 million in the first half of 2019. At this point, we are not seeing the large discounts that buyers have been anticipating, however, as compared to pre-COVID, asking prices are roughly 5% less, and cap rates are up by approximately 500 basis points. Finally, class-A properties on the Westside remain highly desirable and consistent with pre-COVID metrics.â€
Sales inventory is the main reason that investment activity hasn’t rebounded. Many owners have decided to wait out the market uncertainty. “Overall, inventory is fairly low, suggesting that many owners are still taking a wait-and-see approach,†says Stepp. “Of those who are selling, many are smaller mom and pop owners and family offices who were already fatigued with property management and ever-increasing city and state regulations, even before the COVID-induced eviction moratoriums and softening market rents. Many are long-term owners who simply want to move their considerable equity into low-maintenance, less-regulated investments rather than waiting for prices to return to pre-pandemic levels. We have been trading some of our clients out-of-state and expect that trend to continue.â€
Buyers, however, are also cautious in this economic climate as well. Santa Monica’s multifamily fundamentals have deteriorated in the current market, and that has changed the buying pool. “Interest on the buy-side is driven by the need to find sensible investment vehicles for pent-up capital,†says Stepp. “Although vacancy rates are up to 6.1% and rents are flattening or decreasing, rent collections in Santa Monica and West L.A. remain strong at approximately 93 percent as of August 1. The buyers who are active are taking advantage of extremely low interest rates coupled with mild price discounts, and are looking to hold long-term.â€
The federal government’s response and additional rent and unemployment relief will play a crucial role in the market performance later this year and into 2021. “Beyond COVID-19, what remains to be seen is how state and federal governments respond to the needs of the rental market for both tenants and housing providers,†says Stepp. “The November election could have a strong impact on the market, but for those willing to take the risk, there could be significant gains over the long run.â€
Tech stocks are exploding 🙂
Don’t complain about housing is too expensive….all you need to do is buy tech stocks and you will have your downpayment ready in no time….
One of my coworkers is a big Tesla nut, has two of them plus boatloads of TSLA stock. Let’s just say he’ll be retiring early. Just from 1 year ago, this stock has went up 10X. All this stock market money is finding its way into desirable CA RE.
🔥🔥🔥
Biggest month to month sales gain ever recorded in US history for the housing market!!!!!
WOW!
Man, am I happy I am not a depression perma
Bear…..
San Diego is in a freakin 🔥 sellers market. Expected market time
Is at 31 days!!!! This is historic folks….
Renting sucks…..save, invest and buy a house….
https://www.pasadenastarnews.com/2020/08/20/being-a-renter-has-become-the-national-nightmare/
Renting will suck in any place with a massive housing shortage. CA is short millions of units. Until that changes, renters can expect the same. Most potential buyers will jump at the first opportunity they get when it comes to buying. It’s brutal out there!
From Fox Business on Yahoo Finance:
“Barrick Gold Corp. shares surged to their highest level in more than seven years after Warren Buffett’s Berkshire Hathaway revealed a 20.9 million-share stake during the three months through June.
Berkshire’s stake, worth about $564 million, makes the Buffett-led conglomerate the 11th largest shareholder of Barrick Gold, comes as a bit of a surprise to many as the legendary investor has in the past expressed disdain for the precious metal.
“[Not] only will Berkshire do considerably better than gold, but common stocks as a group will do better than gold, and probably farmland will do better than gold,†Buffett said at a Berkshire’s 2012 shareholder meeting. “I mean, if you own an ounce of gold now and, you know, you caress it for the next hundred years, you’ll have an ounce of gold a hundred years from now.”
Buffett’s right-hand man, Charlie Munger, has had a similar dislike for gold, noting that “civilized people don’t buy gold, they invest in productive businesses.”
An assistant to Buffett did not immediately respond to FOX Business’ request for comment.
While both Buffett and Munger have previously slammed gold, it’s possible the Barrick investment decision was made by either Todd Combs or Ted Weschler, Berkshire investment managers who are potential successors at the conglomerate.
Berkshire’s stake comes as gold prices surged 18% during the first half of the year, boosted by both the Federal Reserve and Congress taking unprecedented action to support the U.S. economy amid its sharpest slowdown of the post-World War II era.”
My Wife and I were discussing assets prices the other day, and we agreed that it isn’t a real increase across the board in asset prices as much as a decline in the value of the dollar that is being anticipated by the savvy. I don’t believe that Buffet and Munger didn’t approve this purchase as it is a pretty big buy and this isn’t gold but a gold mine. Buffet and Munger already own Helzberg Diamonds, which uses a lot of gold to make its rings. An investment newsletter I get has switched from possible deflation to inflation as the future. Jared Dillian said “Pay close attention to what Warren Buffett does, not what he says.â€
The best inflation hedge has always been quality Real Estate. You can’t eat gold, or earn anything from owning it. You have to sell it to make anything. Mining companies own some real quality real estate. They sell gold, they don’t generally buy it. Gold is a good place to park spending money in inflationary times, but having income property (stocks or real estate) is necessary to not wind up like about half of the posters on this site who don’t have anything but are waiting for a big crash so they can buy something worth next to nothing with something else worth next to nothing.
The RE market is insanely strong…
https://www.cnbc.com/2020/08/21/july-home-sales-spike-a-record-24point7percent-as-prices-set-a-new-high.html?utm_source=facebook&utm_medium=news_tab&utm_content=algorithm
“Sales of existing homes soared 24.7% in July from June, according to the National Association of Realtors.
The supply of existing homes plummeted 21.1% annually, w LA ith just 1.5 million homes for sale at the end of July.
The median price of a home sold in July rose 8.5% annually to $304,100.“
I’ve been telling you all year that prices can only go up if you have historic low inventory and historic low rates. Plus you millennials finally buying homes now. The bears need way, way, way more inventory in order to pressure prices.
I think I would never sell my house.just rent it out and buy another one. In places like SoCal you become rich by buying and holding real estate.
These are national numbers. You said you only care about SD RE.
My bad. Yes I mainly (or only) care about SD RE because I bought a house here.
I will try to post less about the rest of the country.
@son of landlord
Pls add solar to my timeline – September/October 2020. My installer said it can take up to 90 days but realistically it should only take 30-45days. Maybe he says that because it’s a new built and there is nothing extra they have to do. Who knows. It’s my first time and I have no idea how long this takes: design, permits, hoa approval, installation, inspection…..
Just a heads up so you don’t fall off your chair when I say my solar system started producing 🤣
No matter what, For you, it will seem as if it happened overnight..
Most new homes have solar already. I have only seen a few new homes in CA without Solar put in by the builder and those homes are cheap crap. Hmm, something doesn’t sound right.
Most new developments have solar but if the development started in a certain year, the developers weren’t required to put solar on the houses. In our case solar wasnt required by the builder. We could have added it but the builder overpriced. Like almost every other option. But I do want and need it.
I looked into solar for my home:
I have a 1951 home with original 60Amp panel and 20 yr old roof. Our Elec bill is $70 per month avg.
The installers said: I will need to upgrade to a 200A panel, I will need a new roof before they place the solar panels. But guess what, I dont need 200A for any reason other than solar. My 20 yr old roof has another 5-10 yrs on it.
With an elec bill of only $70 per month avg, it would take at least 10 years for the solar to payback.
No wonder so few homeowners have solar.
With a 70dollar bill you don’t need solar 🙂
The 10y payback sounds about right. With such low usage, you can get away with a very small solar system and you get the 26% tax incentive this year. Might be worth looking into but then again….70 bucks is nothing.
My two story house has a big footprint and we run the upstairs and downstairs unit constantly. When you have bills between 250 dollars On avg and you plan on adding a pool or spool or EV, solar makes more sense.
Another article about that nightmare tenant — with photos of both parties: https://www.dailymail.co.uk/news/article-8655093/NYC-woman-forced-live-serial-grifter-whos-squatting-home-months.html
What is the consensus on regional, suburban real estate in wealthy pockets outside core metropolitan cities? Example: looking at homes in Westlake Village, CA. Seem to be a lot of Westlake Village CA. Seem to be many LA transplants looking there
Shit storm off the coast, Los Alamitos, CA Housing Prices Crater 10% YOY As Orange County Housing Market Turns Toxic On Skyrocketing Mortgage Defaults And Collapsing Demand
https://www.zillow.com/los-alamitos-ca/home-values/
*Select price from dropdown menu on first chart
As an noted economist said, “With 25 million excess, empty and defaulted houses out there, there is no need to build more.â€
The Orange County Register in California. “Chutzpah! Shock! Disbelief! Last week came announcements from mortgage giants Fannie Mae and Freddie Mac that an ‘adverse market fee’ of one-half point will be added to all refinance transactions effective Sept. 1. The fee is aimed at lenders but will be passed down to borrowers. For example, on a $500,000 loan, the fee adds $2,500. Or, converting this fee into the mortgage rate instead of the one-half point cost would raise your rate by roughly 0.125%.â€
“About 70% of the estimated $2.8 trillion in mortgage loan funding this year have been refinance transactions, according to Inside Mortgage Finance. Mortgage lenders, the housing industry, consumer advocacy groups and many others are mad as hell about this. Some believe this is a money grab to recapitalize Fannie and Freddie in order for them to be more expeditiously be released from government conservatorship.â€
“What if that money grab skepticism is wrong? Even though Fannie and Freddie reported combined net profits of $4.3 billion in the second quarter, what if they are once more circling the financial drain? Just a short decade ago we experienced a lightning-fast mortgage market collapse as a preamble to the Great Recession. Bear in mind, Fannie and Freddie own around half of the $11 trillion mortgage market. This week the Mortgage Bankers Association reported an 8.22% mortgage payment delinquency rate from its lender survey. The survey includes all borrowers not making their full contracted payment and includes forbearance borrowers.â€
“VA delinquencies are running over 8%. The FHA delinquency rate is nearly 16%, according to MBA. Closer to home, CoreLogic reports Los Angeles County and Orange County mortgage delinquencies (30 days or more past due) at 7.3% as of May 2020 compared with 2.2% in May 2019. Riverside and San Bernardino counties showed an 8.4% delinquency rate for May 2020 compared with 3.3% in May 2019. California’s delinquency rate was 6.7% in May 2020 compared with 2.2% in the previous May.â€
“Clearly, the mortgage industry has some issues with this move. ‘When we had record low delinquency rates, G-fees (guarantee fees that cover life-of-loan projected credit losses from borrower defaults) never went down,’ said Guy Cecala, CEO and publisher of Inside Mortgage Finance. ‘No question this puts them in better financial shape to deal with (loan) losses and take them out of conservatorship.’â€
“Based on projected COVID-related losses, the Federal Housing Finance Agency gave Fan and Fred the OK to charge this adverse market fee, according to FHFA spokesman Raphael Williams. The FHFA did not provide estimated projected losses. Williams also did not explain why this one-half point charge was made without notice. (FHFA could have made this effective October 1). Historically, F&F’s previous fee actions came with some advance notice to lenders.â€
“Lenders are required per consumer protection laws to honor the already locked refinance transactions even though many of them may not get delivered to F or F until Sept. 1 or later. To my knowledge, many lenders immediately added the adverse market fee for new refinance loans locked as of last Aug. 13. If your refinance loan was locked prior to that date but has not funded, keep your eyes peeled for the possibility of the slow stroll to funding in which your rate lock expires before your loan funds.â€
“Some lenders may try to stick you with the additional one-half point fee. To be fair, if you caused delays of your refinancing by dragging your feet and delaying paperwork, that’s on you. You may have leverage if any funny business starts to happen. Laguna Niguel attorney W. Michael Hensley reminded me of the class-action lawsuit that Wells Fargo Bank contended with back in 2017 for charging rate-lock extension fees to borrowers that were allegedly caused by the bank. Eating this fee is not fair for the lenders. But that’s a separate matter from them trying to pass it on to you on your already locked loan.â€
“Two wrongs don’t make a right. If you think your lender is playing you, just present a copy of this column to your lender.â€
Two reports from the Wall Street Journal. “Fannie Mae’s and Freddie Mac’s new fee has roiled the mortgage industry. It could be just a taste of what is to come as the two giants’ role in the housing market evolves. Potential investors will want to know how Fannie and Freddie can offload risk—or offset it with earnings, including fees. It’s harder for Fannie and Freddie to offload risk at the moment due to the slowing market for so-called credit-risk transfer securities. There was no issuance at all in the second quarter, according to data tracker Mark Fontanilla & Co.â€
“Fannie and Freddie don’t have a lot of market incentive not to raise them: The pair are no longer locked in a battle for market share with private-label securitizers, as before the financial crisis. Today that market isn’t what it once was, and it’s still getting smaller: Bank of America estimates that the nonagency residential mortgage-backed security market will issue about $56 billion this year, down from $129 billion in 2019.â€
“Mortgage giants Fannie Mae and Freddie Mac are taking advantage of the mortgage-refinancing boom to shore up their capital as they seek to return to private ownership. Lenders said the surcharge would add the equivalent of 0.125 percentage point to the cost of a home loan—enough to dissuade or disqualify weaker borrowers who most need to refinance, but too little to damp the boom.â€
“The fee ‘equates to only one-eighth percent in rate, not enough to slow down the mob,’ said Lou Barnes, a senior loan officer for Premier Mortgage Group in Boulder, Colo.â€
“Lenders said the surprise announcement of the surcharge didn’t give them time to adjust fees on refinancings already in the pipeline. They will therefore have to pay the 0.5% fee on those loans rather than passing it on to borrowers. ‘For a lot of lenders, that’s more than they make on a loan,’ said Teresa L. Gregory, president of Traditions Mortgage at York Traditions Bank.â€
“Meanwhile, interest rates have edged up, and the added surcharge has made refinancing less attractive for some homeowners. Jim and Ginny Bertoncino were hoping that refinancing at a lower rate and extending the term of their loan would save them hundreds of dollars a month. That would help offset the loss of income they suffered when they had to close their indoor minigolf course in Scottsdale, Ariz., because of the pandemic. Since reopening in late May, business is down by 60%.â€
“‘We were already banking on, ‘Hey, we’re going to have some extra money to pay some bills,’ and now we might not,’ said Mr. Bertoncino.â€
Eat it and weep home debtor- that shitbox is circling the drain, but hey the weather outside is great. Enjoy ;))))
The Southern California housing market is just different than the rest of the country. I had to figure out why my parents house is now worth $1.5 million. In most other parts of the country, this would be valued at 30%. First, in today’s dollars, they bought the house for around $360K. They are on proposition 13, and their real estate taxes are ridiculously low. Now, I no longer live there; I don’t actually miss it except winters are beautiful there. Homeless has surged, affordability has decreased, average age of purchasing a home is way up. To sum it up, California hasn’t been able to add enough new housing stock the last 30 years to keep up with the growth in the population. The result is the standard of living is actually much lower for adults between 18 to 40, who have to pay much more for their housing. No wonder why people are leaving to places like Texas and Arizona, where you’ll get my parents type of house at $420K. It’s at the point in SoCal, that housing is a crisis to the population’s well being. Some lucky folks, like my parents, are sitting a nice nest egg. In conclusion, the block where I grew up on, has three of the original kids who ended up buying their parent’s house. I think they can inherit the prop 13 taxes.
The higher the price goes, the further it has to drop. smh, yah, CA is different, they are the biggest turd circling the bowl. Enjoy that weather, so beautiful.
Realist,
YouTube/zerohedge doom and gloomers have corrupted your mind.
Do you honestly think RE can fall during these Market conditions? You are brainwashing yourself with these posts. Invest in the stock market, play the game during this low interest environment. All that money printing leads to asset price inflation. Profit from it instead of telling yourself an imaginary RE bubble will pop. I have yet to see one neighbor that bought a new house that he/she/it can’t afford. They Either sold another house, or the couple have both high paying jobs or they inherited. At least the ones I talked to. Nobody here seems poor and Highly over leveraged. The reality is, if you have a low paying job you won’t be buying a house. Not now, and not when the market dips.
You need money in order to buy close to the coast. SoCal has cheap housing, if you are willing to live in Perris, Ca or Lancaster.
I used to be like you. Someone who thought the market has to crash because the average joe can’t afford to buy anymore. That’s not the case. Take a look at Europe. In good locations high earning couples are NOT able to buy a decent home. There is simply nothing for sale and interest rates are 1-2%. The 10y German bond is MInUS 0.6%.
Pray that won’t be the case here anytime soon…..because if housing continues to appreciate steadily and you can’t afford to buy now…..how will you be buying 10 years from now?
Yeah, CA is different. The swings are massive! Dropped 40% last time a bubble popped, was it? We left for Texas just before that hit the fan. Our house in TX lost only 14%. What a difference! But, of course prices in CA will continue to go up forever, right? No way. I’m as old as a Millennial can be, so I’ve seen some things. I know how reality works.
“The result is the standard of living is actually much lower for adults between 18 to 40, who have to pay much more for their housing. No wonder why people are leaving to places like Texas and Arizona, where you’ll get my parents type of house at $420K.”
No kidding, my peers are professionals and in CA they’ve bought expensive fixer-uppers in older neighborhoods where not having been burglarized makes you unusual. In Texas we bought a 3 year old house in a safe suburb for 1/3 the price (paid in full on year nine) and pay zero state income tax. I save thousands doing business in Texas. Big city Texans enjoy higher disposable incomes than their counterparts in CA. Around here, $420K gets you 3,000 square feet (brand new) on an acre in a good neighborhood, 20 minutes from downtown. Californians everywhere.
“Enjoy that weather, so beautiful.”
That’s it. We’d not move back just for the weather or beaches. There’s too much gone wrong in CA at this point. But there’s more than weather for some. Family is a very strong pull. Having family 1,000+ miles away gets old after a few years, even older than the hot summers. Still, the house in CA will have to be an absolute dream in a great neighborhood to be worth it because we’ll be sacrificing almost everything else.
Sincerely,
Turtle
Waiting to strike from Texas
Crap data is crap data.
FIRST TIME home buyer age has NOT gone up.
Boomer retire and downsize, but do not sell in so cl so the kids can keep the low taxes.
The market is absolutely crazy right now–much like 2004/5.
House went up down the street, escrow in two day–full price.
Another new listing–booked for 10 showings starting at 8 am the next morning.
People are sick of the city. and moving WAY OUT to the suburbs, some even going to Palm Springs from LA to ZOOM.
Spot on. Friends of ours in north county San Diego put their house for sale. It was officially on the market one day before going into escrow. I have preaching for months now that the market is sizzling 🔥.
All the money printing goes into housing. Millennials are buying and interest rates are historic low. What else would you expect? Market will go 🚀🚀🚀🚀 and money printer go brrrrrrrr
We can all agree, right now it’s sizzling. Interest rates at near zero, inventory is tight, summer season, people wanting to bunker down. So, do you think any of those conditions will get better (which will push prices higher) or worse (which will push prices down)?
This isn’t a difficult analysis. There is simply no more room to go up. Housing is maxed out. The question is how far will it fall? Sorry, but you “bought” at the wrong time.
Affordable financing makes homes unaffordable.. cheap money allows prices to increase.. deliberate planned inflation, devaluing our Dollar, is killing the next generation..
Here’s a summary of the current housing talk:
“Real estate agents are seeing more demand to purchase a home even though there are no signs the pandemic is coming to an end and unemployment in California is still over 15%.”
“Suburban neighborhoods priced in the $600,000 to $700,000 range are white hot, in part because people from Los Angeles are looking to those neighborhoods where houses are cheaper and, for now, they don’t have to be near their work on the Westside or in downtown Los Angeles.”
So far, no housing recession in sight. Bad news for the bears and the vulture funds that
are in place ready to swoop in.
I kinda miss Mr Landlord. Now that the markets are trading at all time highs I believe we have a good chance of “seeing†him again soon.
Unless he is troubled by the same issue that some of my “landlord†friends face: some tenants lost jobs or moved and it’s not easy to find a high paying renter with good credit at the moment.
Overall, it’s a terrible year for bears. Whatever happened to the W / dead cat bounce etc?
ATH in NASDAQ / Sp500 and median house prices. If you wouldn’t know better you would never think we are in midst of a pandemic.
Once you flush, you can’t un flush-Mortgage Delinquencies Soar To Decade High
https://www.zerohedge.com/markets/mortgage-delinquencies-plus-90-days-due-hits-decade-high
Truthfully, behind the 30-mile smoke cloud, is the sun. Enjoy that weather, so beautiful.
New homes sales beat expectations in July.
https://www.mobile.reuters.com/article/amp/idUSKBN25L1SC
Hilarious, Realtor.com:
“Even if the economy doesn’t improve by next year and a vast swath of Americans remain unemployed, we are not likely to see the flood of foreclosures that characterized the housing crash…”
Don’t be one of the suckers. Realtor.com, Zillow, Redfin, every real estate agent you’ve ever heard from – they’re all the same. Everything is fine! Prices will go up forever! The government is here to help, no matter what – forever! Buy now or get locked out!
Yours patiently,
Turtle
I know one realtard here in WLA and his slogan is:
“it’s never been a better time to buy or sell a home”
Isnt that the most ridiculous quote.
Isnt it ONE or the OTHER ?
Lol, I used to make fun of that sales pitch.
I can make an argument to backup the real estate agent up:
It’s the best time to buy right now:
Take advantage of super low rates, stop paying your landlord and build equity, housing might go up a lot further and they are not building more land. Inflation hedge and you may build beautiful Life lasting memories in your house with your hot wife and kids.
It’s also the best time to sell BUT only if you move to a cheaper area.
Obviously it’s the best time to sell as your expected market time is 30 days and you will most likely see bidding wars…..but where are you going? Further east or out of state?
It’s a fantastic time to sell in California. Look at the trend line. Lots of people are cashing in and moving to nicer abodes out of state, mortgage-free (and sometimes income tax-free).
Don’t be that guy who bought my grandma’s house in 2006 for almost 2X what she paid just a few years earlier. I didn’t know much then but I could see very well who the winner was.
The “gotta be a homeowner” itch caused a lot of people to make financial miscalculations before the last bubble popped. It seems to me people are doing the same thing right now.
Just getting started, kinda like after eating a bad oyster- US Home Price Growth Slowed In June
https://www.zerohedge.com/personal-finance/us-home-price-growth-slowed-june
What goes up, must come down HARD 🙂
Hi M,
I have been following your comments on these boards for about a year or so. And as I read your comments you give me the impression that you are trying very hard to convince yourself the housing market especially in southern California is not in a bubble and that you made the correct decision in buying in a bloated market.
Some of your arguments regarding that we are not in housing bubble do not hold water. For example you mention low inventory. That fact that we have low inventory does not necessary exclude the fact we are in a bubble. In fact it is quite the opposite it is a precursor to a bubble popping. Remember early 2005? Another factor you continue to bring up is low interest rates. Low interest rates will continue and thus we will always have buyers . Will as you and I know low interest rates fuel higher home prices and higher home prices does not bode well for consumers whose wages have not kept up. Remember 2006?. Also you mention the NASDAQ being at all time highs. Well I hope you know it was not due to a viable economy. I think we can all agree it is driven by the Fed printing trillions and insane speculation with no fundamentals.
So here we are now in late August 2020 with Congress about to give the Fed the green light to print more trillions. It is election year after all. And you know what this will do? Well, if I have to spell it for you I think we are all in big trouble.
Sleep well.
Thank you James for the comments.
I agree that low inventory now doesn’t mean we will have low inventory in 2021/2022.
I do post a lot, especially market updates.
It’s my form of celebration to show the bears how wrong they were.
I do not need to convince myself. Here is why: I enjoy being in my new house daily. Do you think we care if the market dumps or keeps going up? Maybe, maybe not. When it dumps bears will say: I told you so. When it doesn’t dump, bears will say: just wait, the crash will happen.
Your mistake is that you compare this situation to 2005/2006.
There are similarities. For instance, houses sell like hot cakes right now. Just like back then.
But, people who couldn’t afford back then were able to buy.
We don’t have NINJA loans anymore. And this time the FED/Government reacted very fast to print trillions. Also, back then we had ARM loans. Most buyers nowadays get a 30y fixed with 3% ish rate.
I see no signs of a crash. If housing dips in a year or two I might consider buying a small SFH as a rental. If I would tell you how much money I put down and how low my PITI is you would quickly see that I would pay EASILY the same amount monthly in rent for a similar house. Do you think buyers like me sell their house if housing dips 10-20%? Hell no. I gotta live somewhere….
Worst case scenario would be my wife and I lose jobs and have to rent out the house and move back to mommy and daddy for a while.
People have been doing the 3% down thing for a while now. And I see new luxury houses in my area that cost twice as much as mine but the sign says payments will be what my much smaller house would rent for. All kinds of salesman fantasyland games going on. A lot of people are getting in over their heads and it’s always worse in CA.
Methinks the only reason your mortgage payments are close to rent is that you unnecessarily paid an extra six figures or two into your principal. You’re right about not needing to worry and I’m glad you enjoy your house. That’s all that really matters. But, you almost certainly did overpay – like everyone else buying so far above mean trendline.
It’s strange that people see 3% interest rates as a good thing. It’s debt. You’re overpaying and paying interest. Best to do neither, or just one – never both. You’ll have to hold onto your house for 10 – 15 years after it hits the fan. There are people from 2006 who still haven’t seen their values recover. They should’ve looked at the mean trendline first and not got so excited about “finally being able to buy”.
Turtle. I used to think like you. “You almost certainly overpaidâ€.
I tell you what. I think As long you can comfortably afford it, it doesn’t matter what the price is. Price is just one part of the equation. As soon as it make sense, I will refinance and push the loan out . Why pay off early? You take the lower rate and keep pushing the loan. If prices keep going higher….good, you get wealthier. If prices finally drop, fantastic! You buy a rental property.
The us will do anything to fight deflation. We might see higher inflation in the future. Perfect for home owners. Your income rises and your debt inflated away. You can only lose if you buy a house that you can afford…..that’s almost impossible to do nowadays.
Waiting for a crash is basically throwing in the towel and hoping for a miracle.
as I read your comments you give me the impression that you are trying very hard to convince yourself the housing market especially in southern California is not in a bubble and that you made the correct decision in buying in a bloated market.
M didn’t buy a house. He changed his online character from a bear to a bull, and now he has to play the part as he wrote it.
M’s misfortune is that he rewrote his online character only a month before the Covid lockdown. Now he’s stuck playing a bull. Think what fun M might have had if he had kept his role as a bear.
Son of a landlord,
How sure are you that I didn’t buy a house?
Willing to do a bet?
“Seen it all before bob†could be the referee/Switzerland. He seems like a neutral kinda guy and level headed. We could all meet and have a beer or two at my house and I show you the deed. But we need to transfer the funds to him beforehand.
It’s gotta be a bet thats worth my time.
How about two bitcoin? That’s roughly 23k at the moment.
A beer sounds great.
Maybe we should wait until after you put in the pool?
Actually, it’s only been about half a year since he’s been a bull.
For years, he was saying the market would drop 50% – 70%. Then, he received an inheritance and bought a house right before the pandemic / economic crisis. The good news is that he won’t lose anything if he doesn’t move. He loves his house and can afford it. That’s all that matters.
The way he talks is like the real estate agents in 2006. I think he writes Realtor.com’s reports and Trump’s tweets on the fantastic economy. 😉
“Even if the economy doesn’t improve by next year and a vast swath of Americans remain unemployed, we are not likely to see the flood of foreclosures that characterized the housing crash…†– Realtor.com
Sure.
You are absolutely right Turtle!
I couldn’t justify NOT buying any longer. Then covid hit and everyone including their grandmas called a RE crash. Fast forward 2 quarters and RE is sizzling hot. Stocks are exploding….
One has to ask himself, is the risk of inflation higher than the chance of a RE crash? And What happens to stocks and RE when we see inflation?
There is a saying “don’t fight the fed .essentially you are betting against the US money printer if you believe in a crash In this Environment… They can relatively easily print another few trillions of they have to.
The only thesis bears have left is waves of foreclosures. Will see what happens. In the meantime I enjoy working from home in my beautiful house.
Real estate poses a much greater risk than inflation, in my view. We’re in a position to wait so we will. As one of the world’s oldest millennials, I scratched that “gotta be a homeowner” itch 13 years ago by moving to Texas. The federal government is not all-powerful over the economy and their track record is poor. We’ll see what forbearance and employment look like mid-2021. I’ve never been one of the bears imagining instant price drops, 50% discounts or depression. I think 30% is more realistic and not for a couple years, because real estate is slow and yes the government is delaying it.
“I think we can all agree it is driven by the Fed printing trillions and insane speculation with no fundamentals.”
j r,
I certainly agree on the first half of this point with you. But I’m not disagreeing with M either. Truth is, I don’t know if we are facing a deflationary crash again due to the second half of your point, or high inflation like what we saw in the ’70s with a crummy economy and rising prices. The question is whether this is asset inflation without underlying inflationary pressure, or a true inflationary event that will spiral out of control. It smells like the ’70s to me. not 2008, and I lived through both. But it is also different than both in many respects, so I’d hedge all bets. We all can see a problem with the central banking system, so we’re really all on the same side. If you don’t have real estate, you are very vulnerable to an inflationary spiral that could be coming, and cash is the worst place to be if this financial repression continues (interest rates held way below inflation).
Joe R: You say cash is the worst place to be, but what other viable options are there for people with cash on hand? Real estate for investment purposes is risky currently, and stocks are also risky currently. Everything is risky.
R,
I think I made it clear that I was talking about an inflationary spiral coexisting with financial repression where interest rates are held well below the rate of inflation. So every day, your money is worth less and less. You would be witnessing the complete destruction of the dollar before your very eyes. This has happened to currencies in many other countries, and there is nothing magical about the dollar that can withstand such abuse.
M would tell you to get Bitcoin, and he may well be right. There are also gold and silver. Stocks with valuable underlying assets have performed well in previous crises. Good luck!
No risk, no gainz
The best place to stash money depends on the money’s purpose. Definitely don’t keep money for retirement in cash right now. But for an emergency fund or home purchase, cash is the place. I moved most of my cash to a no-penalty CD. Money market rates are near 0% and high-yield savings rates are falling fast.
Turtle has good advice. In today’s economy, cash on hand can get you all kinds of services especially in home repairs. I have a bunch of work I’m trying to get going right now. But we probably have too much cash, so I’m not following my own advice exactly because like Responder says “Everything is risky”.
I disagree…..you don’t want to be in cash right now….you want to ride this tech bubble…. watch, Apple stock split shows Apple at 125. Would anyone be surprised to see Apple at 200? This tech bubble has legs. I am dumping more cash on amazon, Tesla and Apple.
Can I borrow your crystal ball, M? The one that tells you which stocks to buy and when. I hope you realize that with your style of investing, the odds are against you in the long term. Read a Boglehead book and visit the Bogleheads forum to see how well those guys are doing. You don’t have to gamble to do well but you do have to be patient and that’s the hard part. Delayed gratification is king.
“[O]verpriced crap shack built during World War II with popcorn ceilings and horrid looking carpet.” Haha! That is just so funny.
New “free rent” bill being considered by California state legislature: https://www.ocregister.com/2020/08/25/free-rent-bill-will-ultimately-harm-tenants/amp/
… Tenants would not have to pay rent for 90 days after the end of a state of emergency — and a landlord would have to wait 15 months to force a tenant to pay any past due rent.
Tenants need not prove any hardship, which would mean that many renters who can afford their rent could simply stop paying with no real consequence.
… landlords could never use such unpaid rent as the reason for filing an “unlawful detainer†eviction action.
After waiting 15 months, landlords would have to file a separate civil lawsuit to collect unpaid amounts, which would mean many landlords would realistically have to permanently give up back rents. …
That will stop any more investments in rental housing. Eventually, the rents will skyrocket like in Tokio.
Insanity. And what will landlords do?
Interesting,
there are 675 strip malls in LA.
also an estimate that LA is short over 500,000 housing units.
The average mega mall in US can house 750 – 1500 people giving each unit about 600sqft of space.
one expert predicts 3/4 of all mega malls in US will disappear soon.
https://spectrumnews1.com/ca/la-west/housing/2020/08/24/strip-malls–big-box-stores-could-be-used-for-housing-in-la?platform=hootsuite
Hey, problem solved. 😉
I saw a Macy’s converted into a self-storage facility.
QE,
Yes, malls are continuing to disappear leaving space that could be converted to housing and some small service businesses that would cater to the residents. The land remains valuable even if the use must change. I think a teardown would be cheaper in most cases rather than converting large retail spaces to housing. In fact, a great deal of the huge parking lots of suburban malls could be used for putting in housing. People are going to want parking spaces nearer their dwelling than the outer areas of mall parking. I’m speaking of suburban malls now.
The urban mall spaces are more problematic. It depends on if the whole “protest” movement is a temporary gimmick to “get” Trump or a permanent part of the urban landscape. Urban areas full of roving bands of losers and looters would lose a lot of population to your idea of newly converted residential malls. Hopefully, some of the small trendy cafes would be able to hitch a ride to the new location. There may also be a swing in the big Democrat controlled cities to DAs and mayors who are more pro-police. See the results of the Fulton Co GA DA office 2020 runoff election. The new DA says there will have to be a change of venue due to the politicization of police prosecutions by the old DA.
The mean price trendline: the home price anchor.
https://journal.firsttuesday.us/the-equilibrium-trendline-the-mean-price-anchor/10281/
Home Price Anchor – excellent article !
Nice to see that chart updated. Bad time to buy, unless you like overpaying to the tune of six figures. Prices are WAY above the mean price trendline, again.
https://journal.firsttuesday.us/wp-content/uploads/Mean-Price-Trendline-Q2-2020.png
They did a bad job “updating†this article.
“ Prices reversed course beginning in Q3 2018, and this downward action will continue in 2019. This is due to a number of related factors, including the downward pressure of rising mortgage interest rates which qualify homebuyers for shrinking principal amounts. first tuesday forecasts prices will continue to decrease until bottoming around Q1 2021.
The next big peak in prices won’t be until after 2022. These will be the years of the Great Confluence, when Baby Boomers and Gen Y hit California’s urban cores. Gen Y will flood into both rental and homebuying markets, whereas the Boomers will focus their energies almost solely in homebuying.â€
In 2019 and 2020 prices continued to go UP.
I was talking about the chart they updated showing price history and the mean trend line. It shows that chances are if you bought recently, you almost certainly overpaid. I don’t know about their predictions.
https://journal.firsttuesday.us/wp-content/uploads/Mean-Price-Trendline-Q2-2020.png
That is a great article and chart!
It shows how much the bubble can deflate. It sets an estimated floor on housing prices based on inflation.
https://www.ocregister.com/2020/08/27/fed-buy-a-home-save-the-economy/
We won’t see rising rates anytime soon…..even lower rates means the wealth gap between asset holders and non-asset holders further increases.
Despite the sarcasm in the article it touches on some good points.
Many months ago I said we might see new ATH’s in the markets by Q4.
I was wrong, we already see it in August.
https://apple.news/A4NsuOkKlTaSbP3aDlUv_-w
A good sign of a bubble is usually when your taxi driver tells you about the next hot stock or bitcoin that you should buy to get rich. The last time I have seen that was in 2017 (I didn’t really hear it from a taxi driver but people that knew nothing about crypto and just jumped on the wagon very late – those people got screwed) with the bitcoin bubble and I cashed out. I don’t see it this time around with stocks. Yes, the valuations are insane but it’s not like your Joe Schmoe is telling you “to buy to get rich†is it? You have an army of Robinhooders (app) who buy stocks – mainly millennials. As we know “ Markets can stay irrational longer than you can stay solventâ€. But is it time to take some profits or will this go for a while with all that money printing? I have seen before what happens if assets go up in a straight line and I thought about taking profits. For now, I’ll stay on the train a bit longer. It’s a bittersweet year. Many in my extended family have nothing. No house, no stocks, just the hope that things will get better for them. Others are mega rich (who own several rental properties). My sad outlook is that the wealth gap will only get bigger. Maybe much bigger. Maybe we have seen nothing yet.
As we have seen over and over the FED will keep bailing out the stock market. Interest rates won’t go up anytime soon….betting against asset inflation at this point is crazy
Actually with the FEDs persistence to keep interest rates low, it basically signals they know we are in for a crappy economy for while so they are trying to scare people into buying NOW and if you know interest will be low for the next 5 years why would you need to buy immediately.
The people that are buying now are the people that’s been waiting to buy for the past five years and haven’t been impacted by the virus…. once that dust settles fasten your seats belts and get ready for a bumpy ride
Actually with the FEDs persistence to keep interest rates low, it basically signals they know we are in for a crappy economy for while so they are trying to scare people into buying NOW and if you know interest will be low for the next 5 years why would you need to buy immediately.
The people that are buying now are the people that’s been waiting to buy for the past five years and haven’t been impacted by the virus…. once that dust settles fasten your seats belts and get ready for a bumpy ride
Basic math> Insanely high rents and cost of living make saving a down payment of hundreds of thousands of dollars impossible for most people. Then the housing market in CA is also competitive for anything that is on the lower to middle end of the scale in most areas. Most people complaining now will most likely never be able to buy anything here unless we have a major crash but even then think of how many people are waiting on the sidelines and how easy investors could buy up everything if it fell 40-50%.
Where I live in California in a suburban coastal part of the Bay area an outdated, tiny crapshack house 2’ from neighbors with a tiny yard is $1mil-1.5 mil. depending on the neighborhood. Fixer uppers sell in a week for $800-900k. To afford this you have to make $300-400k and have a downpayment of several hundred thousand dollars. I did the math on my rental that my boomer landlord bought for cheap 25 years ago. I pay $3,500 a month to rent this outdated ranch house. It would sell for $950k-$1mil and it needs around $100k in upgrades and repairs to be nice.
I am one of these 30 something would be buyers that is stuck renting here because to purchase this home I would need a $200-250k down payment/closing costs and the mortgage, taxes and insurance would cost me over $5k a month for 30 years not including emergency repairs and any updates I would want to do to the house. These numbers just aren’t realistic for most people. I make decent money but am self-employed so even if I could save that kind of down payment which I can’t due to my high rent and other COL expenses it would still be difficult to get a mortgage and then here in the Bay area you’re competing with techies making $500k a year and wealthy cash buyers/investors. I also find these numbers scale anywhere in California because you go to a cheaper area like the North bay or somewhere in SoCal and the jobs pay less so a crapshack may only be $600-700k there but the wages and good jobs are less so the numbers stack the same.
The conclusions reached in the article using the median age of home buyers are not very meaningful. The Baby Boom in 1981 dwarfed the previous generations and foreign buyers were fairly scarce as well. The current millennial generation is only slightly larger than the Boomers and today, and like 1981, the younger dominant generation is competing with the older dominant generation for smaller homes.
The Comparison should be between First Time homebuyers in 1981 and now. I think that comparison would show median age to be far closer.
“All of a sudden many of the new buyers are looking like the Taco Tuesday baby boomers that rail against Millennials for not affording a home when they went to college during a time when college was affordable enough to pay with a paper route. Of course many of these older Americans couldn’t program their way out of a paper bag yet rant on social media platforms built by Millennials.”
It is nice to see this rant. Millennial here, from a divorced parent (w/no outside support) household, went to the best schools on scholarship+loans, consistently a high earner as a tech worker, and still struggling between acting as a head of household for my parent, bills, rentals, etc to get a hold on things. And overall, trying to tread this (in general) shit economy of the gig worker/startup culture where work is not steady. Was hoping last year to be making a 1st time home and car purchase by this time last yr and got slammed by no work at all this yr. NYC area and working in medtech no less. State medtech………
I see alot of the comments by the boomers in the hudson/catskill area and it makes me puke. Esp those who had low prices, steady work (if they wanted it), generational wealth, low education, relying on husband’s wages and skills around spending $$ and just mouthing off. I lean red if anything currently, but am looking forward to how this area skyrockets down. AOC and the war against Landlords, I’m eager for. and I’m in the category of 200k yearly salaries. In fact I just got hired again, and going to take my salary to another state. (Not contributing here…)
People like to dismiss certain attitudes as belonging to white/male/uneducated waiters who can’t afford, but they dismiss those who are from a wide demographic background, very well educated, earn money (and save it viciously – I don’t buy out at all – bulk, recycle, make everything from furniture to clothes myself), and are right there in line with sentiments like AOC, specifically due to the ignorant, caustic, stupid behaviors of boomers.
If Millenials learned to cook at home, stop paying for daily coffee’s and watch their spending, they could afford a home. You can get a home for 10% down. Sure, you pay PMI, but that’s life. This constant whining is disgusting. The problem with many Americans is they dig their graves KNOWING they are doing it. I’ve made my mistakes too so I’m not special, but I know you have to work your butt off to make it in life. I’ve worked overtime whenever I could when younger-a lot. I tell the younger crowd I work with to contact scheduling to pick up extra hours (we need coverage and I’m in healthcare) and they blow it off. They can go suck eggs!
Regarding Prop 13. Probably the best thing about living in California. Those filthy leeches in Sacramento would turn this state to a hell hole if it weren’t for Prop 13 because no one would stay here. It truly would be a 3rd world country with a few rich and the rest peasants.
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