I’ll absolutely will come back in a year when we haven’t seen huge price declines and you guys will all be saying the same thing…”oh keep waiting, the worst is yet to come…” so it won’t accomplish much. You guys will be on your soap box forever.

However I do have a questions for you. If you whole heartedly believe real estate prices to fall so much in Riverside…why aren’t you selling NOW so that you can rent for a year or two and then pick up the same home you sold at 50% of what you sold it for?

Seems to me that would be the wise thing to do if YOU really do believe this is what we are all in for?

Just because there are new developments going for 600,000 or 700,000 doesn’t mean that the majority of homes are that expensive.

OH YES. And most of the people out here in Riversippi make 80k and up to support the 500 to 800k homes ..NOT!!!!! I live here , I know!! My neighborhood is made up of blue collar workers making 40k. Most involved in the home business (and yes peddling loans I consider blue collar). Theres no way in hell these people making 40k shold be buying 400k homes. Get real douchebag.

It appears the shorthand 150 / 200 rule is too simple. Perhaps you should run a full discounted cash flow analysis on the San Diego condo market and post it for free. You’ll end up in the same place, but why do a simple analysis to see the situation is hopeless when a far more time consuming analysis can also be done?

I’m not sure where you are from, but that population of 2 million is spread out over a very wide area. You can leave the border driving north on the I-5 and still be in San Diego an hour later. (With traffic 2 to 3 hours later.) Yes downtown SD is relatively small, but that’s because no one lives there nor do they want to.

I’m currently looking for a new place to rent and downtown at $2500 per month for a 2/2 is overpriced. There are nicer places within a $10 - $20 cab ride of downtown where I could rent a SFR for that amout. With few exception, rents in San Diego for 2/2’s are under $2k.

Some things you need to know about San Diego:

1. Downtown is an after thought for San Diego desireability. Here is a short list of more desireable, and cheeper, locals: Hillcrest, North Park, Mission Hills, Old Town, Point Loma, Solona Beach, Encinitas, Cardiff, Carlsbad, etc.

2. Lack of parking (i.e. Downtown SD) is a major drawback for anyone living in California. Who cares if you have parking when your friends never come over because they can’t park for less than $20?

3. Too close to Chula Vista (i.e Chula Juana), National City (Nasty City) and other Third Worldized locals.

In short, sure I would live in downtown for the right price, but I would not stay there more than a year before finding more social digs.

Remind us all again why it’s desirable?

Remind us again how much land is available?

Remind us again, what the economy is built on?

Just checking to see if you’ve done your homework, or just enjoy cherry-picking statistics that suit your own personal opinion?

Here is the link:
http://www.census.gov/Press-Re.....09756.html

I completely agree with you. When you think about it in terms of just how many people there are out there and then you consider how much inventory is on the market or about to come on the market, it makes sense to think that the inventory can be absorbed. I don’t argue that their won’t be a price correction, I absolutely agree that there will be one. But with the population that we have, and to have 1 that is growing and thus a growing demand for places to live, demand will continue to prop up real estate prices in the future. According to the US census, the population grown in Riverside County was 481,000. That is a lot of people who need a home or eventually will probably try to purchase a home.

I think the people who believe there will be “extreme price drops” are waiting for something that will never happen. There will be price drops, but not like some people on this site think at least in my opinion anyways.

So, if you are buying in bulk and have the $$$ then I’d try for under 200$/ft^2

I have not visited any of these areas or properties so it would be a lot more research before I’d invest.

I’d rather wait this out and invest in gld, oil and options for now.

Probably be under 200$/ft^2 soon.

Is that really so much product for a growing city of 2,000,000 to absorb? Perhaps not at the current avg of $600 p.s.f. but knock 25% off and we’re down to $450 p.s.f. Surely 300 p.s.f. isn’t so tough to stomach.

btw- your 150-200 rule is pure BROKER TALK. I’m telling you as someone with 1,000s of units that the proper way to evaluate an apartment investment is to do a complete discounted cash flow method and to account for all known and foreseeable expenses. An acceptable rate of return today is probably in the 7%-9% range.

Whew.

This is going to burn everyone. I guess I’m pretty fortunate that I will be going in debt free and some decent amount of cash. Other family members have paid off houses, good investments and cash… diversified portfolios.

Chuck

also forgotten: Lessor’s Insurance: running about 150/month

Assuming the unreasonable (you’ll never in the current market get a downtown SD condo for 300/sq ft) Your fixed costs will be 1300/month before your PI payment. In this market, you’ll not get that price unless for a 3 story walk-up, and then your rents are going to be much, much lower than you’re estimating. You can rent a 3 bedroom detatched 1600sq ft w/ 2 car garage with all the trimmings (pergraniteel) in La Jolla for less than 2500.

Like I said, I can’t imagine anyone that can do back-of-napkin math would even consider buying right now. It just doesn’t make any sense unless you’re rolling over 1031 exchanges and have to buy SOMETHING. Better look out of state in that case.

There is a lot of wiggle in the numbers though.

Good location and you can stretch to 200.

I don’t think downtown San Diego is a great location. Some DINKs might like that spot. A significant portion of the gay community might like that. So, its a small section of the market. Similar for lofts in downtown LA. What do you think the schools are like there? Total crap.

Problem with the rule is its a general guide. Location is critical. Comparisons are always a bit tricky.

About desirability… California has nice geographic features but the premiums are loony. Water is cold, budgets/taxes are in trouble, Mexicans are bringing the corruption and gangs with them…

So, you could make a similar arguement that things are much nicer in Mexico, Florida, Carolina’s…

Also have to factor in the employment situation. If you go over to pigginton it notes most of the income growth was related ot the real estate boom. As that goes away median income will drop and leverage rents downward (or people will move and deal with slightly less perfect weather).

Also note the only nice property in SoCal is really close to the water. Within 10 miles at best. The rest of the land is desert. Lots of those people will give up for ghost and leave the state. That can further rachet things down.

What I am trying to be clear with is, yeah, its different here. its also different everywhere else. Less crime, nice parks, good schools, less homesless…. The premium isn’t as big as you are thinking.

I am going to enjoy watching the leverage happen on the way down.

Yeah, I’d have liked to have jumped in back in 01 and sold in 04 with huge gains.

But I am not bitter about it. I heard similar spiels and sounds from people that were paper millionares durring the dot.com and telecom bubble too.

They also got slaughtered on the way down. Fancy houses gone. Fancy cars gone. Some ended up on the street.

I said 300 sq ft was marginal. I stand with that. There will certainly be good points where real estate is an decent investment.

Right now is not that point. Real estate busts and cycles can be long drawn out and painful events.

I think historically the values in real estate are only a nominal hedge against inflation. Unless you get a bargin. A bargin would be cash flow positive as a rental; and less than 10x yearly rent.

When I first looked in to this blog and others I was trying to understand what I was seeing in the housing market. My understanding has transformed over time that we are looking at a credit bubble. Since that point I have been attempting to figure out the best defensive strategies for the comming (potential) crisis.

Anyhow, the debt exaustion looks really clear to me now. The big sign that we have unservicable levels of debt are the I/O or Neg Am loans. Basically the prices over inflated SO much that people can’t buy without slowly sinking or inability to service the principle on the loans.

I already have my 20% down and the majority of my assets in equities in hedged positions (collar trades). I just don’t want to add anymore $ to the stock market right now since I don’t think the downturn is over yet. So, I put what I save by renting into T-Bills for the time being.