Real Estate Frenzy

[laurence]

Kramer, literally a street away from the La Costa border.

If she's still underwater, short sales are very difficult. It's the traditional sales that are getting swamped with offers. But if she only paid $303k she shouldn't be underwater anymore. We nearly offered on a 2 bedroom in La Costa (1000 sq feet) that only had a car port vs. garage that was just under 300k.

But if it's a 2 bedroom, 1 bath with just an assigned parking spot, it's probably getting a lot less attention. Another place we bid on was a 2 bedroom, 2.5 bath, 1150 sq feet but it had an attached 2 car garage and was walking distance from the university (San Marcos). It sold for 315k.

bld999, I don't pretend to know a thing. But we can't imagine leaving San Diego completely. This townhome isn't the dream home, but it's nice and the location is good. If I had my choice I'd like a bit of a veiw and possibly a token back yard so I can grill with charcoal! It's close to a ton of stuff, but nothing really in true walking distance (3 miles from front gate of La Costa spa, though!)

[Fishingmn]

Quote:

Originally Posted by laurence For those who do landlord, what's your rules for buying? Cash flow positive, period? Are you willing to go cash flow negative at all for appreciation/speculation purposes? We are right on the bubble of cash flow neutral on this one, but hey, put enough down payment and any property can be cash flow positive, right?

Personally, I wouldn't buy if it didn't cash flow but I'm in a very different market. I also don't factor appreciation or depreciation into my numbers at all and want them to be a solid investment based on cash flow alone and that's using pretty generous estimates for vacancy and repairs.

1-2 years ago it was pretty easy to get an 8%+ cap rate and a 15% cash on cash rate with 20% down. Now I'm guessing the cap rates are more in the 6-7% range which makes them a lot less attractive to me.

[Chuckanut]

Yes, there seems to be a real shortage of properties at the moment. Combine that with the ultra low interest rates caused by the war on savers desire to increase housing starts, and we have a real seller's market.

A friend recently sold his house for $100,000 over the asking price. The buyer put 50% down. Still, the prices are lower than they were at the peak of the housing boom a few years ago.

[clifp]

The craziness in Vegas real estate market continues according to my realtor, with dozen above list offers being common.

I have stopped buying because there hasn't been an increase in rents to keep with the hassles and raising prices.

[M Paquette]

Around here the frenzy seems to be sharply bounded by school district borders. Live in an area where kids will be assigned to the 'right school', and the seller gets all-cash offers well over asking within days of listing. Live across the street, where the school scores 2% lower on some sort of standardized profile, and it will be weeks before there's a nibble.

I personally think these people are crazy. For what they are (over)paying, they could put several kids through the best private schools in the region.

[rodi]

Laurence - sounds like you did well here in San Diego if you're cash flow neutral (assuming 25% down).

There's a lot of discussion about whether this is another bubble or not, here in San Diego on Piggingtons. (A San Diego local economics/real estate message board. Piggington.com) Also the famous Jim the Realtor's blog has a lot about the recent run up in prices in North County coastal. ( http://www.bubbleinfo.com/)

Good luck and congrats on your new rental.

[Livefree]

My co-worker placed a bid on a 3-family in Brighton, just outside of Boston. The price was $895k. The rents were $2500 each unit. He lost out on it, as there were over 50 offers. And he bid over the asking price.

[lhamo]

Quote:

Originally Posted by Livefree My co-worker placed a bid on a 3-family in Brighton, just outside of Boston. The price was $895k. The rents were $2500 each unit. He lost out on it, as there were over 50 offers. And he bid over the asking price.

Could some of this be because people who have done very well in the stock market recovery are trying to find better returns and diversify as they anticipate a drop in the market? If I had $900k sitting around that I was looking for a place to put, this would look like a pretty good option to me:

2500*3*12 = 90,000/year in rent on a 900k investment = 10% nominal return.

Obviously you'd still have taxes, etc to consider but even so the cash flow looks nice if you have the money to put into it. It probably doesn't make sense from a traditional real estate investment/cash flow perspective if you don't have the cash, but if you do and if you have a fairly low cost of living it could be a really great option even at those prices (live in one unit, rent out the other two, and you're still looking at a decent 6.67% return and 60k in rent/year)

[brewer12345]

Quote:

Originally Posted by lhamo Could some of this be because people who have done very well in the stock market recovery are trying to find better returns and diversify as they anticipate a drop in the market?

Doubtful. TThis appears to me to be the classic retail rube scenario often seen in the equity market: They are too gutless to buy when its tough for a seller to get a bid, but when they see that things are rocketing upward they run with the rest of the lemmings to run over the cliff en masse. Herd behavior.

[ziggy29]

Sounds to me that the return to froth in the housing market is mostly limited to major metro areas. I don't see or hear much evidence of it in more rural areas.

[haha]

Quote:

Originally Posted by brewer12345 Doubtful. TThis appears to me to be the classic retail rube scenario often seen in the equity market: They are too gutless to buy when its tough for a seller to get a bid, but when they see that things are rocketing upward they run with the rest of the lemmings to run over the cliff en masse. Herd behavior.

And this is the way god intended it, right? I don't remember where I read this, but the suggestion was that in the absence of inside information, the best strategy was to supply liquidity to markets needing it, and withdraw liquidity when there is a surplus.

This sounds like a rather blunt strategy, but if you can do it, and you don't get too concentrated, it works. Rebalancing and dollar cost averaging are programmed minimalist ways to approach this.

Ha

[brewer12345]

Quote:

Originally Posted by haha And this is the way god intended it, right? I don't remember where I read this, but the suggestion was that in the absence of inside information, the best strategy was to supply liquidity to markets needing it, and withdraw liquidity when there is a surplus. This sounds like a rather blunt strategy, but if you can do it, and you don't get too concentrated, it works. Rebalancing and dollar cost averaging are programmed minimalist ways to approach this. Ha

No argument from me. I love liquidity constrained markets as a buyer and I love an excess of liquidity when I am a seller.

[daylatedollarshort]

We are in a frenzy market. We want to downsize and move somewhere cheaper outside the metro area within a few years. We have been thinking of speeding up the process with prices so crazy high.

Using your crystal balls, do you think now is a good time to sell? Or would you hold out a bit longer for prices to go up even more if your selling date was optional?

[haha]

Quote:

Originally Posted by daylatedollarshort We are in a frenzy market. We want to downsize and move somewhere cheaper outside the metro area within a few years. We have been thinking of speeding up the process with prices so crazy high. Using your crystal balls, do you think now is a good time to sell? Or would you hold out a bit longer for prices to go up even more if your selling date was optional?

Not expert enough to offer advice, but I will make an observation. Mt Bernanke is scaring the bond and equity markets. If he really does pull back, and not just talk about it, it will also cause mortgage rates to rise. This can stimulate sales, at least temporarily, by making potential buyers think "it's now or never, let's buy while we can!" But eventually higher mortgage rates will kill the real estate rally.

Also, if you really want advice, anyone willing to offer it would need to know where you live, what the characteristics of your home and market are, etc.

Ha

[kramer]

Quote:

Originally Posted by laurence Kramer, literally a street away from the La Costa border. If she's still underwater, short sales are very difficult. It's the traditional sales that are getting swamped with offers. But if she only paid $303k she shouldn't be underwater anymore. We nearly offered on a 2 bedroom in La Costa (1000 sq feet) that only had a car port vs. garage that was just under 300k. But if it's a 2 bedroom, 1 bath with just an assigned parking spot, it's probably getting a lot less attention. Another place we bid on was a 2 bedroom, 2.5 bath, 1150 sq feet but it had an attached 2 car garage and was walking distance from the university (San Marcos). It sold for 315k.

She said it is worth $280,000 and she owes $320,000. Apparently, she had a home equity loan at some point. It is a nice 2 bedroom, 2 bathroom townhome not far off of Alga avenue (which is maybe half mile north of La Costa Avenue). I can't remember how far inland from El Camino Real, maybe a couple of miles? I think she paid $303,000 in 2003. I know she remodeled the kitchen and it is nice. It has its own closed garage, connected the the unit. She cannot refinance, all at 6% interest. It is at 4 different levels, counting the garage. Stairs up from the garage to the living room area, then you have to step up 3 or 4 stairs to the dining room, kitchen, bathroom and bedroom. Then there are stairs up to the main bedroom and bathroom. I never liked all those stairs.

I guess this gives insight into some of the sellers' situations. She is still trapped there. She has no liquid money, typical non-saver.

[Maenad]

Quote:

Originally Posted by Fishingmn Twin cities market is pretty hot too.

I had a feeling this was the case. I live in a pretty upscale neighborhood (inherited house from LBYM parents), and we've recently seen a number of For Sale signs go up. I was just remarking to DH that the housing market must be recovering, and people are rushing to sell now that they can get what they feel their houses are worth. Methinks our property taxes will be increasing in 2015. C'est la vie.

[daylatedollarshort]

Quote:

Originally Posted by haha Not expert enough to offer advice, but I will make an observation. Mt Bernanke is scaring the bond and equity markets. If he really does pull back, and not just talk about it, it will also cause mortgage rates to rise. This can stimulate sales, at least temporarily, by making potential buyers think "it's now or never, let's buy while we can!" But eventually higher mortgage rates will kill the real estate rally.

Those are all great points. I think mortgage rates starting to go up is making some real estate markets crazy. I wonder how high they will have to go before sales and prices start tapering off. It would be great to sell at the peak.

[laurence]

Quote:

Originally Posted by kramer She said it is worth $280,000 and she owes $320,000. Apparently, she had a home equity loan at some point. It is a nice 2 bedroom, 2 bathroom townhome not far off of Alga avenue (which is maybe half mile north of La Costa Avenue). I can't remember how far inland from El Camino Real, maybe a couple of miles? I think she paid $303,000 in 2003. I know she remodeled the kitchen and it is nice. It has its own closed garage, connected the the unit. She cannot refinance, all at 6% interest. It is at 4 different levels, counting the garage. Stairs up from the garage to the living room area, then you have to step up 3 or 4 stairs to the dining room, kitchen, bathroom and bedroom. Then there are stairs up to the main bedroom and bathroom. I never liked all those stairs. I guess this gives insight into some of the sellers' situations. She is still trapped there. She has no liquid money, typical non-saver.

Sorry to get back to you so late, life is a lot busier these years. Wow, that's really, really close to the place I picked up. The border of La Costa is across the street from my place. But I'm in the "poorer" zip code. She has a superior "product" to the 2 bedroom I bid on next to her. Zillow may say $280k but appraisals and robo-appraisals like that are way behind the market realities. I'm certain she could get out from under the property if she listed for $330k.

Here's a closing in her 'hood:

http://www.sdlookup.com/MLS-13001439...lsbad_CA_92009

[laurence]

Quote:

Originally Posted by rodi Laurence - sounds like you did well here in San Diego if you're cash flow neutral (assuming 25% down). There's a lot of discussion about whether this is another bubble or not, here in San Diego on Piggingtons. (A San Diego local economics/real estate message board. Piggington.com) Also the famous Jim the Realtor's blog has a lot about the recent run up in prices in North County coastal. ( bubbleinfo.com | An insider's guide to North San Diego County Real Estate | Klinge Realty Blog by Jim Klinge) Good luck and congrats on your new rental.

Thanks! I've been to those sites before but it's been a long time. Yes, 25% down. 20% has SO MANY PENALTIES! Almost half the extra down payment was recouped from the eliminated fees/points, and it all goes to the principle to boot. Probably one of the biggest things I learned out of this was investement property is so different than owner occupied. I've never been so scrutinized before, normally we are treated like royalty.

[gerntz]

Are we talking townhomes or tulips?