Shared Top Border
sdcia_head3.jpg (14795 bytes)
SDCIA Message Board
Register Latest Topics
 
 
 


Reply
  Author   Comment   Page 5 of 7     «   Prev   2   3   4   5   6   7   Next
hbkmat

Senior Member
Registered:
Posts: 214
Reply with quote  #121 
Exit signs are going to be notice of defaults going up.  Anybody check those recently? 
daveklee

Senior Member
Registered:
Posts: 76
Reply with quote  #122 
Bruce Norris talked with Sean O'Toole (PropertyRadar) on his radio show on Oct 17, 2014.  It interesting that Sean thinks there's greater probability that housing prices will generally be flat or lower (vs higher) in a few years compared to now.

What do you guys think?

https://itunes.apple.com/us/podcast/sean-otoole-joins-bruce-norris/id262945761?i=320189089&mt=2

update: Christopher Thornberg (Bruce Norris' radio guest on Oct 24, 2014) is more bullish, https://itunes.apple.com/us/podcast/christopher-thornberg-joins/id262945761?i=320442789&mt=2
mlreits

Avatar / Picture

Senior Member
Registered:
Posts: 1,012
Reply with quote  #123 
Quote:
Originally Posted by hbkmat
Exit signs are going to be notice of defaults going up.  Anybody check those recently? 


I went to Bruce's presentation on 11/6 in San Jose.  According to the data Bruce presented, the trend is still down for NODs.

__________________
Minh

"Be formless, shapeless like water." Bruce Lee
mlreits

Avatar / Picture

Senior Member
Registered:
Posts: 1,012
Reply with quote  #124 
Quote:
Originally Posted by daveklee
Bruce Norris talked with Sean O'Toole (PropertyRadar) on his radio show on Oct 17, 2014.  It interesting that Sean thinks there's greater probability that housing prices will generally be flat or lower (vs higher) in a few years compared to now.

What do you guys think?

https://itunes.apple.com/us/podcast/sean-otoole-joins-bruce-norris/id262945761?i=320189089&mt=2

update: Christopher Thornberg (Bruce Norris' radio guest on Oct 24, 2014) is more bullish, https://itunes.apple.com/us/podcast/christopher-thornberg-joins/id262945761?i=320442789&mt=2


Based on my observation, Sean tends to be a little more conservative on his forecast/prediction. 

I was invited to a Symposium putting together by Marcus & Millichap on 11/6. This is the 2nd time I have met a billionaire in person (George Marcus).  The 1st time was Mark Zuckerberg at the Facebook campus.  The general consensus of the panel was 3% - 5% appreciation in the Bay Area in 2015 so Sean is not far off.  They believe we have another 3 to 5 years of economic growth with some leaning towards 3 years.

In general, most people on the panel acknowledged that housing affordability in the Bay Area is an issue where rents are going for between $3 - $5/sq.ft. 

It's interesting listening to a young gentleman from a hedge fund, who is only looking for yield.  Therefore, his markets are Bakersfield, Sacramento, Houston, etc..... Talking about investing/gambling with other people's money and putting lipstick on a pig and flip apartment buildings in 3-5 years.  He said that the numbers in the Bay Area is ridiculous and they can't go higher.  A much older gentleman on the panel said "I have heard people saying the same thing over the last 40 years."  [biggrin]

It's interesting to learn that George Marcus lost money investing in Houston, TX.  The main takeaway for me from George Marcus is to invest in Supply Constraint Markets.  Industries must follow intellect because the quality of life matters.  If we have a long-term horizon, stay local and invest in the Bay Area.



__________________
Minh

"Be formless, shapeless like water." Bruce Lee
larrywww

Senior Member
Registered:
Posts: 2,021
Reply with quote  #125 
So as I mentioned before, Bruce is going to do a report presentation at the end of January of 2015 he is calling: 2015: Proceed With Caution.

In the Preamble describing his new report Bruce mentions that he might consider exiting the market with at least some % of his portfolio, even though California has only hit 30% affordability.   During the I Survived Videos he mentions affordability but doesn't really discuss it much.   Here, he intimates that affordability is like a sliding scale, provided you have unusual factors that are affecting the market peak.  He mentioned that loose lending artificially inflated the market to reach 11% affordability during the last peak.  Now, Bruce believes that negative crosswinds could also artificially deflate the market peak, which is what is occurring in the current market.  These might be factors like overly restrictive lending standards,  fewer and less capable buyers, less buyer enthusiasm and other factors.  

Here is what he says:

From the desk of Bruce Norris: Why I’m contemplating selling some California rentals.

In September 2005, I wrote a report called the California Crash. I followed that report with the Category 5 report, laying out the reasons why the downturn would be extreme.

What was different from the Crash of 2007-2009 and the downturn 1990-1996? Why was the severity so different?

In the appraisal world, there’s a definition of market value. It goes as follows:

“The most probable price which a property should bring a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated: (2) both parties are well informed advised, and each acting in what he considers his own best interest: (3) a reasonable time is allowed for exposure in the open market: (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* by anyone associated with the sale."

The most important part of that definition is, “The price is not affected by undue stimulus.” What is meant by that is clarified in the last sentence, “unaffected by special or creative financing or sales concessions by anyone associated with the sale.”

The “undue stimulus” they are referring to is what I’ll call “transactional stimulus.” Transactional stimulus could include a seller carry back second, paying points, providing gift funds for the down-payment, etc.

What is not considered in the definition of undue stimulus is undue “systemic stimulus.” In Moreno Valley, in 2007, nearly every house was worth more than $300,000. In the 90s, I bought tons of them for $35,000. What happened?

In 2007, the lenders had created undue “systemic stimulus.” Anyone breathing could buy a home with no assets, no down payment, and no proof of income. The appraiser was able to easily find the 3-6 required comps to accurately complete their appraisal. No transactional stimulus was evident, and the transaction closed.

In 2010, those homes weren’t worth $300,000 anymore. I bought them during this down cycle for about $70,000. Since the bottom, the prices have moved up nicely to about $225,000. 

Here’s the million dollar question…is it time to exit?

Under normal circumstances, looking at the charts I believe have predicted pretty accurately for what’s next for California, I would have said no way!

We aren’t under normal circumstances!

The flip side to “Undue Stimulus” is “Reverse Stimulus.” Reverse stimulus can come in many forms. The key to looking forward from here is to accurately predict the type and degree of stimulus moving forward. Will it be reverse stimulus or undue stimulus for a wide variety of important categories?

The new report is named 2015: Proceed with Caution!

What’s next for real estate will be up to a wide variety of decision makers.

  • Will budget concerns take a bite out of the benefits we know, love and enjoy by owning real estate? These could include interest deductibility, Proposition13, etc. Is 2015 likely to see undue stimulus or reverse stimulus in this category?
  • Will lending policies loosen up or remain restrictive? And just because lending policies might get less restrictive 2015, we must also consider an historic perspective. Are the lending polices likely to be an undue stimulus or reverse stimulus?
  • Will the volume of sales in 2015 and beyond go up significantly from the levels of 2014? It’s easy to get faked out these days looking at what a chart is telling you. 
  • An even better question than the volume of sales is who is the buyer and will they continue to buy? Hedge fund investors and foreign investors have been pretty big influences in the past few years. Will that reverse and cause issues? 
  • What about affordability? In the past, when California approached 17%, I believed prices were done increasing. Then, in 2006, affordability went from 17% to 11%. I was extremely surprised! What had changed to make such a low affordability number possible? The answer was the “undue stimulus” from the lending policies from 2001-2007. Here’s one of the most important questions this report will answer…

 

Is it possible that just like “undue stimulus” forced prices to extreme highs could “reverse stimulus” in a combination of categories prevent us from reaching that 17% affordability this time?

In other words, are we done going up in prices for this cycle?  The conclusions I make researching this report will tell me if it’s the right time for me to sell some of my inventory.

In timing a market, the benefits of getting in near a bottom pales in comparison to the benefits of getting out near a peak. If you miss a bottom, it can still be hugely profitable. If you miss getting out, it can be devastating.

There are three types of investors. There’s the Mike Cantu type who has spent decades building a portfolio of well located, carefully selected rentals. Mike doesn’t want to exit at a peak. He wants to hold forever.

There’s a second type of investor who doesn’t know why things happen. They are influenced by market momentum and they get hammered when things change.

There’s a third type of investor who buys rental properties for them to go up in value. They may keep some well-located inventory and take the ride down willingly on some properties, but the majority of their properties will be cashed in as near the peak as they dare risk.

I think we have an early peak ahead of us. I’ll tell you just how close we are in January. This report is real important…please don’t miss it!

Sincerly,

Bruce Norris

P.S. by necessity, this report deals with a lot of new topics and combination of topics I’ve never contemplated before. 

BTW, Bruce has announced a new topic for his December presentation, so I am going to be very much interested in hearing what he has to say at that point.
brycewheeler

Senior Member
Registered:
Posts: 533
Reply with quote  #126 
Thanks for sharing that Larry.  Even tho we appears to be only half way the current UP cycle in real estate, it pays to put things in perspective.

I for one don't mind selling a property now and then, especially depending on tenant turnover.
Whenever I have turnover, I analyze whether it would be easier to sell rather than re-paint, rehab, and fix-up.

I just finished selling two for tax reasons as I had a large tax loss on stocks, and wanted to balance my profits off those long term capital losses in stocks.  Because of my stock losses, I learned the hard way not to think I was smart enough to sell at the peak perfectly.  Life just isn't that neat.  So I developed the philosophy that I never again would  wait until the peak to sell but would be happy to sell way before the peak, especially important with real estate as it takes so long to sell(months rather than minutes such as stocks).  So I am happy to be not so GREEDY, be cautious and sell occessionally along the way, especially when I have turnover of a tenant in a house.  Fortulnately,   my turnover is very low, and if too much time goes by, I may have to force a turnover by raising rents maybe.

There are always other investment opportunities as well like other units, multiple units, other geographic areas, oil while it is so low, gold etc.   And its nice to have a healthy reserve once inn a while also.   With that in mind, I probably will sell another home in the spring if any turnover coincides with that timing.

Thanks again Larry, you come up with great stuff.

Bryce
JohnnyCash

Senior Member
Registered:
Posts: 4,617
Reply with quote  #127 
Thank You Larrywww ----- good and informative post. This confirms the suspicions we have discussed since last May when Bruce gave his first chart-less presentation at SDCIA.
__________________
"Nothing knits man to man like the frequent passage, from hand to hand, of cash." Walter Richard Sickert
daveklee

Senior Member
Registered:
Posts: 76
Reply with quote  #128 
It's interesting to see Bruce Norris adjusting his sentiment and predictions.  Even just a year ago I remember Bruce being very bullish on California real estate headed back to the 17% affordability level but it now seems that he's leaning toward an earlier peak.

Anybody registered or planning to register for Bruce's seminar on 1/31?  (http://www.thenorrisgroup.com/training/tng-events-calendar/proceedwithcaution/)
larrywww

Senior Member
Registered:
Posts: 2,021
Reply with quote  #129 

The question that comes to mind is how exactly can Bruce Norris tweak his theory?  I don’t think that the I Survived videos really leave much in the way of clues, though maybe his talk in December will to a greater extent.   I don’t claim to have an answer for this question, but here are some possibilities:

1)      The beauty of the 17% number was that it gave a brightline test that was relatively easy to apply.    Can he propose another specific number, or range of numbers, between 30 (the current affordability number for California, I am informed) and 17?   So any other number, or range of numbers, will have the defect of not being supported by past market peaks (or, at any rate, the most recent ones).  And there is certainly no mathematical or formal way to figure out what a safe number would look like, right?  24 would be safer than 25, for example, but what makes you believe the market will catch fire to that extent?  And this is probably true no matter which number, or range, you choose?

2)      Another alternative would be to provide a criterion, or criteria, that would tell you once the market has peaked.   I guess I am leaning towards this solution, quite frankly, because I can’t see how he can make the prediction more specific given the available evidence.

3)      I suppose that one way to try to play it safe would be to sell a certain % of your inventory now, maybe some houses later.   But
what percentage?  And when? 

4)Another relevant factor would concern whether the market in question for housing is inland or coastal.  Although the standard Bruce adopted was a statewide affordability number, it is arguably relevant to inquire whether (especially in coastal areas) they have achieved, or are close to the 17% number.  (Santa Barbara and the Bay/Silicon Valley have already appreciated into the mid teens.   It might soften the blow to quit early if you are already so much higher than the rest of the state.  (Or maybe not, I don't know.)

      One thing that disturbs me about the entire exercise: Bruce has mentioned that the current market is shot through with non-market forces.  So even if you identify certain market type forces, how will you know the extent to which these non-market forces are going to control the outcome?  (By calling the government and/or the lenders and/or the hedge funds as non market forces I am assuming we will at some point get back to what one might call a "normal"  market.  To the extent you want to consider these actors as part of a "new normal", then I guess I couldn't label them as "non market forces".  I have no way to know what will happen in this regard, but I certainly hope that does NOT happen.)

The government has had a considerable influence, for example, although they have announced the end of their bond buying program.   The government has also passed laws (like Dodd Frank) that have clearly had an impact on the market.   Apart from this, it is plain to me that the big banks have also exercised an outsized influence.    They have dried the vast majority of the inventory from the market.  I believe that they have also flexed their muscles to insure that trustee buying is minimized, farmed out to faux auctions like auction.com, they have considerable control over short sales and have been demanding higher and higher prices.  The big banks are getting fees as servicers and are not financially incentivized to be in any kind of hurry to get rid of these properties on their books.  Even if a considerable amount of inventory were to appear, the big banks would probably sideline it to the hedge funds, their favored outcome.  So where does that leave things?

5)      So what kind of force is going to increase the inventory anytime soon which would threaten the slow tide of price appreciation?   It doesn’t appear that lenders care to flood the market and stop their (favored) policy of gradually getting rid of old inventory.    Hedge funds aren’t going to do it, they probably wouldn’t have placed them into REITs if they had a short term goal in mind.   Builders have elected not to build many single family homes, they seem far more interested in building multifamily right now.   Buyers don’t seem to be in any hurry, especially since prices aren’t really going up quickly, and mortgage rate changes have been gradual (and are still relatively low).  Foreign buyers may be enthusiastic in certain areas, although let's face it they have never amounted to that great a % of the overall market.  (They may be having major impacts in selected areas, but not so much the entire market, in my experience.)

6)      The markets seem really weird to me right now.   I recently read an LA Times article that said that the 2 million plus market for homes was absolutely on fire, whereas the rest of the market was rather stagnant. 

So what happens if the buyers stay on the sidelines?   Maybe the bull market (if you can even call it that), simply peters out slowly.   In this scenario, you may not even need to time the exact peak so long as you have ample warning that things are that the market has lost momentum.  (There is an argument that it's only when the market turns on a dime and starts to quickly slide downhill that you really need a timing theory since a more gradual change might give you time to react, unless the downward plunge starts to accelerate.)  Of course, it's doubtful that anyone in a coastal or highly appreciated market would likely not sell before the market peaks, whether there is any clear guidance available or not.  Although that is ultimately an individual question.

Another issue concerns what is happening in your particular market?  If, in fact, your market has momentum, then one option would be to stay on the sidelines until that starts to fizzle out.  But it seems like alot of markets are flat right now.  Or maybe you wait until the spring to see if the market catches fire, and then start to sell.  All of these are possible options.

Another possible option is to do nothing: Wait until the market appreciates further (if it does), and simply take your lumps if you can't sell in time.   Given the slow way that the market is currently moving, that might possibly be an option, I don't really know.  Or one approach is to sell part, and keep part, and wait and see what you can sell your remaining units for.   Of course, one can argue that a market peak has never been gradual.  On the other hand, there has been alot unique about the present situation, so who knows what is possible, or even likely?

Part of the problem is that the current market is so unlike previous markets, the problems aren't exactly what you typically have faced in the past.   This is not a market that is in hyperdrive sale mode (or at least, not in most California markets) where you could easily lose the option to sell if you don't the timing right.  

So what is causing the enthusiasm in the upscale LA market?   The foreign buyers, according to the article, were in part driving this demographic since LA area homes seem like a bargain compared to New York and London.  (I guess everything is relative).  Since many of these tend to be all cash purchases, lending policies have perhaps less to do with this trend.  (I don’t even know if jumbo loans have recovered---does anyone know?)

Here is what the article concluded:

 

“By most measures, the housing market these days is a bit sluggish. Prices are flat. Sales are drooping. A lot of people are priced out.

But not everyone. The high end is hopping.

Luxury home sales in Southern California are hitting levels not seen in decades. The number of homes bought for $2 million or more in recent months is the highest on record. Sales worth $10 million or more are on pace this year to double their number from the heights of the housing bubble.”

http://www.latimes.com/business/la-fi-luxury-home-sales-20141124-story.html#page=1

 

I don’t really know how to read the current market.  In a normal market,  there would be deal fever and accelerating prices.   And with a market like that, it could come to a swift end and suddenly place a mar ket timer in a difficult position.  But what about a relatively dead market?   Certain segments of the market may be hot, and certain types of buyers (like foreign buyers).   But this is really a small piece of the overall pie, not representative of the overall market, and perhaps limited to certain geographic areas.

Does anyone care to guess how Bruce will thread this needle?  I don't see any easy or obvious answers to this question.

 

RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #130 
Quote:
Originally Posted by larrywww


I recently read an LA Times article that said that the $2 million plus market for homes was absolutely on fire, whereas the rest of the market was rather stagnant. 



For those of you who would like to read about the top end of the California housing market going crazy, click HERE.

hbkmat

Senior Member
Registered:
Posts: 214
Reply with quote  #131 
I still see that Bruce is offering 5yr rental program loans and also 1 year construction loans so that would mean to me that he does not expect a huge collapse any time soon.  With the deflationary pressure we may see prices creep down a bit but I don't see the inventory anywhere to cause prices to fall like the 2007 era.  As much as I would love to see prices triple and cash out I also would not mind picking up more homes at lower prices with these interest rates the way they are.  
RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #132 
Quote:
Originally Posted by hbkmat
I still see that Bruce is offering 5yr rental program loans and also 1 year construction loans so that would mean to me that he does not expect a huge collapse any time soon.


If your analysis is correct, can I assume that Bruce stopped making those loans in 2006 -- before the crash in CA housing prices?
JohnnyCash

Senior Member
Registered:
Posts: 4,617
Reply with quote  #133 
Larrywww --- for an answer to the questions you raised above see the thread "I survived real estate 2014 live video feed"
__________________
"Nothing knits man to man like the frequent passage, from hand to hand, of cash." Walter Richard Sickert
hbkmat

Senior Member
Registered:
Posts: 214
Reply with quote  #134 
I think he only introduced these new loan programs in 2012.  The rental loan program has a 65% LTV so my guess is that he thinks we wont see a dip past that.  He takes great pride in his lending program and keeping investors money safe.  

Curious why he thinks the gov could take away the some of the tax benefits real estate currently enjoys.  The gov is doing everything in its power to inflate the market and that would be a step in the wrong direction.  Gov is trying to inflate from the top down and its really not working.  
kaihacker

Avatar / Picture

Senior Member
Registered:
Posts: 4,861
Reply with quote  #135 
Quote:
Originally Posted by hbkmat
The rental loan program has a 65% LTV so my guess is that he thinks we wont see a dip past that.  He takes great pride in his lending program and keeping investors money safe.  

 


With 65% LTV a 35% drop in values would create a big hit for the lender.  The foreclosure process consumes not only time but financial resources.  And there are traditional costs associated with selling which would need to be absorbed to liquidate any home that was taken back in foreclosure.  

If the LTV of his loan programs has not changed from when he was more bullish on housing prices...that could be insight that he is not too concerned about substantial price declines.  If he thought prices could drop 35% I think loan LTV would be lowered to make room for the losses. 

__________________
Gene Hacker

Passive and active real estate investment opportunities.
http://RiverLakeRE.com riverlakere@gmail.com

Home Inspections in Bakersfield and all of kern county:
http://bakersfieldinspections.com
larrywww

Senior Member
Registered:
Posts: 2,021
Reply with quote  #136 
hbkmat:

I really don't think you have done enough research on the Norris loan programs to establish that Bruce must be a closet optimist because he has made these foolish, brain dead long term bets, etc.  As if Bruce couldn't see that problem, although he claims to be a market timer, etc.   Keep in mind that Bruce was selling the trust deeds---which were the long term risk---and making money on that transaction as well.  The program has proved so popular that they have frequently run out of trust deeds to sell.  And there is another trend that I have also heard about---that alot of these loans were paid off early.  (I don't think there was a prepayment penalty that carried the full term of the loan).   When investors could no longer find deals in the market, alot of them paid off these loans.  You mentioned the building program---the borrower agrees to a construction manager who structures it so that the payments never get ahead of the equity.  There is a shortage of building lots right now so I have no doubt he could sell the project if it came to that.  Also,  Bruce has his own building crew, and I also have the impression that this is a much smaller percentage of his overall program as compared to his other loan programs.  For all these reasons, I would not really worry about Bruce losing money because it is my impression that he made some pretty conservative bets.   I think Bruce has hedged his bets all along and if you speak to Craig about it in detail, I think you too will come away with that impression too.  It is always been my impression that Bruce could exit the market very quickly indeed, and maybe fire sale whatever is left in the pipeline, without a major impact. (Although given the absolute lack of inventory, I doubt a fire sale would really be necessary.)  In any case, Bruce is probably the last person on planet Earth that I would worry about potentially living in the poor house simply because the market turned sooner than expected.  He has spent his entire career figuring out how to hedge this particular bet to the fullest extent possible.

In terms of the market timing, I really think that genuinely Bruce likes the research end of things, quite apart from his ability to sell spaces at his research talks.  And I don't think he is lying or being less than honest about about something as serious to his customers as market risk that there might be a downturn sooner than expected.  Especially in as unusual a market as this has proven to be, that is shot through with non market forces, etc.

Bottom line, I think you have to take seriously the notion that Bruce is going to address the subject of a sooner than expected downturn next month.  The way I tend to look at is is that over the last year and a half he has fallen back on his original model (and the optimism that would entail) as market indicators have deteriorated or not gone according to plan.  And also, as others who were less convinced (like Sean O'Toole and probably others) have not agreed he should stick to the original model in this changing environment.  And I just think he came to a point where he could no longer discount the market risk of an unexpected downturn and felt that new research was warranted.  And if he came to no conclusion at all, I don't think he would give the talk.  So I suspect he probably has come to some kind of conclusion to give to his students and others.  Although we shall see.
hbkmat

Senior Member
Registered:
Posts: 214
Reply with quote  #137 
Ill be the first to admit that I have no idea what Bruce is thinking.  I dont think for one second that Bruce is going to end up poor or even lose money lol.  Knowing Bruce he prob will be selling some of his rentals or maybe he already did.  He isnt the type to use scare tactic marketing to promote an event.  I remember in 09 people would ask if it was the time to buy and he never outright said yes but he would talk about how affordable houses were especially with interest rates so low.  Everything has gone up a really good amount so maybe he sees most of the fast profits already gone.  This could be like the end of the last CA bubble where he was talking about parking his money in other states.

Larry in your message you made it seem like Bruce just makes these loans sells them and doesnt care what happens and that is the exact opposite of what Bruce has said.  The Norris group does servicing on them and I know that he takes great pride on not putting people in risky situations which could lose them money.  I am just thinking out loud here and I am really curious as to what his predictions are for the future. 
RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #138 

For those of you on this thread who want to find out exactly what Bruce Norris is currently thinking about the SoCal real estate market, he's holding a seminar on Jan 31, 2015. 

Why guess when you can get the information you seek straight from the source?
hbkmat

Senior Member
Registered:
Posts: 214
Reply with quote  #139 
Month and a half is a long time
RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #140 
Quote:
Originally Posted by hbkmat
Month and a half is a long time


Then try imagining you have a date with Charlize Theron on Jan 31, 2015.  It may not make the time go faster, but the thrill of the event will make the wait more tolerable.


RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #141 
For those of you who are interested in what Bruce Norris is going to say at his Jan 30, 2015 seminar,
you might want to listen to this preview:

http://www.mcssl.com/mail/view/C8C529933FAA4633B72F592301954047
mlreits

Avatar / Picture

Senior Member
Registered:
Posts: 1,012
Reply with quote  #142 
Here is a summary of Sean O'Toole 2014 year end report.  How did we do in 2014?

Total sales for the entire year fell 11.7 percent from 2013 and were the lowest since 2007.  Sales volume stayed near 7-year lows throughout 2014 because prices rose too far too fast in 2012 and 2013. 

On a year-ago basis, median home prices were up 5.5 percent.  Median prices have been more or less unchanged since May 2014 when the median price peaked at 390,000 dollars.

Cash sales have been steadily declining since reaching a peak of 40.0 percent of total sales, or 14,028, in August 2011. Since then, cash sales have fallen 56.3 percent. Within the 26 largest counties in California, cash sales as a percentage of total sales, were highest in Sacramento, Riverside, and San Diego counties.

Flip sales totaled 969 in December, down 36 percent for the year. Flip sales peaked in May 2013 at 5.1 percent of total sales and have declined 49.0 percent since then. Fresno, Sacramento and Los Angeles had the highest percentage of flips at 5.7, 4.5 and 4.3 percent, respectively.

Institutional Investor LLC and LP purchases totaled 1,030 in December, down 18.8 percent from December 2013. Institutional Purchases have posted consistent monthly declines since peaking in December 2012 and are down 53.6 percent since then. Trustee Sale purchases by LLC and LPs are down 82.7 percent from their October 2012 peak.

Foreclosure starts, Notices of Default (NODs), increased 8.1 percent in December, but are down 14.3 percent from December 2013. Foreclosure Sales gained 6.9 percent for the month but were down 21.6 percent for the year. Over a longer period, both foreclosure notices and sales have been trending lower.

The California real estate market continues to show steady improvement. Nearly one in three homeowners with negative equity in 2014 saw their finances improve significantly as they transitioned from negative to positive equity this past year. Many homeowners are now free to participate in the real estate market or refinance their homes.

While prices are likely still too high, 2015 may fair slightly better thanks to mortgage interest rates trending lower and loosening lending standards.


__________________
Minh

"Be formless, shapeless like water." Bruce Lee
mks_97

Senior Member
Registered:
Posts: 133
Reply with quote  #143 
So looks like 2015 has started pretty strong in San Diego. Inventory is low, prices are  rising and multiple offers are back in vogue. The high end market (900k+) is really strong and anything in the 400's sells really quick. Metro areas (North park, south park, university heights, hillcrest etc.) seem to be doing quite well. I was wondering what changed from last year and the only thing I can come up with is the threat of rising rates. The headline news of economic indicators is helping as well. 

Any one has any other insights to this? Are we off to the races again or is this just a blip like early 2014 and we end the year with a whimper? Anyone noticing any loosening in lending standards? Any specifics of how the SD economy is contributing?

The vacancy in the rental market is 2.6%. This makes the rental market really tight too. 
daveklee

Senior Member
Registered:
Posts: 76
Reply with quote  #144 
Would love to hear people's thoughts on where we are in the current cycle.
mlreits

Avatar / Picture

Senior Member
Registered:
Posts: 1,012
Reply with quote  #145 
A picture is worth a thousand words.  A friend of mine compiled this data.  He currently helps me compiling the Historic Rent Data for our area.  Have to give credit where credit is due.  It would be interesting to see if the rent data can be one of the leading indicators for the HAI. 


Bay Area Counties HAI 1991 - 2014 Q3.png 


__________________
Minh

"Be formless, shapeless like water." Bruce Lee
kaihacker

Avatar / Picture

Senior Member
Registered:
Posts: 4,861
Reply with quote  #146 
That is a really great chart. That is a good friend to know.
__________________
Gene Hacker

Passive and active real estate investment opportunities.
http://RiverLakeRE.com riverlakere@gmail.com

Home Inspections in Bakersfield and all of kern county:
http://bakersfieldinspections.com
Marcrei01

Member
Registered:
Posts: 5
Reply with quote  #147 
I believe prices will remain stagnant and then we'll have one more leg up before next downturn begins in 5 years or so.
__________________
Sell Your House fast in Austin
daveklee

Senior Member
Registered:
Posts: 76
Reply with quote  #148 
Hey guys, I need your input on where you think we are in the current real estate cycle.

I bought a few rentals during the last downturn (in 2009-2011) but never managed to buy our own personal residence.  Instead we decided on just living in one of the rentals.

However, our family has grown and my wife wants to move.  Either to San Diego or to a L.A. suburb.  But I hate buying real estate in exuberant times.  And I'm not sure how long we'll be able to stay in our next house (probably at least 3-5 years but it's difficult to plan for 10-15 years right now).

So, where do you guys see the real estate market going over the next 2-3 years?
brycewheeler

Senior Member
Registered:
Posts: 533
Reply with quote  #149 
My guess is that the residential market in San Diego County will continue to plod aong at a somewhat slower rate progressively upward for the next 2 to 3 years.  Market may top again some years after that but for 2 to 3 years, market should  be ho-hum, boring, boring.

Bryce
larrywww

Senior Member
Registered:
Posts: 2,021
Reply with quote  #150 

1. Since Bruce is still adhering to his 17% affordability model as defining when to exit the market, the question might be posed this way: How long did it take in previous cycles to move from current affordability (which I think is in the 30s) to 17%.   Although keep in mind that it’s not clear things will proceed exactly as in the past because this cycle in many ways is atypical. 

2. I would do the math and see whether you might be better off renting now versus buying now.   I would encourage to at least explore the rental option for 2 reasons: (1) If you are moving to an entirely new area, you may find that simply buying may not by 20/20 hindsight prove the best option, especially if you later discover that you ended up buying in the wrong area or the wrong house, etc. and (2) Rents generally don’t keep pace with the increased expenditures that most buyers are forced to make in an appreciating market.  (You would think that a $500,000 house would rent for a proportionately higher rent than a $400,000 house—but it’s much more complicated than that in practice and you frequently hit a ceiling in terms of rent and you need to consult the market rents, etc).   I think there is a kind of prejudice against renting with investors, though to my mind it’s really about doing the math, etc. and (3) if you keep your rentals, you are going to be forced into being a non resident investor and that has its own challenges, depending how far you move away, etc.

Good luck!

Previous Topic | Next Topic
Print
Reply

Quick Navigation:

Policy