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My family and I will be moving to SD from Irvine soon and we are not sure whether to buy or just rent for now. If we did buy, we would want to look in the 700-900k range.
We would like to keep as much of the benefits of Irvine when we move to SD.
1) Safety
2) Good schools
3) Short commute time
Irvine is somewhat of a fantasyland so I am not expecting these points to be as good as Irvine but we would like to keep it close.
Job is located near UCSD. Is Carmel Valley the best option? Are the houses in CV near rental parity?
What do you mean by rental parity? Rent prices = mortgage payments?
Rental parity pretty much means that the rental price equals all of the monthly ownership payments including mortgage, property taxes, HOA. This is given a 20% down payment. This is usually a good indicator whether or not home prices are good values. Lower priced homes/condos in Irvine are nearing rental parity but the higher priced SFR's are still far from rental parity. I assume SD is the same.
Rental parity pretty much means that the rental price equals all of the monthly ownership payments including mortgage, property taxes, HOA. This is given a 20% down payment. This is usually a good indicator whether or not home prices are good values. Lower priced homes/condos in Irvine are nearing rental parity but the higher priced SFR's are still far from rental parity. I assume SD is the same.
SD is not far off from Irvine or other parts of OC where SFR's are still priced too high when calculating rental parity. Condos and townhomes are a different story though but not drastic.
However there is some light at the end of the tunnel as the rental market here is HOT. Therefore parity wont be too far off, but still not ideal with mind blowing returns.
In the long run, the rental parity comparisons almost are pointless in southern California. I dont see prices getting too depressed where parity will be clear as day. Houses are selling, but they have to be in almost exceptional condition if a seller is demanding a higher listing price. There are a TON of garbage properties out there and even then its not even priced well enough for someone to make a 700-800k "risk" on for the sake of a 100k discount.
Last edited by shmoov_groovzsd; 10-06-2011 at 04:45 PM..
I think now is a decent time to buy. Not bad, not great but if you are buying a HOME to live in and not an investment property then I think it's a fine time to buy. I sold all of my USA real estate back in 2004 and just waited for the crash to come. I finally dipped my feet back in the water, so to speak a few months ago and bought a home in the area.
You will find plenty of good houses in your price range. Our budget was more in the $1 million to $1.2 million budget but we saw some homes a bit less and a bit more. There seems to be a big divide between the $700's and then above that in terms of quality of homes. There will be plenty of great properties at the top end of your price range.
We looked in several areas including Carmel Valley. In fact, we're in a rental property now in Carmel Valley for the past few months. There are some nice houses in Carmel Valley. And the school district is very good in the area. That's one of the big things that attracted us to the area as we have 2 young kids.
We ultimately decided not to buy in Carmel Valley for the simple reason that a lot of the houses are piled on top of one another. It's very high density with many town home complexes and apartment complexes. We saw some beautiful homes near Pacific Highlands Ranch that were very spacious, no Mello Roos fees and low HOA but you literally had no privacy at all as you had about 5 neighbors that could directly see into your back yard and your house. NO way I was going to pay $1 million with that kind of lack of privacy. Even homes in the gated community of Collins Ranch with 4,900 sq. foot homes had a real lack of privacy.
But we have enjoyed Carmel Valley quite a bit being in this rental. It's a super convenient area very close to the beach. It's funny looking at rental listings, many owners market their properties as "East Del Mar" and you laugh a bit but you really are super close to the ocean and the city is very easy to get to as well. We can easily make it to the beaches in Del Mar in 10 minutes if there is not much traffic. You can easily get on I-5 and also you have 56 right there as well so you have access to several areas very quick and easily.
You get more bang for your buck going out a bit further but that wasn't the rub for me..it was just the high density nature of Carmel Valley but it's a super convenient area. Pricey but great location.
Here are homes to give you an idea of what the area has to offer that closed recently to give you an idea on prices:
14098 COLLINS RANCH Pl, San Diego, CA 92130 | MLS# 110017978 (We saw this one and the home was beautiful and spacious but the neighbor could literally look onto the back yard and also surprisingly although it wasn't too close to I-56 you could hear lots of traffic from 56 that echoed even on a saturday afternoon).
Lots of cookie cutter type homes in Carmel Valley but they do have some nicer stuff too.
You might also want to take a look around the development in Verrazano in 92127. It's in the development of Santaluz but not within the Gates. Gorgeous homes and lower HOA fees but you have some Mello Roos taxes there which many areas have but if you're new to San Diego that was something new for us as I've never had to pay Mello Roos taxes in other areas I've lived in.
Verrazano had some nice homes and the prices were much better than Carmel Valley. However we wanted something 5 bedrooms 5 bathrooms and we couldn't find a big enough one on the market there. But if you can do smaller I think it's worth looking at.
Here are some houses that recently sold in Verrazano
We ended up buying in Santaluz (within the gates) and it's a GREAT area. I don't know of anything else like it in the area. It's a gorgeous development. We saw many in this development as well as Santa Monica which is at Santaluz but not within the Gates of Santaluz. You mentioned "Fantasyland". So it reminded me of Santaluz. Besides the higher HOA and Mello Roos taxes, it's as close to "fantastyland" for us as it gets. Pristine scenery, perfectly manicured landscape, low density (1,000 homes on almost 4,000 acres), rolling hills, gated community so very private and safe. Plus you can easily get to the beaches in a few minutes. I couldn't justify buying in a place like Santaluz just a few short years ago but our house was $500,000" less than just a few years ago. Realizing that prices will probably fall some more, we plan to be in the house for the long-term so buying now made sense for us as I didn't want to move my kids from rental to rental. Plus good rentals here are not cheap.
Most of the homes in Santaluz are above your maximum price range but property values should continue to fall throughout 2011 and into 2012. I saw this one and would have purchased it if it was big enough but it was a bit small for us.
14653 Caminito Lazanja, San Diego, CA 92127 | MLS# 110041525 (The owner took a beating on this one with the value falling $300,000+ in a few short years). But within the gates of Santaluz and beautiful house on a quiet street. The price kept dropping on it all summer but it finally closed a few weeks ago. This one is in your price range but I'm not sure if you have factored in Mello Roos and higher HOA fees in some developments).
I also saw a few homes in the development of Santa Monica which was a gated community. We saw this house:
14640 La Plata, San Diego, CA 92127 | MLS# 110029858 - Very beautiful and spacious home with a big back yard. I liked the home but in Santa Monica there are big power lines that you can see from the back yard. Again, I couldn't imagine paying $1 million and having a view of power lines. But it also recently closed. When we toured it, an Ex- NFL player was renting it with his family. Really nice guy.
I really love the Santaluz area, especially with prices in most homes down 30% from the bubble year pricing. I do think prices will get a bit softer but prices won't fall forever. Just as there were many perma-bulls that thought real estate would go up forever... now you have perma-bears that think real estate prices will fall forever. That just isn't the case with real estate. It's cyclical.
I don't think you will hurt yourself waiting on the sidelines if you can and rent a year or so. Prices aren't going to skyrocket any time soon. We most likely won't hit peak prices again for another 12 to 15+ years, IMHO.
But if you find your dream property and negotiate a good price and most importantly, plan to be in the property for a longer period of time....I think now is an OK time to buy. The rental market is HOT here on good properties.
We rented a townhouse and pre-paid 6 months ahead of time but to give you an idea how hot the rental market is.... since we found a house and it's ready before the lease ended, I asked our landlord if we could end our lease earlier. She had NO obligation to refund me any of the rent I already paid but refunded me 2 months as we will move into our house earlier. She said "she won't have ANY problem renting it out". I've not seen an owner do something like that in other areas when pre-paying rent for a period of time. That told me volumes about just how strong the rental market is here on nicer properties in good areas.
Plus we did a lease back with the former owners of our house for $6,000 a month. We leased it back several months so it was perfect as we had the rental house already. The rental market on good properties is very good.
So take a good look around Carmel Valley but also if you can stomach Mello Roos taxes, then look around Verrazano. Carmel Valley is just a few exits from Santaluz so you can be in Carmel Valley in 5-7 minutes as I-56 is right there.
Also, in your price range there are TONS of houses at 4-S Ranch. Tons of homes at 4S Ranch in the $mid 700's to $900's but I just couldn't see spending that kind of money on a house there. I didn't get it. Many of the developments there looked like cheaper, inferior built properties. Some were only a few years old and already were very tired looking. To boot, you still had the same Mello Roos fees as other areas with nicer homes like Verrazano. Tons of foreclosures there (they jokingly call it 4-Closure Ranch). Don't get me wrong..I think the area is very convenient but I just couldn't see paying that kind of money for that quality of housing. Nothing special.
But it seems like there is a big dividing line of people that can afford up to a $700,000 house and then above that is a huge leap for people. Personally, I still don't fully understand how so many people can afford the expensive real estate in San Diego. Especially in the NCC area. Median incomes are very low for the prices of these properties. Even with both spouses working. I do think real estate in San Diego will always be more desirable than most real estate in the USA, but still hard to understand how real estate prices here can be so high with low incomes and relatively low net worths of many residents here.
My advise is not to over leverage yourself. I see many people buying properties here they can't really afford. I've personally known several people that bought expensive homes and I always mistakenly assumed they could afford it, up until I found out they lost it in a foreclosure or a short-sale. San Diego does seem to have a big problem with people trying to keep up with the Jones. It doesn't seem as bad as places like Orange County but still it can be bad here.
I also agree with Shmoov that there is a LOT of garbage properties that just sit on the market forever here and don't sell. Also, there are still some sellers out there that are dreaming and think there was no correction and still trying to get bubble prices. It's comical watching some owners that have their houses on the market 500+ days on the market or longer and asking for bubble prices. But on good properties, in good areas, that are renovated or have nice kitchens/bathrooms and fairly priced with recent comps....they are moving. There isn't a whole lot of great inventory on the market in good areas. Although we did find a few possibilities, there was far more junk on the market and some of them are still sitting on the market. But all of the nicer properties we saw that actually considered are all sold.
Good luck house hunting... PM me if you have any questions. We were looking on and off for 2 years. I don't regret buying now for one second.
Last edited by earlyretirement; 10-06-2011 at 05:04 PM..
But it seems like there is a big dividing line of people that can afford up to a $700,000 house and then above that is a huge leap for people.
Thanks for all your advice. I will be sure to visit those areas you mentioned. It seems there are many similarities between SD and Irvine.
I think now that they lowered the conforming limit from 729k to 625k you will see some of the higher priced areas slide a bit. There is also data that backs up the fact that the more you owe on a loan, the longer the banks will allow you to squat before they foreclose on you.
Are there any communities that were built around 2005-2007? Those communities must be foreclosing like crazy.
Thanks for all your advice. I will be sure to visit those areas you mentioned. It seems there are many similarities between SD and Irvine.
I think now that they lowered the conforming limit from 729k to 625k you will see some of the higher priced areas slide a bit. There is also data that backs up the fact that the more you owe on a loan, the longer the banks will allow you to squat before they foreclose on you.
Are there any communities that were built around 2005-2007? Those communities must be foreclosing like crazy.
earlyretirement has great posts about this kind of thing, especially in the north county area.
The lines are getting defined month after month when it comes the home price dividing lines. That 700k mark really is about as black and white as I have seen it. Too many homes in too many areas that are in the 500k range.
You can get 2005-2007 houses in the South Bay like Otay Ranch from basically the same builders as 4S Ranch and half the price. Of course they are WAY too far from where you are looking and they got decimated in the housing downturn.
Definitely the conforming limit reduction will have a negative effect on home prices but the question is just how much of a negative effect it will have. The pendulum has swung too far the other way.
Before anyone with a pulse could get a mortgage to buy. No documentation in many cases. It was crazy. Now, it is the reverse that you have several qualified people that can easily afford the mortgage payments but they are getting rejected. Many deals are falling apart at the 11th hour. I've seen so many deals where people are pre-approved but then right before the closing the lender has a change of heart. It sucks for the sellers. I've even seen a few cases where the seller has gone out and bought a new property before the closing of selling their house so they were in a HORRIBLE situation with 2 mortgages.
I do think that there will be a negative effect on the lower conforming loan limits. I personally agree about them lowering the limits. It never should have been that high to begin with. That was never the intent to have them that high to begin with. I think they should be much lower.
There is still a big backlog of shadow inventory that will eventually hit the market. I know people that bought million dollar apartments in Florida and they haven't made a mortgage payment in 2 years and the bank still hasn't foreclosed on them. I often wonder just how many of these people are out there. I have a client, that bought several properties in Florida (against my advice) at the peak and bought apartments from $800,000 to $1.3 million and he claims to have not made a mortgage payment on 3 of them for almost 2 years. He just pays his HOA and property taxes.
I agree with Shmoov on the $700's mark being a black and white dividing line. It's almost like all the builders/developers got together and just all agreed that would be the price that they would target on many developments.
Some in 4S Ranch I didn't even bother going in. I just drove by them but I just couldn't imagine paying what they were asking. Some they were building and not done yet but still getting high $700's. Fairly good sized lots though. Some examples below:
But definitely you have a good budget for a nice place. I'd just recommend to do a ton of research on your own even if you have a good realtor. I did almost all the due diligence and research and driving around to areas on my own using Redfin and other websites but mostly Redfin. Then I went to a realtor and told her that since I've done all the research, and I could have used Redfin and they would have rebated back part of the commission. I offered her the same deal that she would need to rebate me back whatever Redfin would have rebated. I signed an exclusive contract with her as a buyer's agent for 90 days and put in the contract that she would rebate back part of the seller's commission. She just arranged all the showings and property visits, wrote up the contract, dealt with the offer and 2 counter offers as it went back and forth a few times before I gave them a take it or leave it last offer. True to her word, I was rebated back part of the commission at the closing.
Also, there are several areas where you can go out further and prices really drop off and you can get more land. But to me, I've never felt the need to have a huge yard. I read some forums where some people were posting things like, "you can get a huge spread out in Alpine". My reaction was, "why in the world would I want to live all the way out in Alpine?!". It was more important to me to just have privacy where neighbors couldn't look into your house or your backyard like in many parts of Carmel Valley. I remember one house we saw in Pacific Highlands Ranch in Carmel Valley where it had a jacuzzi in the back yard. But ALL 3 neighbors behind the house could see directly into the jazcuzi as well as both neighbors on the side. So it would be like having 5 peeping toms on you every time you used the jacuzzi. Plus you could see into everyone's house if the blinds were not closed. The houses were literally that close to one another. LOL.
And I agree that Otay Ranch has some much cheaper properties but no way I'd want that kind of commute daily. There is something to be said for living closer to work. However, I will say that much of Chula Vista gets a bad rap. There are some really amazing and beautiful houses out there in some developments. That surprised me as you hear "Chula Vista" and sometimes just get the wrong impression and think it will be a bunch of Mexicans listening to boom boxes in the hood but it is far from that in many areas. But then there are other areas that really feel tired and worn as well. But I'd have no desire to live in Chula Vista.
Spend a lot of time looking at things online and Google Maps so when you are looking here you hit the ground running.
Also, a great website with some good real estate specific information on San Diego is http://piggington.com/forum (Shmoov was actually the one that turned me onto that board). Some really knowledgable people on that board. Many of them have "thrown in the towel" and ended up buying this year after waiting on the sidelines many years. Another good forum is www.patrick.net although I'll say there are some permabears on that website that think real estate will keep falling forever which I disagree with. But the owner, Patrick is a really good and intelligent guy. Also, http://www.zipmap.net/ I like using for zip codes.
Last edited by earlyretirement; 10-06-2011 at 08:23 PM..
While San Diego isnt insanely diverse as cities with 2-3x times population density per square mile, its an amazing place to raise kids especially in your budget when I take a look around. Just loads of activities all across the board.
Now, I cant really say from personal experience, having kids and raising a family, but my wife and I bought a house here almost a year ago in a lower-middle class area that could use some help and TLC. The house was listed for 2 hours when we put in the offer and they accepted. For us, the house was an incredible value and it was just the right place to start off. So far things are working out beyond my expectations.
As far as your budget, you are in a pretty solid position from the numbers I have been looking at in the desirable school districts in the MLS. You really do have a TON to choose from.
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