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My husband and I are in our mid-20's and are currently renting an apartment in one of California's most desirable areas-Laguna Beach. We are planning on moving to Dallas next year. The only people in Cali who seem to completely understand why we would move are people in our same situation. Our parents bought their houses here 25 years ago when they were $150,000. Our younger friends live in a dream world where they think they can afford a $600,000 house on a $15 an hour wage. California is beautiful, great weather, lots to do. But, I never notice it because I work 6-7 days a week just to pay the bills and try to save for a house. My husband and I make over $100,000 a year combined and know we still can't afford to live comfortably here. I have friends who have their retired parents going back to work to help their kids pay for their houses. I know Dallas doesn't have the scenery, or the weather, but I would rather provide my children with good schools, safe neighborhoods, a nice house, and parents that are actually around! By moving to Dallas, my husband can open his own business, we will buy our dream house, and I will be able to stay home with my kids. Basically, it's all about priorities, and my family is my #1! I'm not trying to bag on California, but it's just not worth it here!
It is all about priorities and deciding you want a little quality in your life. We make decent money even for DC but something is lacking here. We're not going to Dallas to build our dream house but we're likely to get almost 1/3 more house for half the cost of housing here. Add to that a better school system, less traffic, lots to entertain, and friendly people, why not move?
You're very smart. Why hang out in California?
I have chosen to be a SAHM for now. This will be better achieved in Dallas and we'll be able to afford more than one child.
I've had a rental there since 94 and to be honest, rents have gone up very little in that time. There was a recent adjustment upward of about 15-20%, but that was long overdue. Compared to Dallas (cost of mortgage vs. rent), rents are cheap in Socal.
If I were in my 20s and wanted to live there, I'd rent and make investments elsewhere. Then, when the market returns, buy and ride the next wave up.
What confuses me is that many in Dallas seem to be content that their home will never make them any money, so aside from the write-off (which many may not even need), why buy ? I mean, if you can take 200k and invest it over 20 years at 15% or more and be very well off, why would you pay off a home that will never appreciate and may be hard to sell ? In this manner, the home seems more of a liability.
Of course as many of us have shown here, there are places in the Metroplex that show nice appreciation, but they typically cost more and/or require alot more research in order to find.
What confuses me is that many in Dallas seem to be content that their home will never make them any money, so aside from the write-off (which many may not even need), why buy ? I mean, if you can take 200k and invest it over 20 years at 15% or more and be very well off, why would you pay off a home that will never appreciate and may be hard to sell ? In this manner, the home seems more of a liability.
I'm with you here, just a slight twist. Why NOT buy, get something less than you can afford... and INVEST elsewhere (either real estate in another area or stocks, bonds, etc, etc)... you can actually have your cake and eat it, too, without having your personal residence as a high % of your investment portfolio.
I've had a rental there since 94 and to be honest, rents have gone up very little in that time. There was a recent adjustment upward of about 15-20%, but that was long overdue. Compared to Dallas (cost of mortgage vs. rent), rents are cheap in Socal.
It seems strange that the price of rents has not paralleled the price of purchasing a house. Do you have any idea why that should be the case? I would think that rents should be governed by the same laws of supply and demand.
Maybe the answer lies in the demographic nature of California's population change. California is growing in population in spite of its negative domestic migration, because of international migration and also the surplus of births over deaths. But the people who are moving away are a relatively wealthy sector of the population, middle-aged, with a sizable equity in their houses. The population increase is due mostly to the young and relatively more impoverished. So this population simply does not have the money to pay higher rents. The price level of rentals is limited by the market's willingness to pay, whereas the cost of purchase is driven by the expectation of future increase.
This analysis may be simplistic, and there may be better ones. Any ideas?
Yes. Personally I don't like these mountains as much as those around La Quinta. The purple and orange deposits on the La Quinta mountains create better glow across the Coachella than the ones along the 10.
Palm Springs is also converting their airport into an international airport, so the future prospects for that portion of Riverside county remain bright.
Palm Springs Int'l as well as Palmdale Int'l is not what you think. An Airport needs only one int'l flight a month to be called such, and in smaller airports like these their only international flights are Canadian and Mexican.
It is not going to be an international airport like LAX or DFW for at least 20 years, if that. So, don't get your hopes up too high.
Trust me, I get this from the CBP, and it is not happening anytime in the near future, if at all.
Even Bakersfield has in international airport, because of their flights to and from Mexico.
MBG
I've had a rental there since 94 and to be honest, rents have gone up very little in that time. There was a recent adjustment upward of about 15-20%, but that was long overdue. Compared to Dallas (cost of mortgage vs. rent), rents are cheap in Socal.
Rent is actually going up in California and projected to soon match the home prices here. We pay $1500 a month for a 800 sq ft 1 bedroom and when we renew our lease this month it is going up to $1600. That is more than our mortgage payment would be for a 3000 sq. ft. house in Texas. Yes it is still cheaper than buying a home in California, but who wants to throw $1600 away every month! And I know most people on here say that the houses in Texas are not going to appreciate much, but eventually the Texas market will catch up with the rest of America. From the outside looking in, it's a great opportunity!
Last edited by GoPadge; 06-06-2007 at 12:49 PM..
Reason: fixed quote
I'm with you here, just a slight twist. Why NOT buy, get something less than you can afford... and INVEST elsewhere (either real estate in another area or stocks, bonds, etc, etc)... you can actually have your cake and eat it, too, without having your personal residence as a high % of your investment portfolio.
Correct. We agreed on this earlier in another thread. It's just the percentage of 'less than you can afford' is where we are different.
For the areas I wanted to live, I was not happy with the sub 250k housing, but when I jumped to 300k, things changed. I also worry about the number of foreclosures in the sub 250k range because I'm still trying to look at the home as some sort of investment, even if the returns are low.
It seems strange that the price of rents has not paralleled the price of purchasing a house. Do you have any idea why that should be the case? I would think that rents should be governed by the same laws of supply and demand.
Maybe the answer lies in the demographic nature of California's population change. California is growing in population in spite of its negative domestic migration, because of international migration and also the surplus of births over deaths. But the people who are moving away are a relatively wealthy sector of the population, middle-aged, with a sizable equity in their houses. The population increase is due mostly to the young and relatively more impoverished. So this population simply does not have the money to pay higher rents. The price level of rentals is limited by the market's willingness to pay, whereas the cost of purchase is driven by the expectation of future increase.
This analysis may be simplistic, and there may be better ones. Any ideas?
Couple of things....
For many years now (about 8) you could buy a home in CA and almost immediately see appreciation the following month. That's pretty seductive. Then, lending practices became so loose that just about anyone with a job could mortgage 700k, so this just fueled the fire. I knew/know people that bought under the premise of "even if I cannot afford the payment, I will struggle for a few years then sell and take the 40% tax free profit and re-evaluate my situation". They had their retirement mapped out, buy then sell 2 years later, buy then sell 2 years later, etc. Some not only did this for their primary home, but they bought investment homes as well.
The more you can leverage, the more you make. They thought they were pros.
So buy on a neg-em loan (the interest being neg-em'd is nowhere near the appreciation, so you don't care), struggle and make the payments, then sell at a profit.
In addition, alot of investors saw these markets (Fla/CA) as places where they could park some capital for 2 years and get a 40% return, even if they were losing a few hundred per month on expenses - write that off.
Now. The investors are gone, so that supply of rentals is also gone.
There was also a huge conversion process that took place in the last 5 years, apartments to condos. You see, if you build a condo, then lease it out as a apartment for 10 years, you escape the liability of the condo/SFH. Until this last run, the cost of conversion was too high to justify, but over the last 5 years, the owners made a fortune converting.
This took alot of rentals off the market. Where I lived in 92128/92127, I can count 5 of these projects that I can think of off the top of my head. 5, that's many hundreds of rentals that vanished in one set of zip codes.
Now, there just isn't much on the rental market. However, I think that as many people (relocating) see that they cannot sell their home for top dollar and escape, they will instead rent it out 'until the market comes back'. I know of a couple of these types now. They think the market will return next year. I fear they are in for a sad surpise. Maybe 5 years, but not in 2008. 2008 will be the rock bottom for Socal property.
The way this will hurt us is that many people wanting to relocate will not be able to sell their old home in one of the boom markets.
BUT...if they were smart, they'd have savings that they can use on a new home here. Putting 25k down on a 250k home is something extrmely reasonable to expect from just about anyone with some form of retirment/savings vision for their family.
That makes sense. There was a glut of dollars pouring into the purchase of housing from outside of the local market, further inflating purchase prices, and the revenue gain from rentals was seen as incidental to the process, not a motive for it.
I guess there is only so much juice you can squeeze out of a lemon.
Yes, I'd agree that inability to sell at a fictitious market price would slow down out-migration from the overheated coastal areas. This would seem self-limiting, of course. As more people become aware of the option, and the reputations of Atlanta, Houston and DFW improve, the supply of potential buyers would run out.
Actually, the source of migrants to DFW is not entirely from places like California, but mostly from closer to the area, such as surrounding states. The Census Bureau published a table of migration from each USA county to each USA county, and I wrote a program to consolidate those numbers into metro areas. The highest single numbers were for migration from LA, Chicago and NYC, but migration from smaller metros in the south-central states made up the bulk of actual migrants.
My conclusion was that DFW is functioning as a "capital city" of sorts, in the sense of young people going from the provinces to the big city to seek their fortunes. Interestingly enough, there was a sizable positive net migration from Houston to Dallas.
Exceptions to this trend were migration to places nearby, but outside of, DFW... and a net migration from DFW to Austin.
My numbers represented the number of people in a county at the time of the 2000 census who were living in some other specified county in 1995. My program removed the counts of people moving from one county to another withinin a metro, and only included moves from one metro to another.
Something else w/ the California market is that in most areas of California you can now build a second unit in your backyard to lease out. One of the "units" can be your main residence or both rentals. I don't think this would be allowed in some of the areas that are fairly new w/ HOA's but in the older areas this has been a trend from what I've seen by visiting and internet. To me that would be less appealing. I don't want to live in a high density area even if it is on small lots. Not only does this increase the population of one area but it adds to parking problems. Then there is the extreme issue of shared housing that has plagued some areas of California. Investors buying single family homes located near universities and converting them to nothing but 6 bedrooms w/ shared bathrooms and kitchen and it can house over a dozen people. No thanks.
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