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Absolutely I don't think it's anything new at all. Real estate out here has been expensive for some time. Still far from the peak bubble prices but I've said it before and I'll say it again, San Diego DEFINITELY will eventually surpass peak prices from a few years ago. It may take more than a decade but it will happen. The same can't be said for other cities like Las Vegas, Phoenix, Miami and several others.
There is a LOT of demand for other people not only around the USA but around the world to live here.
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You know back when I bought in 2011 I figured it was the bottom. I told my friends and clients that San Diego would DEFINITELY surpass peak bubble year pricing. I knew it would happen but I just didn't think that it would happen this quickly.
30% of residential resale is cash only, flippers and investors, it is and has long been a large component that is speculative in the market, it drives up prices along with other factors, not job growth and income growth like SF or NY
What I wonder about in places like San diego is what happens to these places in places like San Diego where there aren't a ton of high paying jobs which means you can't buy nor rent some 3K+ per month home.
Do the investors just bail or they settle on renting out to wealthy college kids who pack 4-5 to a house? There are only so many 1 percenter millionaires and billionaires in the world, so if you buy some place for 650K, hope it bumps up to 950K , then resell it, it almost becomes you're reselling to another investor at that cost. Eventually the investors stop coming. Kind of like what happened during the bubble burst in a sense.
I've seen some affordable big houses out in Lake Elsinore, i mean under $300K, and they are building entire communities. Schools, plazas, malls, and so on along with the houses. The problem is those places look like ghost towns and the schools haven't even been built yet. But the few places I visited were like 80 percent sold already. I highly doubt somebody like me or any family would buy a house based on BS. Unless they are naive. Because who knows when those schools will be built. So it's more like investors.
I've seen similar things in San Diego. Drive from Del Mar to Rancho Bernardo and Del Sur and you see a ton of new communities building new malls, new homes, etc. And half of them seem like ghost towns. And you know they are ghost towns because it's the short cut to get to where you're going faster. Once people actually live in those communities, it'll be a pain to drive through those back roads. But that's the thing, many of those places seem to be "sold" except nobody seems to be moving in. And those places are 850K+ in San diego.
I imagine people have to live somewhere, but how good of an investment is it? If I struck it rich someplace else and just want to settle into San Diego or somewhere like San Diego, I'm not going to buy some house in the del Sur area for a million. Those places are exactly what the show "Weeds" and it's theme song talk about. "Little boxes...blah blah" And why would anybody who could buy anywhere in the world after making it rich elsewhere, buy and live in a place like Del Sur and so on? Which means families with money. But a million bucks is a hell of a lot of money no matter where you live and especially in San diego. So this is where I"m confused on the investment part. It's one thing to buy cheap and flip. But you actually have to have people who can afford a million plus and who actually want to live there for these things to make sense in the long run. i just see it as nothing has been learned from the last bust.
What I wonder about in places like San diego is what happens to these places in places like San Diego where there aren't a ton of high paying jobs which means you can't buy nor rent some 3K+ per month home.
Do the investors just bail or they settle on renting out to wealthy college kids who pack 4-5 to a house? There are only so many 1 percenter millionaires and billionaires in the world, so if you buy some place for 650K, hope it bumps up to 950K , then resell it, it almost becomes you're reselling to another investor at that cost. Eventually the investors stop coming. Kind of like what happened during the bubble burst in a sense.
I've seen some affordable big houses out in Lake Elsinore, i mean under $300K, and they are building entire communities. Schools, plazas, malls, and so on along with the houses. The problem is those places look like ghost towns and the schools haven't even been built yet. But the few places I visited were like 80 percent sold already. I highly doubt somebody like me or any family would buy a house based on BS. Unless they are naive. Because who knows when those schools will be built. So it's more like investors.
I've seen similar things in San Diego. Drive from Del Mar to Rancho Bernardo and Del Sur and you see a ton of new communities building new malls, new homes, etc. And half of them seem like ghost towns. And you know they are ghost towns because it's the short cut to get to where you're going faster. Once people actually live in those communities, it'll be a pain to drive through those back roads. But that's the thing, many of those places seem to be "sold" except nobody seems to be moving in. And those places are 850K+ in San diego.
I imagine people have to live somewhere, but how good of an investment is it? If I struck it rich someplace else and just want to settle into San Diego or somewhere like San Diego, I'm not going to buy some house in the del Sur area for a million. Those places are exactly what the show "Weeds" and it's theme song talk about. "Little boxes...blah blah" And why would anybody who could buy anywhere in the world after making it rich elsewhere, buy and live in a place like Del Sur and so on? Which means families with money. But a million bucks is a hell of a lot of money no matter where you live and especially in San diego. So this is where I"m confused on the investment part. It's one thing to buy cheap and flip. But you actually have to have people who can afford a million plus and who actually want to live there for these things to make sense in the long run. i just see it as nothing has been learned from the last bust.
Pedro,
But the thing you have to remember is it's not just "investors" that are buying here with cash. There are several that are buying to live in as a home and not an investment property or even an "investment". This will always be a very desirable area.
I understand your point about some of these nothing special communities in North County. I myself couldn't understand people paying $700,000 to $850,000+ for nothing special places in 4S Ranch and other areas. However, you can't underestimate many families buying here for the good school districts. Man, I underestimated that part of things before I bought here. I knew the demand for schools in this area were strong but I admit I underestimated the demand from families to live in this area due to the wonderful schools.
I only bought a few years ago and we have received several unsolicited offers to purchase our house. I'm not interested in selling but don't think that everyone buying with cash are just investors. Many families as well looking for a home. The people looking to purchase ours were parents with young kids that wanted to buy for the PUSD schools in the area plus the great weather and area.
But the thing you have to remember is it's not just "investors" that are buying here with cash. There are several that are buying to live in as a home and not an investment property or even an "investment". This will always be a very desirable area.
I understand your point about some of these nothing special communities in North County. I myself couldn't understand people paying $700,000 to $850,000+ for nothing special places in 4S Ranch and other areas. However, you can't underestimate many families buying here for the good school districts. Man, I underestimated that part of things before I bought here. I knew the demand for schools in this area were strong but I admit I underestimated the demand from families to live in this area due to the wonderful schools.
I only bought a few years ago and we have received several unsolicited offers to purchase our house. I'm not interested in selling but don't think that everyone buying with cash are just investors. Many families as well looking for a home. The people looking to purchase ours were parents with young kids that wanted to buy for the PUSD schools in the area plus the great weather and area.
I do imagine that many are families who want to find good schools for their kids. But there are certain communities where it's obvious that is more investors than families. Like I said, drive through any of those new neighborhoods and its empty. Its like ghost towns, except most of the homes are already sold.
There are also new communities that seem to be building 'new towns' in a way with new schools and all. Except those places don't really exist yet. So buy there and your kids go to some other school until the new 'town' is built. And I would never understand a family buying a home in hopes that the new school is good with good teachers. And hope they build it in time for your kids to go to school.
Some of these places seem more BS hype to me. Years ago there were tons of new expensive Condo buildings being built all over the US. Especially in cities. Expensive. Overpriced. As time went on, some turned to overpriced apartments. But there were always these "potential" stores, clubs, gyms, etc on the bottom floors. Coming soon. It sounded exciting. It sounded great. I wanted to go to some of those places.
But after I moved out a year later, none of those places existed yet. Still coming soon. A few years later I visited to see if some of those stores finally arrived. There was one hair saloon. All the other stores were still for lease. So if you bought one of these overpriced condos based on things to come, five years and still to come isn't exactly a selling point.
This brings me back to these 'new communities' and families. If it is mostly families and they have 1-3 kids all going to school, those kids are not going to be able to go to the great schools that exist. new schools will have to be created. And who knows when that happens or if they'll be great. You really can't add a bunch of 100+ homes with families and kids and expect them all to go to the same existing schools without renovations, new buildings, and new schools.
To me, its one thing where you buy a home in Carmel Valley or Del mar and so on and know your kids will go to the good schools, go to say TPHS. It's another to buy a new home in a new community where the math just doesn't add up in the long run for you kids to be fit into the existing schools. There is just only so much space. Which means they go to other schools or new schools get built.
'Investors' includes the buy-to-rent folks, the flippers, the buy-and-holders, etc. For the most part, at least in the low-end of the market where I live, it's the flippers and rehabbers. The new thing this time around is some are doing flip-to-rent which means they have a much longer time horizon than the typical flipper who needs to be in and out of the deal in 60-90 days.
'Investors' includes the buy-to-rent folks, the flippers, the buy-and-holders, etc. For the most part, at least in the low-end of the market where I live, it's the flippers and rehabbers. The new thing this time around is some are doing flip-to-rent which means they have a much longer time horizon than the typical flipper who needs to be in and out of the deal in 60-90 days.
Same here Sass in Lemon Grove.
Although, I have to say, the majority of flips that I have seen are being resold (perhaps some to holders and renting them out.)
For many of these properties, its a much needed rehab for older folks who have moved out and from the looks, just couldnt keep up with the maintenance of the properties anymore. It seems I have seen less go for sale just to exchange hands with an investor and simply rent out a dump.
In my area, its been great to see and I presume, bound to happen at some point for being one of the more relatively affordable areas in SD close to Downtown and major freeways with an improving school district.
I do imagine that many are families who want to find good schools for their kids. But there are certain communities where it's obvious that is more investors than families. Like I said, drive through any of those new neighborhoods and its empty. Its like ghost towns, except most of the homes are already sold.
There are also new communities that seem to be building 'new towns' in a way with new schools and all. Except those places don't really exist yet. So buy there and your kids go to some other school until the new 'town' is built. And I would never understand a family buying a home in hopes that the new school is good with good teachers. And hope they build it in time for your kids to go to school.
Some of these places seem more BS hype to me. Years ago there were tons of new expensive Condo buildings being built all over the US. Especially in cities. Expensive. Overpriced. As time went on, some turned to overpriced apartments. But there were always these "potential" stores, clubs, gyms, etc on the bottom floors. Coming soon. It sounded exciting. It sounded great. I wanted to go to some of those places.
But after I moved out a year later, none of those places existed yet. Still coming soon. A few years later I visited to see if some of those stores finally arrived. There was one hair saloon. All the other stores were still for lease. So if you bought one of these overpriced condos based on things to come, five years and still to come isn't exactly a selling point.
This brings me back to these 'new communities' and families. If it is mostly families and they have 1-3 kids all going to school, those kids are not going to be able to go to the great schools that exist. new schools will have to be created. And who knows when that happens or if they'll be great. You really can't add a bunch of 100+ homes with families and kids and expect them all to go to the same existing schools without renovations, new buildings, and new schools.
To me, its one thing where you buy a home in Carmel Valley or Del mar and so on and know your kids will go to the good schools, go to say TPHS. It's another to buy a new home in a new community where the math just doesn't add up in the long run for you kids to be fit into the existing schools. There is just only so much space. Which means they go to other schools or new schools get built.
Pedro,
I always enjoy your posts. Just out of curiosity, what new communities were you referring to as ghost towns or that were empty? Are these in North County? I was just curious if you could specifically mention which one. Here in my area, even the newest ones are almost all sold out and I know they are being snapped up by families with young kids. Can you list a few of the "ghost town" communities you are referring to? I'm just curious.
You make good points about the new schools getting crowded. That is totally true as more and more families move to the area. You see that all the time, especially with the newer schools. They are however building more and more newer schools in the area. But you are right when you say that not all the parents will be guaranteed spots at all these schools they thought their kids would go to.
Take our area for instance. There are SO MANY young families with kids, they have a huge demand for Kindergarten spots. I already knew it was going to be a problem because I can just see more newer families in the area or even within my own development. Schools like Willow Grove Elementary which are really great have so much demand for them by parents, they have to create like 5 Kindergarten classes and even then not everyone will get in.
This year for example, there is a waiting list to get in that is 55 kids deep! You can live right across the street from the school and you might not get in. It seems totally crazy to me! It's obvious for this coming Fall there will be MANY pissed off parents that live in the area and will have to send their kid to another PUSD school vs. the one that may be around the block from them.
We should also see a slowdown in the real estate activity I'd think. As the stock market deflates and the "wealth effect" winds down...... I imagine things should slow down a bit. The stock market the past 2 years has fueled a lot of this real estate purchasing as people felt wealthier but we should see a slowdown now as it deflates.
I always enjoy your posts. Just out of curiosity, what new communities were you referring to as ghost towns or that were empty? Are these in North County? I was just curious if you could specifically mention which one. Here in my area, even the newest ones are almost all sold out and I know they are being snapped up by families with young kids. Can you list a few of the "ghost town" communities you are referring to? I'm just curious.
You make good points about the new schools getting crowded. That is totally true as more and more families move to the area. You see that all the time, especially with the newer schools. They are however building more and more newer schools in the area. But you are right when you say that not all the parents will be guaranteed spots at all these schools they thought their kids would go to.
Take our area for instance. There are SO MANY young families with kids, they have a huge demand for Kindergarten spots. I already knew it was going to be a problem because I can just see more newer families in the area or even within my own development. Schools like Willow Grove Elementary which are really great have so much demand for them by parents, they have to create like 5 Kindergarten classes and even then not everyone will get in.
This year for example, there is a waiting list to get in that is 55 kids deep! You can live right across the street from the school and you might not get in. It seems totally crazy to me! It's obvious for this coming Fall there will be MANY pissed off parents that live in the area and will have to send their kid to another PUSD school vs. the one that may be around the block from them.
We should also see a slowdown in the real estate activity I'd think. As the stock market deflates and the "wealth effect" winds down...... I imagine things should slow down a bit. The stock market the past 2 years has fueled a lot of this real estate purchasing as people felt wealthier but we should see a slowdown now as it deflates.
Same story (countless overflowing elementary schools) where I am in the La Costa area of Carlsbad, which is a mix of new development and 80s/90s/2000s tracts. I've often wondered how this will play out in the 20-30 years timeframe with them building so many schools and would be curious to see what others think, what will all these schools look like? As the neighborhoods age, will the local K-5 schools get less crowded to the point that they need to bus students in to fill them up, like what has happened in neighborhoods with an aging population like Point Loma and other SD neighborhoods?
Or, if these areas continue to have the best school districts, will the McMansion occupants sell and downsize when the kids are out of the house to a steady supply of new young families paying top dollar to get into these districts? Although my children are only 3 and 1 year old, that is already our plan once the kids move out, to sell and downsize out of the 'burbs.
I always enjoy your posts. Just out of curiosity, what new communities were you referring to as ghost towns or that were empty? Are these in North County? I was just curious if you could specifically mention which one. Here in my area, even the newest ones are almost all sold out and I know they are being snapped up by families with young kids. Can you list a few of the "ghost town" communities you are referring to? I'm just curious.
You make good points about the new schools getting crowded. That is totally true as more and more families move to the area. You see that all the time, especially with the newer schools. They are however building more and more newer schools in the area. But you are right when you say that not all the parents will be guaranteed spots at all these schools they thought their kids would go to.
Take our area for instance. There are SO MANY young families with kids, they have a huge demand for Kindergarten spots. I already knew it was going to be a problem because I can just see more newer families in the area or even within my own development. Schools like Willow Grove Elementary which are really great have so much demand for them by parents, they have to create like 5 Kindergarten classes and even then not everyone will get in.
This year for example, there is a waiting list to get in that is 55 kids deep! You can live right across the street from the school and you might not get in. It seems totally crazy to me! It's obvious for this coming Fall there will be MANY pissed off parents that live in the area and will have to send their kid to another PUSD school vs. the one that may be around the block from them.
We should also see a slowdown in the real estate activity I'd think. As the stock market deflates and the "wealth effect" winds down...... I imagine things should slow down a bit. The stock market the past 2 years has fueled a lot of this real estate purchasing as people felt wealthier but we should see a slowdown now as it deflates.
I don't know the difference, but during the housing boom there were tons of these communities built up and then when everything crashed, those same communities wind up being ghost town foreclosure land. It's hard to imagine 850K homes not going the same route, especially if they dont wind up getting the good schools for their kids.
I"m talking about the new communities half built or fully built and sold. If you drive along
del mar heights rd past the catholic high school, turn left on carmel valley rd and find your way out to Rancho Bernardo and so on there are tons of new developments. Some are practically sold out.
What I do notice is it's still the easy way get to Rancho Bernardo without traffic. When you have a ton of new developments and people, it leads to traffic jams, pain in the neck back roads and so on. Especially during rush hours or packed weekends. I don't see any of that. I see lots of houses that rarely have cars coming and going. I see many houses that have no lights on. And yet most of these developments are sold. Maybe people are living there but they don't see to be the normal families who have kids go to school or parents working. Again, when you have 100s of houses being built all along that route, it should mean traffic. I have yet to see that at all. I'm glad of that, but I imagine one day it'll cause a need to build some other highway.
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