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1) Reading over the posts, I think everyone responding has been very reasonable, and no one is trying to shut you up, so no need for the snide remarks about this being a "DISCUSSION board". I think that's exactly what everyone has been doing so far.
Must I really point out what ONE person has repeatedly done?
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Originally Posted by Sassberto
It's a tough reality...Some people just rent and then whine about it on the internet...
...We get posts like this every day...
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Originally Posted by Sassberto
...In fact I arrived at many of the same conclusions you did. What I didn't do was whine about it....
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Originally Posted by John_Galt
2) You repeatedly state that you think we should be able to expect a "reasonable" price for homes. How exactly are you describing "reasonable"? Is it based on what you can afford? If as you say, prices are unreasonably high, then people wouldn't be paying them. But as long as people are paying the prices offered, then it would seem that the prices are entirely reasonable to some. The market (as a whole) determines what a reasonable price is, and if the prices aren't sustainable, they will move in a direction until they achieve equilibrium. And I agree with your overall thesis - I think prices are higher than is ultimately justifiable right now, and I think there will be an overall correction (not down to historically low levels, but lower than they are currently), but there is stickiness is prices and this takes time.
How I define "Reasonable" is based on how every dictionary defines it. In the context of home prices, look at the disparity, even now, of home prices to home values. They're clearly off kilter. Put it this way: NOBODY should be in negative equity or "upside down" as it were. Even in this crisis, it should not happen. Break even, sure. If a house is valued at $400,000 yet has to be sold at a loss because previously it was sold at $800,000, that condition means there was overpricing. I'm not saying what you don't already know, but my point is...a REASONABLE price is within a REASONABLE threshold north of the home value, such that the home never goes into negative equity. You see where I'm going with this? Assuming a pre-set value of a property, and a price that is at or above that value, and regular payments being made on the property, there is no logic behind a later negative equity situation unless said property was (1) undervalued or (2) overpriced. Both are unacceptable.
Example: A house is valued at $400,000. The price is set at $600,000. The bank gets $480,000 from the loan and $120,000 cash down. Right away the buyer has no equity yet, by my math...in fact they're in the hole $80,000. Assuming a basic interest rate, it would take them a number of years to even get to a point of having equity on the books - and assuming a crisis like the one we're in, that turns into a higher amount of negative equity.
What I just explained above, is exactly what this crisis is displaying. Yes, you already know that. But I'm simply making the point about what it is I disagree with. It's not a whine, it's calculated logic.
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Originally Posted by John_Galt
3) Who is doing the "molesting" of the consumers that you are talking about? With an economy built on mutually beneficial exchange, all transactions occur only with the consent of both parties. If someone is charging too high a price for something, one is free to vote with their feet and walk away. If they can't get someone else to buy at that higher price, they will have to lower their price or go out of business. If all the prices are too high for someone, they are free to relocate elsewhere. No one has a "right" to a home in San Diego. There are plenty of other places where homes are cheaper, and people are free to move to.
To quote the judge from Law & Order, "it's not about being right, it's about doing right". No, people don't have the "right" to a home, anywhere. But why deprive consumers of the opportunity when they have the income and financing, and are ready and willing to buy now? You say people can relocate - as I'm considering doing, but what do I sacrifice? I'm not going to find a job that pays my current salary in Little Rock, Arkansas (where home prices are reasonable). Some people are going to college and don't want to transfer. Some people have family here, and no consumer - no consumer - should be forced out because our state can't seem to regulate things properly. And before someone starts complaining, yes, I do believe that pricing methodology should be heavily regulated at the state level to prohibit price gouging...since San Diego alone is incapable of fair and equitable pricing. Don't get me started on Santa Barbara or other areas.
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Originally Posted by John_Galt
4) If a bank chose not to accept your offer, it could have been for any number of reasons, not the least of which was your financing scheme. If you feel like the bank is making a stupid decision by turning down your "higher" all financed offer, that is ultimately their mistake. But it is likely if we were to hear the other side of the story, they would have several compelling reasons why they made that decision. Banks tend to (at least try to) avoid making uneconomical decisions - if accepting your offer would offer them the best risk-adjusted return, I am sure they would have done it.
"Best risk adjusted return", well let's talk about that.
Real life example. A guy came in first on a $225,000 short sale with a $160,000 bid, $20,000 cash down, no earnest money deposit. By my math that's $45,000 less than the bank wanted, on a 4 bedroom 3 bath custom remodeled home that wasn't even in foreclosure. He specifically stated that he wanted the property as investment property. The bank took his offer and is awaiting backup offers.
My offer after his was to come in with no money down BUT to pay the entire asking price plus $5,000, pay my own closing costs and fees, pay for my own inspections, accept full responsibility for any non-"God" issues (i.e. termites, etc) AND gave an earnest offering of $1500. Mind you, I noted that it's to be my primary residence. My offer was entered and not officially rejected, but basically ignored.
Now, you tell me...who's the greater risk? Some guy who put $20,000 cash but could theoretically back out since he didn't really offer anything worth biting into, or my offer where the bank essentially loses nothing and I'm fully committed?
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Originally Posted by John_Galt
Just a few thoughts... I just disagree with a general sense of entitlement, that views things like "homes at a price I want" as something you innately deserve, and that if they aren't offered to you, it is the fault of big business, or people molesting consumers, or businesses in San Diego not offering a "fair wage".
I'd love to keep hearing everyone else's thoughts on this.
-JG
There's no sense of personal entitlement. Sense of being ripped off? Sure, but all of you already agree with that. The difference between me and you is, you all try to qualify it as "...an unfortunate benefit of living here." I like to call it what it is - a problem.
Homes should be priced fairly. Period. Not by my personal standard, not to ludicrous low levels, but by simple math. Home value vs. Home price. As long as there's an equitable balance between the two, I'm fine, regardless of whether I can personally afford it or not. If I see a house with all broken windows, run down paint, torn up carpet, neglected yard, in a crime-ridden neighborhood going for $400,000, I will state again for the record - it's a problem. If some guy bought a house for $600,000 that was appraised at $300,000, I'll call it what it is - a problem. Saying "well other people are buying" - just because they have no choice but to get ripped off, doesn't make it right.
Bottom line? San Diego is expensive when it comes to housing, everyone that lives here knows this, most people that don't live here know this. I don't see what the discussion is all about, it's not going to change just because people complain about it.
Example: A house is valued at $400,000. The price is set at $600,000. The bank gets $480,000 from the loan and $120,000 cash down. Right away the buyer has no equity yet, by my math...in fact they're in the hole $80,000. Assuming a basic interest rate, it would take them a number of years to even get to a point of having equity on the books - and assuming a crisis like the one we're in, that turns into a higher amount of negative equity.
I don't think I follow. I'm not sure I understand the difference between what you're referring to as "Home Value" vs. "Home Price". If a home is valued at $400,000, why am I paying $600,000 for it? If someone is willing to pay $600,000 for the home, isn't it's "value" $600,000? How does one define a market value if its not by how much one is willing to pay for something?
Additionally, I think the recent housing bubble has everything to do with why people own negative equity in their homes. I mean, take your own situation as an example. You are looking for 100% financing of your property. If you buy something for $400,000 (and let's assume that its price is equal to its value), then it would only take a small decrease in housing prices for you to be underwater. On top of that, you had many people who had equity in their homes, and were continually sucking that equity out using negative amort. loans, or by constantly taking HELOCs. Its no shock that there are a number of people who are underwater in their loans. SD's high housing prices aren't the cause.
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Originally Posted by revelated
And before someone starts complaining, yes, I do believe that pricing methodology should be heavily regulated at the state level to prohibit price gouging...since San Diego alone is incapable of fair and equitable pricing.
I think the above is a big part of the reason we are in disagreement. I am very skeptical of the state's ability to regulate pricing in a beneficial manner. In fact, I can't even conceive of a way in which this could happen logistically. You would want the state to put a cap on home prices? How is this fair to people who bought homes, and have had them appreciate in value, and would now like to sell them at a current market price, that you consider "unreasonable". If they could find a willing buyer at this price, I'm not sure why there is a need for government regulation here..
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Originally Posted by revelated
My offer was entered and not officially rejected, but basically ignored.
Your situation is definitely interesting. From your set of facts, I indeed find it pretty bizarre that the bank would choose to ignore your offer, given the facts that you've stated.
What is your theory for why the bank did it? And what is your proposed solution? That there be regulation that a private company (the bank) has to accept the highest offer received, no matter what? i.e., take away the bank's ability to make their own independent risk decisions? (even if they may seem illogical to us as outsiders, with limited information?)
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Originally Posted by revelated
If some guy bought a house for $600,000 that was appraised at $300,000, I'll call it what it is - a problem.
Again - I just think I need more clarity by what you mean here by value vs. price. I think the relevant metric is the market price - if people are willing to buy a home for $600,000, it has a value of $600,000.
I'm surprised there are banks allowing 0% down loans. At least my understanding is the FED highly recommends against this. Well, I know SDCCU requires 95% loan to value. Which means you cannot get a loan for more than 95% of the appraised value of the home (they send an appraiser to verify and protect themselves). So it wouldn't be possible to pay $600k if the home appraises at $400k.
I didn't read through every post on Page 2 and 3, but I'll answer the question of why your 100% offers are being rejected by the seller (Especially for REO).
100% financing is nearly non-existant right now. I'm not suggesting you don't have a pre-approval for 100% financing, but the seller will always be skeptical that the approval is not sound. They are not accepting your offers because they don't want to be tied up in escrow for 30-45 days only to see the financing fall through.
You could improve your chances greatly by having the capacity to submit a non-refundable deposit into escrow of 3% of the purchase price. This would indicate you are a serious buyer and not just a hopeful buyer.
Last edited by SD Lender; 05-23-2008 at 02:41 PM..
Reason: error removed
Again ...San Diego has ALWAYS been a desirable place to live (so tired of that excuse already)...and yes prices are a function of supply and demand....but that doesn't explain how prices got so out of whack with incomes!!
Sassberto....did you know that homes like the one you bought in Rolando for 470k in 2006 sold for a little over 230k in 2000? I think we all know incomes didn't rise that much in Cali in 6 years. It's called a paper gain. I think we all know where prices are currently headed now too. You said in another post that you don't know what a 250k house looks like in SD? Look in your own neighborhood ! I know for a fact that they are starting in that range now. Prices are not done falling.
Hang in there revelated.......wait a bit longer......your patience will be rewarded!
Last edited by shannon94; 05-23-2008 at 05:30 PM..
Sassberto....did you know that homes like the one you bought in Rolando for 470k in 2006 sold for a little over 230k in 2000? I think we all know incomes didn't rise that much in Cali in 6 years. I think we all know where prices are currently headed now too. You said in another post that you don't know what a 250k house looks like in SD? Look in your own neighborhood ! I know for a fact that they are in that range now.
I know exactly what they look like Shannon, a disaster area.
My friends are trying to buy foreclosures in the low 300k range in Chula Vista and are being outbid by tens of bidders. A lot of stuff is trashed, copper wire ripped out, fixtures and doorknobs stolen, etc...
Check out the mls in your area Sassberto. ...and tell me what you see.
I keep a close eye on it. Most of the houses in my neighborhood are selling in the high 300k-low 400k range. Some tiny ones selling in low 300k. Some nicer ones in high 400's. Pretty much nothing has sold below 300k and across all prices almost all that have sold are garbage. There are some trashed places and foreclosures that are lower. The cheapest place in the neighborhood is 300k and it is completely wrecked, should be condemned.
If you go just south or just west it gets 50k cheaper but that is a lot sketchier than my neighborhood. There have been barely any sales in over a year in my immediate neighborhood.
Shannon you are over a thousand miles away, you'll just have to agree to disagree with me, the wife and walk the neighborhood almost every day. My friends are looking sub 300k and it is not easy to find something decent, they are complaining about it too.
Asking price and selling price are two different things. I'm well aware of the area and what is sketchy and what isn't...I bet you live right around 70th and University correct? I just don't find that to be too much different than the College Grove area.92115. Point is.....houses in that area are going for ALOT less than they were 2 years ago and the bottom hasn't been hit yet. Tell your friends to hang out a bit...they'll find something below 300 soon.
I'll be in San Diego next week for 10 days ....wanna have lunch? lol Just kidding...I've been harrassing you for so long now I feel like I know you. I enjoy your posts Sassberto that's why I follow you around the threads. We only disagree on taco shops and home prices!
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We only disagree on taco shops and home prices!
