Author Topic: INFLATION IS OUR FRIEND  (Read 54587 times)

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Offline Soylent Green Is People

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Re: INFLATION IS OUR FRIEND
« Reply #705 on: June 14, 2022, 09:33:24 PM »
A forum similar to TI that I follow. It's Bay Area Real Estate and Tech focused.

https://realestateforums.net/t/uh-oh-the-layoffs-begin/1062?page=15
My .02c

SGIP

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Offline Compressed-Village

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Re: INFLATION IS OUR FRIEND
« Reply #706 on: June 14, 2022, 09:42:38 PM »
For a tech rich area, that forum suck-a** compare to TalkIrvine. Well organized and easy to read. It will go down in flame.  ;D

Offline OCtoSV

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Re: INFLATION IS OUR FRIEND
« Reply #707 on: June 15, 2022, 07:44:40 AM »
there is a difference between primary and investment properties. if a house that is exactly what you are looking for, and you can afford it, plan to stay it long term (forever home for Calbears and unicorn for USC) it really doesn't matter if you overpay it by 10 or 20%.....you only live it once.

Is anyone but CalBruin or USC purchasing right now? I personally pulled back from levering up to get a unicorn property months ago based on how I read the tea leaves but I’m conservative by nature and support a family on my earnings and am well into a 1.99 15 yr. My equity portfolio seems to have priced in the looming stagflation but I feel that pain is still to come in residential real estate pricing, and given none of us have lived the bursting of a 40 yr bond bubble I fear the decline will be slow and long.

There's a lot more people than just CalBear and I who bought.  I bought because the property that I purchased only comes around once every few years (at least for me) and I don't care what prices will do in 1, 2, 3, 5, or even 10 years as this is house is it for me.  Also, I have about 8 years in liquid reserves to cover payments for all my properties (including assuming my rentals don't generate rental income) so may be more risk tolerant than most but I also do it when I can I can financially manage the additional financial burden.

Bingo, the most valuable asset in life is time.
Recall my prediction is close to a 40% hit, and I'm very sure we'll see that, especially above $2M, especially in OC without the organic high paying job base. I am very confident rates will now pass 8% as the Fed is intent on deterring purchases at current pricing levels, and a crapload of boomers all across the 15M+ population SoCal area are going to be panicked sellers over the next 1-2 years as they try to get themselves out of CA. Boomers and job losses, especially in FIRE as SG pointed out, will drive the inventory.

It would eat at me if I overpayed by 20%, let alone 40%.

Offline OCtoSV

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Re: INFLATION IS OUR FRIEND
« Reply #708 on: June 15, 2022, 07:54:07 AM »
there is a difference between primary and investment properties. if a house that is exactly what you are looking for, and you can afford it, plan to stay it long term (forever home for Calbears and unicorn for USC) it really doesn't matter if you overpay it by 10 or 20%.....you only live it once.

Is anyone but CalBruin or USC purchasing right now? I personally pulled back from levering up to get a unicorn property months ago based on how I read the tea leaves but I’m conservative by nature and support a family on my earnings and am well into a 1.99 15 yr. My equity portfolio seems to have priced in the looming stagflation but I feel that pain is still to come in residential real estate pricing, and given none of us have lived the bursting of a 40 yr bond bubble I fear the decline will be slow and long.

There's a lot more people than just CalBear and I who bought.  I bought because the property that I purchased only comes around once every few years (at least for me) and I don't care what prices will do in 1, 2, 3, 5, or even 10 years as this is house is it for me.  Also, I have about 8 years in liquid reserves to cover payments for all my properties (including assuming my rentals don't generate rental income) so may be more risk tolerant than most but I also do it when I can I can financially manage the additional financial burden.

Bingo, the most valuable asset in life is time.
Recall my prediction is close to a 40% hit, and I'm very sure we'll see that, especially above $2M, especially in OC without the organic high paying job base. I am very confident rates will now pass 8% as the Fed is intent on deterring purchases at current pricing levels, and a crapload of boomers all across the 15M+ population SoCal area are going to be panicked sellers over the next 1-2 years as they try to get themselves out of CA. Boomers and job losses, especially in FIRE as SG pointed out, will drive the inventory.

It would eat at me if I overpayed by 20%, let alone 40%.

USC - your situation is unique in terms of flexibility as a single guy without kids which enables a much different mental framework when contemplating leverage and survivability of liquid assets in the event of an extreme downturn, but sounds like you're in great shape and I hope you find your unicorn to be fulfilling - it's a beautiful property.

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Offline OCtoSV

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Re: INFLATION IS OUR FRIEND
« Reply #709 on: June 15, 2022, 08:03:35 AM »
Is anyone but CalBruin or USC purchasing right now? I personally pulled back from levering up to get a unicorn property months ago based on how I read the tea leaves but I’m conservative by nature and support a family on my earnings and am well into a 1.99 15 yr. My equity portfolio seems to have priced in the looming stagflation but I feel that pain is still to come in residential real estate pricing, and given none of us have lived the bursting of a 40 yr bond bubble I fear the decline will be slow and long.

How do you think the Bay will fare compared to Irvine?

It will decline but not as severe given the massive job base here, but people will feel poorer when RSUs don't provide the same boost. My neighborhood listings went from busy OHs to crickets literally over the last 2 months. The key difference up here is the paucity of good public schools - there is no Irvine where you have 5 quality public high schools in the same city and a variety of price points to get into those schools at. Any really good high school area starts at $2M, which is 4x what a mid-career 2 earner family pulls down here annually, so not too far off from traditional underwriting guidelines. Plus the business of enterprise software, especially as the drive to 800G makes the cloud experience more seamless, will continue to eat the world. Make sure your children major in CSCI!

Offline zubs

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Re: INFLATION IS OUR FRIEND
« Reply #710 on: June 15, 2022, 09:19:50 AM »
Recall my prediction is close to a 40% hit, and I'm very sure we'll see that, especially above $2M, especially in OC without the organic high paying job base. I am very confident rates will now pass 8% as the Fed is intent on deterring purchases at current pricing levels, and a crapload of boomers all across the 15M+ population SoCal area are going to be panicked sellers over the next 1-2 years as they try to get themselves out of CA. Boomers and job losses, especially in FIRE as SG pointed out, will drive the inventory.


If I were a boomer who owns a house in CA, I would not sell..........ever.


I would rent my house out and move somewhere like idaho for the cheaper taxes.  Why?
~As a boomer, I probably refi'd to a 2.6% mortgage in 2021 or own the house outright.
~Prop 13 means I'm paying $2,500/year vs. my neighbor who just bought and pays $6,200/year.

Why would I ever sell?  Unless I need a big jolt of cash?

The goal is to maintain.  Why sell your 25 year old house when it will generate huge rent per month. 
rent is crazy expensive right now.

Offline zubs

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Re: INFLATION IS OUR FRIEND
« Reply #711 on: June 15, 2022, 09:27:42 AM »
Investment property in CA is like a goose that keeps giving you golden eggs.
As time drags on, the eggs get heavier and heavier.

I just raised my rent on my rental and my tenant accepted it .  Still below market rates.

Offline OCtoSV

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Re: INFLATION IS OUR FRIEND
« Reply #712 on: June 15, 2022, 09:57:34 AM »
Recall my prediction is close to a 40% hit, and I'm very sure we'll see that, especially above $2M, especially in OC without the organic high paying job base. I am very confident rates will now pass 8% as the Fed is intent on deterring purchases at current pricing levels, and a crapload of boomers all across the 15M+ population SoCal area are going to be panicked sellers over the next 1-2 years as they try to get themselves out of CA. Boomers and job losses, especially in FIRE as SG pointed out, will drive the inventory.


If I were a boomer who owns a house in CA, I would not sell..........ever.


I would rent my house out and move somewhere like idaho for the cheaper taxes.  Why?
~As a boomer, I probably refi'd to a 2.6% mortgage in 2021 or own the house outright.
~Prop 13 means I'm paying $2,500/year vs. my neighbor who just bought and pays $6,200/year.

Why would I ever sell?  Unless I need a big jolt of cash?

The goal is to maintain.  Why sell your 25 year old house when it will generate huge rent per month. 
rent is crazy expensive right now.

Because many will need the cash - house rich/cash poor - especially for assisted living. Many boomers lived beyond their means for all those years of wage stagflation.

Offline The California Court Company

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Re: INFLATION IS OUR FRIEND
« Reply #713 on: June 15, 2022, 10:09:53 AM »
exactly...the house we left behind in Irvine, was bought in 2011/2012, at the lowest price point and we also refied near the lowest rate...probably it will stay at rental forever...

we are very conservative and frugal, so all of our houses the market rent can easily cover PITI plus some.

Recall my prediction is close to a 40% hit, and I'm very sure we'll see that, especially above $2M, especially in OC without the organic high paying job base. I am very confident rates will now pass 8% as the Fed is intent on deterring purchases at current pricing levels, and a crapload of boomers all across the 15M+ population SoCal area are going to be panicked sellers over the next 1-2 years as they try to get themselves out of CA. Boomers and job losses, especially in FIRE as SG pointed out, will drive the inventory.


If I were a boomer who owns a house in CA, I would not sell..........ever.


I would rent my house out and move somewhere like idaho for the cheaper taxes.  Why?
~As a boomer, I probably refi'd to a 2.6% mortgage in 2021 or own the house outright.
~Prop 13 means I'm paying $2,500/year vs. my neighbor who just bought and pays $6,200/year.

Why would I ever sell?  Unless I need a big jolt of cash?

The goal is to maintain.  Why sell your 25 year old house when it will generate huge rent per month. 
rent is crazy expensive right now.
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Offline CalBears96

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Re: INFLATION IS OUR FRIEND
« Reply #714 on: June 15, 2022, 11:46:10 AM »
there is a difference between primary and investment properties. if a house that is exactly what you are looking for, and you can afford it, plan to stay it long term (forever home for Calbears and unicorn for USC) it really doesn't matter if you overpay it by 10 or 20%.....you only live it once.

Is anyone but CalBruin or USC purchasing right now? I personally pulled back from levering up to get a unicorn property months ago based on how I read the tea leaves but I’m conservative by nature and support a family on my earnings and am well into a 1.99 15 yr. My equity portfolio seems to have priced in the looming stagflation but I feel that pain is still to come in residential real estate pricing, and given none of us have lived the bursting of a 40 yr bond bubble I fear the decline will be slow and long.

There's a lot more people than just CalBear and I who bought.  I bought because the property that I purchased only comes around once every few years (at least for me) and I don't care what prices will do in 1, 2, 3, 5, or even 10 years as this is house is it for me.  Also, I have about 8 years in liquid reserves to cover payments for all my properties (including assuming my rentals don't generate rental income) so may be more risk tolerant than most but I also do it when I can I can financially manage the additional financial burden.

Bingo, the most valuable asset in life is time.
Recall my prediction is close to a 40% hit, and I'm very sure we'll see that, especially above $2M, especially in OC without the organic high paying job base. I am very confident rates will now pass 8% as the Fed is intent on deterring purchases at current pricing levels, and a crapload of boomers all across the 15M+ population SoCal area are going to be panicked sellers over the next 1-2 years as they try to get themselves out of CA. Boomers and job losses, especially in FIRE as SG pointed out, will drive the inventory.

It would eat at me if I overpayed by 20%, let alone 40%.

I'm quite confident that your prediction about 40% drop is completely wrong. Also, I bought at the end of 2021, so I didn't really overpay that much. Housing price has gone up about 20% since I bought. I don't think housing price will drop more than 20%, which means it will just drop back to what I paid.

But the most important thing, as CV and Martin already said, this is my primary residence, and forever home at that, so I don't care even if it does drop 40%, meaning I overpaid by 20%.

This may not be the unicorn home, but it checked out almost all the boxes we desired: new construction (a MUST for my wife), location (unlike some TI'ers, we love PS), floorplan (we love IP's cookie cutter floorplan  ;D). And it has a good size lot too, unlike most of the homes in Irvine.

The only box that didn't check for me is the lack of driveway, but it's not that important to my wife. Personally, I would have prefer Highland, which checked out two more boxes for me, driveway and NO parking on the street. I'm probably the only person in the world who likes the idea of no parking on the street.  ;D Unfortunately, the Highland home that we would have got would come with extremely small lot. So we decided on the bigger lot (plus some privacy) over driveway.

The main driving factor for us is that there aren't many new construction left in Irvine. We don't like Great Park, so that only leaves PS and OH. PS will be built out soon and OH is going to be too expensive for us, so we can't wait. And, of course, if we don't buy in Irvine, we can't sell our Eastvale home either, so if a drop is coming, that one will most likely drop even more.

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Re: INFLATION IS OUR FRIEND
« Reply #715 on: June 15, 2022, 11:59:32 AM »
Investment property in CA is like a goose that keeps giving you golden eggs.
As time drags on, the eggs get heavier and heavier.

I just raised my rent on my rental and my tenant accepted it .  Still below market rates.


I listed a Baker Ranch rental listing for a client on Monday, I already have 5 applications.  Rental market is full steam ahead.
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Re: INFLATION IS OUR FRIEND
« Reply #716 on: June 15, 2022, 12:02:02 PM »
there is a difference between primary and investment properties. if a house that is exactly what you are looking for, and you can afford it, plan to stay it long term (forever home for Calbears and unicorn for USC) it really doesn't matter if you overpay it by 10 or 20%.....you only live it once.

Is anyone but CalBruin or USC purchasing right now? I personally pulled back from levering up to get a unicorn property months ago based on how I read the tea leaves but I’m conservative by nature and support a family on my earnings and am well into a 1.99 15 yr. My equity portfolio seems to have priced in the looming stagflation but I feel that pain is still to come in residential real estate pricing, and given none of us have lived the bursting of a 40 yr bond bubble I fear the decline will be slow and long.

There's a lot more people than just CalBear and I who bought.  I bought because the property that I purchased only comes around once every few years (at least for me) and I don't care what prices will do in 1, 2, 3, 5, or even 10 years as this is house is it for me.  Also, I have about 8 years in liquid reserves to cover payments for all my properties (including assuming my rentals don't generate rental income) so may be more risk tolerant than most but I also do it when I can I can financially manage the additional financial burden.

Bingo, the most valuable asset in life is time.
Recall my prediction is close to a 40% hit, and I'm very sure we'll see that, especially above $2M, especially in OC without the organic high paying job base. I am very confident rates will now pass 8% as the Fed is intent on deterring purchases at current pricing levels, and a crapload of boomers all across the 15M+ population SoCal area are going to be panicked sellers over the next 1-2 years as they try to get themselves out of CA. Boomers and job losses, especially in FIRE as SG pointed out, will drive the inventory.

It would eat at me if I overpayed by 20%, let alone 40%.

I have a 2.375% 30-fixed rate on my Tustin Ranch home and I'll be about $1,500 cash flow positive when I rent it out so that home is not hitting the market anytime soon.  There are a lot of owners out there who have fixed rates in the 2% to 3% range and those people are not going to be selling until they absolutely have to.  That's going to keep a lot of inventory off the market.  And where are all those people who have gotten priced out due to the high prices and high rates going to live?  That's right, rental properties and that's why the rental market is still hot.
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Offline zubs

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Re: INFLATION IS OUR FRIEND
« Reply #717 on: June 15, 2022, 12:09:49 PM »
I met another of my rental tenants last night.  They have been renting my house since 2017.
I was going to raise their rent, but decided not to since the house looked great, and they also put in upgrades.


I think the dude was nervous last night as he kept showing me how great he kept up the house.
I appreciated it and I guess it worked on me cause now I'm just leaving the rent the same.




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Re: INFLATION IS OUR FRIEND
« Reply #718 on: June 15, 2022, 12:51:16 PM »
I met another of my rental tenants last night.  They have been renting my house since 2017.
I was going to raise their rent, but decided not to since the house looked great, and they also put in upgrades.


I think the dude was nervous last night as he kept showing me how great he kept up the house.
I appreciated it and I guess it worked on me cause now I'm just leaving the rent the same.


I'm the same way, I have a few rentals where I'm several hundreds below the market on the rent but my tenants are great and pay on time like clockwork and don't call to bug me about little things so I've kept the rent the same for years.  Given that their rent is way under market I may have them as tenants for a long time. As I tell my landlord clients, good tenants are worth their weight in gold.
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Offline CalBears96

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Re: INFLATION IS OUR FRIEND
« Reply #719 on: June 15, 2022, 12:57:55 PM »
I met another of my rental tenants last night.  They have been renting my house since 2017.
I was going to raise their rent, but decided not to since the house looked great, and they also put in upgrades.


I think the dude was nervous last night as he kept showing me how great he kept up the house.
I appreciated it and I guess it worked on me cause now I'm just leaving the rent the same.

I wish I got tenants like yours.

My tenants pretty much trashed my house in Lake Elsinore. TWICE. Spent a lot of money on repairs and renovations each time. That's why I'm selling that house now. Will never be landlord again.

 

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