Thread regarding Qualcomm Inc. layoffs

If it drops 20%, you lose your down payment of 20%. Usually, that is all the money a new home buyer has. 20% sounds VERY much possible as a drop in price.

No one is denying home prices might flatten and go down slightly. But you have a lot of screws loose to think we'll see a 50% correction. Even the uber bears in the RE markets stopped predicting that. Anyway, good luck holding you're breath.

Here is one in University CIty.

5561 STRESEMANN

San Diego, CA 92122

$870K

The posters numbers really indicate a market that is near the highest price.

No where to go but down.

Article about flat tax says only Republicans want it. http://www.nytimes.com/2015/05/16/business/economy/republican-presidential-candidates-rally-around-flat-tax.html

Flat tax lowers taxes on billionaires like Trump.

Crazy landlord poster, why don't you buy some in University CIty if you think it is a good deal??

My friend has a 2 acre hilltop house in El Cajon. Very nice. Next door is a Chinese doctor who has a hilltop house with view of valley (who has a bigger house on bigger lot with premium gardens and pool). Not everybody wants crowded beach side.

Ok OP. So let's summary all the entire circular argument as to why you think home prices will fall 50%

1. You first suggested home prices will fall 50% because the mortgage interest deduction will be eliminated by the GOP

I first debunk that notion by pointing out that the GOP in general isn't interested in getting rid of it, only a select few GOP and a few select Democrats. And none of them can agree on how to do it because the GOP wants to keep breaks for the rich while the democrats want to keep breaks for the poorer. And that since neither Republicans or Democrats will dominate our government for the next 4 years, you won't get any agreement on this.

1. Then, without any thing to say from point #1, you redirect suggest the GOP is pushing for a flat tax and that would eliminate mortgate interest deduction, and cause a 50% decline in house prices. And again, I show that that's false because the GOP is more interested preserving the status quo of giving tax breaks to the wealthy. A flat tax would significantly increase rich(er) people's tax because they would end up paying more than that current 15% tax on capital gains and dividend, which rich people derive most of their revenue from.

2. Then, you redirect again and mention rich people don't have mortgages. And again, I show you that's false too, because rich people often carry a mortgage so that they can keep their income in higher yielding returns, defer their taxes (IE tax shelter) and take out a lower interest loans to arbitrage between the low interest environment and what their net worth is generating in terms of income above that low interest. People like Mark Z of Facebook that has a huge mortgage out on his Palo Alto home, because the appreciation from his stock grants at Facebook is probably greater than that 2.5-3.5% loan he has.

3. Then you redirect and say start talking about how why would people buy a home with a $4000 mortgage, when they could rent a home for $2500. And again, I show you the error you are making by comparing two different classes of homes, and that a home with a $4000 mortgage isn't going to rent for $2000.

4. Then you try to prove I'm wrong by showing me a craiglist rental add of $3250/month ($1250 more than you're original $2000/month rental that you claimed to be able to find in UTC), and stating that home is close to $900k. I correct you again that you are wrong, because that home in that area isn't $900k, it's closer to $780k, and show you one of many active MLS listings in the UTC area that disproves your overly inflated price you said for resale homes in that area. I also further correct you wrto the 30 year mortgage rate (around 4% right now, not 4.25%) and also correct you showing you that the mortgage payments are around $2950-3000/month, and that while property taxes would be about $500/month, most of it is deductible as personal property tax on schedule A provided you aren't hitting AMT (which if you are, it means you make a pretty good amount of money such that an extra $500/month to own something yourself, isn't a big deal). And that cost is even BEFORE any mortgage interest deduction. So in the worst case scenartio, buying and renting is about at parity and with the mortgage interest deduction you might even come out ahead, especially considering most people put 30-40% down, and that 30-40% downpayment is earning 0% in a short term savings anyway.

Dead silence

1. Furthermore, based on historical data, I show you that even with tax law changes, they don't apply retroactively to people who already enjoy the benefits, only preclude new people from enjoying the benefits. So any sort of change would only impact people like you trying to buy. And with rates and payments so low and FIXED for over 15-30 years, there would be very little motivation for existing buyers to sell since rent already is at parity for many people and is expected to continue to increase (currently estimated at 4% annually).

Dead silence

1. Then I bring up the fact that even during the worst of the real estate crisis back in 2009, most of the upper echelon of homes (those homes you consider expensive in the $800k+) in the tier 1 desired markets did NOT correct 40-50% on average, more like 20-25% (and you can look at all the charts on SDLookup,Redfin, and just about every real estate blog that documents this) Dead silience

2. Then you redirect and mention that about el cajon and vista and how builders can build there. I have no idea why you would bring up a tier 3/4 housing submarket in comparison to the tier 1 and 2 market of $800k+homes as comparison, and other than to continue to make shit up as you try to rationalize your viewpoint. It would be equivalent to someone trying to cross shop a Ford Fiesta and a Mercedes C400 at the same time.

3. Then you redirect again and bring up how it's entirely possible that chinese people (women in general) would buy in el cajon and vista, to which I call you out for continuing to pull out shit from your ass, because chinese people wouldn't be caught dead buying in vista and el cajon because they care so much about the school district, and chinese women in general care so much about status. I mean come on, can you see the same Chinese woman that carries a $2000 Louis Vuitton bag live in El Cajon and Vista???

Anything else you want to pull out of your ass to rationalize that 50% off that you apparently are so fixated with? Seriously, it's been entertaining to follow your self-rationalizations.

@F859cFc-4jgw. Maybe, but the ones that bought aren't exactly in a hurry to sell. Which brings me back to the original issue. Where's the supply?

@F859cFc-4lrf. Liar. You weren't at "the auctions". If you were, you would know that isn't true. 25% was the biggest discount you could see. try again.

Chinese probably will stop buying with the devaluation in their currency.

All the Asians I know are buying out of the main areas. The prices are so high now they can't afford nicer areas.

I saw the biggest percentage discounts in La Jolla and Del Mar at auctions during the recession a few years ago. There were not a lot of repos in those neighborhoods, but the ones that did happen sold for real cheap.

It amazes me that a lot of you keep trying to rationalize a scenario where there is an argamendon cratering of home prices, despite the ones holding the ownership cards are all considerably stronger than the ones during the worst real estate crisis that happened in 2009. Even during that crisis, tier 1 real estate locations never corrected 40%, more like 20-25%. The majority of people in those areas simply just held on and bought homes from the financially weak and doubled up on their ownership. Look at all the historical data from 2009-2011.

In order for a cratering of home prices, we need financially weak, sketchy buyers who take out a loan they can't afford when rates reset. And right now, for most of SD, those buyers don't exist because of strict underwriting guidelines that still exists for GSE loans. You can do less than 20% down with an FHA loan, but that requires.an FHA approved property, which isn't going to be a $700k+home.

@F859cFc-3liy. And if you buy now and you don't have at least two years worth of cash reserves you really aren't in a financial position to be buying. In fact, if you don't have two years worth of cash reservrd, you shouldn't be buying a house at anytime, because you would be considered financially weak.

Like I said before , most people who are buying anything requiring a conforming plus loan are typically putting down at least 35%, some as high as 40-50%. And those folks aren't buying in vista and el cajon.

A lot of you are underestimating those who have the financial means to buy, irrespective of your financial situation. Just do a county record search on recent purchase history of $800k+ homes or ask your agent/broker to. They usually have recorded the purchased loan amount, if there is a loan at all. I'm seeing a lot of $1million+ homes bought with cash, and no they aren't all Asian foreigners...

Looks there there's plenty of people doing financially well irrespective of how people at the Q are doing.

Point is not whether houses are built in Vista or El Cajon. The developers could tear down a 1 story and build a 7 story apartment. Supply increase. Supply verses demand is basic economics. University City is middle class, not upper class. Vista is mixed, low, middle and some mansions on 10 acres. El Cajon hills has some high end homes on 5 acre lots also. Throw solar on the roof and an air conditioner and you get a mansion at 1/10 the price of the ocean city. So if a developer built a bunch of mansions for real cheap, some Chinese women would want them. Chinese culture is to buy new only.

If you buy a house now and have to sell, you lose that 3% mortgage you got back in 2010. All those mortgages are not assumable. People now are at 4%. Next year 5%. Year after that 6%. Maybe 7% mortgage the year after.

The funny part is that those of you that need to borrow a significant amount of money to buy thinking you'll get a better deal when rates go up and home prices go down while most likely have the same amount of payments. The only difference is how much of your payment goes towards principal and how much goes towards interest for the life of the loan. And with the way home prices are sticky going down, your payments end up being slightly more with rising rates and slow trickle down in house prices (if that were to happen). Those of us that already bought on a lowest possible 15/30 year fixed rates are just waiting for rates to rise so the rest of our cash and income and earn more than how much our fixed rate costs on our housing will be locked in for the 30+years. Our present day monthly cost will be the same as your future day's monthly costs, with the difference that we can still arbitrage our existing cash we didn't use to put it into a much higher yielding return in the future, should interest raise rise significantly. You won't be able to because you'll be starting out 10-15 years from now and be buried in the same payments, most of which will go towards interest payments to the bank. And the beauty of this is if the mortgage interest deduction were to get eliminated you wouldn't be able to write any of it off. I don't know about you but losing a mortgage interest deduction when you are buying at 17% seems to be far worse than all those people that bought a decade or so earlier than you did at 2.5-3.0%. In fact, those people, their mortgages would have already amortized down so that most of their payments is principle anyway. For example one I'm 10 years into one of my 15 year loans, and the interest portion of the payments ends up being $200/month or a total of $2400/year writeoff... Whooodeedo.....So ya, you late buyers would be totally screwed, and everyone else that bought at a low fixed rate would just be holding on to their homes and passing it to their kids.

@F859cFc-3mmz. Too bad by the time interest rates rise to 17%+ again, you'll most likely already be dead or eating out of a feeding tube 30 years from now, and just about the rest of the U.S. economy would have imploded. Oh, and since chances are you stick your cash in your mattress earning no interest or dividend, the value of your cash would have fallen twice that in purchasing power. Meanwhile, those who had 3%-4% fixed rate 30 year mortgages will be laughing our asses off because borrowing $800k+ on the bank's dime at 3%-4% instead of using our own money, and then taking our own money and putting into a CD at 10-12% (which is what CD rates were back when mortgage rates were 17%), the banks would be paying us to keep a mortgage and that arbitraging would give us a 7-8% return on money that we borrowed from the banks. God, I wish that would happen.

@F859cFc-3mmz. If you are considering el cajon and vista and citing those areas as the reasons why RE prices are going to fall 50% in UTC and countywide, then clearly you have no clue about buying a house and aren't even ready to buy. El Cajon and Vista versus UTC? Sorry, now it explains why you "need" prices to fall 50% in UTC in your dreams. Affordability (for you). I can't think of anyone that would be cross shopping UTC with El Cajon/Vista. Talk about being at the opposite extremes of the housing market, one being at the higher end and one being at the low end. Thanks for the good laugh. I'm done with this thread. It's been entertaining.

My realtor who is old (about 65 years old) says mortgages were 17% when he started selling.

We hit bottom just now, so only way to go is up on interest rate.

Interest rate up = price down.

Loss of mortgage deduction = price down.

Low gas price, low steel price, low lumber price = cheap to build houses in vista and El Cajon = price down.

I agree most of the millions will be able to pay mortgage. But 1% of the houses

are always for sale. Some just because they are on hard times or layoff or moving.

The market is the 1% for sale and whether 1% of buyers are willing to buy.

99% of homeowners just sit. 1% trade. Those 1% are the ones that set the price.

So, even if 99% are ok, if just 1% have to sell because of whatever, they get deal with buyers.

Those buyers don't have to buy. They can always rent a few more years if price even

start to look like they are falling. But if you lose your job (even

if only 1000 people), those people have to sell 1,000 homes.

There are always sellers. There are times when

there are few buyers (years 2008 till 2012 approx., there were only bargain hunters buying

at cheap prices).

But I do enjoy reading about all the entertaining theories of how home prices might fall 50+%. I mean I guess if affordability is an issue for you, you do get desperate and try to come up with new and creative ways of thinking how home prices might fall to a level you can afford them comfortably. We've seen arguments how home prices would fall drastically when Qualcomm has a big layoff. Nope, inventory in San Diego is at an all time low right now (look it up on SDLookup).... Home prices will fall 50+% once mortgage interest rises .25%.... Nope, we're already about 1% higher than when people were saying this when we hit rock bottom on rates back in end of 2014.....

The only times that home prices had drastically corrected is when people could no longer afford to continue making their monthly payments on a widespread scale. That happened to all those liar-loan/stated income borrowers, none of which we currently have at the moment.

Oh, and when tax laws do change, it's very unusual they change such that the rules are applied retroactively. Hence those with existing mortgages most likely will be grandfathered in. The only ones that end up getting screwed are first time (young) home buyers who will find it even harder to buy a new home....Look no further than what was planned to eliminate the 529 college savings plan. People with existing contributions would have been grandfathered in, versus people that started after the law would have been subject to the new taxes.

And like I said, you're not comparing apples to apples. Because that UTC house listed at $3200 wouldn't be around $870k. It's closer to $780kish... Something like this, which imho is slightly overpriced and won't sell until it's around $780k-ish.

http://www.sdlookup.com/MLS-150062339-5069_Maynard_San_Diego_CA_92122

Also, 30 year on a conforming loan isn't 4.25% but closer to just below 4% with no points.

Standard 20% on $780k would leave you with a mortgage of $624k. At 4% mortgage would be $2950/month With 4.25%, mortgage would be $3070/month.

1% property tax would set you back about $650/month or $3650/month. The property tax itself would be deductible under "personal property tax" on schedule A unless you hit AMT (which means you make sufficient money) regardless of whether you want to imagine if mortgage interest is deductible or not.

I wish you were right about GOP being able to successfully remove mortgage interest deductions. And I wish you were right if that happened property values would fall 50%. I'd be buying homes with cash. But there's two problems with your arguments. (1) Not every GOP senator/rep nor Democrats senator/rep wants to (2) the ones that do can't agree on how to do it and (3) not a single political party is expected to dominate both Congress and the White House in 2016 (4) if you look at canada which did eliminate any sort of mortgage interest deduction, home prices didn't come crashing down as a result.

It seems like home prices are sticky upward and while prices may trickle down, it takes a catastrophic failure on the ability of homeowners to pay suddenly to actually move home prices significantly down. Like if you extend easy credit to people who have real no means to pay the loan, and then suddenly jack up their loan rates such that their monthly payments become unbearable, as what happened about 5-8 years ago. Most people who "own" a primary home have staying power and aren't motivated to sell regardless of what the markets are doing, simply because primary home purchases have more to do with emotional purchases than purchases that make complete financial sense. So long as they can continue to make their payments, that's all they care about. If there's no motivation to sell, and if builders aren't building enough to meet demand in the area (as in the case of San Diego), you're going to have a supply constraint for a long time. Don't believe me, that's fine. Keep holding your breath. Let us know how that works out for you 3-4 years from now.

If flat rate tax (no home deductions), that $870K (if $3500 rental) would drop to:

$870K *3500/4712 = $646K. Approx. $224K drop when you sell.

$3500 / month: http://sandiego.craigslist.org/csd/apa/5375818916.html

Here's on in University City for rent on CL for $3250:

http://sandiego.craigslist.org/csd/apa/5365570525.html

$3200 is from apartments.com. Do you think it is $2800 or $3400? Got to be close to that.

Uh your utc 4/2 is not going to rent only for $3200/month currently. Good luck with that one.

Here's a house in University City, San Diego for $870K, 4br 2ba. It would rent for $3,200 a month ($800 per bedroom). You have 4.5% interest rate, 1.2% property tax, and 0.8% for other (insurance, roof, water heater, furnace, etc repair fund). So 6.5% cost to own. $870000 * 6.5 /12/100 = $4712 per month. Rent: $3200, Own:$4712. Rent does not cover expenses to own, so now is not the time to buy as a rental. If you want to be a landlord, look in other states.

But if you get back 9% state income tax and 30% federal, $4712(1-0.39) =$2874, cheaper to buy if primary residence. Now if the 39%deduction goes away with flat tax, house monthly cost would have to drop to rental price. It would drop to: $8700003200/4712 = $590K. That's almost $300K drop if Republicans get the flat rate in. That would wipe out your down payment.

@F859cFc-1lie And like I said before, you aren't comparing apples to apples. If you are talking about $2500/month for a condo, then you should also be talking about a condo for purchase with a mortgage $2400/or less, which seems to also be why people are buying condos (at least the ones that can qualify/afford to buy).

@F859cFc-1mqc. Better to have a free and clear house than to rent.

Better to rent with a risky job.

bwk: You may not find a house for rent for 2K, but you can rent some decent condos in UTC and small houses in Talmadge/Normal Heights for about $2,500.

But I have to hand it to you OP. You are doing a pretty good job demonstrating being a low information democrat voter as well as low information trump voters. I'vr come to the conclusion that most people.in this country are fvking morons that spend much time bickering over party lines, that they end up.getting screwedmover by those that don't really care about anything except money.

Also mortgage interest deduction will never be eliminated on properties considered rental income because that deduction is considered operating cost of running a rental business. So your magical 50% isn't going to happen. Lastly most Republicans aren't for flat tax, because most Republicans pushing for fiscal bills are for lowering taxes for the wealthy. Flat tax would effectively raise taxes for the wealthy, considering most wealthier people derive their income from.passive income, not paycheck income. And currently, passive income has an effective tax rate of 15% and not subject to social security and sdi taxes. Which is why ceos take a $0 salary but take a huge stock grant as compesation

Think about it. In fact I don't recall with all my writeoffs, my tax rate ever exceeding 15.5%.

@F859cFc-1zum. False. Absolutely false. Case in point. Marc Z, CEO of Facebook has a $4million mortgage. For tax reasons. Look it up. You newbies have so much to learn about tax shelters.

Most super rich don't have mortgage, which is why Republicans want to remove it from the middle class. Also, most Republicans want to kill Social Security since rich don't need it.

Most if not all Republicans are pushing for a flat rate with no deductions. That means no mortgage deduction. If the market is in balance between rent per month (R) and mortgage per month (PITIM = principle+interest+Taxes+Insurance+Maintenance). Assume a renter wants to buy a home and his marginal tax rate is 30% Federal plus 9% state (=39%). If he is renting a home and the next door (Exactly the same model, condition).

The renter will buy if: PITIM*(1-0.39) < Rent.

If Republican flat tax, then the renter will buy if: PITIM < Rent.

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