Don Bauder from the Reader ask a very appropriate question about what happens next now that the price boom is clearly over.
My own view is that we are just getting started and we won't know until this time next year how big the selloff is going to be.
The Upride Ends: Now It Gets Interesting
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11 comments:
From the article:
"Alan Gin, economist at the University of San Diego, doubts that much borrowed money went to finance local consumption."
He is sane? Having lived in an SD gated community from 2001 till Feb 2006, I can tell you my neighbors used -home appreciation- to finance tons of upgrades to their -new- homes. For 5 years our street was flowing with local vendors.
A few neighbors moved away to bigger houses, but most just stayed and spent money turning their home into palaces. Put in a pool. Get upgraded floors. Hardscaping the backyard and that killer grill.
That's all local consumption.
Sales to rentals. . .
Richard Russell in his weekly newsletter made an observation that a lot of homes in his area (LaJolla) that were for sale are now for rent. . .same here in Little Italy area - at least 3 places within a block of me that were for sale are now for rent. . .a nice two-bedroom 1200 Square Foot here in La Vita is on the market for $2000 a month!. . .the owner can't possibly be covering his/her mortgage, taxes, and HOA. . .I have been there myself in 1992 in Northern Calif. I couldn't sell a condo, so I rented. I had deep pockets, and the rent covered 90% of expenses. . .10 years later, the prices soared. . .but I wonder how many people will be able to hold on for 5-10 years.
mas,
Totally agree on the home equity extraction into consumer goods during the boom. I'm amazed at the denial of this in the article as we've all seen take place.
mark,
The expired listing into rental trend is also very clear, there is no chance that the rents are covering costs on these units. Also compounding the problems for investors are there are a lot of rental projects underway downtown as well. I actually think rents will decrease a bit as these units complete.
Rents. . .
Yes, in my little walkaround today, I noted that a pretty large project east of Gaslamp is getting ready to rent, and the building across from me on Union and Chesnut which is now about topping out shows no signs of a sales office. . .my guess is they try to rent it. Next Spring should be very interesting when all the Ballpark places hit the market.
The place by La Vita is called Current and it's going to be a rental. Very low probability of a condo conversion given the market.
Current is going to be 11 stories with 146 rentals. Pretty substantial influx of units into Little Italy.
Do you think there is any chance of Laurel Bay converting to rentals? If so, how would we go about renting from them.
Based on the chatter in another thread the same developer is also selling 101 Market, a similar apartment conversion project also with slow sales, they have rented units at that project. I haven't heard specifics about Laurel Bay however I'd call the sales office and ask about renting a place. I can't believe they'd turn down your money.
Let me us know what you find out.
Link from another housing blog about rental in AZ. . .
http://housingdoom.com/2006/09/17/gilbert-az-rental-market/
This is being played out in all the "bubble" cities. . .can't sell, so rent - when market is awash in rentals, prices go down. . .
SwimJet,
Where did you see that ad?
Based on my reading of the Craigslist post and my knowledge of what's going on at 350 Ash I think these are the balance on the unsold units in the building.
The developer sales office has been closed, the outfit that is doing the rentals is located on India Street so it's close to the building.
You made a good point: no one knows and we'll see in 12 months.
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