Wednesday, July 26, 2006

Investment Idea: San Diego Condos

Where to look:

San Diego Condos in the Gaslamp/Downtown.

I have a hunch that downtown San Diego condos are a great place to start looking to make big bets. Many people are bearish on the San Diego housing market and they are justified to an extent. But what is causing this sentiment? Lost jobs? Stagnant growth? Poor weather or government? Interest rates on mortgages? Well they are higher but relatively very low, historically. Is San Diego less desirable today than yesterday?

To the contrary the Gaslamp district is getting better and more attractive. Job growth is healthy. Do the research! It was voted 5th best big city to live in.

No my friends the correction or cheapening of downtown condos is due to excess supply and low demand which comes from an increase of supply or overbuilding by zealous developers. Watch this market. Look for a comfortable bottom or create a comfortable bottom with low ball offers and snatch up these bargain priced condos while you can. Sit out for at least 3 months and study and get ready to pounce on adjustable rate mortgages adjusting upward and an uptick in defaults. This is my theory:

There was an extreme pendulum to the positive in condo prices from 2002-2005. Now that same pendulum is swinging negative due to oversupply, not new land on the beach being built or major job losses. In the next 18 months we will witness the pendulum come back to where the market price should really be, a market derived medium with mid 7 interest rates and personal income growth.

Ex. 2BD 2BA condo at 1100 sq ft.

Peak: $535K in 2005
Predicted Lows Sellers will accept: $365-405K late 2006
TRUE MARKET PRICE: $450-$470K Early 2008

Whether I am right or wrong you have to respect the fact that I have an opinion. Also this assumes no major event changes things such as a 9/11, an earthquake or stock market collapse. Or an event like the Fed cutting rates back down to 1%. If one of this events happens all bets should be off. Stalk this very unique market and prepare to pounce.

Tuesday, July 25, 2006

700k homes on 70k income

As an avid reader of Fatwallet, I came across an interesting post yesterday. The discussion centered around the brave or stupid owners of $700,000 homes with income in the neighborhood of $70,000 for the entire household.

Read the post here:

Reading post after post one would believe that mortgage interest rates are going to rise to 11% before 2007! My goodness give me a break. You can predict the short term economic future with great success, but you can't predict intangibles. You can't predict the unpredictable. Who could predict $3.20 gas prices five years ago? Who could predict 9/11 five years ago? Who could predict Krispy Kreme tanking in the manner it did? You can not predict the future, but you can make beats that have odds behind them. Listening to media and mass market commentary are like playing the slot machine, the odds belong to the house not you.

And if you are going to bet, do not play the nickel slot machines. Skip the slots if you can. But at least bet using $1 or if you can $5 limits. The jackpots are bigger and the payouts are too. If you lose, you should have gained a costly education as opposed to cry about losing $100.