All Forum Posts by: Brent Seehusen

San Francisco was supposed to have exceeded it's bubble peak long ago.. All the braggadocious posters from that area have assured us time and time again.  There must be some mistake here.. These charts show LA and San Diego doing better since 2000.  Say it ain't so!

@Cort Green

The military personnel are a good source of tenants, but not the only source.  Currently, I also have a pharmacist and a caregiver for the elderly.  The military base can make the tenant pool very fickle because sometimes you have a block of marines leaving the area all at once and other times lots of marines moving in.  Also, the housing allowance they receive is decided on a yearly basis (I think) and sometimes it can be lowered which increases their incentive to live on base to save money.  When the housing allowance is higher they want to live off base because they can pocket the difference between the allowance and the rent they are paying.

One of the things that appealed to me was that crime was relatively lower, mostly petty thefts, vandalism, and minor drug busts, compared to other inexpensive areas like San Bernardino that are known for violent crime.  I have looked into Desert Hot Springs as well and the numbers looked good, but the reputation is that crime is pretty high with lots of gang activity.  I don't know if that's an outdated perception due to improvements being made by the city, but I would try to talk to somebody on the ground there before investing.

@Cort Green

I've been involved in 29 palms for close to a year now, having bought a couple of duplexes.  Vacancy in general is pretty high which is the biggest challenge, but prices are very low so it makes cash flowing possible even despite the vacancy issues.  A good property manager and a strong marketing program will set you apart, and having a modern looking interior with washer/dryer hookups will also help.  I wouldn't count on very much appreciation, but that's not why I bought out there.  I view it as more of a bond-like asset to offset the risks of other investments that I own that are more volatile, like stocks and coastal real estate.

@Doug N. @Matt R.

Dr. Housing Bubble built his following during the housing crash but unlike other bearish blogs from that time, he is still preaching to an audience that really hasn't moved on.  Those were their glory days.  Many of the commenters still believe wholeheartedly that this is just a pause before the '08 crash resumes.  If you go into the comments section and start talking bullish on real estate they will absolutely murder you and call you every name in the book. 

I think DHB knows his audience and doesn't want to alienate his loyal readers, so his analysis shouldn't be taken as representative of the overall housing market, but rather a place to see the worst excesses highlighted.  There are always going to be sellers asking for unrealistic prices.  And there will always be a certain number of buyers that are sheep being led to the slaughter by their realtors.  DHB is great at highlighting these things, but he shouldn't be treated like an authority on SoCal real estate.  His blog is primarily a place to be entertained and a forum for permabears to vent their frustrations.

@Matt R.

The main thing I disagree with is believing that all cycles will conform to a certain length.  Taking the historical average number of years is fine for a baseline to compare against, but there's no reason to believe that future cycles will conform exactly to a 7 or 10 year cycle.  Every historical cycle has been completely different and they will vary in length depending on a whole host of macro forces. 

If somebody drops a nuke on LA or a major earthquake levels half the city, you can bet prices would decline tomorrow.  On the other hand, if nothing extreme happens and risky lending products are not reintroduced and the Fed doesn't go crazy with rates, prices could avoid a decline for many years.  Focusing on the average number of years or average percentage increase really doesn't improve our ability to predict the future.

@Matt R.

I would listen to somebody like Bruce Norris who has a track record of correctly calling the market tops and bottoms, and acted on his own advice to complete hundreds of transactions, over an academic that really has nothing to lose if his analysis is wrong.  People should stop caring so much about the number of years between cycles and instead focus on the conditions that have led to market tops to determine how close we are to hitting one.

@Ken Graham

I have read the book by Robert Campbell in it's entirety and it would have helped avoid the crash for anybody that followed it.  Basically, he advises keeping an eye on the direction of five macro indicators for your market, home sales, foreclosure filings, builder permits, interest rates, and one other that is escaping me at the moment.  Anyway, when most of those are flashing red it's time to think about selling and when most of them turn green again, time to think about buying.  One caveat is that his book focuses on the California market which tends to have pronounced booms and busts.  Not all markets are that way.

The book by Craig Hall I'm still in the process of reading but I believe it is more national in scope as he got his start in Michigan if I recall correctly.  He is a hugely successful investor and puts his RE timing advice in the context of the national economy.  I'm not far enough along to tell if his advice would have helped avoid the 2008 crash.  There is a poster on BP named Joel Owens that said he finished this book, and he might be able to answer that question.

The prior cycle lasted from 1991 - 2007 so sometimes the "typical 10 year cycle" lasts a lot longer than 10 years.  Affordability is a big determining factor in how long the cycle lasts, but with rates still near all time lows, there isn't the kind of pressure on affordability that there would be if we were in a more normal rate environment.  I agree prices will eventually decline again, but not within 18 months unless mortgage rates unexpectedly lurch upward.  If I were trying to decide when to sell, I would hold out for more signs that the market is about to turn rather than base it on a 10 year average.

Hey @Account Closed -

Estimating where we are in the market cycle is more an art than a science.  Different people will have different viewpoints on this subject, but in general with prices having increased pretty dramatically over the past 3-4 years, many feel that we are well past the early stages of the cycle and maybe close to the end, but others feel there is still a long ways to go.  Nobody knows for sure though.

There are a couple of books on timing the real estate market that lay out the fundamentals of the market cycle and how to recognize where we are at.  One is by Craig Hall and one by Robert Campbell.

Redfin.com covers Atlanta and Raleigh and they allow keyword searches of the remarks.