Monday, May 02, 2005

The California Effect

I am not picking on Californians, but stories like this are becoming pretty common. "The advantage to the buyer is that the buyer gets a wonderful appreciation, this market is going only up."

"In this kind of market, a house has to be an investment. So where does all the money come from? 'I have a lot of people coming from California, because their market is capping off.'"

Not that a lack of common sense had to be imported. "That market is a newfangled thing in this town, a phenomenon, and it's not going to stop."

"The house three down from us closed on March 1 at $1.06 million and they're listing it now for $1.9 million, that's $870,000 more than they paid for it, figuring the sign will sit there until the end of the year. I think they'll get close to that."


At 8:56 AM, Anonymous Anonymous said...

Of course everyone is paying cash for these properties. Like Munger said: "Bad".

At 9:14 AM, Anonymous Anonymous said...

Another Tycoon in the making!

These people produce nothing for our society. You have to love this system.

At 9:17 AM, Anonymous ain'tgoingtoflorida said...

In the Florida article, the salesweasel mentions that the money to buy these million$ homes must be coming from California cuz it's "topping out there."

Bullphlegm. I've lived in Calif all my life. I've never met one person who has considered moving to Florida from Calif. It just doesn't happen. Maybe some speculator money is shuffling around. But Californians don't move to Florida. Nevada, yes. Colorado, yes. Hawaii, yes. Arizona, yes. Mexico even, yes. But not Florida. Hey, we already have beaches and Disneyland.

The guy is delusional.

At 9:22 AM, Blogger goleta said...


Actually I've met people moved to Florida from Santa Barbara, but they moved back shortly after.

At 9:31 AM, Anonymous Anonymous said...

My agent is trying to tell me that the appreciation will make up for the costs to get in.

But I don't get it. We want a home to live in (we've owned for 10 years already but are looking to move). What good does appreciation do . . . except raise our taxes. Unless we sell, of course, and move far away.

At 10:35 AM, Blogger Sunny said...

All I got to say is if you can't figure out what is wrong with the following in a financial sense, you had better be a high wage earner cuz you're money ain't gonna grow:

"By his figuring, in a cash buy, since the current monthly rent for such apartments in and around Dunbar is $500, the gross annual income would amount to $120,000. Roldan figures on a 3 percent loss for vacancy, about $3,600 per year, and 10 percent each (about $12,000) for a property manager, maintenance, property taxes and insurance.

That would leave an investor with $68,400 per year, or $5,700 per month.

"With that $5,700 per month, you can make whatever improvements you want on the properties and you still have another $5,700 coming next month," he explained. "Your original investment of $1 million returns $200,000, for a 20 percent return on your money in one year. Plus, since you bought it with cash, the property is just sitting there rising in value.

"If you choose to sell the properties later, then what you do is hold the note on them with about 10 percent down. Then you'll have a monthly income on $900,000 at the current interest rate with no maintenance and ownership hassles. As an example: $900,000 at 7 percent interest over 30 years equals a payment of $5,987.72 ."

Hint: In the span of two paragraphs the income is $5,700 and the imputed mtg payment later is $5,987. And a 3% vacancy assumption--ha,ha,ha,ha,ha.

At 10:40 AM, Anonymous Anonymous said...

9:31AM Anon,

Hi, there... please take no offense to this but your agent works on commission... he/she is just trying to move inventory...

At 10:56 AM, Blogger realist said...

i loved reading about pine island. it's a no-glitz place. it's 19 miles of rural, old florida, isalnd. the islanders fight development with everything they've got. two years ago, i bought a 12,000 sq.ft. lot in st. james city, one of three cities on the island, for $17,000. it overlooks the water and is in walking distance to the island's only ersatz beach. right now, the island is nothing but a fishing village, palm tree farm and yaughter's port. prices are still low.


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