All Forum Posts by: J. Martin

If you're asking yourself it it's too much, it probably is!

Only invest funds where you can realize a good ROI (including quality of tenants). Not just because your eyeball would rather see it prettier!

If it don't make dollars, then it don't make sense!

JOB GROWTH AND RE PRICE APPRECIATION IN ORLANDO MSA

As you can see for the last two and a half decades, job growth and loss has had a strong correlation with home price appreciation. As job growth accelerates, real estate price appreciation accelerates. And now we see both job growth and RE prices decelerating in your area. So I would expect appreciation to decelerate in the area going forward. Remember, these are not DECLINES in jobs or prices. It is DECELERATION - jobs and RE Prices are growing less quickly. Unlike most geographic areas, the relationship seemed to break down in the 90's.

ADDING ECONOMIC CONDITIONS - ALSO DECELERATING

Note that the home transaction price in right axis has different scale..

Fortunately, the leading index for the state is still holding up, and hasn't showed that downward trends that foreshadowed the last decline as early as 2005!!!

@Curtis Yoder, I agree!

@George Gammon, you hit the nail on the head!! Preach it!!! You sound like me! lol

The Fed usually saves us with about 500bp drop in rates. Financing is not as loose in credit quality, but our safety net is smaller also..

JOB GROWTH AND RE PRICE APPRECIATION IN ORLANDO MSA

As you can see for the last two and a half decades, job growth and loss has had a strong correlation with home price appreciation. As job growth accelerates, real estate price appreciation accelerates. And now we see both job growth and RE prices decelerating in your area. So I would expect appreciation to decelerate in the area going forward. Remember, these are not DECLINES in jobs or prices. It is DECELERATION - jobs and RE Prices are growing less quickly. Unlike most geographic areas, the relationship seemed to break down in the 90's.

ADDING ECONOMIC CONDITIONS - ALSO DECELERATING

Note that the home transaction price in right axis has different scale..

Fortunately, the leading index for the state is still holding up, and hasn't showed that downward trends that foreshadowed the last decline as early as 2005!!!

@Curtis Yoder, I agree!

@George Gammon, you hit the nail on the head!! Preach it!!! You sound like me! lol

The Fed usually saves us with about 500bp drop in rates. Financing is not as loose in credit quality, but our safety net is smaller also..

Chris, good run-down on the FHA game. For the 203k, will they still use 75% of the post-rehab market rents from the appraisal for the non-owner-occupied units, to add to the borrower's income for DTI calculation? Every once in a while, these dog vacant 4plexes pop up in Oakland, and with market rents where they are, the back side of the project can look pretty good. Wasn't sure how the DTI underwrites on the rents from the in-rehab units if I was going to go big on a $1MM+ 203k deal..

Also, $1.2MM is the final loan balance, right? Not purchase+rehab, right? Also, I assume they still require the downpayment, even if the value comes in a lot higher, and you are something like 85% LTV? (in other words, they still want 3.5% downpayment, even if your LTV is lower than 96.5% - aka, LTC, not LTV..?)

Thanks Chris! I've only used straight FHA, but refinanced that loan a while back, and would love to use the full 203k on a $1MM+ 4plex to move into, probably next time the market slows down a bit.. (1-3 years..?)

I'm looking at vacant lots in the Santa Cruz / Ben Lomond / Felton / Scotts Valley / Boulder Creek area. Not as far down as Monterey.

I'm looking for a secluded lot (not in line sight of neighbors), preferably buildable size (adequate minimum lot size - but not absolutely necessary), with redwoods and water (seasonal stream OK). Upslope (potentially steep) lots are OK. No utilities is OK. Seclusion is the key. Zoning flexible.

Does anyone on BP have lots to sell down there? Or know an agent down there? Know the best place to go to get a deal on a lot? I've spoken with a couple agents down there, and looked at a few pocket listings so far. But it seems like this area is a very tight RE community. And I'm sort of an outsider..

The redwood forests down in Santa Cruz county are some of the most beautiful places in the limited number of places in this world I have visited! Many lots have seasonal or year-round streams running through them. Many areas are secluded in nature, yet only a short drive (or sometimes hike) to the nearest store. Both the edge of Silicon Valley (Campbell) and Santa Cruz are within 40min. You're in the forest, but the beach/ocean is close. Oakland and SF aren't too far, and it's on the way to my parents and relatives' homes on the Central Coast near San Luis Obispo. Better yet, lots are surprisingly inexpensive down there!

@Jay Hinrichswas talking about the ability to use some of the lots for timber production, although that wasn't my original intent (nice to know though - I will look for the timber zoning as a kicker - I believe you can still build 1 SFH on a timber zoned lot down in Santa Cruz county.)

@Shane Pearlmanisn't in the land market that I'm aware of, but knows a bit about the hill folks out there. Setting aside being near the hill folks, do you have any tips Shane? Or know anyone down there? @Peter Chester, you've taken an Airbnb trip up there, right? Any feedback or tips regarding your experience?

@Helen Chau, good seeing you! Any info or leads for me about Santa Cruz lots?

@Michael O'Connell,

If you're in it for the long term, think a smaller community bank in your area will value your relationship more, especially if you develop it over the long term. They can be more flexible to tailor to your situation in my experience, because the decision-making capacity and exception process is so much closer to the loan officer than a big bank. That relationship could come in really handy when you need it also! (full disclosure: I regulate state-charted banks in CA, outside of your state - largely community banks).

While I understand where @Jacob Sampsonis coming from, I think it depends more on your individual situation, and I'm more with @Jeff B., what do you think?

@John Choi,

A bit of a "false equivalency" comparison I think between putting cash in an investment for a return, and starting a flipping business outside of your existing construction project management role. Also, that out of state being the only alternative to starting a business.

A little more flavor: lots of flippers making good money all over the East Bay, especially in Oakland and Berkeley, in this generally rapidly increasing market. It's almost hard to lose. (Until prices stop going up! This market has been very forgiving for cost overruns and time delays). I will say that some of the most successful are those with their own construction companies, as they have the cost and experience advantage to take on bigger projects. So you may have an advantage with your construction background. But it's a lot of work too!!

As far as making some cash flow, some investors on this are investing in notes (mortgage notes), private lending to other real estate investors, going just outside the Bay, buying small businesses, etc.. You don't need to throw out of state investing out of the options, but there are also a lot of other options in between starting a flipping business and investing all your money in Midwest rentals.

Good luck in your search!
And come out to @Johnson H.'s meetup in Milpitas!

Silicon Valley Job Growth and RE Price Appreciation

@Gloria Mirza, I agree with you on job losses and/or recession before price decreases..

You can see there seems to be a pretty close correlation to the rate of job growth and the rate of real estate price appreciation in Silicon Valley. As the rate of job growth declines (deceleration; jobs growing at a slower rate), the rate of RE price appreciation slows. It appears we may have reached peak job growth of just under 6% in the Summer of 2015, and has declined to a growth rate of below 5%.

And surprise surprise.. There is a relationship between the stock market and Silicon valley RE prices too! (and of course jobs and stocks related also..)

Stock Market and Silicon Valley RE Prices

It will be interesting to see if the recent pullback in stock prices has a measurable impact on home price appreciation when the Spring comes back around. @Julia Tsewill you hop back on in the Spring and let us know what the market is like? I will keep an eye on days on market and months supply, along with prices. I feel like a lot of investors in the Bay Area are keeping a close eye on the 2016 Spring season..

Silicon Valley Jobs, RE growth, Economic Conditions, and CA Leading Indicators

While it looks like we can still expect appreciation in 2016 in Silicon Valley RE prices, I would expect the rate of appreciation to slow. Why? It looks like Silicon Valley job growth has peaked and is decelerating, economic conditions are declining from cyclically elevated levels, the stock market drop cannot help, and the CA leading index looks like it tends to towards the end of a cycle.. This tends to slow house price appreciation, based on what I can see..

And when unemployment rises again, price appreciation will likely slow to close to zero or go negative, although the timing on job losses is certainly uncertain!

Sound crazy @Account Closed?

@Sebastian Frey, I'm talking to an agent about some land down in Santa Cruz :) I love the redwoods!!

@Account Closed, Minh, and the rest of the crew at Johnson's next meetup. Great folks! :)  Get some insights into how people are doing it in the Bay Area..

@Josh Angeles,

LONG TERM PRICE APPRECIATION - SF & CA vs Phoenix - What does the data say?

The red line at the top is the SF/S San Francisco MSA. The black line at the bottom is the Phoenix - Mesa - Glendale MSA. @Account Closed have some great posts with additional detail on BP - both about long-term price and RENT appreciation in the SF Bay Area - and about some the mixed success of investors taking their CA gains out of state. Minh has been an awesome mentor and friend over the last couple years, and fellow student of history - and I really respect his opinion. @Matt R. hit it on the head.

HIGH, MID, AND LOW TIER PRICE APPRECIATION IN SAN FRANCISCO

Here's what Amit is saying about higher-quality real estate, above. Lower price points are more volatile and higher-price properties didn't fall as much last time (although that's partially because they didn't rise as much). All price points are coincidentally the same appreciation since the beginning of this data set in January of Price  1987.

Just for sh*ts and giggles, here's another comparison..

SF Price Tiers, Oakland/Hayward/Berkeley, and Stockton/Lodi

I was surprised the Oakland/Berkeley MSA was in the middle of the SF pack..