I had a vision of hell yesterday.
The crazy man who agreed to marry me is from Chicago. His background is politics and he worked for the ILL state legislature before moving out to California. I point this out because while he's experienced "the Machine" in action, he wasn't prepared our trip Saturday.
My DH wanted to stop at Heritage, one of the developments for custom built homes in Woodland. He's thinking about buying a lot, sitting on it and building later. We're both simple people who like building things, anything and everything. We have this vision of lots of sweat equity no matter what we decide to buy.
However this is California, right outside of Davis. I have some idea of what it would entail but, bless his unusually optimistic soul, he wants take the idea out for a spin.
Apparently in this community the lots start at the price of a medium condo. The restrictions are so numerous that you all still end up essentially living in the same style and floorplan, which can't be under 3000 sqft. I asked the salesperson
why you would build here instead of Davis since the prices and restrictions were about the same. She didn't answer but she did say that buying here gave you the
possiblity of sending your kids to either Davis or Woodland schools.
This isn't an option in the other developments right down and across the street
but then those homes aren't sporting $800,000 price tags. That is so Davis- if you throw money at them, you can get into their school district.
So we go and tour a spec home in the development. We came away completely unimpressed. The lot wasn't any bigger then the Centex offerings down the street at $620k. The flyer raved about barrel and vaulted ceilings. It had one small barrel in the family room and a small vaulted in a bedroom. The master was small and the floorplan made it feel like 2600 sqft.
A trip to Califoria Closets, a lot of molding, and some really unfortunate marble tile choices made this place custom. I named it "the over-priced house of brown". Never thought I'd ever say it but Centex had these yahoos beat hands down on price and quality. I think I have to go wash my hands now >; )
Thursday, April 3, 2008
Tips on Successfully Renting In the Coming Real Estate Crash
Tips on Successfully Renting In the Coming Real Estate Crash
1 Avoid property management firms like the plague.
They seem to do nothing but cost both parties money for little service. I've done my best by renting from owners who love that I can snake my own drains, replace crown molding, replace a small subfloor section that's rotting, etc.
When renting from an owner, consider these things:
A.) Gauge the personality of your potential new landlord.
Are they now renting a home that they were trying to sell? I did this in Tarzana in 1990. The owners were flippers and pissed as hell at being on the wrong side of the housing bubble. The home wouldn't sell after they completed a bunch of upgrades and an addition using substandard materials. This evil little Jewish woman rented it to us and just made us miserable. She lived locally and her daughter lived right next door. She'd walk into the home without notice. She'd
sneak in so quiet I almost hit her with a baseball bat once. She harassed us the entire time. We left as soon as the lease was completed.
B.) What else can you bring to the table?
Are you willing to really take care of the place? Most individual landlords are terrified of renting to demanding, high maintenance tenants. So don't be that person - easy cheesy lemon squeezy. High-maintenance tenants need to rent high-end apartments or they will never be happy. On the other side of the spectrum, the amazing Mr. Gwynster and I have no fear of working on the home. We do draw the line at running gas lines and major structural issues. These are things
the landlords will need to deal with on their own.
If you can work out something regarding regular maintenance and perhaps doing some small sweat equity projects in return for small reduction in rent - I say go for it. You'll like the property more, the owners will like you more, and it's a great excuse for buying power tools!
2 Be prepared to demonstrate financial and personal stability.
Remember that individual landlords are afraid of scary tenants. After prices escalated here in the greater Sacramento area, the only people left to buy were sub-prime individuals and speculators. We now have the same situation with rentals, just without later. If you were one of the savvy folks who sat on the sidelines during the real estate madness here, Sacramento is now your rental oyster.
If possible, when setting down to draw up the rental agreement, walk in with recent copies of your credit reports, a reference list, etc. I even include my resume and hand it all off to the homeowner.
In short, don't waste anyone's time on a scenario that will never work. If you have bad credit, point it out and bring something else along to define why and how it is being corrected. Basically, treat it like an interview if you want a good deal.
3 Be prepared to love the place.
1 Avoid property management firms like the plague.
They seem to do nothing but cost both parties money for little service. I've done my best by renting from owners who love that I can snake my own drains, replace crown molding, replace a small subfloor section that's rotting, etc.
When renting from an owner, consider these things:
A.) Gauge the personality of your potential new landlord.
Are they now renting a home that they were trying to sell? I did this in Tarzana in 1990. The owners were flippers and pissed as hell at being on the wrong side of the housing bubble. The home wouldn't sell after they completed a bunch of upgrades and an addition using substandard materials. This evil little Jewish woman rented it to us and just made us miserable. She lived locally and her daughter lived right next door. She'd walk into the home without notice. She'd
sneak in so quiet I almost hit her with a baseball bat once. She harassed us the entire time. We left as soon as the lease was completed.
B.) What else can you bring to the table?
Are you willing to really take care of the place? Most individual landlords are terrified of renting to demanding, high maintenance tenants. So don't be that person - easy cheesy lemon squeezy. High-maintenance tenants need to rent high-end apartments or they will never be happy. On the other side of the spectrum, the amazing Mr. Gwynster and I have no fear of working on the home. We do draw the line at running gas lines and major structural issues. These are things
the landlords will need to deal with on their own.
If you can work out something regarding regular maintenance and perhaps doing some small sweat equity projects in return for small reduction in rent - I say go for it. You'll like the property more, the owners will like you more, and it's a great excuse for buying power tools!
2 Be prepared to demonstrate financial and personal stability.
Remember that individual landlords are afraid of scary tenants. After prices escalated here in the greater Sacramento area, the only people left to buy were sub-prime individuals and speculators. We now have the same situation with rentals, just without later. If you were one of the savvy folks who sat on the sidelines during the real estate madness here, Sacramento is now your rental oyster.
If possible, when setting down to draw up the rental agreement, walk in with recent copies of your credit reports, a reference list, etc. I even include my resume and hand it all off to the homeowner.
In short, don't waste anyone's time on a scenario that will never work. If you have bad credit, point it out and bring something else along to define why and how it is being corrected. Basically, treat it like an interview if you want a good deal.
3 Be prepared to love the place.
If you don't like it, don't rent it. Coming home to a place you hate sucks and you'll resent the resent the home and the landlord and it all goes downhill from there. In summer of 07, you will have so much to choice from so there is no pressure. We housing bears are nothing if not patient.
4 Be careful of renting a home now that the seller could not move before the bubble burst.
Imagine purchasing a home to flip using the last of your resources and finding yourself underwater and unable to sell. You'd be terrified too. Local landlords can be a pain if they are new to it and frantic about the property. The closer they are to loosing the property due to over-leveraging, the worse they will be.
If the potential landlords aren't local then you get some breathing room. Remember that you are renting a home to live in, not a mansion to maintain as a central valley shrine to their bad financial timing. Don't trash the property but don't be afraid if it either. And never rent a property while it's on the market to be sold. I insist that the home remain off the market while I am a tenant. If you get a bad feeling about the expectations, run, don't walk away from it.
On the other hand, the best landlord I ever had lived in Land Park. She was renting her old family fourplex downtown with no intention of selling for years. The place was a gem in the rough. She'd make me cookies every Christmas. I attended the funeral of her husband and cried along with her. We had a great relationship and I stayed there for 10 years until she had her daughter in law take over the management.
5 Do the math before you go shopping.
For us housing bears, this is such a no-brainer but I had to include it. Look at the neighborhood choices, look at what is being asked and then see what is actually being rented. I recently have seen a 3/2 and 4/3 renting for the same amount one street apart. Guess which one is still on the market 2 months later?
I had restricted my search to Davis and Woodland but these people are still drinking from the 2005 punch bowl. I'm now looking at Natomas and I'm amazed at the listings, all competing for those few people with the incomes, financial worthiness, and stability to be rent their 4/3 homes. So much is out there that you can actually watch them under bid themselves in real time.
There will be better deals in Natomas, Rocklin, Folsom, and Elk Grove long before you see them in the central city. Just make sure to keep #4 in mind because these areas will also see the worst of the downturn.
6 Advertise yourself
Think of finding anew place to rent like networking to find that next great job. I posted on Craigslist stating what I wanted and what I could offer. I've been blown away at the response. The downside is you also get a lot of offers you'd never consider (no I will not commit to a land lease on your Oakpark albatross). Just stick to your budget and don't budge.
7 Don't forget to save!
Don't spend more then 25% of your income on a rental. Bad things can and will happen to the best and smartest of us. Use this upcoming lull in rental prices to sock away money for that down-payment once prices come back down.
"can't afford to live in Davis "
From the Sacramento Bee:
"Another breed of motorist on I-80, however, is an environmental concern. It's the motorist who lives in Dixon or Vacaville or Woodland who must drive to the university job in Davis. It's the motorist who creates traffic and air pollution because he or she can't afford to live in Davis because the city lacks the housing supply to meet the demand. Other cities are building the necessary homes (neighborhoods are generally money-losers for municipal governments, not profit centers). We don't recall Woodland or Dixon or West Sacramento ever suing Davis for its land-use decisions that end up creating traffic and air quality impacts on the region."
"Another breed of motorist on I-80, however, is an environmental concern. It's the motorist who lives in Dixon or Vacaville or Woodland who must drive to the university job in Davis. It's the motorist who creates traffic and air pollution because he or she can't afford to live in Davis because the city lacks the housing supply to meet the demand. Other cities are building the necessary homes (neighborhoods are generally money-losers for municipal governments, not profit centers). We don't recall Woodland or Dixon or West Sacramento ever suing Davis for its land-use decisions that end up creating traffic and air quality impacts on the region."
Davis is different: a rant who's time has come
On a blog I regularly read, a poster commented on the housing market in Davis and how he felt that the local paper would never accurately cover the decline. I agree whole heartedly that the Davis Enterprise is not going to do any real reporting on the housing or rental market. They are far too beholden to local landed gentry, no matter how independent and liberal they feel themselves to be.
We had Measure X last fall which the citizenry voted down. I really believe the only reason it didn't pass was because too many property owners were worried about additional inventory reducing their perceived equity.
But those local home owners didn’t really perceive that the whole slow growth argument behind “NO on X” had been defeated long before we went to the polls. Woodland's new developments are fast approaching the Davis city limits. This of course makes the failure of measure X moot. These new homes are superior to most of the Davis. They are larger, family friendly, and just a 10 minute drive away from central Davis. “Exclusivity” is not going to save the Davis market.
The big employer here is UCD which is awful about employee compensation, the exception of top administrators and some faculty. There are not enough of those choice positions to save the Davis market. Most UCD employees are older and either bought here years and years ago. The younger workers generally commute in from other areas. So UCD is contributing to the problem, not solving it.
In addition, UCD can't seem to attract new talent to the campus which could become buyers either. In fact, the whole UC system is loosing employees. Some workers are leaving for positions at other universities out of the state with comparable pay. Others are retiring and relocating out of the area, selling homes to cash in on equity gains and taking their retirement nest eggs with them. So the local economy is not propping up values.
So who is left to save Davis from the Bubble?
Until recently parents of UCD students would buy a condo or house for their child to live in while they attended school. The proud parents would then sell the house after son or daughter’s graduation. We used to see this begin each spring, leaving few homes on the market for the local population.
However, Spring 06 in Davis was dead. Recent graduates aren't remaining. The employment opportunities in areas with healthier housing markets are too numerous to entice them into staying. As inventory continued to increase into the summer, I’ve seen everything from serial re-listings to hide the days on market to price haircuts of up to $50k in one swift stroke. The few buyers left in Davis demanded price reductions or incentives, often both.
That means the only target market left is families commuting into Sacramento. Woodland, with its better housing value, is just as easy to commute from as Davis. But with prices declining in Sacramento, why does the buyer need to commute at all when homes near their employer are usually much better priced?
But what about the few Davis home owners who were commuting to Bay Area jobs? They are either currently trying to sell or have already left.
So to summarize, Davis' sustainable housing value is pretty much a figment of realty marketing imagination.
We had Measure X last fall which the citizenry voted down. I really believe the only reason it didn't pass was because too many property owners were worried about additional inventory reducing their perceived equity.
But those local home owners didn’t really perceive that the whole slow growth argument behind “NO on X” had been defeated long before we went to the polls. Woodland's new developments are fast approaching the Davis city limits. This of course makes the failure of measure X moot. These new homes are superior to most of the Davis. They are larger, family friendly, and just a 10 minute drive away from central Davis. “Exclusivity” is not going to save the Davis market.
The big employer here is UCD which is awful about employee compensation, the exception of top administrators and some faculty. There are not enough of those choice positions to save the Davis market. Most UCD employees are older and either bought here years and years ago. The younger workers generally commute in from other areas. So UCD is contributing to the problem, not solving it.
In addition, UCD can't seem to attract new talent to the campus which could become buyers either. In fact, the whole UC system is loosing employees. Some workers are leaving for positions at other universities out of the state with comparable pay. Others are retiring and relocating out of the area, selling homes to cash in on equity gains and taking their retirement nest eggs with them. So the local economy is not propping up values.
So who is left to save Davis from the Bubble?
Until recently parents of UCD students would buy a condo or house for their child to live in while they attended school. The proud parents would then sell the house after son or daughter’s graduation. We used to see this begin each spring, leaving few homes on the market for the local population.
However, Spring 06 in Davis was dead. Recent graduates aren't remaining. The employment opportunities in areas with healthier housing markets are too numerous to entice them into staying. As inventory continued to increase into the summer, I’ve seen everything from serial re-listings to hide the days on market to price haircuts of up to $50k in one swift stroke. The few buyers left in Davis demanded price reductions or incentives, often both.
That means the only target market left is families commuting into Sacramento. Woodland, with its better housing value, is just as easy to commute from as Davis. But with prices declining in Sacramento, why does the buyer need to commute at all when homes near their employer are usually much better priced?
But what about the few Davis home owners who were commuting to Bay Area jobs? They are either currently trying to sell or have already left.
So to summarize, Davis' sustainable housing value is pretty much a figment of realty marketing imagination.
Population change for 2000 to 2005
| Estimates of the Components of Population Change 4-1-00 to 7-1-05 | ||||
| Geographic Area | Total Population Change* | Natural Increase | ||
| Births less Deaths | Net International Migration | Net Internal Migration | ||
| United States | 14,985,802 | 8,651,861 | 6,333,941 | - |
| .New York | 277,809 | 527,876 | 667,007 | -1,001,100 |
| .California | 2,260,494 | 1,557,112 | 1,415,879 | -664,460 |
| .Illinois | 343,724 | 406,425 | 328,020 | -391,031 |
| .Massachusetts | 49,638 | 131,329 | 162,674 | -236,415 |
| .New Jersey | 303,578 | 220,220 | 290,194 | -194,901 |
| .Ohio | 110,897 | 217,877 | 75,142 | -177,150 |
| .Michigan | 182,380 | 235,760 | 122,901 | -165,084 |
| .Louisiana | 54,670 | 129,889 | 20,174 | -89,547 |
| .Kansas | 55,863 | 76,138 | 38,222 | -57,763 |
| .District of Columbia | -21,538 | 12,393 | 20,618 | -53,550 |
| .Idaho | 135,140 | 58,884 | 14,522 | 61,273 |
| .Oregon | 219,620 | 75,196 | 72,263 | 77,821 |
| .Washington | 393,619 | 180,160 | 134,242 | 80,974 |
| .Virginia | 488,435 | 231,055 | 139,977 | 103,521 |
| .Tennessee | 273,697 | 117,203 | 49,973 | 109,707 |
| .South Carolina | 243,267 | 97,715 | 36,401 | 115,084 |
| .Texas | 2,008,176 | 1,155,182 | 663,161 | 218,722 |
| .North Carolina | 636,751 | 248,097 | 158,224 | 232,448 |
| .Georgia | 885,760 | 376,105 | 192,844 | 232,666 |
| .Nevada | 416,550 | 81,661 | 66,098 | 270,945 |
| .Arizona | 808,660 | 241,732 | 168,078 | 408,160 |
| .Florida | 1,807,040 | 246,058 | 528,085 | 1,057,619 |
| *Total population change includes residual - see "State and County Terms & Definitions" | ||||
| Source: Population Division, U.S. Census Bureau, Release Date: 12-22-2005 | ||||
They said it could never happen here
Another 3/1 SFR house right around the corner from me for sale. Looks like another flipper in trouble and loosing some money while doing it. It's located on a pretty busy street.
708 L street, Davis CA 95616
MLS 60058871
Price Reduced: 06/19/06 -- $468,000 to $450,000
Price Reduced: 07/20/06 -- $450,000 to $425,000
Price Reduced: 07/26/06 -- $425,000 to $415,000
And everyone said no one would ever loose money in Davis real estate.....
708 L street, Davis CA 95616
MLS 60058871
Price Reduced: 06/19/06 -- $468,000 to $450,000
Price Reduced: 07/20/06 -- $450,000 to $425,000
Price Reduced: 07/26/06 -- $425,000 to $415,000
| Sale History | |
| 09/21/2005: | $427,000 |
|---|---|
| 09/01/2000: | $169,000 |
And everyone said no one would ever loose money in Davis real estate.....
a little morning schadenfreude
It's finally official - Sacramento real estate is in decline
Sacramento Bee article: home prices head south
I did my usual check on zip realty:
264 single family homes and condos on the market in Davis
133 are reduced
The above numbers do not include the FSBOs and the reduced number doesn't include sellers relisting at lower prices like this one below
916 PENNSYLVANIA PL, Davis, CA 95616
MLS 60077388
Originally listed at $539,000 April 10th 2006 and back on market at $499,000 now. It's located 2 doors down from the rail line and right across the street from some student apartments. To make this owner even less happy, I've counted 11 properties within a mile all under his price. Some are even in much better shape with better amenties and 2 are under $400,000.
Sale History from Zillow
05/23/2003: $360,000
06/23/2000: $195,000
People here just don't make that kind of money to be able to afford $300,000 homes.
I know most of my friends are still bullish on RE and believe it can't possibly go down. I know I'm going to feel bad for some of them (they are my friends after all) when the jaw-dropping brick of reality comes crashing through their suburan picture windows and hits them upside the head.
Sacramento Bee article: home prices head south
I did my usual check on zip realty:
264 single family homes and condos on the market in Davis
133 are reduced
The above numbers do not include the FSBOs and the reduced number doesn't include sellers relisting at lower prices like this one below
916 PENNSYLVANIA PL, Davis, CA 95616
MLS 60077388
Originally listed at $539,000 April 10th 2006 and back on market at $499,000 now. It's located 2 doors down from the rail line and right across the street from some student apartments. To make this owner even less happy, I've counted 11 properties within a mile all under his price. Some are even in much better shape with better amenties and 2 are under $400,000.
Sale History from Zillow
05/23/2003: $360,000
06/23/2000: $195,000
People here just don't make that kind of money to be able to afford $300,000 homes.
I know most of my friends are still bullish on RE and believe it can't possibly go down. I know I'm going to feel bad for some of them (they are my friends after all) when the jaw-dropping brick of reality comes crashing through their suburan picture windows and hits them upside the head.
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