Wednesday, July 25, 2007

A tale of two meetings

Two meetings today, both turned into discussions on real estate.

First meeting: A group of mostly non-degreed support personnel.

It started with a discussion on why I haven't bought a home (everyone else in the meeting owned). After pointing out that the homes I'm looking at should drop $250k in two years... (no disagreement, they were willing to work 'on that theory') The comeback? "You missing out on the appreciation even if it declines."
"Not everyone has your prioritie; some people will buy anyway. Besides, with the weather here, how will prices ever go down?" (Note: every J6P agreed with this; despite the fact we had just talked about record foreclosures!)

I tried to point out that saving $1,200/month+ was enough to lease a new Mercedes every three years and pay all expenses on it... But somehow all of them were convinced buying now would improve my standard of living. ugh...

Group consensus: Buy now before you're priced out forever!

2nd meeting: A group of senior (lead) engineers, managers, and a senior manager. Half own, half do not.

"The middle class is priced out of the state. Since the company cannot afford raises, when can I transfer to Houston?"

"Foreclosures won't stop. We're going to see the 1990's crash again."

We then discussed a coworker who is selling his place... only to rent it back! Sadly for my coworker, the sale fell through (new info post this meeting). :(

Group consensus: Middle class is priced out of California. Don't worry about it; transfer out of state. My buying status never came into this conversation. The group quickly dismissed anyone who bought today as someone failing an IQ test. Homeowners were working up the guts to sell and rent (some have already). I'm the only bubble blogger in the group (I think...)

The first group would be Subprime or Alt-A buyers.

The second group was all the type who would have 20% down saved up, prime 30-year (or 15 year).

I'm very glad that I won't have to compete with the first group buying a home (soon... die subprime, die!). My purchase will be a happy one (for me). Some failed J6P will turn over their granite countered, 4 bedroom, with a partial view, as soon as this falls out. They'll have to pay to cart away all of their junk to close the deal with me... ;)

The intensity with which the 2nd group wants to move to Houston shocked me. These people love California! Oh... I didn't even have to tell the 2nd group that my company was holding onto land options for Houston. You see... in the 2nd meeting I didn't have much to say anything; I received an education into the 1990 recession (I *thought* that I knew every twist by now...) and previous job relocations from the company. It was also surprising to find someone who knew more about aerospace land options in other states than myself. They also knew about a few bond/currency/leading indicator markets that the housing blogs have been ignoring. Alas, nothing concrete (we did have to get to work...)

The 1st meeting ended with "everyone wants to live in California."
The 2nd meeting ended with a theoretical discussion into the likelihood that the epicenter of US aerospace would shift to Texas or Colorado.

Also of interesting note, a group of non-degreed engineers, who half own and half don't, have become rather vocal about never buying in California (or about to sell). As they put it, if real estate ever becomes really cheap in California, then its time to buy their retirement homes in XX state for tax purposes. (Lively lunch discussion on state taxes...) Some of them bought cheap land around an Idaho lake; they'll retire together as a group. Most are waiting for material prices to drop before initiation construction. (But they are paying for the plans, surveys, and doing contractor research today.)

I also found it very amusing to note that the two groups who are against buying now are the two groups who do not watch much TV. Its also the two groups with good credit and cash in the bank (even if they own a home).

Interesting times ahead...

Got popcorn?


Westside Bubble said...

Good discussion, Neil. Personally, though, having visited Houston and other parts of Texas I could never live there, however cheap the houses are. Something about culturally being rooted on the west coast.

wannabuy said...



But now imagine moving with several thousand Californians. :)

Nothing definite yet. I was more interested in the two outlooks.