Mike Mueller, Social Media.ist

California First Time Buyer Grants

I read an article in the Contra Costa Times yesterday.
It was also covered by all the news stations.

"Loan Defaults are the Worst in the East Bay!"

Hey, I can see that.
I blame all sorts of people here: LINK
Good people have been mislead into signing for more house than they can honestly afford.
The payments on the loan changes and viola!

"Honey, we can't afford to pay the mortgage this month"

And since money is the primary cause listed in divorces - guess what else the east bay might soon be leading in?

I was talking to a divorce attorney the other day and he was eagerly waiting for the flood. He already hired a couple extra people to help with the "soon to be" work load - really!

No matter why the current homeowner is past due there are a couple of things to look for here.

On the Opportunity Side of the coin, if you are buying your first home, picking up additional investment property, or just looking to get a deal - This may be your time!

• Distress Sales
• Foreclosures
• Notice of Defaults
• Short Sales

Over the weekend we held our Investing in Real Estate: 101 seminar.
We filled the big room of the Walnut Creek Marriott.
150 people if I heard right.
No room for walk ins.

I heard nothing but good comments so far.

One of the best things (I think) in doing these seminars is that each and every person has a card they can turn in before the end and have their question answered. They don't have to stand up, they can ask anonymously, and get a real answer to maybe something they were afraid to ask.

The question came up, "Where would you suggest investing in?"
It's an open dialogue in this part of the session.

Rob handled the question originally and rattled off some far away cities in NC, WA and then mentioned Sacramento. Charlie Krackeler didn't have much to say about it, but I did.
I objected!

Rob's point was that since Sacramento was the Capitol, it was the hub of the state.
There will always be jobs because they are not going to up and move the Capitol to Walnut Creek. Jobs equal good housing appreciation.

My point was that he is part right.
Jobs, schools, and roads all add to healthy appreciation and a good overall economy.
That's true enough.
But the world is driven by supply and demand.

I argued that pretty much anywhere in the central valley there is plenty of cheap land.




I used the area by the Arco Arena where Hwy 80 intersects Hwy 5 as an example.
I have a very good friend who bought a new house, in a new division, for 1/3 what he could have down here in the Bay Area.
By the way, the Arco Arena was originally built back in 1988 in the middle of farm land. This area is now called Natomas. and it literally is right next to the Arco Arena. It even has it's own school district!

Important Point
When we as a society need more housing we build horizontally not vertically.
That means "Out" not "Up".
That's housing - not office space.
Office space builds up not out.
We want to live in our own home, our own little homestead that we can stake out with a white picket fence.
When we go to work, we want to go to the hustling bustling towers with the corner office.
Your mileage may vary, but you can see my point.

As more Sacramento housing was needed, developers simply bought the cheapest land available (farm land) and built OUT.

Some of the most expensive residential land in the bay area is where?
In places where they can NOT or will not build out.

Case in point - the SF Peninsula.
Surrounded by water on three sides and SJ on the other where can they go?
So there is a finite amount of houses able to be built.
That means suitable housing is scarce and not plentiful.

Or look at CA coastland. Want to buy a house overlooking the ocean?
This also a good example of a limited amount of spaces available.
You and I both know you'll either pay the big bucks, or have to settle for somewhere obscure.
"Cheap coastal homesites are available in the Aleutian Islands - Call Now, Operators are Standing By!"

Looking at Natomas as an example.
I went looking for a picture of before and after.
I found a whole page on the CA website dealing with the growth in this area:
LINK
Oh, and here's another good page: LINK

Here's a picture of the area showing 1999 and then again in 2003.

 

The red squares are farmland, bluegray housing.
It's easy to see, we converted lots of farmland to housing.
And you know what's outside of the picture?
Even more farmland!

Tree-hugging aside, here's the point:
If Sacramento housing is or becomes expensive, the developer just turns around and buys more farm land and builds more houses.
Don't blame the developer, he's just doing what the market dictates he do.
he sees the demand and increases the supply.

Macro economics say...
With a diminishing supply and rising demand, prices will increase.
(Think Oil and Gas)
What do you think gas would cost if oil was plentiful and all we had to do was turn on the tap?

While the conversion of farmland to houses isn't as easy as "turning on the tap", and limited growth or no growth initiatives may stand in the way of rabid builders plowing under the fields of corn, the general idea remains.

I met yesterday with the person who posed the original question.
As it turns out they may not be able to afford a place in the bay area.
Sacramento may fit their price range.
They are First Time Home Buyers and have limited buying power.
If they buy smart, and with a good exit plan, I see no reason why not to buy where they can.

DISCLAIMER:
I am not advocating Growth or No Growth.
I am not down on Sacramento.
Farmers vs. Builders.
Golden State vs the Kings.
Arnold vs. ?
I'm simply making the case that scarcity builds value.