Posted on 08/18/2004 10:28:56 PM PDT by BurbankKarl
Anyone who owns a house here can be excused for toying with all kinds of ideas as property values climb toward the stratosphere, making ordinary folks feel as if they've won the lottery.
It's hard not to think about picking up and moving someplace else, maybe to a quiet little town in the Midwest, where you could use your real estate profits to live like royalty.
For some San Diego County homeowners, the idea of cashing out has become too enticing to resist.
They are selling their homes and moving to relatively inexpensive places such as Wisconsin, Tennessee and Idaho, where they can pay cash for new houses, get out of debt and squirrel away money for their childrens' college funds.
These transplants are making plenty of sacrifices along the way. They are leaving behind jobs, friends and family. They are encountering lifestyle challenges, along with snow, humidity and mosquitos. They are moving to places where their Southern California sensibilities are distinctly out of place, where finding a good restaurant requires the skills of a detective, where the only professional sporting event is the local rodeo. And they are making a decision that financial experts warn could close the door permanently on a return to San Diego.
People here sell their homes and move out of state all the time, of course, for any number of reasons. But with the price of local real estate reaching almost comical levels, some are now moving to turn their homes into profits.
"It started as a joke, looking at the equity in our house," said Joe Byrne, 46, who recently sold his home and is moving with his wife to a small town in Tennessee. "When we realized how much there really was, that's when we started thinking about moving elsewhere."
The Byrnes bought their 2,250-square-foot Mira Mesa house for $298,000 in 2001, sold it for twice that much in July and decided to move to a town 18 miles south of Nashville, Tenn. They chose Franklin, population 45,000, after researching areas of the country on the Internet. They liked the climate, the proximity to an urban area – and, of course, the price of real estate. Their new home, which is 2,900 square feet, has four bedrooms and sits on an acre. The cost? Only $229,000, paid in cash.
The Byrnes are the beneficiaries of a local real estate market that has spiked beyond many people's wildest imaginations. Five years ago, the median price of a home in San Diego County was just above $200,000. For the first six months of this year, the median price was $464,000 – and it continues to grow by the month.
Local real estate agents don't have data about the number of homeowners who are selling for the primary reason of cashing out. But clearly the potential profits are too large for some people to pass up, especially given the favorable capital-gains tax laws.
A married couple don't have to pay federal or state taxes on up to $500,000 of profit from the sale of a home if they have lived in it for two of the past five years. A single person in the same category pays no state or federal tax on up to $250,000 in capital gains on a home.
Carla Baden, 40, calls her two-bedroom North Park house "a gift certificate that you can decide when to cash in." She and her husband, Robert Bullock, 41, a cabinetmaker, bought it in 1998 for $119,000. They figure they can make a profit of $350,000 or more if they sell now.
So the couple are house-hunting in Asheville, N.C., a city near the Blue Ridge Mountains where they don't know a soul. Carla Baden, a video producer, discovered the town while shooting a commercial and fell for the area's charming vibe. The couple did the math and realized they could pay cash for a house and still have about $200,000 left over.
"That's a pretty persuasive argument for giving up the Southern California lifestyle," Baden said.
Bill and Donna Lafreniere, both 53, call their recent relocation "the California equity move."
The couple, who owned a property-inspection business in San Diego, were visiting Las Cruces, N.M., on business last year when they looked at home prices almost as a lark. They started making some calculations, and then "we just looked at each other and said, 'I think we need to make this move,' " Donna Lafreniere recalled.
In November, the couple sold the house on Mount Helix in La Mesa that they'd bought three years earlier and used the $300,000 profit to help buy three properties in Las Cruces, including a sprawling three-bedroom home with "a view that would rival being on the top of Mount Soledad," Donna Lafreniere said.
They plan to make a living in Las Cruces buying and fixing up old homes and then reselling them. They're also counting on rental income from one of the houses they bought in the area.
One of the Lafrenieres' few regrets is that they didn't wait a bit longer before making the move. In the nine months since they sold their house, home prices in San Diego County have increased more than 18 percent, according to DataQuick Information Systems, a La Jolla firm that monitors real estate prices.
"If we had stayed six months longer we might have made another $100,000," Donna Lafreniere said. "But we just look at each other and say, 'We can't look back.' "
There are, of course, drawbacks to moving from San Diego to Las Cruces, population 85,000 and a high-desert town near the Texas border where summer temperatures have been known to hover near 100 degrees.
Lafreniere, a native San Diegan, misses her friends, the Southern California weather, the ocean, the great restaurants – "the sophistication of a big city," as she puts it. It was only in the last year, she said, that Las Cruces got its first Starbucks.
"That was front-page news here," she said.
Fortunately for the couple, Las Cruces has a small but growing community of other Southern California transplants, some of whom made the move for exactly the same reasons.
Karen Roberts, who is Donna Lafreniere's hairdresser in Las Cruces, sold her Rancho Bernardo town house last year, made a $195,000 profit and used the money to buy a house in Las Cruces on a quarter-acre. She had money left over to open her own beauty salon. In San Diego, she worked as a beautician in somebody else's salon.
Roberts, 48, a single mother, also paid off her car loans and other debts. For the first time in her life, she can afford to take her 12-year-old daughter on vacations around the country. In Rancho Bernardo, the roar of traffic from Interstate 15 was deafening outside her town house. In Las Cruces, her property has glorious sunset views. From a chair on her patio, she can see "a golden eagle sitting on top of a power pole eating a snake." She plans to build a pool in her back yard.
Yet there are times when Roberts admits feeling alone, her Bohemian sensibilities out of place in a socially conservative area. She is appalled by the New Mexicans' erratic driving habits. The daily reminders of small-town life, such as the fuss over the annual pecan growers conference, sometimes make her nostalgic for California.
She calls herself "an equity refugee."
"Some days I go, 'What the hell was I thinking?' " she said.
She remains convinced, however, that she made the right decision. Perhaps never again in her life, she said, will she have a chance to reap such a huge cash windfall.
"When the brass ring comes around, if you don't make your move, you wave goodbye," she said.
Some San Diego County real estate agents see that same sense of urgency among other homeowners who are thinking about cashing out. The almost palpable fear among many potential sellers – whether correct or not – is that housing prices will drop when interest rates eventually rise from their current, historically low levels. The upcoming presidential election adds another element of uncertainty. All the more incentive, this reasoning goes, to sell now rather than wait.
Local real estate agents and other experts don't necessarily agree, although there's no real consensus about the long-term prospects of local housing prices.
Some experts think the local market is due for a slight or maybe a major correction. Others think prices won't go down for the foreseeable future. There is simply too much demand and not enough supply, they say.
"My barometer says there's still people coming into the market," said Steve Lemack of Realty Executives-Dillon in Chula Vista.
Lemack predicts local housing prices will eventually level off but not decline. He does, however, think local real estate prices have reached "nosebleed territory."
Kathy and Greg Marks of Chula Vista weren't willing to take chances. They started thinking about selling their home in April after their neighbors sold theirs and netted a titanic profit.
"You just sit in amazement and say, 'When is the bubble going to burst and what end do I want to be on?'" Kathy Marks, 42, said.
Last month, the Markses quit their jobs and sold their 3,000-square-foot home, which they'd bought in 1998, making a profit of $438,500. Then they moved back to their native Wisconsin and paid cash for a $375,000 house on an acre. Their new house in the Milwaukee suburb of Oconomowoc is 3,700 square feet, with five bedrooms, a lower-deck patio, a basement rec room, a balcony off the master bedroom and a swing set in the yard.
In San Diego, Greg Marks, 42, had a high-paying job as a plant manager for an electronics firm and Kathy Marks, 42, was a substitute elementary school teacher. Kathy Marks plans to continue her substitute work in Wisconsin, but her husband has yet to find a job.
Although the Markses have three children to support, they're not worried about their finances. They don't have a mortgage or car payments, having used their profits to pay off the loans on their two cars. Greg Marks figures he can afford to wait a few months before looking for employment.
"When you take out the house payments and the two car payments for your monthly expenses, you can make half the amount you make in California and have the same standard of living, maybe even a little higher," he said.
Are they worried about the snow and freezing winters? They claim not to be, having both grown up in the Midwest.
Still, making such a move can be risky for people who haven't lined up jobs and whose real estate profits aren't enough for early retirement.
The Byrnes, who are moving to Tennessee, both quit their jobs. He was a human-resource recruiter; she was an assistant vice president for a financial firm. They will lose their health-insurance benefits and will have to pay an estimated $500 a month for coverage. Joe Byrne says they'll need to find work eventually, although the profit from the sale of their Mira Mesa house has given them "a cushion until we settle in financially."
Financial experts caution about making such a move without considering all the details. For instance, while the cost of living might be lower in places like Tennessee, so are salaries, noted Jeanni Harrison of Harrison-deCharon Financial Planning & Tax Services in Rancho Bernardo.
Harrison also said the cost of selling one house and buying another typically eats away 8 percent to 10 percent of a seller's profits.
"The biggest risk," she said, "is if you want to come back to San Diego, you're probably going to be priced out of the market."
There are also the emotional costs of leaving behind family, saying farewell to neighbors, uprooting children.
Some of Steve and Elizabeth Taggart's relatives didn't take the news well when the native San Diegans decided this summer to sell their Bonita home and move to Nampa, Idaho, population 67,000, about 12 miles west of Boise.
Elizabeth Taggart has five siblings in San Diego County, and they were "kind of hurt," said Steve Taggart, 42, who worked as a part-time grocer in San Diego and also owned a company that organizes running events.
By moving now, the couple figure their 13-year-old son will be able to spend two years in the Idaho school system before he enters high school. That way, "when he gets to high school, he won't be some freak who just moved into town," Steve Taggart said.
The Taggarts bought their Bonita house in 1998 and made a $350,000 profit when they sold it last month. They paid $259,000 for an acre in Idaho, with views of the mountains from their brand new four-bedroom, 2,800-square-foot house. They paid cash.
They haven't lined up new jobs yet, but have enough money so they won't have to work full-time for the immediate future. The thought of Idaho's winter chill is offset by the knowledge that they can retire much earlier than if they'd remained in San Diego.
"In San Diego, we'd never have enough money to pay the mortgage off," Steve Taggart said. "We'd literally have to work the next 25 years."
Steve Taggart said his parents, who also live in San Diego, became emotional when he told them he was moving so far away.
"My mom cried and stuff," he said. "But they were understanding. They said, 'You guys know what's best.' "
The Socal housing market has hit a wall. You heard it here first.
A couple weeks ago, actually.
There certainly are a lot more signs up than a few months ago.....
but how far will prices fall?
My son is a real estate agent in San Diego. He would agree with your assessment. He had 25 deals in process last month. Only 11 this month. The small turnaround in interest rates disqualified a bunch of potential buyers. Some sellers are already dropping prices to get those buyers back before the deals are permanently out of reach.
I'm very pleased with my move to Idaho. Mira Mesa was just too crowded. I made a visit to San Diego 3 weeks ago. The issues that prompted me to relocate are even more significant now. I'm happy with a 3900 sq ft house on 1/3 acre in a beautiful neighborhood. Having the mortgage paid off is great. Ditto with having all the credit card debt paid off. College? I can handle it on a "pay as you go" basis because I have no other significant expenses. Even with 2 kids in college.
Is there anything I miss? Sure. Bolsa Vietnamese restaurant in Mira Mesa. La Salsa Mexican restaurant at Costa Verde. Siamese Basil Thai restaurant in Encinitas. San Diego Technical Books in Clairement Mesa. American Shooting Center in Kearny Mesa. El Cajon Gun Exchange.
How do you solve that in a small town? Buy books online from Amazon and Barnes & Noble after reading the reviews. Find new local restaurants with fabulous Greek, Mongolian and Thai cuisine. Patronize 5 local gunshops each of whose inventories exceeds all the gunshops in San Diego combined. Break out a snowmobile in the winter and jet ski in the summer. Take a 2 hour drive to Yellowstone National Park.
So many places like Idaho are simply marvelous, provided you can take your money with you there. Socal is still a wonderful place, provided your household makes over maybe 125K a year. Otherwise, it is a not so great. That is why the middle class is decamping.
Unfortunately for others, they also tend to screw up the market for the locals if it is a nearby California refuge state. Happened to Santa Fe, Durango, Seattle, Hawaii, you name it.
LOL. I read the headline and couldn't figure out why South Dakota was having a real estate boom...
I'm doing the same job in Idaho that I did in San Diego. My hourly rates are lower because I work from my home office instead of subsidizing very expensive office real estate in San Diego. My former co-workers from the San Diego office are dropping off the payroll by attrition. They can't compete in the labor market. The work is moving to other states where costs are more in line with the market. The company revenues continue to improve, but not as a consequence of contributions from the idle staff in San Diego.
My immediate boss is actually in Mclean, VA. My current workgroup has employees all over the continental U.S.. My contracts are structured such that 95% of the work can be done from my home office. The balance is accomplished by delivering hardware/software product to the customer site.
Me, too!
And then I thought I saw a pig soaring past my window.
I saw that story about Las Vegas having the highest gain in real estate prices last year. I know three couples that have bought "investment houses" there...and I can only imagine that once a perceived correction is noticed, that people will move out of these and into something else. I would say Phoenix too, as I hear rents keep falling there.
You know the market is out of whack when you're almost embarrassed to say you live in a house that's only worth $575,000. We live in Vista and if our small house was in Carmel Valley it would easily be worth $775,000, in La Jolla $1M+.
I will miss Eriberto's Mexican drive-thru, tho.
high-finance PING.
The San Fernando Valley's residential real estate market turned more buyer-friendly in July as single-family home sales declined slightly from a year ago and the median price, while $94,000 higher than a year earlier, retreated from June's record level, officials said Wednesday.
Last month, there were sales of 1,210 single-family homes, 63 fewer than in July 2003, according to the Van Nuys-based Southland Regional Association of Realtors.
Compared with July of 2003, though, the torrid price appreciation continued, with the median up by 23.8 percent from last year -- to $489,000. That was $16,000 less than June's record of $505,000.
Monthly swings are normal, and prices are expected to continue running ahead of last year's in the months ahead, and they will probably climb back above the half-million-dollar threshold, industry officials and analysts said.
"I don't see prices coming down at all," said the association president, Lynn Rinker.
July presented a mixed bag.
As the median price -- the point at which half sell for more and half for less -- has shot up for single-family homes, buyers seeking a less-expensive option turned to the condominium market. A total of 524 sold last month, up 14.4 percent from the previous July, and overall sales increased 0.2 percent.
The condominium median price rose by 24.6 percent from a year earlier to $299,000, but fell 5.1 percent from the June record of $315,000.
Price is an issue in both markets.
"'Affordable' is a very relative term," said Rinker, the association's president. "Realtors are relieved to see an easing of the unrelenting upward pressure on prices. The feeding frenzy is subsiding."
For example, pending escrows, a sign of future sales, fell an annual 11.8 percent, their sixth consecutive decline. They were off 8.6 percent from June.
Last week the Van Nuys-based trade group reported active listings were up an annual 86.2 percent to 4,356 properties at the end of July. That's a big jump percentage-wise, but only a 2-month supply at the current sales pace.
But buyers do have more properties to choose from than they did a few months ago, and this will probably moderate price increases.
The Valley's market mirrored all of Southern California during July, according to a separate report Wednesday from market tracker DataQuick Information Systems.
Last month, consumers bought 32,988 homes, 5 percent fewer than a year ago, the company said. The median price was $402,000 last month, up an annual 22.6 percent and 1 percent less than June's.
Los Angeles County's median price was $406,000, up an annual 23.8 percent. Sales fell 3.2 percent to 11,549 units. In Ventura County, the median price increased 24.6 percent to $502,000, and sales fell 16 percent to 1,281 units.
DataQuick analyst John Karevoll said there are no signs of stress in the market yet.
"It's still a seller's market. Buyers may have a bit more choice, but there is still a supply-and-demand imbalance, that's for sure," he said.
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