Don't Sell Your Beach House

Posted by: Chris Palmeri on May 1, 2008

california.jpg

There was an interesting article in today’s San Jose Mercury News talking about the latest census data and California’s demographics. White middle-class residents are leaving the state. The Hispanic population is still growing but at a much lower slower rate than Texas. The reason: the high cost of living and better job prospects elsewhere. The housing bust could reverse the trend.

The article goes on to note another trend that of Baby Boomers selling their California homes when they retire, taking their fat profits and moving elsewhere, choosing to live their Golden Years some place other than the Golden State.

My wife and I took a little trip down the California coast last weekend. We visited a bunch of towns just north of San Diego and as usual, checked out the local home prices. While housing prices in inland communities are getting hammered, there were no bargains to be found at the beach. If you want to live some place nice with a view of the ocean such as Del Mar or Encinitas you’re going to pay a couple of million for it.

Middle class retirees may sell their McMansion and move some place cheaper but lots of well to do Boomers will stay pay up for property on the ocean. You may have heard of the retiree who was killed by a Great White Shark last week swimming off of Solana Beach. I still saw surfers and kayakers in the water despite the shark warnings. There’s something about the lure of the ocean.

Reader Comments

Pinder

May 5, 2008 12:40 AM

Thank you for your great nice. It was good advice.

DontGetSuckerIn

May 5, 2008 4:36 AM

The geography of So.California consists of a long narrow sliver of cool coastal area then the vast semi-arid desert.The early land investors(landscamers) bought the vast desert for $0.25/acre. Later, these scamers sent postcards showing fruits hanging from trees, imported palm trees, swimming pool, flowering gardens, and yes, even had naive editors of the east write about the beautiful weather of So. California-- some did so for a token vacation or a modest fee. Deja vu? California landscamer didn't tell the buyers about the water shortage in the desert inferno. Earlier in So. California history,the water problem was temporarily solved by Mr. Mulhulland who piped in stolen water from Owens Valley, and later a series of aquaducts from Sacramento delta, Mono Lake, and Colorado River. With new supplies of water, the landscamers turned to land development selling not only the housing but the "California Promise." Example: Advertised on a giant billboard next to I-5 freeway, "The California Promise. Live it in Mission Viejo." The return of WW2 GIs sustained the migration to and the settlement of So. California. Paved streets, superhighways, and urban sprawl obscure the fact that So.Calif is basically a semi-arid desert with its seasonal highwinds, dry air, and sizzling summer heat. The Spin Doctors of Madison Ave, hired by the landscamers, worked magic upon the proletariates. With the new sources of water, the desert now bloomed with manicured green lawns, majestic palm trees, and flower gardens with kaleiscope colours. Landscamer enlisted the assistance of magazine writers who would photograph this Eden to be published on national magazines back east, such as NY, New Jersey,etc. Before you can say, "California, here we come," the biggest real estate scam was in full force. What's the number one scam in California? It's real estate, real estate, real estate. "Buy land now, because God aint making any more of it." Madison Ave emphasized your purchase is for a "home" not a house. "Buy your home now because it's a good investment and tax write off. Buy your home now and kick your landlord to the curb." With so much money to be made, real estate agents sign-on in droves; real estate interest groups and organization flourished promoting the virtues of "home" ownership; and naturally, the finance companies came calling. For the scam to work, buyers must qualify and move up to higher price "home." By ensuring a steady supply of liquidity in the mortgage papers, scamers sustain the ability of an existing owner using his equity to finance his next mover-upper. And thus, the scamer were able to perpetuate the real estate scam --that is until the recent mortgage meltdown fiasco caused by their own greed overwhelming their bag of tricks: over appraised property,undocumented income, questionable credit history. The moral of this story: don't believe that postcard you received, or the story you read recently about California's beautiful real estate. It's just an old scam from a page in So. California history.

JMH

May 5, 2008 12:53 PM

I agree with dontgetsuckerin. As I stare out at the surfers and joggers here in Cardiff, Ca (just south of Encintias) enjoying my breakfast after an early morning surf session, dressed in shorts and flip flops (just as I did in December, January, etc.), I can't understand why anyone would want to live here. My advice? Stay away so home prices keep dropping. $500k for nice 3/2 on the beach would be great.

XYZ

May 6, 2008 7:21 PM

I own oceanfront property condo in Del Mar. It's down maybe a max of 3% from peak. Location, location, location. You don't get more location than oceanfront California. There is always a pent up demand for it because of the limited supply and the owners' reluctance to sell. Lots of foreigners with strong currencies are now trolling the market.

descartes

May 7, 2008 12:51 PM

This is the reason I bought in Shelter Island, NY
No desert, 125 miles from NYC and it feels like 1,000 miles, no sharks, warm water, beautiful landscape, great beaches no crowds ...just 2 hours from the financial capital of the US.

Midwest

May 7, 2008 11:49 PM

Location is a prime driver behind prices of real estate but no locale, no matter how in demand, can weather a pinching off of credit. Even the most attractive areas will feel it soon and that includes southern California. If buyers cannot get a loan, then prime real estate will sit and sit and sit before the markdowns start fast and furious. Japan real estate shed as much as 66% of its value and to say it can't happen here is foolish. California's coastline will surely see a slowdown in sales and a major leveling off in price. Let a few of those choice coastal homes go into foreclosure auction and prices will take a beating.

Scambuster

May 8, 2008 5:57 AM

Because of their one sided comments, JHM, and XYZ are most likely real estate speculators. Real estate speculation is a big scam in So.California. Folks with less money speculate in the Riverside, Fresno, San Bernardino, and elsewhere in the remote semi-arid desert of So. California. Folks with more money and the tons of real estate investment companies with millions of $$$ all speculate on beach properties. Some of the more popular speculation play grounds are Newport Beach, Huntington Beach, and around San Diego County such as Del Mar, La Jolla and the Coronado peninsula. Playing on the romantic image of beach life, these speculators won't tell you about flood plain, the active Newport-Inglewood earthquake fault that cuts parallel to So.California beaches, tsunami dangers, liquifaction soil, the San Onfre Nuclear plant near San Clement which is just north Del Mar, and high maintenance and property taxes. Even the less emotional issues are problematic. To wit: Because of the corrosive ocean salt air, and the intense ultraviolet radiation reflection from the ocean, your beach front home deteriorates 3 times or more faster than normal. Wood windows, doors, stairs, columns and plywood roof sheathing are constantly attacked by these elements. Paints peel quicky. Exposed wood rots faster than normal because of the moist air. Another thing these speculators won't tell you: The intense exposure to ultraviolet ray is not recommended to people with fair complexion because it can cause premature aging and even some form of melanoma. The beach weather is not always warm and sunny. There are cold windy days, especially during the stormy months of October, November, December, January and February. If your property is not protected by a government built sea wall(hint: lowest bidder), your living room becomes a swimming pool for marine life. If your beach home is above sea level, your home will be at sea level when the constant ocean waves undermine the cliff walls. These are minor things your friendly real estate agent and speculators won't tell you. But Bloggers will tell how wonderful, romantic, and peaceful oceanfront property is because they have their agenda above your yours. Remember the answer to this question: What is the biggest scam in So. California? It's real estate, real estate, real estate. When Bloggers are telling you about "lots of foreigners with strong currencies are now trolling the market," it time to run for the heartland of Kansas where decent honest Americans still exist, where a man's word means something, and where a man's morality is more important than just making a buck. I thank XYZ and JHM for the opportunity to comment on this most important social issue.

Squeezebox

May 12, 2008 1:56 PM

It's the same old story - supply and demand. For awhile, the California universities turned out some highly paid programmers and there was more demand for housing than there was supply. The programmers outbid everyone and they got the houses. Everyone else got what was left. Then the highly paid programming jobs went to India. Suddenly there was too much supply and not enough demand. Prices are plunging.

Marla

July 18, 2008 11:33 PM

If you want to find the biggest real estate fraud operation in the history of CA - just follow Mayor Alan Autry's so-called "citywide upgrade." Residents of Fresno are being annihilated in order to replace sewer/water lines without authorization, permits or inspections. That is how property is being vacated in order to pull this off - eliminating people. Trail of ID theft, forged deeds, altered legal documents, suspected homicide as Autry's key man behind this laughs, "You can't live for the dead." Property is then haphazardly patched back together and sold as "original" on new deeds that entail illegally revised property lines.
Mayor Autry has the audacity to say that this operation is helping to lower the crime rate in Fresno. Thanks, pal. Tell that to my dead family members, my dead neighbors, and all the others who are dead as a result of this barbaric operation - all linked to the same mob. Not only taking what others worked lifetimes for but in some cases, even their identities.

lookingup

August 28, 2008 9:27 PM

confused on article why not move out of California.....Theres tons of traffic hear, theres no privacy here, new houses take away your privacy its like living next to guard towers, more and more people come to California every day.....

Confused about the article because its tiny compared to the second comment, wheres "the whole article"....Not just some day trip to San Diego

Patty

February 16, 2009 1:18 PM

I stayed at a great beach house in San Diego. I wish the owners were selling it. I would highly recommend the place at http://sandiegohouserentals.com/

vincent

July 7, 2009 6:38 PM

Houses on and near the beach in florida are still reasonably priced in some places, I found a website with a nice house in Flagler Beach--which is a nice, some-what quaint little town; the house is a block from the ocean for under $300,000. http://pinkreclusestudios.com/houseforsale/

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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