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Thursday, July 01, 2004

La Jolla, California Housing Prices Keep Climbing

by Blanche Evans

Condos have doubled in price, and single-family homes have risen 68 percent in La Jolla, California, a community of San Diego which is experiencing one of the hottest housing markets in the country.

"La Jolla is bounded by the Pacific to the west, Pacific Beach to the south, Del Mar to the north, and University Town Center to the east," says Realtor Joanne Fishman. "The jewel of the city of San Diego, La Jolla features secluded coves and beaches, ocean caves, and a marine preserve. The village district hosts cafes, boutiques, coffee houses, galleries, and fine restaurants. More than 8,000 people live in this city of expensive, ocean-view custom homes, making use of the La Jolla Beach & Tennis Club at La Jolla Shores, just south of the Scripps Institute of Oceanography. La Jolla also is home to the University of California at San Diego, numerous research institutes such as the Salk Institute, as well as tech and biotech companies. The Torrey Pines State Preserve is one of the largest ocean-front preserves on the coast and includes the nationally-known Torrey Pines Golf Course along with takeoff sites for hang gliders.

About the market, Fishman says, "The La Jolla market is strong, but not as strong as some of other north county communities in that the average number of days a home stays on the market before being sold is 78 compared to 35 or less in some other areas. This is attributable to the high average sold price of $1,722,668 in May, up 19 percent this year over the average sold in 2003, according to MLS statistics. Currently there are 154 homes on the market in La Jolla ranging in price from $939,000 to $29 million."

Says Realtor Jason Yow, "La Jolla is the coastal community in San Diego where most of the priciest homes exist. It boasts a very high literacy rate due to its proximity to University of California, San Diego. It also has an abundance of desirable local shops and dining establishments. If I had to be stuck anywhere in San Diego County, it would have to be La Jolla!

He says, "Real estate news reveals that La Jolla rose significantly for May '04 in comparison to the same time last year. The median sales price for a single-family detached home was $1,739,773 which represents an increase of 68.1percent from May '03. The median sales price for a condo was $669,000 which represents an increase of 52.8 percent from last year. The interest rates have ticked significantly upwards in the in past few months. This will scare away those with a short memory. But interest rates are still at historic lows. Also, there is a frenzy of people trying to lock in their rates by purchasing before it goes up even more. I have noticed a significant increase in the number of homes available for sale and time they stay on the market.

"In La Jolla, in the local MLS, there are currently 168 single-family homes from $799,000 to $29 million and 126 condominiums from $379,000 to $4.5 million," say Realtors Max and Edith Ricketts. "Residential sales continue strong throughout San Diego County. Although San Diego County inventories of available resale homes and condos have increased sharply in the past two months, inventories and prices in La Jolla appear to be stabilizing."

Published: July 1, 2004

Blanche Evans is the publisher of Agent News and the associate editor of Realty Times, the Internet's largest independent real estate news service. She is the author of two best-selling real estate books: The Hottest e-Careers In Real Estate, Real Estate Education Company, an Internet marketing primer for real estate professionals, and homesurfing.net: The Insider's Guide To Buying And Selling Your Home Using The Internet, Dearborn, a consumer homebuying and selling guide. In 2000, she was recognized by the editors of REALTOR(r) Magazines as one of the "25 Most Influential People In Real Estate," and in 2003 when the "Most Influential" list was updated, she was recognized as one of nine "Notables." She is also a frequent contributor to "Your Money" on CNN fn.

Copyright © 2004 Realty Times. All Rights Reserved.

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Retirees: To Mortgage Or Not To Mortgage

by Henry Savage

Question: My husband and I are recently retired and living on a fixed pension and social security in Oakland, California. We own a townhouse with a $130,000 mortgage balance. We could probably sell it for at least $350,000 and net well over $200,000. Our plan is to sell it this year and move to the west coast of Florida where the weather is nice and the real estate is cheap. I think we should purchase our new home in Florida with the proceeds of our Oakland house and carry no mortgage because we are on a fixed income. My husband thinks we can afford a mortgage and that we should invest the equity instead. We don't have a lot of savings but we don't have big spending habits. Is there a rule of thumb as to how large of a mortgage retirees should take?

Answer: Lenders have income guidelines to help determine an affordable mortgage in relation to household income. But I never advise a borrower to determine their mortgage amount based on what the bank will lend. In my experience, most folks don't want a mortgage balance and monthly payment as high as most lenders will allow. Remember that the lender doesn't care about whether or not you can feed yourself at the end of the day -- it only cares about one thing: receiving your mortgage payment.

My guess is that you and your husband will find that a middle ground is best suited for your situation. What I mean is that it's probably not best to pay all cash, and it's not best to borrow as much as possible. Let's look at some of the issues that need to be considered before you and your husband make this decision.

First, you should consider affordability. Create a realistic monthly budget. Write down all your typical living expenses and try to be as realistic as possible. Review your checkbook register if it helps. The idea is to come up with a number (or a range) that includes all typical expenses. Be sure to include things such as estimated real estate taxes, hazard insurance and home maintenance costs in your budget.

Once you have an idea as to what your average monthly cash outflow is, compare it with your fixed income. This will help you determine how much of a mortgage payment, if any, you would comfortably be able to afford.

The second thing to consider is liquidity. You say you don't have a big savings account. Consider the drawbacks of having a very limited liquid savings account. Every household should have some cash in the bank for a rainy day. What would happen, for example, if you had a death or illness in the family and you had to fly across the country and stay in a hotel for week? If you don't have the cash to pay for such an expense, you run the risk of creating an ongoing credit card balance -- something that should be avoided like the plague.

Third, you should consider the tax issues. Undoubtedly, any mortgage interest you pay can be deducted on your income tax return. In essence, a tax deductible mortgage means the actual "cost-to-borrow" is less than your mortgage interest rate. For example, a six percent rate on a 30-year mortgage might equate to only five percent when you take into consideration the tax savings. A tax advisor would be able to help you on the issues of itemizing deductions on your return versus taking the standard deduction.

The last thing to do is compare the "cost-to-borrow" of a mortgage with the advantages of keeping your money and using it. If your after tax "cost-to-borrow" is only five percent, it's perfectly reasonable, although not guaranteed, to assume that money invested wisely will earn a considerable higher return than five percent over time. If you agree with this notion, the logical conclusion would be that an affordable mortgage balance would make some sense.

My advice is to first ascertain the amount of mortgage you can comfortably afford. Obtain the mortgage, stash away a bit of cash for emergencies and invest the rest wisely and conservatively.

Published: July 1, 2004

Henry Savage, the president of PMC Mortgage Corporation in Alexandria, VA, is a mortgage columnist whose work has appeared in numerous consumer, real estate, and mortgage publications. Mr. Savage welcomes your questions for possible use in this column, however because of the volume of mail received, Mr. Savage cannot answer questions individually.

Copyright © 2004 Realty Times. All Rights Reserved.

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