Buy what you want and can enjoy, not what you can “get”. If you ENJOY your home, you will want to keep it.
Actually, I would NEVER buy in this market with all the things I know about the Fed and crap in Washington. Renting is FAR superior to buying in Orange County.
Posted by dethman on 10/27/09 at 04:01 AM
always informative articles. but what’s the with freaky looking pictures?
It’s Halloween week. Yesterday was the song “Spooky,” and today it is “Thriller.” I have “Witchy Woman” coming out tomorrow. I found some intresting images for that one.
Posted by autox on 10/27/09 at 05:48 AM
“The real estate market will always boil down to loan plus downpayment. The more money you have saved, the greater your downpayment and the more you can bid to compete with others at your income level. The saver always comes out ahead. “
The problem is once people save more than 20%, they don’t stay within their own income level.
Posted by Geotpf on 10/27/09 at 05:49 AM
I like how in Irvine, “an unusually large lot” means one seventh of an acre.
Posted by cara on 10/27/09 at 06:24 AM
IR,
Savers win, huh? Let’s think about that for a second. Suppose you save $25k/ year by renting instead of owning. And you do this for 8 years, and then buy with $200k down. Yes, during the saving time that money was liquid, which is great for financial comfort and security. But in order to translate into bidding out other buyers you STILL have to eventually put it all into real estate, just later rather than sooner. Sure you earned rather than paid interest on it, and by having smaller leverage your price point is less fickle-ly tied to interest rates, but if in the end you still have to retroactively assign that much of your income to real estate, have you really won?
Posted by Lee in Irvine on 10/27/09 at 07:10 AM
What’s The Fed (our caretaker) gonna do about this little problem? Look at all the home-debtors in this OC neighborhood. BTW, most of these homes are in the Yale loop. Tic, Tic, Tic
10 Elderwood, Irvine, CA - more info »
Foreclosure: $524,000
2 bed 2 bath
“This property is a Pre-Foreclosure.
11 Whispering Wind, Irvine, CA - more info »
Foreclosure: $830,000
4 bed 3 bath
“This property is a Pre-Foreclosure.
34 Claret, Irvine, CA - more info »
Foreclosure: $371,000
2 bed 2 bath
“This property is a Pre-Foreclosure.
61 Claret, Irvine, CA - more info »
Foreclosure: $352,000
2 bed 1.5 bath
“This property is a Pre-Foreclosure.
42 Claret, Irvine, CA - more info »
Foreclosure: $389,788
2 bed 1 bath
18 Southsand, Irvine, CA - more info »
Foreclosure: $474,900
2 bed 2 bath
“This is an REO
Misty Run, Irvine, CA - more info »
Foreclosure: $494,694
3 bed 2 bath
13 Longshore, Irvine, CA - more info »
Foreclosure: $720,000
2 bed 2 bath
“This property is a Pre-Foreclosure.
Posted by lowrydr310 on 10/27/09 at 07:39 AM
What is a .75 bathroom? Is it a complete bathroom with half a toilet?
Posted by ConsiderAgain on 10/27/09 at 07:46 AM
“Federal Reserve interest rate support is a major reason not to buy a home. When these supports are removed and interest rates rise to market levels, loans will get smaller and prices will go lower ....”
That is the most astute observation of the year.
The question is timing. And how much the time between now and whenever the government gets out of rate-support mode is worth to you.
Assuming financial ability to buy is not a factor, one’s resolve to not support the bubble is currently being tested against the one’s desire to own a home.
Posted by gman on 10/27/09 at 07:55 AM
I’m getting tired of waiting. Sigh.
Posted by Barren_Irvine on 10/27/09 at 08:28 AM
Good things come to people who are patient. Don’t you know “Patience is a virtue”. Not a whole of people have that virtue in today’s bubble market. I am waiting for 10 yrs and I sure am not going to do something stupid now; when judgment day is upon us…
Another house near me that I know. I watched them fix it up last year. Then they had a for lease sign out and someone was living there. Recently I saw the for sale sign. So did the previous owner remodel and then the flipper bought it? I’m thinking that’s the case.
Posted by Eat that! on 10/27/09 at 09:31 AM
The problem as I see it, is we are up against a wall. A classic liquidity trap. If we pull out the tax credit, the housing market will crash. If we raise interest rates, the housing market will crash. If we stop propping up failed banks, then they’ll have to dump their inventory, the housing market will crash. If we don’t keep the patient on life support, he’ll crash. There’s no easy way out of this scenario, until someone pulls the plug for us (i.e. the dollar crashes).
The sucky part is, I make more money and I don’t get any tax benefits for being prudent and waiting out a very sick housing market. In fact, I’m punished for it, getting less interest on my savings and being placed in a higher tax bracket.
Posted by Alan on 10/27/09 at 09:43 AM
I read the address as “4 EARLYMORON Irvine”
Had to go back and re-read it.
You are assigning that much of your income toward housing whether your rent or own. The question is do you want to assign that much of your savings to own such a volatile asset?
In our IHB reports, we always recommend a healthy cash reserve held in reasonably liquid investments outside of real estate. In reality, most people do go all-in when they buy a house, but we certainly do not recommend it.
If you put some amount of your savings into real estate, and that money is producing either a cashflow benefit or providing an inflation hedge through appreciation, then you are getting a return on your money. As long as you do not put in too much, you can get a reasonable rate of return. I covered those issues in Investment Value of Residential Real Estate.
BTW, I have the calculator up and running for you.
This whole week is Woodbridge properties. Only today is not a short sale, but I found it interesting because the seller is dreaming.
Posted by Geotpf on 10/27/09 at 10:19 AM
Close, but a full bath should be sink/toliet/bathtub/shower. That is, each quarter of a bath is one plumbing fixture; a full bath has four fixtures, a 3/4 has three, a 1/2 has two. Not quite sure how you count a bathroom with a tub but no shower (not likely in Irvine, but they do exist in some older homes).
Posted by Chuck on 10/27/09 at 10:25 AM
Funny, 18 Southsand was featured on this blog about a week ago, and the main point was that it was refreshing that it was NOT a short sale or REO and that the mortgage debt was very low. Yet it shows up on your list as a $474,000 foreclosure….
Posted by Geotpf on 10/27/09 at 10:36 AM
Well, assuming there isn’t a second big crash due to all the pre-foreclosures finally becoming REOs and short sales all at once (a bit of an assumption, to be sure), you shouldn’t wait any further. According to Redfin, Irvine’s house prices are up by $19 a square foot from this time last year and up by $27 a square foot from the absolute low in early March. (Irvine condos have been basically flat along the bottom since March.)
Of course, even at this (either permanent or temporary) bottom, renting in Irvine is cheaper than owning. Since there are high transaction costs in buying and selling a house but not in moving from one rental unit to another, I would buy now, but only if you plan on living in the same place for at least a decade or so, perferably until you die or at least you pay off the mortgage. Otherwise, rent on a permanent basis. Other cities are different, of course.
Posted by Sue in Irvine on 10/27/09 at 10:36 AM
11 Whispering Wind is right around the corner from this house. The map has the street as Whisper Circle, which is wrong.
I seem to recall 11 Whispering Wind listed a few months ago at 1.25 million. If this is the same house it’s comparable to today’s house.
Posted by Geotpf on 10/27/09 at 10:37 AM
This comment was supposed to go under gman’s “I’m tired of waiting” comment below. Dunno why it moved up here.
Incidentally, there are .25 baths in Irvine. There are a few homes in the El Camino area that have a bathroom with just a sink. I found that strange.
Posted by Sue in Irvine on 10/27/09 at 10:43 AM
This was meant to go under Lee in Irvine list of nearby homes. 11 Whispering Wind is on his list.
Posted by Eat that! on 10/27/09 at 11:02 AM
See that’s the problem right there. “Plan on living in the same place for a decade or more”. That’s one reason why NOT to buy a home. Who wants to live in the same tiny condo or town home for 10 years or more. I say the H with that.
I’m not sure if $1.15m for a 3000sft Woodbridge house is delusional.
Remember the blog entry for the equity sale of the Woodbridge house that low-listed for $869k? It recieved multiple offers over $1mil and closed at $1.13m earlier this month.
Posted by cara on 10/27/09 at 11:17 AM
If you continue to rent forever then you never have to assign any of your savings towards a volatile asset, and can use it all as reserves, so no buying and renting do not inherently put the same amount towards housing.
The problem as I see it that saving does not get you out of this SoCal loop of paying way too much of your income towards housing. Whether you saved it up ahead of time, (out of income) or you borrow for next to all of it (out of income). It doesn’t escape the problem of having way too much of your net worth in your house.
(thanks for the calculator, I’ll check it out!!)
Posted by gman on 10/27/09 at 11:47 AM
I’m pouting because I know that there’s likely going to be another leg down and my tax money’s being used to forestall that. Sigh.
Posted by Fracture on 10/27/09 at 11:55 AM
Don’t forget:
Black Magic Woman - Fleetwood Mac / Santana
Superstition - Stevie Wonder
Dragula - Rob Zombie
etc… fun theme week =)
Posted by gman on 10/27/09 at 11:56 AM
10 years and you’re not tired of waiting? You must be some kind of a monk. Getting to the point where 1/3 of your mortgage term would have been paid for at that point. Isn’t there just a point where if it meets your minimum needs and you can easily afford it, you should just take the plunge?
Posted by Craig on 10/27/09 at 12:35 PM
Isn’t the real danger of rising mortgage interest rates that they will trigger a humongous new wave of mortgage defaults from everyone with adjustable rate mortgages? Many people figured they could sell the house before the reset, but now they have no equity and no way out. If the only options are locking in at unaffordable fixed rates or walking away, guess which one wins….
Posted by Craig on 10/27/09 at 12:37 PM
All that proves is that there are lots of delusional people out there, and some of them have money.
Posted by Geotpf on 10/27/09 at 12:38 PM
Makes sense to me. That is, if you find your dream home, go ahead and buy it. If not, renting probably makes more sense financially, IMHO.
Posted by Craig on 10/27/09 at 12:38 PM
I feel your pain, brother….
Posted by Geotpf on 10/27/09 at 12:39 PM
Oh, this is Irvine-only advice. In other parts of the state/country, things may be different.
Posted by Geotpf on 10/27/09 at 12:40 PM
Rates would have to rise a lot for this to be a problem, unless people are buying today with a variable interest loan, which is amazingly stupid considering that rates will probably never be this low again during our lifetimes.
Posted by Geotpf on 10/27/09 at 12:45 PM
I think a lot, again, depends on how permanent your plans are. If your job and life situation is such that you plan on never moving again, go for it. If not, renting is probably best.
(Unless you live out in the sticks, like in Riverside (where I’m at). Then go ahead and buy no matter what. The math heavily favors buying out here, opposite of Irvine.)
Posted by Geotpf on 10/27/09 at 12:50 PM
And it’s not a laundry room or wet bar of some sort?
Posted by And then, there's that on 10/27/09 at 12:51 PM
So… a wet bar is a .25 bath? Right.
Posted by And then, there's that on 10/27/09 at 12:58 PM
Same thing in Valencia, CA. Med household income is in the low $100s, median homes in the low $400s.
We bought earlier this year with the help of 2 tax credits ($10k CA new const, $8k first time) and a 5.0% 30yr fixed. Builder kicked in 35k of incentives, plus 4% back on a broker co-op (hard to spit in this state and not hit a broker). All with 3.5% down, courtesy of Uncle FHA.
We were literally paid to buy the house.
Sure, the value will go down a bit (though prices here have already corrected nicely), but my money isn’t at risk.
Posted by newbie2008 on 10/27/09 at 01:10 PM
The way I see it, the laws favor the non-saver with low to no money down.
Case #1: Responsible traditional “homeowner” uses 20% down on over price house that was bid up by “new generation homeowners” and then must sell at 20% reduction because of relocatioin. The low to the homeowner will be the whole 20% down plus cost of house sale.
Case #2: New generation “homeowner” Purchase over priced house with 0% down and then must sell because of relocation. Buy new home with with 3.5% down, and then walk away from first home. No cost for sale of first home. The first and second home can be bid up to almost any price without significant loss to homeowner.
Radio ad this morning with financing of 125% equility at 4%. Buying down the interest with the money above 100% equity? Looks like bad habits are hard to break, especially when the govt. is encouraging them.
Lee, Q: What’s the caretaker going to do? Answer: Kick the can down the road, and let your children and grandchildren pay for the mess.
Posted by Lee in Irvine on 10/27/09 at 01:12 PM
Doesn’t that make you feel warm and fuzzy inside.
Just think, the incompetent federal govt is now doing everything they possibly can to make sure you and I pay a bubble price for our Irvine home. They’ll even offer you an $8,000 tax credit if you do it now.
I see what you are saying. The way out of the SoCal loop of paying too much of your income towards housing is a choice about quality of life.
People can always decide on their own accord to put less than the allowed maximums toward housing and accept a lower standard of living in exchange for a lower housing cost. If you consistently make that choice, you will save money. When the time comes to “move up,” someone wanting to get out of the loop could refinance to a shorter amortization period and stay where they are rather than stretch again and again for the biggest most expensive house they can obtain. The crazy loop is a choice, or more accurately, it is a trajectory that results from a series of choices in housing over many decades. I want my trajectory to avoid crashing into a market mountain.
Posted by Lee in Irvine on 10/27/09 at 01:28 PM
I think there are opportunities to flip right now, but doing it at this time in Irvine California isn’t very smart. There are so many better opportunities, that are much less risky than betting on a $900,000 Irvine flip. I don’t think it’s smart to try to flip anything in white collar Orange County right now ... and then trying to do it with something that’ll likely require financing outside of the govt’s backstop is just stupid. Oh well ... JMHO ... but I’ll follow this property to see how things work out.
Granted, most of us know the difference but that’s why non-fundamentals are usually the suspect in real estate valuation.
Posted by tonye on 10/27/09 at 01:52 PM
Huh? Says who? There’s lot of long term owners who are way above that 20%. Even with refinances and HELOCs you’ll find many owners sitting on 50% equity to paid off houses.
At some point, your reach a point where your mortgage payment is less than rental. Heck, we just did a refi to 5 1/8%. Our mortage with insurance and taxes is like at least 500 bucks less than renting. How much would a 2700 sq foot, 5b/3ba “9 year old” house rent for in TR?
As IR said, the savers always win.
Posted by tonye on 10/27/09 at 01:58 PM
The way of the saver is to lock in the house payment and allow for inflation to eventually lift the cost of renting to above your mortgage payment.
Granted, the 0% money down screwed that up, but with historic very low interest rates and depressed housing valuations (OK more like a return to normal), if you can lock up a payment that you can easily handle you can sit for 30 years and pay off your house.
Again, it’s all in the monthly payment: mortgage vs. renting. Somehow I don’t think rents are going to drop 30% in the next five years in Irvine or anywhere West of the Santa Ana Fwy (except of course in Santa Ana proper).
Of course, as a saver, I take the long look. To me the house is a place to live, raise my family, play my Frank Zappa, hold my 4000 LP collection, my Sony SL1000HF Super Beta Deck, my four channel reel to reel, assorted Marantz quad receivers, etc, etc… As my brother in law says: “You guys sure have a LOT of stuff”...
If I had to rent a place to hold my stuff I surely could not afford it (or rather, I would not want to pay it).
Posted by tonye on 10/27/09 at 02:02 PM
Valencia?
Commute?
Posted by And then, there's that on 10/27/09 at 02:40 PM
Commutes with traffic…
45 mins to Pasadena or Glendale.
35 mins to Burbank.
Direct metrolink to Downtown LA.
45 mins to the west valley / warner center.
Access to 4+ job hubs in less than one hour. That’s assuming you don’t work in town; there are actually quite a few employers with HQs here (Princess Cruises, Woodward HRT, Advanced Bionics are the 3 largest).
90th+ percentile on schools. One of the safest cities in the US. Affluent demographic, master planned by Victor Gruen.
And hotter than blazes in the summer !
Posted by matt138 on 10/27/09 at 07:03 PM
“It’s the least worse option.” ha ha. I love when people tell me that. It’s that rationale, over decades, that got us into this mess.
Posted by matt138 on 10/27/09 at 07:12 PM
Housing - check mate, Dollar - check mate. Please tell me your savings are in other currencies.
Posted by Swiller on 10/27/09 at 06:58 AM
Buy what you want and can enjoy, not what you can “get”. If you ENJOY your home, you will want to keep it.
Actually, I would NEVER buy in this market with all the things I know about the Fed and crap in Washington. Renting is FAR superior to buying in Orange County.
Posted by dethman on 10/27/09 at 04:01 AM
always informative articles. but what’s the with freaky looking pictures?
Posted by IrvineRenter on 10/27/09 at 05:19 AM
It’s Halloween week. Yesterday was the song “Spooky,” and today it is “Thriller.” I have “Witchy Woman” coming out tomorrow. I found some intresting images for that one.
Posted by autox on 10/27/09 at 05:48 AM
“The real estate market will always boil down to loan plus downpayment. The more money you have saved, the greater your downpayment and the more you can bid to compete with others at your income level. The saver always comes out ahead. “
The problem is once people save more than 20%, they don’t stay within their own income level.
Posted by Geotpf on 10/27/09 at 05:49 AM
I like how in Irvine, “an unusually large lot” means one seventh of an acre.
Posted by cara on 10/27/09 at 06:24 AM
IR,
Savers win, huh? Let’s think about that for a second. Suppose you save $25k/ year by renting instead of owning. And you do this for 8 years, and then buy with $200k down. Yes, during the saving time that money was liquid, which is great for financial comfort and security. But in order to translate into bidding out other buyers you STILL have to eventually put it all into real estate, just later rather than sooner. Sure you earned rather than paid interest on it, and by having smaller leverage your price point is less fickle-ly tied to interest rates, but if in the end you still have to retroactively assign that much of your income to real estate, have you really won?
Posted by Lee in Irvine on 10/27/09 at 07:10 AM
What’s The Fed (our caretaker) gonna do about this little problem? Look at all the home-debtors in this OC neighborhood. BTW, most of these homes are in the Yale loop. Tic, Tic, Tic
10 Elderwood, Irvine, CA - more info »
Foreclosure: $524,000
2 bed 2 bath
“This property is a Pre-Foreclosure.
11 Whispering Wind, Irvine, CA - more info »
Foreclosure: $830,000
4 bed 3 bath
“This property is a Pre-Foreclosure.
34 Claret, Irvine, CA - more info »
Foreclosure: $371,000
2 bed 2 bath
“This property is a Pre-Foreclosure.
61 Claret, Irvine, CA - more info »
Foreclosure: $352,000
2 bed 1.5 bath
“This property is a Pre-Foreclosure.
42 Claret, Irvine, CA - more info »
Foreclosure: $389,788
2 bed 1 bath
18 Southsand, Irvine, CA - more info »
Foreclosure: $474,900
2 bed 2 bath
“This is an REO
Misty Run, Irvine, CA - more info »
Foreclosure: $494,694
3 bed 2 bath
13 Longshore, Irvine, CA - more info »
Foreclosure: $720,000
2 bed 2 bath
“This property is a Pre-Foreclosure.
Posted by lowrydr310 on 10/27/09 at 07:39 AM
What is a .75 bathroom? Is it a complete bathroom with half a toilet?
Posted by ConsiderAgain on 10/27/09 at 07:46 AM
“Federal Reserve interest rate support is a major reason not to buy a home. When these supports are removed and interest rates rise to market levels, loans will get smaller and prices will go lower ....”
That is the most astute observation of the year.
The question is timing. And how much the time between now and whenever the government gets out of rate-support mode is worth to you.
Assuming financial ability to buy is not a factor, one’s resolve to not support the bubble is currently being tested against the one’s desire to own a home.
Posted by gman on 10/27/09 at 07:55 AM
I’m getting tired of waiting. Sigh.
Posted by Barren_Irvine on 10/27/09 at 08:28 AM
Good things come to people who are patient. Don’t you know “Patience is a virtue”. Not a whole of people have that virtue in today’s bubble market. I am waiting for 10 yrs and I sure am not going to do something stupid now; when judgment day is upon us…
Posted by irvine_home_owner on 10/27/09 at 08:59 AM
I believe a .75 bathroom is sink/toilet/shower.
1/2 bath is sink/toilet.
1 bath is sink/toilet/bathtub.
Posted by Sue in Irvine on 10/27/09 at 09:10 AM
Another house near me that I know. I watched them fix it up last year. Then they had a for lease sign out and someone was living there. Recently I saw the for sale sign. So did the previous owner remodel and then the flipper bought it? I’m thinking that’s the case.
Posted by Eat that! on 10/27/09 at 09:31 AM
The problem as I see it, is we are up against a wall. A classic liquidity trap. If we pull out the tax credit, the housing market will crash. If we raise interest rates, the housing market will crash. If we stop propping up failed banks, then they’ll have to dump their inventory, the housing market will crash. If we don’t keep the patient on life support, he’ll crash. There’s no easy way out of this scenario, until someone pulls the plug for us (i.e. the dollar crashes).
The sucky part is, I make more money and I don’t get any tax benefits for being prudent and waiting out a very sick housing market. In fact, I’m punished for it, getting less interest on my savings and being placed in a higher tax bracket.
Posted by Alan on 10/27/09 at 09:43 AM
I read the address as “4 EARLYMORON Irvine”
Had to go back and re-read it.
Posted by IrvineRenter on 10/27/09 at 09:53 AM
You are assigning that much of your income toward housing whether your rent or own. The question is do you want to assign that much of your savings to own such a volatile asset?
In our IHB reports, we always recommend a healthy cash reserve held in reasonably liquid investments outside of real estate. In reality, most people do go all-in when they buy a house, but we certainly do not recommend it.
If you put some amount of your savings into real estate, and that money is producing either a cashflow benefit or providing an inflation hedge through appreciation, then you are getting a return on your money. As long as you do not put in too much, you can get a reasonable rate of return. I covered those issues in Investment Value of Residential Real Estate.
BTW, I have the calculator up and running for you.
Posted by IrvineRenter on 10/27/09 at 09:55 AM
This whole week is Woodbridge properties. Only today is not a short sale, but I found it interesting because the seller is dreaming.
Posted by Geotpf on 10/27/09 at 10:19 AM
Close, but a full bath should be sink/toliet/bathtub/shower. That is, each quarter of a bath is one plumbing fixture; a full bath has four fixtures, a 3/4 has three, a 1/2 has two. Not quite sure how you count a bathroom with a tub but no shower (not likely in Irvine, but they do exist in some older homes).
Posted by Chuck on 10/27/09 at 10:25 AM
Funny, 18 Southsand was featured on this blog about a week ago, and the main point was that it was refreshing that it was NOT a short sale or REO and that the mortgage debt was very low. Yet it shows up on your list as a $474,000 foreclosure….
Posted by Geotpf on 10/27/09 at 10:36 AM
Well, assuming there isn’t a second big crash due to all the pre-foreclosures finally becoming REOs and short sales all at once (a bit of an assumption, to be sure), you shouldn’t wait any further. According to Redfin, Irvine’s house prices are up by $19 a square foot from this time last year and up by $27 a square foot from the absolute low in early March. (Irvine condos have been basically flat along the bottom since March.)
Of course, even at this (either permanent or temporary) bottom, renting in Irvine is cheaper than owning. Since there are high transaction costs in buying and selling a house but not in moving from one rental unit to another, I would buy now, but only if you plan on living in the same place for at least a decade or so, perferably until you die or at least you pay off the mortgage. Otherwise, rent on a permanent basis. Other cities are different, of course.
Posted by Sue in Irvine on 10/27/09 at 10:36 AM
11 Whispering Wind is right around the corner from this house. The map has the street as Whisper Circle, which is wrong.
I seem to recall 11 Whispering Wind listed a few months ago at 1.25 million. If this is the same house it’s comparable to today’s house.
Posted by Geotpf on 10/27/09 at 10:37 AM
This comment was supposed to go under gman’s “I’m tired of waiting” comment below. Dunno why it moved up here.
Posted by irvine_home_owner on 10/27/09 at 10:38 AM
Sorry… by “bathtub” I meant “bathtub w/ shower” because as you stated, a bathtub without one is rare in most homes in Irvine.
Nitpick award for geotpf today!
Posted by Sue in Irvine on 10/27/09 at 10:38 AM
A bad flipper dream.
Posted by irvine_home_owner on 10/27/09 at 10:40 AM
Incidentally, there are .25 baths in Irvine. There are a few homes in the El Camino area that have a bathroom with just a sink. I found that strange.
Posted by Sue in Irvine on 10/27/09 at 10:43 AM
This was meant to go under Lee in Irvine list of nearby homes. 11 Whispering Wind is on his list.
Posted by Eat that! on 10/27/09 at 11:02 AM
See that’s the problem right there. “Plan on living in the same place for a decade or more”. That’s one reason why NOT to buy a home. Who wants to live in the same tiny condo or town home for 10 years or more. I say the H with that.
Posted by irvine_home_owner on 10/27/09 at 11:16 AM
I’m not sure if $1.15m for a 3000sft Woodbridge house is delusional.
Remember the blog entry for the equity sale of the Woodbridge house that low-listed for $869k? It recieved multiple offers over $1mil and closed at $1.13m earlier this month.
Posted by cara on 10/27/09 at 11:17 AM
If you continue to rent forever then you never have to assign any of your savings towards a volatile asset, and can use it all as reserves, so no buying and renting do not inherently put the same amount towards housing.
The problem as I see it that saving does not get you out of this SoCal loop of paying way too much of your income towards housing. Whether you saved it up ahead of time, (out of income) or you borrow for next to all of it (out of income). It doesn’t escape the problem of having way too much of your net worth in your house.
(thanks for the calculator, I’ll check it out!!)
Posted by gman on 10/27/09 at 11:47 AM
I’m pouting because I know that there’s likely going to be another leg down and my tax money’s being used to forestall that. Sigh.
Posted by Fracture on 10/27/09 at 11:55 AM
Don’t forget:
Black Magic Woman - Fleetwood Mac / Santana
Superstition - Stevie Wonder
Dragula - Rob Zombie
etc… fun theme week =)
Posted by gman on 10/27/09 at 11:56 AM
10 years and you’re not tired of waiting? You must be some kind of a monk. Getting to the point where 1/3 of your mortgage term would have been paid for at that point. Isn’t there just a point where if it meets your minimum needs and you can easily afford it, you should just take the plunge?
Posted by Craig on 10/27/09 at 12:35 PM
Isn’t the real danger of rising mortgage interest rates that they will trigger a humongous new wave of mortgage defaults from everyone with adjustable rate mortgages? Many people figured they could sell the house before the reset, but now they have no equity and no way out. If the only options are locking in at unaffordable fixed rates or walking away, guess which one wins….
Posted by Craig on 10/27/09 at 12:37 PM
All that proves is that there are lots of delusional people out there, and some of them have money.
Posted by Geotpf on 10/27/09 at 12:38 PM
Makes sense to me. That is, if you find your dream home, go ahead and buy it. If not, renting probably makes more sense financially, IMHO.
Posted by Craig on 10/27/09 at 12:38 PM
I feel your pain, brother….
Posted by Geotpf on 10/27/09 at 12:39 PM
Oh, this is Irvine-only advice. In other parts of the state/country, things may be different.
Posted by Geotpf on 10/27/09 at 12:40 PM
Rates would have to rise a lot for this to be a problem, unless people are buying today with a variable interest loan, which is amazingly stupid considering that rates will probably never be this low again during our lifetimes.
Posted by Geotpf on 10/27/09 at 12:45 PM
I think a lot, again, depends on how permanent your plans are. If your job and life situation is such that you plan on never moving again, go for it. If not, renting is probably best.
(Unless you live out in the sticks, like in Riverside (where I’m at). Then go ahead and buy no matter what. The math heavily favors buying out here, opposite of Irvine.)
Posted by Geotpf on 10/27/09 at 12:50 PM
And it’s not a laundry room or wet bar of some sort?
Posted by And then, there's that on 10/27/09 at 12:51 PM
So… a wet bar is a .25 bath? Right.
Posted by And then, there's that on 10/27/09 at 12:58 PM
Same thing in Valencia, CA. Med household income is in the low $100s, median homes in the low $400s.
We bought earlier this year with the help of 2 tax credits ($10k CA new const, $8k first time) and a 5.0% 30yr fixed. Builder kicked in 35k of incentives, plus 4% back on a broker co-op (hard to spit in this state and not hit a broker). All with 3.5% down, courtesy of Uncle FHA.
We were literally paid to buy the house.
Sure, the value will go down a bit (though prices here have already corrected nicely), but my money isn’t at risk.
Posted by newbie2008 on 10/27/09 at 01:10 PM
The way I see it, the laws favor the non-saver with low to no money down.
Case #1: Responsible traditional “homeowner” uses 20% down on over price house that was bid up by “new generation homeowners” and then must sell at 20% reduction because of relocatioin. The low to the homeowner will be the whole 20% down plus cost of house sale.
Case #2: New generation “homeowner” Purchase over priced house with 0% down and then must sell because of relocation. Buy new home with with 3.5% down, and then walk away from first home. No cost for sale of first home. The first and second home can be bid up to almost any price without significant loss to homeowner.
Radio ad this morning with financing of 125% equility at 4%. Buying down the interest with the money above 100% equity? Looks like bad habits are hard to break, especially when the govt. is encouraging them.
Lee, Q: What’s the caretaker going to do? Answer: Kick the can down the road, and let your children and grandchildren pay for the mess.
Posted by Lee in Irvine on 10/27/09 at 01:12 PM
Doesn’t that make you feel warm and fuzzy inside.
Just think, the incompetent federal govt is now doing everything they possibly can to make sure you and I pay a bubble price for our Irvine home. They’ll even offer you an $8,000 tax credit if you do it now.
Posted by IrvineRenter on 10/27/09 at 01:19 PM
I see what you are saying. The way out of the SoCal loop of paying too much of your income towards housing is a choice about quality of life.
People can always decide on their own accord to put less than the allowed maximums toward housing and accept a lower standard of living in exchange for a lower housing cost. If you consistently make that choice, you will save money. When the time comes to “move up,” someone wanting to get out of the loop could refinance to a shorter amortization period and stay where they are rather than stretch again and again for the biggest most expensive house they can obtain. The crazy loop is a choice, or more accurately, it is a trajectory that results from a series of choices in housing over many decades. I want my trajectory to avoid crashing into a market mountain.
Posted by Lee in Irvine on 10/27/09 at 01:28 PM
I think there are opportunities to flip right now, but doing it at this time in Irvine California isn’t very smart. There are so many better opportunities, that are much less risky than betting on a $900,000 Irvine flip. I don’t think it’s smart to try to flip anything in white collar Orange County right now ... and then trying to do it with something that’ll likely require financing outside of the govt’s backstop is just stupid. Oh well ... JMHO ... but I’ll follow this property to see how things work out.
Posted by irvine_home_owner on 10/27/09 at 01:43 PM
But is it a delusion if it’s the current reality?
Granted, most of us know the difference but that’s why non-fundamentals are usually the suspect in real estate valuation.
Posted by tonye on 10/27/09 at 01:52 PM
Huh? Says who? There’s lot of long term owners who are way above that 20%. Even with refinances and HELOCs you’ll find many owners sitting on 50% equity to paid off houses.
At some point, your reach a point where your mortgage payment is less than rental. Heck, we just did a refi to 5 1/8%. Our mortage with insurance and taxes is like at least 500 bucks less than renting. How much would a 2700 sq foot, 5b/3ba “9 year old” house rent for in TR?
As IR said, the savers always win.
Posted by tonye on 10/27/09 at 01:58 PM
The way of the saver is to lock in the house payment and allow for inflation to eventually lift the cost of renting to above your mortgage payment.
Granted, the 0% money down screwed that up, but with historic very low interest rates and depressed housing valuations (OK more like a return to normal), if you can lock up a payment that you can easily handle you can sit for 30 years and pay off your house.
Again, it’s all in the monthly payment: mortgage vs. renting. Somehow I don’t think rents are going to drop 30% in the next five years in Irvine or anywhere West of the Santa Ana Fwy (except of course in Santa Ana proper).
Of course, as a saver, I take the long look. To me the house is a place to live, raise my family, play my Frank Zappa, hold my 4000 LP collection, my Sony SL1000HF Super Beta Deck, my four channel reel to reel, assorted Marantz quad receivers, etc, etc… As my brother in law says: “You guys sure have a LOT of stuff”...
If I had to rent a place to hold my stuff I surely could not afford it (or rather, I would not want to pay it).
Posted by tonye on 10/27/09 at 02:02 PM
Valencia?
Commute?
Posted by And then, there's that on 10/27/09 at 02:40 PM
Commutes with traffic…
45 mins to Pasadena or Glendale.
35 mins to Burbank.
Direct metrolink to Downtown LA.
45 mins to the west valley / warner center.
Access to 4+ job hubs in less than one hour. That’s assuming you don’t work in town; there are actually quite a few employers with HQs here (Princess Cruises, Woodward HRT, Advanced Bionics are the 3 largest).
90th+ percentile on schools. One of the safest cities in the US. Affluent demographic, master planned by Victor Gruen.
And hotter than blazes in the summer !
Posted by matt138 on 10/27/09 at 07:03 PM
“It’s the least worse option.” ha ha. I love when people tell me that. It’s that rationale, over decades, that got us into this mess.
Posted by matt138 on 10/27/09 at 07:12 PM
Housing - check mate, Dollar - check mate. Please tell me your savings are in other currencies.