Irvine Housing Blog

not surprising, but sad and irresponsible to get a loan for $400k+ and not even have $88k for the down payment.

$88k should be easy to save.
$2100/month mortgage payment+$900HOA = $3000/month. save this sum over 30 months(2.5 years) prior to getting the mortgage and you have your $88k.

hmm, i think the $3,369 monthly cash outlay is a more realistic number to use. you’d have the down payment in only 26 months (2 years 2 months)

agree its sad but agree with IR’s point of it being a reality

however, when discussing rental parity, do you assume 3.5% down or 20% down?  it makes a big difference right?  also, if using income in appraisal, would the loan monthly cash outlay be less than or equal to the income?

So, Mike, is your fictional buyer living at home with their family for 26 months to save up 88k?  That would royally suck; I’d rather rent forever. 

A married couple living in coastal OC with a kid would need a two-bedroom apt, about $2k or so in Tustin.  Then they could save roughly 1k per month if all the extra went to the down payment.  They would take 88 months or over 7 years.  I don’t think saving 20 percent down is easy in Irvine, especially if you have a family.

A single guy or gal with a really good job could do it in a few years, but most families could not.  It costs a lot to live in OC, you know.

I disagree.  I come from a saving culture and I see how much my friends spend and how easy it is to save if they tried.  A married couple with a kid renting for 2k a month and wanting to buy a 400k place should be making 70k a month after taxes at the minimum.  Rent + living should be 48k (2k rent+2k living) so they should be able to set aside $20k+ per year.  4-5 years of saving and they have their downpayment.  Frankly their rent and monthly living is way to high so I think they can save 88k faster.  People just don’t know how to save…

I don’t think a lot of households have a $150k pre-tax income. Also $2k living is very tight for a family. The daycare alone is $1k per month. Add on food ($500), 2 cheap cars ($500), very basic travel/vacation ($300), clothes/insurance/beauty/entertainment/etc ($300), cable/web/phone ($200) and you get very close to $3k for a fairly basic, no frills lifestyle. Even if you made $150 k, you only save $10k per year. The only solution is to move to a cheaper state, will lower rents and without income tax. That’s my plan.

Most people are horrible savers.  Regarding our fictious young family living in OC, once you add up all the monthly expenses listed above and add in savings for retirement, student loans, existing credit card debt…there isn’t a whole lot left over to save for a downpayment.  Even saving $1500/month would take almost 5 years to save the 84K.  Few people are willing to sacrifice like that and put their lives on hold for 5 years to save that magic downpayment.

With reoccuring monthly expense like that there very little chances of saving enought for a 20% down.  Time to get real and live within one means.  The only one that I might agree with is $500 for food.  Who needs cable when free digital TV is available.  With a one income family, I rarely break $150k per year, but save about $30k.  That even with $12 to 15k for donations.  Granted not many expensive vacations in the last 20 years, running the cars until they are in the ground, buy only when on deep discount sales (harder now with the low inventory at the stores).  I know many who make much less than me, but save more.

At the grand opening, the agent said the first year’s HOA was included in the price.  So, they should have no defaults on the HOA.  If the units are not complete, then they may also qualify for mostly owner occuppied, since those other units are not yet available.

As for time on the market as an indicator for being overbuilt, I think the number of vacant units are more accurate.  A investor buy lots of vacant unit will decease the time on the market, but their still not enough people to live in them.

The traffic noise was too much for me.  RE agent had background music to cover the noise.

Those numbers are very close to what our expenses are but don’t forhet health insurance where many employers don’t pay for health insurance of family members so that comes out of the paycheck as well, so add at least $500 to cover family members. Add some $ for car insurance, registration, and maintenance - all necessary - and you end up with at least $4,000 monthly expenses which means a family needs to make at least $70,000 a year to be left with that much money. Now, if you have two family members working and each is making say $70,000 a year, then it’s possible to save maybe $2,000 / month after the added expense of child care depending on whether you have one or two kids…. It’s not easy for most people but not so hard for some.

I agree with the others that saving 88K is a lot harder in reality than it is in some idealized situation.  Even if you have a good income and you live well within your means, things aren’t always so simple.  You may get laid off and lose a few months worth of income.  You may need to buy a new car.  Or, you may decide that you want to further your education.  Lot of things happen.

Among my friends who have bought homes in recent years, almost all of them received sizable contributions from their parents for their down payments.  I think most of these parents have wholeheartedly embraced the “housing is always a great investment” mantra, and in many cases, they were the ones who were pushing their reluctant kids to buy a house.

A friend of a friend bought a house about a year ago and he had lived at home for several years (even shared a car with his mom) in order to save for a big down payment on this boring 500K tract house in the burbs.  While I think he should be commended for his prudence, I wish he would have stopped to think about whether or not this house was really worth half a mill.