Irvine Housing Blog

Perhaps people should not think of their home primarily as an investment and more as a residential consumption good.  Thinking like an investor led most to get into the most house they could as prices were rising - to maximize their gains.  Generally speaking, I think the best play is to trade down when prices are going up, and trade up as prices fall.  When prices are high, the uppper-end of a buyer’s range will be less affordable than when prices are lower.  Of course you might lose out on bubble riches.

There are two types of investors: ones focused on capital appreciation and ones focused on cash flow.  The examples the author used were very comparably priced properties.  Say you are in a home you paid $500k for, that has high HOA fees.  You could really get by with a $250k home or even $125k condo.  How much should your capital position really matter?  Even if you have 50% equity, you could probably save $20k-$30k/yr in expenses.  My opinion on waiting is that those cash-flow drains add up.  So maybe you think you could sell for $450k next year instead of $425k this year.  That’s a big maybe, but a real definite expense for that year.  And you need to factor in the maybe of $400k prices next year.

My in-laws and parents saw about $750k in bubble equity disappear between them.  They thought the bubble prices were justified because ‘they aren’t making any more land in FL’.  They knew exactly what their homes were worth because the homes next door to each sold near peak.  Both will probably have to sell in the next 5 years as having the space that was good when 2-3 kids were at home isn’t very practical when it’s just them.  I think deciding when to sell should be influenced at least as much by cash-flow as by future prices.

Is there any reason to buy the listed home, as opposed to custom building?

The Santa-Monica ‘dream home’ from the article backs up onto an airport and is a long way from the beach.

moving up in a declining market.  genius!  why didn’t I think of it.

rent now or be priced out forever.

I wonder why when Mr. Humphries talks about the costs of staying in downtown Chicago he doesn’t mention the costs of moving to Elgin.  For example, Elgin is 40 miles from downtown so that is at least 2.5 gallons a day of gas.  Easily $2000 in gas alone not including increased maintenance.  It is also likely the family in the downtown condo only has one car.  That second payment will be a pain.  I live in San Francisco, and my partner and I have an old car we don’t drive much because public transit is so good here.  We talked about buying one of the cheap houses in the outer suburbs so we could have a garden and everything, but the commute costs would SUCK.  And we’d have to buy another car.

Another cost people underestimate is home maintenance.  When I owned a house in Turtle Rock from 2003 - 2006 I spent a lot, lot more on keeping that place maintained than I expected.  I suspect that the two (!) HOAs and maintenance I paid to live in Turtle Rock would be a bit more than a condo HOA.  It could go either way, as IR says, but moving to the suburbs certainly isn’t a slam dunk.

The high-end is moving.
It’s just taking longer, mainly due to seller’s greed.
A perfect example is today’s profiled home.
Bought on 3/11/10 for $3.02M, now listed at $3.395M

Nice swimming pool. Should be illegal when you have to import the damned water from up north:

Irvine Ranch Water District