Calling All California Real Estate Experts ... (San Diego, Santa Ana: short sale, mortgage, loan)

[dogmom]

Originally Posted by The Floridian

$500,00.00 can buy a fairly new mansion on the Beach in Florida.

It's beyond me why a guy would pay 1/2 million bones for a basic/average home in California when that same $ buys you a large home/small masion anywhere in the US.

Because we want to live in California...it's our home

[drshang]

Originally Posted by The Floridian

$500,00.00 can buy a fairly new mansion on the Beach in Florida.

It's beyond me why a guy would pay 1/2 million bones for a basic/average home in California when that same $ buys you a large home/small masion anywhere in the US.

You could also buy a mansion in Thailand for less than Florida too. Even less in Africa I'm sure too. Cost of living is not the only consideration when choosing a place to live.

[RCLL]

Originally Posted by drshang

I think you have to consider the risk:reward of buying a house now. Consider the fact that most predictions are for at least another 20% drop in housing prices in the next couple years. Consider the fact that if you put 80,000 dollars down on this property and the value drops 15% you have lost your entire lot of 80k in cash. That's a lot of money to lose! Even the "best case" scenario housing price predictions call for further declines. But what if things are even worse than predicted, and say, housing prices drop 30-35% more? I ask you, what's the upside of buying a house now? Even in the best case scenario you break even or only lose a little bit of money. The worst case is you lose almost a six figure amount of money.

Also consider the fact that in the last California real estate recession the good neighborhoods declined the same amount as bad neighborhoods, but the good neighborhoods declined much later in the real estate cycle than the bad ones. This, being a really nice neighborhood, is likely why the prices have been "sticky."

They will drop just as much it will just happen AFTER the bad neighborhoods have started to recover. Remember, what fuels price appreciation in higher income neighborhoods is people "trading up" from lower income ones. So since people can't trade up due to the rapid depreciation in housing prices in low neighborhoods, they are still priced out of nicer neighborhoods. However, eventually people have to move and sell/liquidate their houses for various reasons, and eventually people in nicer neighborhoods will need a buyer. Normally those buyers come from people trading up. The fact that real estate is such an illiquid investment is the fundamental reason why the nice neighborhoods have been more "sticky." Higher income people can generally wait longer before selling their assets and many of them haven't been "forced" to move yet, compared to people in lower income areas which are plagued by foreclosures and high unemployment (unemployment is almost always much higher among low income people than high income).

Also consider that the Salinas area consistently ranks as one of the most "unaffordable" housing markets in terms of median income:median house price. This is one of the key metrics that drives real estate prices...people need to make a certain income to afford a certain level of house. These numbers will almost certainly deviate back to historical averages, which still put real estate prices in this area (and most of CA) way out of whack with history. Combine that with people having less than average cash on hand due to a bad recession and a massive deleveraging of consumer balance sheets and housing price:income ratios may actually fall BELOW historical averages, despite low interest rates.

In short I think buying a house now is the rough equivalent of burning money. Rent for a year and buy the same house for probably 20% lower, plus we'll know a lot more in 6-12 months about how bad this recession will get. Housing prices will almost 100% certain not be HIGHER in 12 months than now...but they could be a LOT lower. In a recession, cash is king. Please don't forget that.

My guess is this property could bottom close to 1998 levels (not all the way but if that house drops to 400k that's still only a 30% additional decline). Income levels have not increased that much since 1998, although this is a difficult number to substantiate since a lot of the latest income data is from 2006 which is a completely different economic environment than now. Regardless I wouldn't touch that property unless it was in the low-mid 400s personally.

I can certainly understand the frustration many potential homebuyers are faced with in this economy. That said there are no guarantees that this home will be available in the mid-400ks in one year. Another buyer could be looking at this home as well and say in 5 months the price drops to 500K. This in the eyes of a buyer could look like a real bargain. Its among million dollar homes (not familiar with this location) location, location, location and the buyer would be very happy living there for a long time. So they decide to buy it, prudent or otherwise, now this home is off the market. I would imagine that this could be a dream home for many people. Not only that but investors may see some great potential in this property and may make a competitive offer. So again it is a very frustrating time for potential home buyers. It will be interesting to see what the state of real estate will be in one year. That said I believe some areas will fare alot better than others.

[sheri257]

Originally Posted by dogmom

We are in the same boat as you..how much more will prices fall?

I know someone who bought a foreclosure in the same area. They also paid $575K but for a smaller house at 1800 square feet. She says the value of her home is already down $85K so, naturally, I'd like to avoid overpaying if I can.

Originally Posted by RCLL

That said there are no guarantees that this home will be available in the mid-400ks in one year.

And, of course, that's the other problem. If I wait too long I could miss the bottom entirely.

[sheri257]

Originally Posted by The Floridian

$500,00.00 can buy a fairly new mansion on the Beach in Florida.

It's beyond me why a guy would pay 1/2 million bones for a basic/average home in California when that same $ buys you a large home/small masion anywhere in the US.

The reason you can buy a mansion in Florida for cheap is probably because people like me wouldn't be making much money there. Wages and working conditions for my profession suck in states like Florida. I would have to take a huge pay cut if I moved there.

And while this area in California is expensive, it's not just standard tract homes. A lot of the properties in this neighborhood are million dollar properties.

Yeah, it's expensive but, this is really where I want to live. I've wanted to live in this area forever and I love this neighborhood. I can afford it so ... that's where I'm going to buy.

[cobmw]

It seems to me that you are using the old real estate market paradigm. You assume that prices will fall for a while then rebound and the old growth appreciation rates will be once again enjoyed by RE investors. I don't see it that way.

While house prices are declining unemployment is going up especialy in CA. There will be lots more people loosing their jobs. Even at lower prices people will not be able to afford houses (I'm speaking in general terms about the overall market). And the RE market has not yet seen the full effect of the mortgage crisis problem. Find a chart on mortgage resets. The peak for arms adjusting does not occur until mid 2011. That means that there will be many, many more people getting upside down on their house loans and going into foreclosure. The RE market bottom is still quite a ways off and we are going to be seeing stagnant prices for perhaps a decade to come. Just my opinion.

[sheri257]

Originally Posted by cobmw

It seems to me that you are using the old real estate market paradigm. You assume that prices will fall for a while then rebound and the old growth appreciation rates will be once again enjoyed by RE investors. I don't see it that way.

I'm not counting on the same appreciation rates as 2000-2005 but, California has always enjoyed better than average home appreciation. In 1970 homes sold for 24K on average, by 2000 (before the outrageous boom prices) homes were up to 240K.

http://www.mybudget360.com/wp-conten...5_medianus.gif

That's 1000 percent apprecation (or 10 times more value) over 30 years so ... that's still pretty good.

[cobmw]

Yes and between 1970 and 2000 there was a huge baby boomer generation creating wealth, forming families and buying homes. That's over. And we were borrowing from the rest of the world to finance our buying binges. That's over too. I say we are in for a long hard bottom in housing.

[Mika>Kimi]

Originally Posted by cobmw

Yes and between 1970 and 2000 there was a huge baby boomer generation creating wealth, forming families and buying homes. That's over. And we were borrowing from the rest of the world to finance our buying binges. That's over too. I say we are in for a long hard bottom in housing.

Agree 100%. When the bottom eventually hits appreciation will be very slow for a long time. Though waiting is always difficult when it comes to buying a home, in the current financial climate it is a rather safe bet; and when the bottom can eventually be called you will not have to run to the bank in a frantic panic to bid against 56 other buyers fighting for the same property.

[dogmom]

I tend to agree with the last two posters...I don't think we in our generation will ever see a market like the one we are recovering from...it was like a free for all. I think if someone is in the market for a home to live in and enjoy, and you see what you love and the price is ok, then go for it. No guarantees in waiting...I would rather be in my home enjoying life as opposed to hunting for a home in a few years and get in a all out bidding war. We are just too old for that stuff anymore. Life is short, no guarantees.