OC Real Estate... Buy or Wait? (Los Angeles, Irvine: mortgage, loan, foreclosures)

[Axiom]

I just got one of those real estate prediction type newsletters saying that a typical RE cycle runs 28 months or so and OC is probably about month 21,
thus they're predicting an upturn by next spring.

I'm not sure I'd consider anything that's happeneing with RE values right now to be typical though. Has there ever been a run up in prices comparable to what happened in OC in recent years?

Given the huge increases in such a short period of time, wouldn't it stand to reason that the correction would not be typical either?

Anyway, give it your best shot!
What's your prediction?
I'd love to hear what folks living there are seeing and hearing.

Any good credible links with more info would be great too.


FWIW... if someone were coming to the Phoenix area I'd say my guess is that we haven't hit bottom yet and I'd probably wait it out a bit longer (and from what I understand we've already taken about as big of a hit as anyplace)

[Roma]

Gosh, It is so hard to predict this market but we decided to wait it out and see.

I've been watching the Orange County market along the coast and it still seems to be going up. Sure, "some" homes drop their prices but I think they were asking to much to begin with or the home or location is not that great.

Like any financial decision you make in life, it is some what of a gamble. But we are hoping but no way are we certain, that prices will go down, so we can get back in.

I read other stuff, like you have, where they are saying the same thing. I read that come next year, certain markets will start going up again. To name a couple I remember off hand was, Phoenix, Los Angeles and Las Vegas.

So Who knows really? See, you think Phoenix will still go down and I read it will start seeing a up swing come next year. I wish I had a crystal ball.

[kturbe]

The market in OC is staying overall pretty firm. The number of homes being sold is down but pricing is mixed. March/April Single Family homes were priced above last year, May we saw a slight decline (based on average price of homes sold) but if you look at the YTD it is flat. I just pulled this data for a client.

But before you read the detail, I will add in all the years I have been doing real estate I have never found anyone who regretted buying their first home.

Year to Date Sales Comparison for Orange County

Single Family Residence
Time Period Number of Sales Median Sale Price
May 2007 1,566 $695,000
May 2006 2,111 $708,500
Apr 2007 1,524 $730,000
Apr 2006 2,165 $705,000
2007 YTD 7,895 $700,000
2006 21,494 $700,000
Condominium
Time Period Number of Sales Median Sale Price
May 2007 776 $480,000
May 2006 1,279 $465,000
Apr 2007 840 $475,000
Apr 2006 1,360 $457,500
2007 YTD 4,474 $474,500
2006 12,018 $462,500

As you will note a couple of interesting things are going on in the county. The number of home sales is certainly down, but pricing overall is in Single Family Homes is stagnant and in condo up slightly. Keep in mind whenever you look at sales numbers it depends on the selection of homes that sold as each month a different mix of homes could sale. However, if you look at 2006 vs. 2007 though the number of sales are down, but pricing is not.

Declining Home Prices vs. Higher Interest Rates:
Many times I get asked, especially in today’s market, what affects does declining home prices really have on the market vs. higher interest rates? There are number of differences but the most obvious one that new home buyers need to look at doesn't really have anything to do with the price reduction rather the interest rate.
I find many home buyers are making the assumption that because the pricing in some areas is going down that their payments or the amount of house they can buy will change dramatically in the same direction. However one thing that is not taken into consideration is the current interest rate. So what are buyers doing waiting.....and waiting and waiting.....for the huge price drop in the market.
While missing the fact that interest rates are going up. Though interest rates are still at historic lows an radical federal reduction is not anticipated in the near future which tends to lead to the idea that rates will continue on this trend. Now my crystal ball may be a little foggy but even if we take the most recent up tick in interest rates, the scenario between declining home prices vs. higher interest rates is still important to look at.
I thought this quick little illustration would help home buyers realize why NOW is a great time to buy in Saddleback Valley.
Scenario A: Today’s Price = $650,000
• 20% down payment = $130,000
• Total Loan amount = $520,000
• Interest rate (6.25APR) = 6%*
• Monthly Payment = $3,117.66
Scenario B: Future Reduced Price = $600,000
• 20% Down Payment = $120,000
• Total Loan Amount = $480,000
• Interest rate (APR 7.25) = 7%*
• Monthly Payment = $3,193,45
What is the difference B equals $75.79 per month MORE *(note: the above scenario is only intended as a guideline. There are many variables in determining a consumers qualifications and how that affects an interest rate and loan program. The above rates were based on a 30year fixed rate term)
Wow, that is a $50,000 price drop with an increase in your mortgage payment!
There is a third scenario that also needs to be looked at here in South Orange County and that is in many neighborhoods, though the number of home sales is down, pricing is steady and in some instances increasing. So when you see a $50,000 price reduction and the sold comparables support higher you'll know this is a good deal. Most importantly, let's not forget with the lower interest rates, increase in inventory and the fact that sellers are ready to negotiate all lead to it being a great time to buy a home.
As a professional Realtor® I recommend to buyers that you meet with at least three lenders who will work closely with you and your Realtor to ensure your entire needs are being looked including the timing of when you want to purchase your home. So as the market changes you the buyer understand how it impacts you and you have two professionals on your side ensuring your objectives are met.

Just to close serious buyers are eating up the current inventory in fact open houses are really picking up and in my office we are actually seeing multiple offers on good deals. If interest rates happen to get reduced the inventory will eat up quicker resulting in a slight up tick.

[EscapeCalifornia]

Originally Posted by kturbe

I will add in all the years I have been doing real estate I have never found anyone who regretted buying their first home.

Then let me be your first.

[Axiom]

Thanks for the numbers kturbe


Although I just can't wrap my mind around how prices could possibly remain stable or increase there; especially given the disparity between average family income and median home price.

It seems like those 2 numbers eventually have to line up closer than they are now for sustained growth. That's if I'm remembering principles from econ 101 correctly anyway. Are you all seeing companies offering huge wage increases?

Are there really first time home buyers who can afford a home in a nice, safe neighborhood there? If so, how in the world do they do it?

I asked a realtor there that question and his response was that when buying a house in OC you have to think of the numbers as funny money.
Hmm... maybe explains at least a bit of the whole subprime mess.


So what do current inventory levels look like?
That's one of the really scary things here.


Thanks for all the responses - keep them coming.

[Tom63376]

All real estate agents are going to tell you to buy. They don't make
any money telling otherwise. It is true the SoCal has held on to price
support but the drop is coming. I expect 25%. Anyone rushing in now
to buy is a fool. I want to buy but I know a drop is coming so I rent.

[kturbe]

Actually Tom that is not true I just told a buyer today they shouldn't buy and do all the time. As well, I will tell a seller if they shouldn't sell.

Escape California - sorry to hear that. But don't give up hope in homeownership.

[EscapeCalifornia]

Originally Posted by kturbe

Escape California - sorry to hear that. But don't give up hope in homeownership.

I enjoy being a homeowner but the cost here is way beyond what I would have been allowed to buy in just about any other state given my household income. I will be a homeowner again, it just won't be here. Being house poor is for the birds.

[Tom63376]

kturbe-

When the prices drop 25%, look me up. I will be buying in either Marquee
or "The Plaza Irvine". I assume foreclosures in either of these buildings
would be snatched up at 30% off market value?

[Roma]

Well darn, 30% off!! LOOK ME UP TOO!! I see some beautiful homes for around $2-3,000,000 in that area. If I can get them for 30% off, Woohoo, I'm in!