Buy or Rent in 2011 Orange county (Los Angeles, Long Beach: foreclosures, low crime, student loans)

[Vascodagama]

For me, rental parity would be a factor but so is market forecast, property tax and interest rates.

One of the concerns with buying in this environment is taking on the heavy debt and being financially locked to the home. If values go down significantly and you end up upside-down you might not be able to sell if you had too ... like if you lose household income. Buyers who puts down 20% or more could stand to lose a good chunk of their nest egg if they end up going into foreclosure and ruin their credit. For some people, it could be a significant risk to purchase in this environment.

[Charles]

Originally Posted by Don9

One of the concerns with buying in this environment is taking on the heavy debt and being financially locked to the home. If values go down significantly and you end up upside-down you might not be able to sell if you had too ... like if you lose household income. Buyers who puts down 20% or more could stand to lose a good chunk of their nest egg if they end up going into foreclosure and ruin their credit. For some people, it could be a significant risk to purchase in this environment.

Isn't this true for anyone at any time? Housing prices can always go down, however like equities, the long term trend is for them to go up.

[DowntownVentura]

Originally Posted by Don9

What do you mean by a house pays dividends? Dividends are payments made by a corporation to its shareholders.

I'm not saying buying a house is generally a bad idea. I have bought two and plan to buy another when the timing is right. Right now the timing is not right, especially in Orange County. Home values are deflating and we will probably see significant declines followed by a stagnant market for years to come.

I was using a more generic definition. I should have said a rental provides income. In a stock, the dividend is the income, in real estate, the rent is the income.

[Vascodagama]

Originally Posted by Charles

Isn't this true for anyone at any time? Housing prices can always go down, however like equities, the long term trend is for them to go up.

We are in one of the worst housing markets in history with no end in sight. The majority of experts say the home values will drop significantly across the nation, especially in states like California.

[bhcompy]

Originally Posted by Don9

We are in one of the worst housing markets in history with no end in sight. The majority of experts say the home values will drop significantly across the nation, especially in states like California.

Worst housing market is a relative term. For me, it's only getting better. One day maybe traditional income to housing price metrics will actually fall into line in the basin

[proudmommy]

Originally Posted by Don9

We are in one of the worst housing markets in history with no end in sight. The majority of experts say the home values will drop significantly across the nation, especially in states like California.

Most of the predictions I've read is 0-10% drop over the next couple years. I haven't read (or remember reading) predictions worse than that.

Would that drop be due to rising interest rates? Maybe. But if they are, then it doesn't make that much difference as borrowing more with a low rate is similar to borrowing less with a higher rate. Meaning, those who bought now and paid a higher price also bought when rates were rock bottom. They wouldn't be paying much more out of pocket than the guy who bought the same house for less but with a higher rate.

Also, we've been reading about housing crashing for four years. And it did crash. But it hasn't crashed that much lately - like in the past two years. How long do you wait?

Finally, notice how today's prices aren't that much out of whack with the normalized linear appreciation line in the chart you posted? It almost looks as prices are about where they would have been had no bubble ever occurred.



What did Warren Buffet say about stocks: Be greedy when people panic and panic when people are greedy.

[Vascodagama]

Originally Posted by proudmommy

Most of the predictions I've read is 0-10% drop over the next couple years. I haven't read (or remember reading) predictions worse than that.

Would that drop be due to rising interest rates? Maybe. But if they are, then it doesn't make that much difference as borrowing more with a low rate is similar to borrowing less with a higher rate. Meaning, those who bought now and paid a higher price also bought when rates were rock bottom. They wouldn't be paying much more out of pocket than the guy who bought the same house for less but with a higher rate.

Also, we've been reading about housing crashing for four years. And it did crash. But it hasn't crashed that much lately - like in the past two years. How long do you wait?

Finally, notice how today's prices aren't that much out of whack with the normalized linear appreciation line in the chart you posted? It almost looks as prices are about where they would have been had no bubble ever occurred.



What did Warren Buffet say about stocks: Be greedy when people panic and panic when people are greedy.

Home values did not drop much since Obama took office due to government intervention. This intervention ended last October. You and I paid for artificially propping up the housing market. What’s worse is the government lured unsuspecting 1st time home buyers into high risk mortgages, using sub-prime type loans, where they will be in an upside-down situation in the near future and a good percentage of them will foreclose and ruin their credit and in some cases their lives. They threw these people under the bus in an effort to kick the can down the road a little longer to protect the banks. Home prices in California will drop anywhere between 20-50% from today’s values.

[proudmommy]

Originally Posted by Don9

Home prices in California will drop anywhere between 20-50% from today’s values.

Where in California is question 1, and when? Barstow housing prices and Newport Beach housing prices aren't always in sync.

For example what will a house that just sold in Mission Viejo for $700K in Oct 2010 sell for in Oct 2011? Oct 2012? Oct 2013? How about some hard numbers?

[Vascodagama]

Originally Posted by proudmommy

Where in California is question 1, and when? Barstow housing prices and Newport Beach housing prices aren't always in sync.

For example what will a house that just sold in Mission Viejo for $700K in Oct 2010 sell for in Oct 2011? Oct 2012? Oct 2013? How about some hard numbers?

There are lots of articles and data out there; you just have to do some research. Below are a few links to articles I found interesting and informative.

January 1 2011: US Housing: The Story of 2011

ROBERT SHILLER: If House Prices Keep Falling This Fast, The Economy Is Screwed

[proudmommy]

Originally Posted by Don9

There are lots of articles and data out there; you just have to do some research. Below are a few links to articles I found interesting and informative.

January 1 2011: US Housing: The Story of 2011

ROBERT SHILLER: If House Prices Keep Falling This Fast, The Economy Is Screwed

(I didn't check the links out...) but it looks like these are very general assessments of the US. Everything is local. What about Mission Viejo? (This is the OC forum after all.)

For example what will a house that just sold in Mission Viejo for $700K in Oct 2010 sell for in Oct 2011? Oct 2012? Oct 2013? How about some hard numbers?

Care to provide your opinion on the hypothetical home I mentioned above?

$700K down to what in a year? two years? three years? You honestly think the $700K home with be selling for no more than $560K (and as low as $350K) in the next X years? And how many years are we talking about?

Something like this?

6 SONGVIEW, Mission Viejo, CA 92692 | MLS# P724680

Anyone else on board with that?