How low will home prices go in OC? (Orange, Corona: real estate, 2009)

[sheri257]

Originally Posted by New Englander

What is the justification for homes selling for low 600s in those areas?.

On the other hand, I wouldn't say there was no justification for those prices either ...

OC has a lot going for it. Lots of business there, corporate headquarters, etc. so incomes have probably grown quite a bit ... probably not as much as home prices did but, probably a lot more than other areas of California.

All of the major SoCal freeways go through there so, with it's central location on the coast, it's a major transporation hub of sorts, especially with the convenient location of John Wayne airport. All of that is very good for business.

And, of course, you have the beaches, quality retail and, for the most part, very nice neighborhoods.

It would be great if prices got down to $300K but, I doubt that will actually happen.

[RedNC]

Originally Posted by sheri257

Yeah but, would those thousands qualify for a mortgage now?

As was previously pointed out, many people who bid up those prices had no business getting a mortgage to begin with. Their credit sucked, and their income claims were, at best, questionable.

Now with the credit crunch and tightened lending guidelines, people who bid up prices before probably won't be able to bid up prices now since it's highly unlikely that anybody will lend them money.

And, even people with great credit and cash can't get mortgages right now ... the pendulum so to speak, has swung to the other extreme. So ... it's got to negatively impact prices at some point.

The real money speculators are the ones that drove the prices up, and yes they would qualify for a mortgage. The “I can do that too wanna be speculators” are the ones that are the big losers now.
If all home prices were cut in half, the speculators would jump in and snap up every available home. A few well positioned buyers would be able to get some great deals, but greed would soon set in and the same cycle would repeat and prices would skyrocket again.
Get yourself in position to jump in when/if the prices drop by half. This may be the perfect opportunity for the smart buyers to make some money.

[Axiom]

Originally Posted by flo2900

Just curious if prices here will ever go as low as pre 1999 level.
Between 1999 and 2006 home prices in OC grew 180%...thats almost 3 times.

Your opinions please

Personally I think prices will drop, I doubt it will be to pre 1999 levels though.

I agree that lax financing standards played a huge role in the unprecedented price run-ups. You had plenty of folks, who by any conventional standards would have been stretching to afford a $300,000 price tag, qualifying for $600,000 or more. I don't think anyone can deny that was happening in a big way in OC. Of course that created a false demand and drove prices up.

BTW, it's my contention that it was happening at all price points, not just in the entry level market, so it seems to me that the backlash would eventually be felt across the board. Certainly folks with more money and higher incomes are able to hang on longer... but if you're in over your head, you're in over your head and eventually something has to give.

It would also be interesting to take a look at trends in owner occupied propeties over that time period. I'm betting the percentage dropped. I don't have any figures to back that up though - just a guess.

I have a better handle on those numbers in our previous neighborhood in AZ and I can tell you it was a hot bed for folks who got caught up in buying properties, many of them probably as a result of 'easy money in RE' type seminars and shows like flip this house, property ladder, etc. Believe me, it had a huge effect on prices once the market started to cool.

So I would never discount the effect of speculators and I do believe more folks got involved in that the past few years than previously . Yes, some of them are well informed and make rational decisions, but certainly not all. It's easy to get caught up in the frenzy when prices just seem to keep spiraling up and up.

While I can buy that properties in OC will continue to demand a high price tag relative to most places (location, location and all) I still think the numbers are going to have to line up closer with fundamentals than they are now, especially with tightening credit standards.

[New Englander]

Originally Posted by sheri257

On the other hand, I wouldn't say there was no justification for those prices either ...

OC has a lot going for it. Lots of business there, corporate headquarters, etc. so incomes have probably grown quite a bit ... probably not as much as home prices did but, probably a lot more than other areas of California.

All of the major SoCal freeways go through there so, with it's central location on the coast, it's a major transporation hub of sorts, especially with the convenient location of John Wayne airport. All of that is very good for business.

And, of course, you have the beaches, quality retail and, for the most part, very nice neighborhoods.

It would be great if prices got down to $300K but, I doubt that will actually happen.

Right. I accept that OC should have a premium for many of the factors that you have mentioned, however it still does not justify the inflated prices.

Even if you're wealthy and have the $s, you should be looking at the numbers before you buy. A great way of estimating the right purchase price is looking at your annual income and dedicating 30-35% to your housing costs. Furthermore do a valuation of the property based on the rental market: See how much the property can bring in per month and then match that up against the expenses. Even if you do not plan on renting out the property, things may change, your job may get transfered etc.

It makes no difference if you're rich or poor, these ideas are based on time tested principles. The market will return to it sooner or later.

[Reivax]

Originally Posted by flo2900

Reivax,

Would you stay here or return from Houston if prices would fall like some predict from low 600`s to low 300`s?
Just curious

Truthfully? No way.
When I look at what I could buy for 300k in Houston outskirts like Kingwood, and I look what I could get for that here (assuming the 600k homes were now 300k) no way.
600k here is a dump, let's face it.

and the lure of never having to deal with the franchise tax board ever again is awfully sweet.

[flo2900]

Reivax,
That`s me....and thats why in september we`re going to Houston (Sugar Land or Woodlands) to buy something.
California dreamin` is just real dreamin`...nothing real ...

[TurcoLoco]

Originally Posted by RedNC

Let’s suppose that a $600k home goes down to $300k. If that were to happen then you had better be ready to close the deal on that day, because there will be thousands just like you ready to bid prices right back up.
I remember when $200k was a stretch now $300k would be a bargain. Go figure.

Remember the 'recession' in late 80s/early 90s? It just might happen again where many who got carried away and either cashed out on their equity or got an inflated house towards the end of the pricing jump will have to foreclose and walk away from their loans. After all, if you had a $600K+ mortgage and your house only worth $500K or less, you just might wanna do that!
It will again, housing prices do flactuate once every 7 to 10 years like this, so do the foreclosures and BKs...

Oh and I wouldn't think about buying a 3bdrm house over $250K I don't care where it is. I don't like investors who cause the housing prices to get jacked all over the country either. I think they should be thrown in jail, they are f'ing up the economy just to fill in their bank accounts...

[RedNC]

Originally Posted by TurcoLoco

Remember the 'recession' in late 80s/early 90s? It just might happen again where many who got carried away and either cashed out on their equity or got an inflated house towards the end of the pricing jump will have to foreclose and walk away from their loans. After all, if you had a $600K+ mortgage and your house only worth $500K or less, you just might wanna do that!
It will again, housing prices do flactuate once every 7 to 10 years like this, so do the foreclosures and BKs...

Oh and I wouldn't think about buying a 3bdrm house over $250K I don't care where it is. I don't like investors who cause the housing prices to get jacked all over the country either. I think they should be thrown in jail, they are f'ing up the economy just to fill in their bank accounts...

I absolutely remember what happened in the late 80’s and early 90’s. There were a number of people upside down value to equity. Some also made the DUMB decision to bail out and leave the bank holding the bag. These LOSERS not only hurt themselves but their neighbors. The home values depending on where you lived lost about 22% nowhere near the 50% predicted for today’s homes.

As for the $250k home. You will never find a home in a desirable area of CA for that much so that will never be a problem for you.

You can’t blame it all on investors the run up was market driven. Everyone saw their friends buy property and sell for a profit and that started a buying frenzy where everyone wanted a piece of the easy money. This led to high demand and short supply that drove prices up. A lot of people figured it was worth the risk to pay a high price figuring it would only go up. Worked great for a while and now some are left with homes they can’t sell and can’t pay for. Some will stick it out some will bail. Prices will, drop, flatten out and eventually stabilize and life will go on.

[ncitgal]

Just an interesting tidbit...

We bought our home in the best part of Garden Grove (the west side)...we paid $170k for it in 1996. Our next door neighbor paid $210k for a smaller home in 1990. Thats about 25% more...6 yrs earlier. Apply that to a home now...that stinks!

The good news that both of us sold in mid 2005 : )

[TurcoLoco]

Originally Posted by RedNC

You can’t blame it all on investors the run up was market driven. Everyone saw their friends buy property and sell for a profit and that started a buying frenzy where everyone wanted a piece of the easy money. This led to high demand and short supply that drove prices up. A lot of people figured it was worth the risk to pay a high price figuring it would only go up. Worked great for a while and now some are left with homes they can’t sell and can’t pay for. Some will stick it out some will bail. Prices will, drop, flatten out and eventually stabilize and life will go on.

I meant to include all those people who were trying to make a 'quick buck' under investors....regardless, I hope they all foreclose or BK, I have no sympathy for those who are trying to make life harder and more expensive because either they are living a life they can't afford and they go after money making scams or they simply wanted to make their $aving$ even larger!
If they can turn their investments around and silently bank on it, so be it but if they get stuck with their stupid investment and can't sell it for the ridiculous value they think the property is worth, then I do not want to hear them whine about how they are losing/lost money either!
How could one lose the money he never had to begin with?
A delusional wealth seems to make some people think they have $$.