Where are home prices headed? (Orange, Mission Viejo: renters, condo, loan)
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Ok. Although I'm not sure what the difference is since ... a lot of the bottom callers seem to think that's where the bottom will be (a 10-15 percent further drop).
Since there's always a major time lag with the data, by the time you have assurance we've hit bottom you could very well pay more than that 10-15 percent at that point.
Speaking of the bidding wars: this could be an anomaly but a 2200 square foot house that received 12 bids in my neighborhood sold for $255,000 because the buyer, an investor, paid cash.
He just flipped it for $340K ... an $85K profit in less than a month.
Your details make me believe your area might actually have hit a bottom, so I apologize if my assumptions about your situation were based on our situation down here in So Cal. What area of the Central Coast are you seeing places for $115/sqft? What city?
A 55% drop is much like what we've seen in the IE which is very much searching for a bottom. Areas in Southern Orange County however have only seen a 20-30% drop and definitely have a good 20-30% more to go off peak.
Not al properties will reach bottom at once!
Low end properties will reach bottom sooner because you can only compress so much value before cannot compress anymore.
Some of the low end properties have reached bottom already while high end will continue to fall.
If you average the two categories you`ll end up with another 10-15% drop.
Then, if youre looking at particular type property, (a fussy buyer) youre only going to come across that kind of property once or twice before bottom so buying now might get you the house you couldnt get later.
It`s hard to time everything to a perfection while youre getting the house you want.....too many variables.
If you see somthing you like and if youre a low end buyer, buy now....lower prices doesnt mean lots of selection.
Flipped it for $85K in a month!! The good old days are back. I'd better start buying before I miss out. I knew CA would come back soon. You just have to have confidence. Whether misplaced or real.
Ok. Although I'm not sure what the difference is since ... a lot of the bottom callers seem to think that's where the bottom will be (a 10-15 percent further drop).
Since there's always a major time lag with the data, by the time you have assurance we've hit bottom you could very well pay more than that 10-15 percent at that point.
Speaking of the bidding wars: this could be an anomaly but a 2200 square foot house that received 12 bids in my neighborhood sold for $255,000 because the buyer, an investor, paid cash.
He just flipped it for $340K ... an $85K profit in less than a month.
Real Estate is not like the stock market. You can look at data from most of the bubble areas, California, Arizona, Nevada, Florida to name a few. When markets peaked, there was a couple years where prices were near the peak. Historically bottoms of Real Estate markets turn even slower than the top. Add to it the enormous downward pressure on the economy. The worst may be over or just beginning, my crystal ball is a little fuzzy on that. The ones predicting a quick "V" shaped turnaround are the ones never thought prices would fall in the first place. You should Google Yale Professor Robert Shiller's comments and Case-Shiller index and get his take. He has been right on the money for the past several years on the housing market.
Not sure which "bottom callers" you are listening too, but some of the best know experts that predicted the housing and credit crash seem to agree its going to get a lot worse. The ones I have read who think we are near a bottom like the NAR experts, never saw this coming in the first place. I know every market is different and yours indeed may be at the bottom, but just to say prices have fallen a certain percent means we must be near the bottom is not rational. Not with this economy.
Regarding the flipper, do you have a link to that property? I would like to look at that. So he was able to make an offer, close on the property, list it and re-sell it all in less than a month? And, he spent zero dollars on any fix-up or rehab, no closing costs? So being a little sarcastic, but about 2-3 three months minimum to do all that and after closing costs and Capital Gains taxes he netted about 30K to 40K or so. Still very impressive. I don't totally get how someone can take the same house without having to rehab it or anything and get someone else to pay 85K more for it in the same market conditions just a few weeks later. You would think the bidding wars you are speaking of would even things out. The cash transaction part would make them a more appealing buyer but that is a big jump in price. I would like to see the details.
I believe you can make money on houses in any market if you are very careful. I have been making money on the stock market even with the big declines, but you have to be smart about it.
Good luck
Last edited by Winkelman; 11-14-2008 at 07:34 AM..
A 55% drop is much like what we've seen in the IE which is very much searching for a bottom. Areas in Southern Orange County however have only seen a 20-30% drop and definitely have a good 20-30% more to go off peak.
I think this is absurd and let me explain why. What areas are you talking about because ... there's less desirable areas like Santa Ana and Anaheim. Then there's more desirable areas like Irvine or Huntington Beach.
In September 174 Anaheim houses sold for $350K on average and 269 houses sold in Santa Ana for $280K. Those towns have dropped over 30 percent since last year but do you want to live there?
Irvine and Huntington Beach, by contrast, have only dropped 4-5 percent since last year. 184 Irvine houses sold for $580K on average while 139 houses sold in Huntington Beach sold for $608K.
If you're waiting for those areas to drop by 50 percent ... then you've got another ten years with only 4-5 percent annual depreciation ... and we all know that's not gonna happen because even the most pessimistic bottom callers think the market will recover by then.
I live in south Monterey county which, basically, is the inland empire of the central coast. To be honest, a lot of farm workers live here, it's heavily hispanic and that drives prices down ... just like Santa Ana in OC. But this is where I work and it doesn't bother me so I figure I might as well save money both on gas and housing.
But it would be absurd for me to expect a 50+ percent drop in Monterey or Carmel ... just like it's absurd to expect that kind of drop in Irvine or Huntington Beach. Yeah prices have dropped some but they will never get that low. So unless you're talking about places like Santa Ana or Anaheim I think you're living in a dream world.
In September 174 Anaheim houses sold for $350K on average and 269 houses sold in Santa Ana for $280K. Those towns have dropped over 30 percent since last year but do you want to live there?
Irvine and Huntington Beach, by contrast, have only dropped 4-5 percent since last year. 184 Irvine houses sold for $580K on average while 139 houses sold in Huntington Beach sold for $608K.
What will happen/is happening is like a domino effect. The least desirable neighborhoods will drop first, putting downward pressure on the surrounding nicer communities. As the prices of homes in these nicers areas drop, downward pressure will be put on the even more expensive homes. This downward pressure will eventually make it all the way up the ladder to the most desirable parts of OC. For someone like me, why would I live in Irvine and buy a house for $700k or whatever they cost in Irvine, when I could live less than 10 miles away in nice area like Mission Viejo or Foothill Ranch for much less?
I think this is absurd and let me explain why. What areas are you talking about because ... there's less desirable areas like Santa Ana and Anaheim. Then there's more desirable areas like Irvine or Huntington Beach.
In September 174 Anaheim houses sold for $350K on average and 269 houses sold in Santa Ana for $280K. Those towns have dropped over 30 percent since last year but do you want to live there?
Irvine and Huntington Beach, by contrast, have only dropped 4-5 percent since last year. 184 Irvine houses sold for $580K on average while 139 houses sold in Huntington Beach sold for $608K.
If you're waiting for those areas to drop by 50 percent ... then you've got another ten years with only 4-5 percent annual depreciation ... and we all know that's not gonna happen because even the most pessimistic bottom callers think the market will recover by then.
I live in south Monterey county which, basically, is the inland empire of the central coast. To be honest, a lot of farm workers live here, it's heavily hispanic and that drives prices down ... just like Santa Ana in OC. But this is where I work and it doesn't bother me so I figure I might as well save money both on gas and housing.
But it would be absurd for me to expect a 50+ percent drop in Monterey or Carmel ... just like it's absurd to expect that kind of drop in Irvine or Huntington Beach. Yeah prices have dropped some but they will never get that low. So unless you're talking about places like Santa Ana or Anaheim I think you're living in a dream world.
You seem to still miss the point here. Let me break it down for you:
1. Least desirable areas (like Santa Ana, Anaheim, the IE) were largely impacted by the implosion of sub-prime loans (generalized based on demographics and prices).
2. Places where prices were naturally higher (Irvine, Huntington Beach, South OC) had less exposure to sub-prime
3. These more desirable places bubbled not due to sub-prime, but to Alt-A, Neg-Am, Option loans. The data is there.
4. These option arm, neg-am and alt-a loans have just started to recast and will accelerate through 2009 and 2010.
5. A person that used an alternative loan (rather than the standard 30 yr fixed, 20% down) usually can-not service their entire, fully amortized loan amount with their income. (If they could, they would have used traditional mortgages)
6. Once these loans recast, you will see the more desirable, higher-end places sustaining large losses.
So despite how desirable an area is, there is still a downward pressure on prices - if these areas are so desirable why have they dropped at all? Why aren't millions of bidders rushing to get a great deal at 5% off?
If you look at the history of past real estate bubbles, you see that the least desirable areas bubble first and also crash first. The high-end comes down after the low end.
Oh, and your argument - Santa Ana and Anaheim down 30%, but would I want to live there? No, but Ladera Ranch is also down 30% and it is perfectly desirable. It still has plenty to drop as well. And I don't necessarily think Santa Ana or Anaheim have bottomed either.
I think you are a bit naive about the economic situation the country is in. I know it might not feel like things are really that bad but that is because the rough patches are ahead of us. Everyday large sectors are shedding thousands, tens of thousands of jobs. Large retail chains are going bankrupt, the auto industry is in shambles, the financial markets are running around with their heads cut off. Paulson just announced yesterday that no bail-out money would be used to purchase troubled assets (bad mortgages). There goes the hope for a free hand-out for risky buyers. Maybe it's a coincidence but I saw 23 of my target properties drop their listing price $5-$20k after the news.
I just watched this video the other day, we should have listened to Peter Schiff all along:
"It's not wealth that's increased in the last few years. We haven't increased our productive capacity. All that's increased is the paper values of our stocks and real estate. But that's not real wealth... When you see the stock market come down and the real estate bubble burst all that phony wealth is gonna evaporate and all that's going to be left is all the debt we've accumulated to foreigners." - Peter Schiff
Once more people start to wake up and realize that appreciation is dead, you will see these markets free fall and most likely overshoot fundamentals.
unfortunately with all the stuff thats going on the alt-a arms and such might not even happen. there was a major lender yesterday(chase maybe?) that put a moratorium on foreclosures and instead will be renegotiating with the majority of their customers that are in foreclosure, near foreclosure, or potentially at risk for foreclosure to negotiate an affordable monthly payment in order for them to stay in their homes(and keep money flowing to the bank). we may never see the effects of the arm resets projected over the next 3-4 years because of this
unfortunately with all the stuff thats going on the alt-a arms and such might not even happen. there was a major lender yesterday(chase maybe?) that put a moratorium on foreclosures and instead will be renegotiating with the majority of their customers that are in foreclosure, near foreclosure, or potentially at risk for foreclosure to negotiate an affordable monthly payment in order for them to stay in their homes(and keep money flowing to the bank). we may never see the effects of the arm resets projected over the next 3-4 years because of this
Exactly. Pretty much all of the major lenders have moratoriums now.
Besides, I never was convinced the Alt-A hit was going to be that bad anyway. These are higher income areas with a lot of wealth. There just isn't the huge number of Notices of Default in these areas indicating a massive crash. Of course, the wishful thinkers will say it will take a couple of years but even most of the pessimists think the market will start to recover by then.
Besides, now that the government and the banks are getting more aggressive in renegotiating these loans ... I seriously doubt you're going to see a 50+ percent drop in any of the primo areas.
Of course the wishful thinkers will say that these workouts won't work out in the end but ... these are in demand primo areas. It's just unrealistic to expect them to get that cheap.
I think this is absurd and let me explain why. What areas are you talking about because ... there's less desirable areas like Santa Ana and Anaheim. Then there's more desirable areas like Irvine or Huntington Beach.
In September 174 Anaheim houses sold for $350K on average and 269 houses sold in Santa Ana for $280K. Those towns have dropped over 30 percent since last year but do you want to live there?
Irvine and Huntington Beach, by contrast, have only dropped 4-5 percent since last year. 184 Irvine houses sold for $580K on average while 139 houses sold in Huntington Beach sold for $608K.
If you're waiting for those areas to drop by 50 percent ... then you've got another ten years with only 4-5 percent annual depreciation ... and we all know that's not gonna happen because even the most pessimistic bottom callers think the market will recover by then.
I live in south Monterey county which, basically, is the inland empire of the central coast. To be honest, a lot of farm workers live here, it's heavily hispanic and that drives prices down ... just like Santa Ana in OC. But this is where I work and it doesn't bother me so I figure I might as well save money both on gas and housing.
But it would be absurd for me to expect a 50+ percent drop in Monterey or Carmel ... just like it's absurd to expect that kind of drop in Irvine or Huntington Beach. Yeah prices have dropped some but they will never get that low. So unless you're talking about places like Santa Ana or Anaheim I think you're living in a dream world.
Feel free to give details on that 85K profit flop. Address would be nice.
The data quick link goes through September, before the credit crisis, since most of the homes were in escrow way before the problem surfaced. Lets see how October and November look. October consumer spending came out today down a record amount. My hunch is prices will plummet at an even bigger amount.
You posts have a strong hint of the National Association of Realtors "mantra." No one knows what exactly will happen in the housing market. On one end of the spectrum, some like you believe we will have a rapid sudden change of direction and houses will quickly appreciate. Again, that is the latest NAR line. "Buy now or it may be too late". On the other end others believe prices will continue to plummet and we won't see even these prices for 20 years.
With what has gone on this decade, I don't think much is out of the realm of possibility. No possibility is absurd. Who really thought prices would rise record amounts and then fall record amounts. Anything is possible.
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