CA Homes, Affordable Yet? (Orange: lenders, to buy, bankruptcy)

[flo2900]

Originally Posted by KaraG

I remember watching affordability in OC going down to 11% and common sense would tell you that unless you were in the top 10% of income earners, you shouldn't be buying the average house there. But no, the mortgage companies came up with the creative mortgages, no interest, no money down, in fact, they gave buyers $10-20,000 cash at closing to furnish homes or pay off credit cards. They had to do something to find new buyers since so few could qualify normally. And the mortgage folks made a ton of money signing people up for these loans, homeowners saw their equity go up and kept doing refi's to take out cash.

I was a new home researcher for several years there and I watched times where developers had waiting lists of buyers for new homes and prices would go up $50,000 in one quarter. I also watched last year as developments shut down before they were finished with many vacant homes and lots.

It didn't make sense, but there were very few people waving warning flags. We always used to say it was the big elephant in the room in California - no one wanted the craziness to stop because everyone was making money (including government agencies). BTW, we happily rented during our stay in CA and then bought when we moved out of state.

you could have bought while "the craziness" and sold in `06...this way you could have paid cash for your out of state home!

[AK123]

Originally Posted by flo2900

b/c the cities you mentioned are not desirable....for lots of ppl So Cal is the place to be!

That's not true.

Houston especially has lots of "overpriced" homes inside the city. This is because of the location being close to all the big-city amenities.

It's the suburbs where the cheaper homes are, the ones people hear about.

[bhcompy]

Originally Posted by Soccersupporter

Why move to TX? Well paying cash for a new 3500 sq. ft. home on a quarter acre lot and putting $200,000 in the bank had something to do with it.

But to be fair we also moved here because our daughter gave us our first grandchild with another on the way. Too good a deal to pass up for us.

tx also has the highest property tax as a percentage of home value in the nation

[Soccersupporter]

Originally Posted by bhcompy

tx also has the highest property tax as a percentage of home value in the nation

Property taxes are definitely higher than CA but the cheaper housing makes up for that. I pay $6500 in property taxes but for the same house in CA I would pay much more. It is an even trade off as far as taxes go. It is always to each their own. We are happy with our move and that is all that matters anyways.

[Charles]

Originally Posted by flo2900

b/c the cities you mentioned are not desirable....for lots of ppl So Cal is the place to be!

So your explanation is So Cal became three times more desirable in nine years and most everywhere else became about 20%-50% more desirable in those same nine years? Is that what you are implying?

So I guess my next question is, why was So Cal one-third as desirable in 1997 than it was in 2006?

[Charles]

Originally Posted by Soccersupporter

Property taxes are definitely higher than CA but the cheaper housing makes up for that. I pay $6500 in property taxes but for the same house in CA I would pay much more. It is an even trade off as far as taxes go. It is always to each their own. We are happy with our move and that is all that matters anyways.

And California has state income tax.

In Alabama the taxes are ridiculously low (though food is taxed). However, little things like community landscaping, underground utilities, lots of convenient roadway signs, are lacking. I hate to write this, but I wish my taxes were raised sometimes to benefit from more of these conveniences. May just be a cultural thing.

[kettlepot]

Originally Posted by Charles

What I read was 1) No coastal land available, 2) More houses built inland - in fact too many and, 3) Coastal housing won't drop too low.

But (maybe it's me, it's early, my coffee isn't hitting me yet) I don't see the tie in to my original question of why the huge price increases which occurred everywhere in SoCal including coastal areas in the IE - as compared to the rest of the country.

I would say it's an issue of inelastic supply. Because of land scarcity, the supply of homes in California couldn't respond to the demand increase caused by the lax lending standards. Therefore a small increase in demand causes a high delta price change. In areas outside of Southern California with lots of land, the market was able to easily accommodate a slight increase in demand, or the market knew, that if necessary, more supply could easily be brought online.

In coastal California, there is no ability to accommodate increases in demand, except to repress demand by pricing people out of the market, or to downsize people into condominium/townhome type projects. The IE got some of the halo effect from the coastal areas because of proximity and because coastal residents took their equity from a small property and used it to buy a larger inland home.

Houston, Atlanta, etc aren't really in land scarce areas, so they don't see this effect of sharp price changes in response to small demand changes. But overall, as the population increases, an existing SFH home will appreciate faster than inflation and income as what was once a starter home, affordable to people of modest means, becomes a move up home to people who are earning more than average and are willing to pay for it to move out of a condominium. The people of modest means will be downsized into condominium projects.

No one seems to have a problem grasping that middle income people in New York City live in apartments or homes of very modest square footage. The same will become the norm in coastal California. And those who already own a SFH near the coast, will reap the benefits of this appreciation, over a period of 20, 30, 50 years.

[VeronikaW]

My parents are house hunting and finding townhomes and condos in Mission Viejo, Aliso Viejo, even some in Dana point, for under $300,000.

V. =)

[dockj]

Originally Posted by VeronikaW

My parents are house hunting and finding townhomes and condos in Mission Viejo, Aliso Viejo, even some in Dana point, for under $300,000.

V. =)

Right, there are actually quite a few. I was pleasantly surprised. Prices keep dropping, too.

[killer2021]

Originally Posted by Charles

Why did this happen so dramatically in Southern California (as compared to Houston or Denver or Atlanta or Salt Lake City...)? Cost of lending was lower and credit was easy there too.

I am thinking it is the property tax structure. Dallas and Houston did see more people buying homes but those people foreclosed rather quickly. In texas the property taxes are in the 3% range. In Ca it is only 1%. Yea, you can get the mortgage for 400-500k but can you afford the 12,000-15,000/year property tax bill? I don't think so.

Also, it seems in texas land is cheaper and it is a lot easier to build in Texas.