How are people affording this? (Oxnard, Orange: sales, mortgages, credit)

[Axiom]

Originally Posted by Charles

Out of curiosity, and if you have the numbers or approximate numbers handy, what are some comparison numbers (rents/mortgages/housing prices) between then (1990s) and now which would illustrate the point?

I don't have specific price to rent numbers, how about price to income trends though? It's a bit of an assumption of course, but I think it's a fairly safe bet that when P/I ratios are in the 4 - 4.5 range we are a whole lot closer to rental parity than when P/I ratios are in the 7-8 range.

Creative affordability products make crazy high P/I ratios work when buying (at least short term, or when equity withdrawl is a way of life, especially with double digit appreciation) but it's not really possible to keep up with monthly rent payments without the supporting income. At least that would be my contention.

Unfortunately I don't have access to current numbers, but the following is as per Data Quick Info Systems:

Price to income ratios 1995 - 2006
(Santa Ana, Anaheim, Irvine MSA/MD)

1995 4.0
1996 4.1
1997 4.0
1998 4.1
1999 4.1
2000 4.3
2001 4.7
2002 5.3
2003 6.1
2004 7.6
2005 7.7
2006 8.6

It would be interesting to know where the numbers are now. My guess is probably still in the 5-7 range, but that's just a guess. I don't have access to the official data.

[kchui1028]

Originally Posted by k374

how are people still buying at these price levels? Do you think they are putting 20% down? I don't understand it... with this uncertain job market how are people getting the confidence to make such major commitments? Or do people these days even think of these things?

the fact of the matter is, at all different economic times, there'll always be people going broke and people getting rich every single day.

i was broke all my early 20s, started a biz last year and now earning over 200k and more next year. Do i really deserve that much just for 6 months work of setting it up, not really compared to all the hard workers who get paid minimum wage, Is it pure luck? Probably. Did i put in some hard work during that 6 months, you bet i did.
So again do i deserve it?.. now you decide.

P.S. Mark Zuckerberg became a multi-BILLIONAIRE (most on paper, but he could sell his shares for it) in a matter of years, basically he earned over 1 billion for the idea/work he put in to start Facebook in one year. Now does he deserve it? It's capitalism at its best.

If you have what the public want, the rest just fall into places.

[anaheimhillsinit]

Originally Posted by k374

A decent home in South Orange County (3bd, 1700ish sqft) is still costing $500-600k and prices don't seem to be budging, with the state of the local economy here (jobs have virtually disappeared) how are people still buying at these price levels? Do you think they are putting 20% down? I don't understand it... with this uncertain job market how are people getting the confidence to make such major commitments? Or do people these days even think of these things?

I am a business owner, on my street there are business owners, engineers, doctors, lawyers, family money, families where both the husband and wife have good jobs, one guy is a retired inventor, real estate brokers and the list goes on. Orange County is run but people who work hard and a lot of family money as well. A lot of people make these commitments too without worrying about the repercussions. It is a tough world my friend. I am not easy street either, I have more bills then I know what to do with. Work hard and good luck. If you buy something in the OC make sure you like it.

[killer2021]

Originally Posted by Charles

Just to provide a feel for the situation out there, I found this yesterday's OC Register

OC Cities with highest foreclosures:

Portola Hills 62.50%
Anaheim 59.80%
La Habra 58.80%
Rancho Santa Marg. 57.20%
Buena Park 53.70%
Santa Ana 53.00%
Lake Forest 52.50%
Ladera Ranch 46.10%

Now, here are the lowest:

Seal Beach 3.90%
Newport Coast 5.40%
Corona Del Mar 6.70%
Laguna Woods 6.80%
Laguna Beach 9.30%


Why do you suppose there is such a huge difference? What do the high cities have in common? What do the low cities have in common? Why are some so high and others so low?


Which cities have highest foreclosure share? - Mortgage Insider : The Orange County Register

Its because the upper middle class loans are Alt-A. Those loans were written slightly after all the sub prime loans. Most of those are resetting in 2010-2011. So We don't see high foreclosure rates in those areas yet. However, don't be fooled. The upper middle class areas aren't safe, in fact, they are sitting on a bubble which will slowly deflate. It'll drop 40-50% for most of those areas. If you don't believe me, just look at the drop in homes sales and compare that to the sales data for subprime areas. It goes hand in hand.

[Charles]

Originally Posted by killer2021

Its because the upper middle class loans are Alt-A. Those loans were written slightly after all the sub prime loans. Most of those are resetting in 2010-2011. So We don't see high foreclosure rates in those areas yet. However, don't be fooled. The upper middle class areas aren't safe, in fact, they are sitting on a bubble which will slowly deflate. It'll drop 40-50% for most of those areas. If you don't believe me, just look at the drop in homes sales and compare that to the sales data for subprime areas. It goes hand in hand.

If interest rates stay historically low, for say one or two more years (during the peak of the Alt-A resets), would there necessarily be a lot of foreclosures? Meaning, if interest rates stay really low, yes they would reset, but maybe not catastrophically for those loan holders?

[EscapeCalifornia]

Originally Posted by Charles

If interest rates stay historically low, for say one or two more years (during the peak of the Alt-A resets), would there necessarily be a lot of foreclosures? Meaning, if interest rates stay really low, yes they would reset, but maybe not catastrophically for those loan holders?

My understanding is that many of these loans have two "gotcha" components: The possible adjustment of the interest rate to current market rates and principle amortization. Even if interest rates stay low, going making the minimum payment that doesn't even cover the monthly interest to suddenly having to start making payments on a 25 year amortization of the principle + accumulated unpaid interest could be quite a shock. With the weak economy, who knows how many people are just hanging on as it is. I think the wild card is the economy. The longer the recession drags on, the more people are going to run out of options.

[Axiom]

Originally Posted by EscapeCalifornia

I think the wild card is the economy. The longer the recession drags on, the more people are going to run out of options.

Regarding the resets, what about the extend & pretend wild card?

Even a couple of years ago I never would have believed banks would allow people to remain in houses they stopped making payments on 18 months or more ago, nor would I have believed taxpayers would be funding mortage principle write downs. Both are happening.

Whether it be due to creative bank accounting practices, or tax payer funded government intervention programs, the result is the same; there are plenty of "homeowners" still in houses they never could, and probably still can't, afford. That affects inventory. And I guess I can understand limited inventory and record low interest rates propping prices.

But like the OP, I too wonder where buyers are coming from at current price levels, because as far as I can tell, the overall employment and income numbers certainly don't support the prices.

[flo2900]

Originally Posted by k374

A decent home in South Orange County (3bd, 1700ish sqft) is still costing $500-600k and prices don't seem to be budging, with the state of the local economy here (jobs have virtually disappeared) how are people still buying at these price levels? Do you think they are putting 20% down? I don't understand it... with this uncertain job market how are people getting the confidence to make such major commitments? Or do people these days even think of these things?

simple answer....in OC there are and always be more ppl with money than homes available....supply and demand!....currently 30% of all Real Estate tranzactions are CASH!!

[Charles]

Originally Posted by flo2900

simple answer....in OC there are and always be more ppl with money than homes available....supply and demand!....currently 30% of all Real Estate tranzactions are CASH!!

Must be something like that. Why then are the median incomes in Orange County not much higher then regions (Denver, Dallas as examples) with significantly lower housing prices?

[MaryMe63]

Originally Posted by Charles

Here are 31 single family homes in South OC which sold in the past six months for $450K or less, 3BR, up to 1750 square feet:


Real Estate Search | Redfin

Yeah, that could be, but if you want good schools you will have to still dish out well over $500,000. We lost a whole lot of money on our condo when we sold it(we did not short sale the house), but will probably never again be able to buy a house here. Neither would I want to. It is just outrages. I can understand that people with children prefer Irvine and its schools. After all, that is the reason why we bought here initially. But other than that, I would much rather be in San Juan Capistrano because it seems to have charm, whereas Irvine is just pretty and has no soul. Be careful buying a house in certain parts of Santa Ana.