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Home prices have been inching up, decent inventory is almost zero and realtors are acting like buyers should accept anything otherwise they will be outbid in seconds.
Seriously, is this something that is going to last long-term? Has the economy improved so much that people are getting fat salaries and good jobs are a dime a dozen?
I see some marginal improvements in the job market, but salaries are quite low - infact lower than 10 years ago even but we have a great contraction of mortgage credit. I am expecting that after the financial mess of the last 5 years people's savings are nowhere near stable.
A decent single family home in the OC area still costs upwards of half a million, 20% down plus closing is over $110,000 and taxes/hoa/mello roos (if any) PLUS mortgage and maintenance costs can simply seem like sticker shock...how are people able to afford it?
Question - what do you think is the long term sentiment? Are prices going up from this point to a new permanent high? Will salaries rise too to compensate or will people just be willing to pay a higher share of their pay towards housing?
Home prices have been inching up, decent inventory is almost zero and realtors are acting like buyers should accept anything otherwise they will be outbid in seconds.
Seriously, is this something that is going to last long-term? Has the economy improved so much that people are getting fat salaries and good jobs are a dime a dozen?
I see some marginal improvements in the job market, but salaries are quite low - infact lower than 10 years ago even but we have a great contraction of mortgage credit. I am expecting that after the financial mess of the last 5 years people's savings are nowhere near stable.
A decent single family home in the OC area still costs upwards of half a million, 20% down plus closing is over $110,000 and taxes/hoa/mello roos (if any) PLUS mortgage and maintenance costs can simply seem like sticker shock...how are people able to afford it?
Question - what do you think is the long term sentiment? Are prices going up from this point to a new permanent high? Will salaries rise too to compensate or will people just be willing to pay a higher share of their pay towards housing?
The one thing that seems out of whack, or destined to change is interest rates. Right now they are insanely low (I just refinanced to 2.75%, 15 years). If rates go up then people would be able to borrow less and prices would probably go down. But what the heck do I know? If gas stays high then that puts a damper on a person's willingness to commute from Orange County to a job outside OC. If school budgets remain horrible, then one of the traditionally good things about some parts of OC, schools, may suffer and the draw to OC may go down (as compared to a lot of LA County).
People can't pay too much more than a certain amount of their salaries towards housing because banks are reluctant to loan someone more money than they can afford (not that it doesn't happen); Realistic people realize the 28% or 32% limit or whatever is there for a reason.
Salaries will rise if demand for those services arise.
Long term, OC still has a lot going for it. Jobs, weather, schools, lower crime, planning, newness, reputation.
There is no such thing as a permanent high. Real estate cycles. Hopefully it will not again see the inflated prices driven by speculative investing followed by another correction. This recent crash was not part of the normal cycle. It was a correction from inasanely inflated prices. People were buying houses and selling htem again before they were even completed. Those buyers woudl in turn often sell the house to other investors without anyone very moving in. Suddenly people realize they just paid a huge price for a house no one lives in and no one really wants to or can live in at that price.
The same thing happened with ostriches about 15-20 years ago. People started investing in ostriches because the meat was supposedly very healthy and very tastey. Other heard about this and want to buy in. The original invesotrs sold their "ostriches" (which they never even saw) for big profits. Other people heard of the big profits, so they wanted to buy ostriches so they could make big profits too. Then tehy sold to yet other people looking for big profits. Eventually an ostrich would bring up to $70,000, yet the meat of an ostrich was worth maybe $1.500. Suddenly some people realized how stupid that was, and more people realized Ostrich meat is really not all that good anyway and the price plummeted. The people left holding the Ostriches lost their tails.
Housing was simply the next Ostrich. People saw houseing prices skyrocketing and other people making huge profits, so they wanted to get in. Pretty soon investment groups were buying houses en masse as an investment and then simply re-selling them for a profit. Becuase the prices were so inflated, banks became willing to lend money to anyone to buy houses, even if they already had a house and did not need another. they woudl lend with no equity becuase in a year, there woudl be equity and in five years loads of equity - they could hardly lose. In addion, the governemnt was encouraging banks to lend to everybody, even or especially those who really could not afford a house. Eventually people realized no one could afford to buy houses at the inflated prices and they really were not worth that much anyway. Unfortunately, unlike Ostriches, everyone needs a house, so everyone saw their home values fall to a real market value. People who bought before the inflated brices took off did not get hurt, unless they refinanced to take out non-exisient equity to buy toys or vacations. However, investors left holding scores of houses and recnet buyers got hurt badly.
What will happen now? If the market is left to function nromally, housing prices will trickle up as the supply gets eaten up and demand increases. Then prices will fall some and trickle up and fall just like normal. Hopefully we will not see another explosion in increased home values becasue that will be followed by another correction.
Right now prices are more or less flat. There may be a small upward tick, but it is nto that significant. However as people get more compfrtable that the crash is over and they are not going to lose their jobs in a month, more people will be interest in buying again. Unlike the past however, banks are not likely to lend to people who really cannot afford the house. Prices are not likely to shoot up again. Builders are starting to re-open projects they either tabled, or projects that went bankrupt and were purchased for future use as a huge discount. They are re-grading these projects to make them suitable for affordable homes. The builders are focussing on 1800-2500 s.f. homes rather than 5000 s.f. McMansions. Apparently that is what they precieve the upcoming demand will be focused. There is quite a lot of work for redistential grading contractors that survived the crash, so it appears that builders are anticipating a substantial increase in demand in the next 1-5 years. I have not seen a lot of projects opeing up for construction yet, but quite a bit of grading. It is not an explosion or grading nor a return to pre-2007 levels of work. Many graders will complain it is still not enough work, but it is substantially more than there was a yeaar or two ago.
Of course that is for new houses. THere will always be people who insist they must have a new house and that will provide at least some market for new houses. The market for previously occupied houses will continue to be impacted by the large number of forclosures ont he market. Banks finally learned that dumping thousands of homes ont he market at once reduces prices and causes the banks to loose money. The eventually figured out they need to just let some of the foreclosed houses sit for a while. As the banks conitnue to feed the forclosed and foreclosable houses into the market, the suppliy of previously occupied homes will remain pretty high. There is nothing to drive a big surge in demand. Mortgage rates are low which makes banks very cautious about lending money. They cannot take significant risks for tiny returns. The baby boom is moving into retirement. There is not huge swell of population finally reachingthe point where they can buy their own home. There are some, but not a huge swell. Further the mass migration into California is slowing. In fact, some repots indicate the middle class is leaving California. They are being replaced by immigrants who cannot afford to buy homes at high prices and very wealthy people who are interested in the very high end homes. I am nto sure whether that is true, if it is, it will mean that middle class homes will mostly be sold to investors who intend to rent them out to immigrants. Eventually, the immigrant population will stabilize and begin making enough to buy their own homes. That will provide some increase in demand. It will probably not create a boom.
Another pending issue is the huge increase in taxes coming in 2013. Regardless of who gets elected, taxes will increase either quite a bit, or a whole lot. Right now many people are holding off on new major purcheses (cars houses, etc) until they see how big the tax impact ont he economy really is. If the impact is percieved as relatively minor, they will go ahead with the purchases and we may see a bit of a surge. If they percieve the impact as signficant, they will sit on their savings and avoid borrowing becuase they foresee hard times ahead, and by forseeing hard times and not makeing purchases, they will actually create hard times.
It is all far far mor cmomplex that I have decsirbed. This is just a gloss over. there are so many different issues that can influence where things go that no one can really predict what will happen with any accuracy. Many economists are predicting a second but smaller economic crash inthe beginning of 2013, but it may well never occur. The election could have an impact but it may not. Who gets elected is really irrelevant. How people with money to spend or invest see the election's impact is what will make all the difference. When people spend their moeny and/or invest in business growth, things get better. When they sit on their money, they get worse. How people percieve the future will determine whether they spend/invest or sit on their money.
Where we are, a mountain town 100 miles from OC, most houses are presently sold within two or three weeks of listing, at or near asking price, and many, many, many were bought without financing. Granted, the asking prices are still low when compared with cities around us, but then again, this is the community of second homes, so half of the owners here already have their principal residences "down the hill", i.e. OC, LA, or Riverside County.
I have no idea where people find the money to buy their second homes in cash at asking price, but that's what happens right now where we are.
This has always seemed to be the ultimate paradox - all you hear on the news is how bad the economy is, how so many people are suffering without jobs and yet houses costing half a million dollars and up with very high taxes and ongoing cost of ownership have multiple bidding wars. I have no idea either how people are so flush with cash after all that has happened in the past few years. The low interest rates do not explain it since prices are still much above what normal affordability levels have been in the past (3-3.5 times income)...and prices have already gone up 10% from last year, more than enough to offset any gains in interest rates anyway.
This has always seemed to be the ultimate paradox - all you hear on the news is how bad the economy is, how so many people are suffering without jobs and yet houses costing half a million dollars and up with very high taxes and ongoing cost of ownership have multiple bidding wars. I have no idea either how people are so flush with cash after all that has happened in the past few years. The low interest rates do not explain it since prices are still much above what normal affordability levels have been in the past (3-3.5 times income)...and prices have already gone up 10% from last year, more than enough to offset any gains in interest rates anyway.
Remember that in a place like OC, you're not just competing against locals with local jobs paying local salaries. You're competing with the world's wealthy and investors for a basic necessity of life. They see OC housing as a place to park their money and get a better return than the money market while you're just looking for safe a place to tuck your kids in at night.
There is no such thing as a permanent high. Real estate cycles. Hopefully it will not again see the inflated prices driven by speculative investing followed by another correction. This recent crash was not part of the normal cycle. It was a correction from inasanely inflated prices. People were buying houses and selling htem again before they were even completed. Those buyers woudl in turn often sell the house to other investors without anyone very moving in. Suddenly people realize they just paid a huge price for a house no one lives in and no one really wants to or can live in at that price.
The same thing happened with ostriches about 15-20 years ago. People started investing in ostriches because the meat was supposedly very healthy and very tastey. Other heard about this and want to buy in. The original invesotrs sold their "ostriches" (which they never even saw) for big profits. Other people heard of the big profits, so they wanted to buy ostriches so they could make big profits too. Then tehy sold to yet other people looking for big profits. Eventually an ostrich would bring up to $70,000, yet the meat of an ostrich was worth maybe $1.500. Suddenly some people realized how stupid that was, and more people realized Ostrich meat is really not all that good anyway and the price plummeted. The people left holding the Ostriches lost their tails.
Housing was simply the next Ostrich. People saw houseing prices skyrocketing and other people making huge profits, so they wanted to get in. Pretty soon investment groups were buying houses en masse as an investment and then simply re-selling them for a profit. Becuase the prices were so inflated, banks became willing to lend money to anyone to buy houses, even if they already had a house and did not need another. they woudl lend with no equity becuase in a year, there woudl be equity and in five years loads of equity - they could hardly lose. In addion, the governemnt was encouraging banks to lend to everybody, even or especially those who really could not afford a house. Eventually people realized no one could afford to buy houses at the inflated prices and they really were not worth that much anyway. Unfortunately, unlike Ostriches, everyone needs a house, so everyone saw their home values fall to a real market value. People who bought before the inflated brices took off did not get hurt, unless they refinanced to take out non-exisient equity to buy toys or vacations. However, investors left holding scores of houses and recnet buyers got hurt badly.
What will happen now? If the market is left to function nromally, housing prices will trickle up as the supply gets eaten up and demand increases. Then prices will fall some and trickle up and fall just like normal. Hopefully we will not see another explosion in increased home values becasue that will be followed by another correction.
Right now prices are more or less flat. There may be a small upward tick, but it is nto that significant. However as people get more compfrtable that the crash is over and they are not going to lose their jobs in a month, more people will be interest in buying again. Unlike the past however, banks are not likely to lend to people who really cannot afford the house. Prices are not likely to shoot up again. Builders are starting to re-open projects they either tabled, or projects that went bankrupt and were purchased for future use as a huge discount. They are re-grading these projects to make them suitable for affordable homes. The builders are focussing on 1800-2500 s.f. homes rather than 5000 s.f. McMansions. Apparently that is what they precieve the upcoming demand will be focused. There is quite a lot of work for redistential grading contractors that survived the crash, so it appears that builders are anticipating a substantial increase in demand in the next 1-5 years. I have not seen a lot of projects opeing up for construction yet, but quite a bit of grading. It is not an explosion or grading nor a return to pre-2007 levels of work. Many graders will complain it is still not enough work, but it is substantially more than there was a yeaar or two ago.
Of course that is for new houses. THere will always be people who insist they must have a new house and that will provide at least some market for new houses. The market for previously occupied houses will continue to be impacted by the large number of forclosures ont he market. Banks finally learned that dumping thousands of homes ont he market at once reduces prices and causes the banks to loose money. The eventually figured out they need to just let some of the foreclosed houses sit for a while. As the banks conitnue to feed the forclosed and foreclosable houses into the market, the suppliy of previously occupied homes will remain pretty high. There is nothing to drive a big surge in demand. Mortgage rates are low which makes banks very cautious about lending money. They cannot take significant risks for tiny returns. The baby boom is moving into retirement. There is not huge swell of population finally reachingthe point where they can buy their own home. There are some, but not a huge swell. Further the mass migration into California is slowing. In fact, some repots indicate the middle class is leaving California. They are being replaced by immigrants who cannot afford to buy homes at high prices and very wealthy people who are interested in the very high end homes. I am nto sure whether that is true, if it is, it will mean that middle class homes will mostly be sold to investors who intend to rent them out to immigrants. Eventually, the immigrant population will stabilize and begin making enough to buy their own homes. That will provide some increase in demand. It will probably not create a boom.
Another pending issue is the huge increase in taxes coming in 2013. Regardless of who gets elected, taxes will increase either quite a bit, or a whole lot. Right now many people are holding off on new major purcheses (cars houses, etc) until they see how big the tax impact ont he economy really is. If the impact is percieved as relatively minor, they will go ahead with the purchases and we may see a bit of a surge. If they percieve the impact as signficant, they will sit on their savings and avoid borrowing becuase they foresee hard times ahead, and by forseeing hard times and not makeing purchases, they will actually create hard times.
It is all far far mor cmomplex that I have decsirbed. This is just a gloss over. there are so many different issues that can influence where things go that no one can really predict what will happen with any accuracy. Many economists are predicting a second but smaller economic crash inthe beginning of 2013, but it may well never occur. The election could have an impact but it may not. Who gets elected is really irrelevant. How people with money to spend or invest see the election's impact is what will make all the difference. When people spend their moeny and/or invest in business growth, things get better. When they sit on their money, they get worse. How people percieve the future will determine whether they spend/invest or sit on their money.
So are you talking about huge tax increases in just CA?, or the U.S as whole? Im really thinkin about leavin CA as well. Im 35, and want to be able to own my own property by 2013.
Don't be fooled. The people buying have outside money. I know the Chinese have been snapping up OC real estate as investments. The Chinese market is in a bubble so investors over there are bringing their capital to the US because the market over here has bottomed out and stabilized.
The local economy is NOT improving. The economic data shows it. Incomes aren't even beating inflation. So technically everyone is getting a pay decrease as an aggregate. If housing prices go up, it's definitively not a result of local economic improvement.
Interest rates are low so investors aren't getting much of a return anywhere else. The perception is that homes are undervalued in some markets so taking cash and buying up real estate to achieve a bigger return over the next couple of years makes sense to them. Foreclosures are disappearing taking the downward pressure off. With little new construction happening, almost all the demand has to go into resales, driving up prices. As new construction occurs, that should alleviate some of the upward pressure. I wouldn't blame Chinese investors directly as nearly all the buyers are American. However the situation overseas is keeping interest rates down.
Orange County's a relatively expensive market. If you're not making sufficient salary to afford it, you should be looking elsewhere where home prices better match your income.
Don't be fooled. The people buying have outside money. I know the Chinese have been snapping up OC real estate as investments. The Chinese market is in a bubble so investors over there are bringing their capital to the US because the market over here has bottomed out and stabilized.
The local economy is NOT improving. The economic data shows it. Incomes aren't even beating inflation. So technically everyone is getting a pay decrease as an aggregate. If housing prices go up, it's definitively not a result of local economic improvement.
sorry..but not sure this is true at all..
many of us..are retired..worked hard til we did..and now have sufficient funds to yes..buy homes with cash..we know of many..and yes..when we worked we had good paying jobs..but I think the bottom line is we didn't spend everything we made..we saved..for the rainy day called retirement
we personally also paid all college expenses for our kids..yes it was less than..but 11 years including law school and USC was not cheap
several years ago we bought a newish home in the desert area..our realtor called me one Sat when the model I wanted hit the market..it was a foreclosure..she said it was a great buy and would selll ASAP...we drove out that day...I jokingly said "but we can pay cash"..she replied "most can"...so we offered over list price..that weekend they got 9 offers..all cash..we were at the top of the list cuz we had no contingencies..in 3 days we had the keys ..my hubby said he had never spent so much money in 3 days in his life..
so yes..some of us older folks planned for this time of our lives..it is lovely to own two homes in Southern Calif..neither has a loan..and yes..we know quite a few non Asians in the same situation...
just saying
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