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Joe Van Fossen, you do realize that $650k is a ridiculous amount of money for the typical family? For a household earning $100,000/yr which is still a very decent household income in Southern California, that's 6.5 times that income!!!!! Even for a household earning $150k/yr which is not the typical household in LA/OC, it's still 4 times income which is rather quite high given the typical debts families have these days - car loans, kids etc. etc.
I would say those homes are $200k overvalued! Raise the interest rate to 8% and we will see those valuations fall by $200k, I bet ya!
BTW, you're talking about Yorba Linda here...definitely a good neighborhood but hardly some exclusive enclave!! It's way inland and there is nothing exclusive about it!
My forecast is that housing prices will continue to go up for 1-2 years and then we will have a repeat crash just like 2008, which is just a total shame really... each times this boom/bust happens it not only ruins people buying homes for non-speculative purposes but it also ruins the economy...Wall St. investors get rich of course. Wall St. loves volatility because that's how they make their money.
Saw a few houses on Redfin for 500k in fountain valley. Its a pretty nice area. I'm currently out of the market but there are some deals there, 4.7 % interest rate isn't bad either truthfully. People just got used to 3.5. Because right now that's the true affordability level at the selling prices.
I wouldn't pay over 500k for a house in oc. And that's in a good area not some ****hole area
FV is nice I lived there for 2 years, just gets hot removed from the beach and next to 405F.
Joe Van Fossen, you do realize that $650k is a ridiculous amount of money for the typical family? For a household earning $100,000/yr which is still a very decent household income in Southern California, that's 6.5 times that income!!!!! Even for a household earning $150k/yr which is not the typical household in LA/OC, it's still 4 times income which is rather quite high given the typical debts families have these days - car loans, kids etc. etc.
I would say those homes are $200k overvalued! Raise the interest rate to 8% and we will see those valuations fall by $200k, I bet ya!
BTW, you're talking about Yorba Linda here...definitely a good neighborhood but hardly some exclusive enclave!! It's way inland and there is nothing exclusive about it!
My forecast is that housing prices will continue to go up for 1-2 years and then we will have a repeat crash just like 2008, which is just a total shame really... each times this boom/bust happens it not only ruins people buying homes for non-speculative purposes but it also ruins the economy...Wall St. investors get rich of course. Wall St. loves volatility because that's how they make their money.
Yeah, I agree that $650K is a ridiculous amount of money for a family earning $100K/yr. I didn't want to make any assumptions about that person's income, lifestyle or family situation. I made no allusions to the exclusivity of any of those neighborhoods or the actual value of the homes. It was just a quick response to an earlier question.
FV is 6 miles from the beach it doesn't get too hot and when it does its still not as hot as Yorba or inland cities. 650k is a stupid amount to pay for a house hell 500k is a HALF OF A MILLION DOLLARS. Notice how everyone uses the numbers to sell you something instead of saying 650 THOUSAND DOLLARS. They say 650. Start saying DOLLARS after the number and you will get what people used to call sticker shock. But meh it's only 650 doesn't sound as expensive.
Well..what can we say. i agree that's a lot of money for a home but OC is OC....just as Ny is NY...DC is DC. miami is miami. it's not cheap to live in these places. if you think 650k is overvalued, how do you feel about a 1000 sq ft condo listed at 750k with a 1,000 monthly condo fee? the prices are all driven by the area...supply and demand.
A household earning 100k living in a 650k house can be completely affordable. only if they have no mortgage or very low mortgage. We often see questions on here - is it possible to live in OC or anywhere for that matter making $### a year? if you want to rent a small home, perhaps. It's not about how much you make that only matters, but also how much you have saved and how you spend and how much you want to spend vs. save. what about an elderly couple that has worked (and saved) hard over the years that now only bring in 100k combined but have 2 million in cash.
If the person has the funds, the buyer needs to ask himself is the premium cost of owning this home in this area worth it? just as you ask yourself when you buy a car, is $20k worth it for this honda accord or is $50k worth it for this BMW. they both get you from point a to point b. supply and demand say yes; otherwise they wouldn't be selling at that price.
As for OC, your assumptions of affordability may be limited to just the people you know. i know my share of people who live paycheck to paycheck. i know people who own multiple properties with equity in each. i know people who are hundreds of thousands in debt. there are households in my circle earning < 200k a year living in 400k homes....there also are doctors and lawyers. and even amongst those professions, some live in modest townhomes while others live in semi mansions.
home ownership is not for everyone. while i know this is not the case, i would like to think most homeowners, especially of homes priced in the upper ranges have the means to stay current on their payments and still have money for food and clothes.
Since a lot of people here seem to think we're in the midst of another bubble, I would like to share some insight. People who have been investing in real estate for a long time (20+ years) know that this is not a bubble. We are simply coming off the bottom of the market cycle. Here's how the cycle works:
- Prices crash. Lending standards tighten.
- Prices reach bottom.
- Economy starts to improve. Investors pick up profitable deals, reducing available inventory or low-priced real estate.
- Low inventory prompts some to buy, thinking they will get left behind. Lenders have started to loosen standards (just a little). The investors and these buyers start bidding up prices a little because they want in, causing a ~10-20% jump in prices.
- More people start to list their properties for sale, increasing inventory. This causes prices to stabilize.
- Prices increase at a slow, healthy rate as the economy continues to improve. There may be some small hiccups, but overall, prices will climb slow and steady for a good amount of time.
- Lenders loosen standards more and more, and unqualified people start buying real estate (because they finally "qualify"). This increased demand drives prices further higher.
- Prices climb quickly as more unqualified people buy, and speculators buy, thinking it's going to last forever and they will be able to sell it for more in 6 months or a year.
- Smart people realize THIS is a bubble, and step back. Demand for real estate drops, the economy falters, the unqualified buyers get foreclosed upon, and you have the next crash.
We have just experienced the "jump" that happens right after the bottom, and are settling in now with the increase in inventory. None of this is new, but apparently not enough people have studied the market to know what's going on. It's been happening for decades. Cycles are unavoidable. Obviously the amount of time each stage takes can vary, and localized disasters will clearly affect pricing (yes, if we have "the big one" you can bet that real estate values will plummet), but overall, this is how the cycle works.
There's an old saying: "Real estate is a 10 year game played by people with 5 year memories."
Since a lot of people here seem to think we're in the midst of another bubble, I would like to share some insight. People who have been investing in real estate for a long time (20+ years) know that this is not a bubble. We are simply coming off the bottom of the market cycle. Here's how the cycle works:
- Prices crash. Lending standards tighten.
- Prices reach bottom.
- Economy starts to improve. Investors pick up profitable deals, reducing available inventory or low-priced real estate.
- Low inventory prompts some to buy, thinking they will get left behind. Lenders have started to loosen standards (just a little). The investors and these buyers start bidding up prices a little because they want in, causing a ~10-20% jump in prices.
- More people start to list their properties for sale, increasing inventory. This causes prices to stabilize.
- Prices increase at a slow, healthy rate as the economy continues to improve. There may be some small hiccups, but overall, prices will climb slow and steady for a good amount of time.
- Lenders loosen standards more and more, and unqualified people start buying real estate (because they finally "qualify"). This increased demand drives prices further higher.
- Prices climb quickly as more unqualified people buy, and speculators buy, thinking it's going to last forever and they will be able to sell it for more in 6 months or a year.
- Smart people realize THIS is a bubble, and step back. Demand for real estate drops, the economy falters, the unqualified buyers get foreclosed upon, and you have the next crash.
We have just experienced the "jump" that happens right after the bottom, and are settling in now with the increase in inventory. None of this is new, but apparently not enough people have studied the market to know what's going on. It's been happening for decades. Cycles are unavoidable. Obviously the amount of time each stage takes can vary, and localized disasters will clearly affect pricing (yes, if we have "the big one" you can bet that real estate values will plummet), but overall, this is how the cycle works.
There's an old saying: "Real estate is a 10 year game played by people with 5 year memories."
That's all great in a perfect world but you are missing some important facts.
Inventory was artificially held back to bring up prices.
The reasons houses ARE selling is because investors are borrowing cheaply raising prices and n turn realtors are panicking normal buyers to bid higher thus overpaying.
Homeownership rates are back to 1995 levels.
We have not built any housing really since 2008-2009
Economy is NOT improving. The bs unemployment report is just that.
The wage/economic growth is nonexistent. Sure coroprations are showing huge profits but they are simply doing it with less employees.
People are listing their houses because the sale prices have reached the level of their underwater loans so they are looking to get out from under the debt they are in. There are still tons of people who are paying their mortgage but literally have no way to move up or even down because by the time they are done with the sale its basically a wash and they ave no money out if the sale. The best they can do s get out from under the house debt but they. Go go from " owners" to renters. I know two people in this situation.
LOAN originations DROPPED just like re-fi apps dropped since interest rate jumped from 3.5 to 4.7. That simple raise rise made loan originations and Re-fis drop. That alone should tell you something. The 100 percentage points basically took away about 10-20% of a buyers purchasing power.
The mere mention by the FED of tapering off the MBS purchasing threw the market off. And I firmly believe you will see 5% by the end of the year unless Bernanke or Yellen start sme massive purchasing of MBS. We are already purchasing what 85 billion worth EVERY month.
Look at last month reports and you will see a big change.
House prices are dropping simply because WTF pricing is just that WTF. Not selling. I watched. Three houses drop about 45k in price before they went pending
BTW Wels Fargo is letting go of 2500 people in their mortgage loan origination division because they have no sales. What does that tell you?
Oh BTW Goldman Sachs stated 60% of all sales in 2013 were CASH buyers so either a crap load of people just had 300k or more just sitting in the bank or they leveraged or pooled money to buy cash. The investors came in and leveraged the F out if the money rhe FED was guaranteeing and took advantage of the low rates. There is no way on gods green earth normal traditional buyers are pushing up these house prices. Prices ARE going up you are right, but the reason they are going up is the dangerous part. http://www.maxkeiser.com/2013/08/60-...s-cash-buyers/
And there are quite a few investor/hedge funds that went into the rental business and are getting some dismal returns. It would be suicidal to dump but. Hell people panic anything s possible. Look at the way the bubble popped.
Like I said your description is right IF the market was a traditional normal market. Im sorry miss but you CANNOT compare this market with past markets because no past market has been so incredibly manipulated as this one has. You have ENDLESS loan mods HAMP, HARP, banks that simply do not foreclose, the LOL homeowners bill of rights, artificially low interest rates and the fact the FED is purchasing MBS and guaranteeing the purchases makes for bad conditions. I have gone through three up and down markets. I have yet to lose money on housing.
Last edited by Electrician4you; 08-23-2013 at 06:42 PM..
And you said real estate is a 10 year game llayed by people with 5 year memory
You may be right in that sense but the main blame lies with banks lenders and realtors. Not to mention Clinton's fair housing act that started the whole ball rolling. Most people when they buy a house they buy it like they would a car. They look at the monthly payment. And then lenders come along and sell these schmicks on come on use your equity to buy that shiny car boat or vacation. You deserve it you HAVE 200,000 dollars in equity take some of that out and spend it on yourself. YOU deserve it. And schlib starts thinking he really HAS 200,000 dollars and borrows it. After all when he sells the house he will get it all back. What realtors banks and lenders did was atrocious and some people deserve to go to jail. Yet they paid some fines and its ok. Back to pumping up the prices get the whole train rolling again
And there are the smart loan owners who kept pulling out the equity over years and actually made money. Squatted for a few years and now if they were truly smart are buying cash and not having to worry.
I can guarantee there are more than a few of these cash buyers who gamed the system
About foreign buyers..........they aren't naive. Some very smart Chinese are buying up alot. I don't think they are flippers. They buy low hold forever and sell. You have 2 generations of families living in some of those house. I know some of them, actually Cambodians and Vietnamese. Asian are very good with their money. I knew several in CM and they had 3 generations in a 4 bdr house. Place was tidy and they ate a lot of rice, which is cheap.
Some Chinese I have been told are buying as a possible escape route if there country goes back to less capitalism and more mao/marxism.
Same in Canada almost all foreign buyers are Chinese.
That is how the Japanese ended up owning so much of Hawaii. Grouped their resources, shared and slowly but surely they all had homes. Western oriented families do not do that.
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Was just making a candid observations of the facts.
