1st time homebuyer - Not looking so good right now (Huntington Beach: for sale, real estate)
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I know at least three friends that saved up for 20% and bought in the past 2 years. All of them are highly educated and double income households.
It's a government policy driven inflation not a bubble. Can't you guys see it? The gov is "normalizing" the high prices of the last bubble to stop the foreclosures. If you have done things right in the past 7 years ,saved diligently and have your money in an "asset", your money would have increased to keep up with the eroding purchasing power. You would be in a position to buy now.
If you think the prices will go down when they raise interest, you haven't studied history. In the 80s when they raised interest, the home price stayed flat. Why? Because policy makers don't raise interest to cause deflation.
That's great, your friends must be making combined $200k plus, which works with the current housing prices.
But you guys do agree that first time home buyers (in general), are at an all time low correct? and you know a healthy housing market is fueled by first time home buyers making up 40-50% of the market. Currently we are around 30%. Prices are prices, they can be 100K or 1million per house, but when it's not fueled correctly, it's a bubble.
I'm sure in the 80s when interest rates were raised, first time home buyers where still buying in bunches b/c prices weren't as crazy as it is today.
I do agree, the government has a hand in this as well. Keeping the rates at an all time low will make people who normally wouldn't buy think somehow they can afford just because the interest rates are low. It's always smarter to buy when the rates are higher and prices lower.
But you guys do agree that first time home buyers (in general), are at an all time low correct? and you know a healthy housing market is fueled by first time home buyers making up 40-50% of the market. Currently we are around 30%. Prices are prices, they can be 100K or 1million per house, but when it's not fueled correctly, it's a bubble.
How so that a healthy market needs first time home buyers making up 40-50% of the market? A market full of investors can be healthy as long as the rent increases support the investment. We are just moving from one equilibrium to another with lots of people renting.
I really feel sorry for the young people starting out and try to save up for a place of their own. Save all you can now, diversify your investment, max out your 401k, and hope for a major conflict with Russia or China to bring the prices down.
How so that a healthy market needs first time home buyers making up 40-50% of the market? A market full of investors can be healthy as long as the rent increases support the investment. We are just moving from one equilibrium to another with lots of people renting.
I really feel sorry for the young people starting out and try to save up for a place of their own. Save all you can now, diversify your investment, max out your 401k, and hope for a major conflict with Russia or China to bring the prices down.
Exactly that, at this rate we are heading towards a society where there are more renters than homeowners. More renters w/ relatively lower incomes (compared to housing/rent prices) means more people with less money, and a small majority with lots of money. This results in an economy with no middle class. I don't see that being healthy but some might.
The young will have a hard time saving money because of large student loans, not to mention it's harder to find professional jobs right out of school than it's ever been.
I could be mistaken but I cannot think of anywhere where they sell new SFHomes in OC in that price range. I heard there were some new homes in Stanton (torn down, rebuilt) in that price range.
Tustin Legacy (aka The District) has new homes going up as low as $650k (Sheldon development).
I've seen comparable in Laguna Niguel and Foothill Ranch as well.
I know at least three friends that saved up for 20% and bought in the past 2 years. All of them are highly educated and double income households.
It's a government policy driven inflation not a bubble. Can't you guys see it? The gov is "normalizing" the high prices of the last bubble to stop the foreclosures. If you have done things right in the past 7 years ,saved diligently and have your money in an "asset", your money would have increased to keep up with the eroding purchasing power. You would be in a position to buy now.
If you think the prices will go down when they raise interest, you haven't studied history. In the 80s when they raised interest, the home price stayed flat. Why? Because policy makers don't raise interest to cause deflation.
What were the house prices your friends incomes and their COL for the time they were saving?
In my area your friends must be making at least 180-200k living in a low/free rent situation maybe with family AND have no debt at all. No car payment, no car insurance, no cc debt, no kids etc to put that away what is the 20% requirement to buy here.
We know it's bank/lender/government driven policy. It's still a bubble being inflated. It's the policy that is escalating the prices. There is nothing normal about this market. You would be a fool to think so. Lenders/banks COMPLETELY changed the housing rules. This in turn completely changed the housing market. The prices charged for homes today are not sustainable by today's wages. That's why there is the FHA loan. It's basically taxpayer subsidized loan. You think there are a lot of 20% down buyers? And banks are really stretching the DTI ratios to get people to buy.
You raise interest rates today 2-3% and keep the prices the same you will make every loan origination/refi hit a brick wall. It was absolutely proven a few years back when they raised the rate from 3.5-4% to almost 5%. And that was about 100 percentage points. And it stopped everything in its tracks. Why do you think the rate is so damn low? Because the lower rate allows a buyer to borrow more which gives him purchasing power to buy that crapshack for exorbitant prices.
The government and banks are keeping the price high to satisfy the old existing loans. It's to make the lenders and banks whole. They don't give a f about the homebuyer. And with high prices all those underwater/squatting homeowners who missed payments or stopped making payments can now be foreclosed (weather they want to or not) and the bank can recoupe their money and get another wild eyed foaming at the mouth buyer on the payment hook.
If rates go up you really narrow your buyer pool to select few that can carry the high house price AND higher loan rate. So at thst point you have a market that is stagnant. So something gives. Either the rate or the price. You're not gonna have both unless you want low sales volume
What investment rate and from whom are you talking about. Nobody is paying anything on savings CD or anything else. Banks are loaning at 3.5% they sure as hell aren't gonna give you anywhere near that on a CD/Savings acc. Everyone is scurrying around for yeld. At maybe 4-5% return? And unless you make a crap load of money and have a low COL you're not gonna save 100-150,000 plus in 5-7 years. At 5 years it would require 20 k a year to be put aside to reach 100k and that's a house target price at 500,000. That's 1667 dollars a month required. The average house price in OC is well over 500,000. More like 650,000 plus. That's about 26,000 a year needed to be put aside for 5 years. And in that time the house prices are going up making you chase that added cost
Quote:
Originally Posted by motobecaneti
How so that a healthy market needs first time home buyers making up 40-50% of the market? A market full of investors can be healthy as long as the rent increases support the investment. We are just moving from one equilibrium to another with lots of people renting.
I really feel sorry for the young people starting out and try to save up for a place of their own. Save all you can now, diversify your investment, max out your 401k, and hope for a major conflict with Russia or China to bring the prices down.
That's the problem. There aren't any first time buyers. That market is decimated. The prices are basically unaffordable. There are some condos townhomes thst are somewhat affordable. I just got a ad showing a small two bed townhouse type in GG for 299,999. I'm willing to bet that gets pumped up to 350k by bidding.
Know any young first time buyers that have 70k ready and required credit DTI and income ?
Quote:
Originally Posted by bhcompy
Tustin Legacy (aka The District) has new homes going up as low as $650k (Sheldon development).
I've seen comparable in Laguna Niguel and Foothill Ranch as well.
Probably first phase only and that starting price doesn't mean sale price. By the time you add any options like walls and doors ( joking) those 650k houses will get pumped to 750k.
There is a development next to a friends house in Westminster/GG area. He told me when they broke ground the houses were advertized in the 750k asking price. Then dropped to $650k and now at $high 700s. We went to see the models. The cheapest is 820k starting price now. And the materials are builder grade. Which means it's ok to minimal quality but looks good for a while
What investment rate and from whom are you talking about. Nobody is paying anything on savings CD or anything else. Banks are loaning at 3.5% they sure as hell aren't gonna give you anywhere near that on a CD/Savings acc. Everyone is scurrying around for yeld. At maybe 4-5% return? And unless you make a crap load of money and have a low COL you're not gonna save 100-150,000 plus in 5-7 years. At 5 years it would require 20 k a year to be put aside to reach 100k and that's a house target price at 500,000. That's 1667 dollars a month required. The average house price in OC is well over 500,000. More like 650,000 plus. That's about 26,000 a year needed to be put aside for 5 years. And in that time the house prices are going up making you chase that added cost
Electrician4you, I wish I could rep you more for this!
My husband and I find ourselves in this very situation right now, along with so many others we know. With around 40% of our income going to rent , along with raising three children, maxing out retirement accounts, keeping a decent emergency fund, along with all of the other expenses that go into day to day living, there is little left over to save for a home. We have no debt, either! We are trying to put away around 1,000.00-1500.00 per month in our house fund, but like you mentioned that would take us around 6-7 years to save 20% for a down payment. By that time our kids will be in high school and college, so its almost seems pointless.
Waiting this bubble out and hoping for the best. If we can never afford a home here in OC, then after the kids are grown, we'll take our savings and buy a nice little cabin in the mountains
Electrician4you, I wish I could rep you more for this!
My husband and I find ourselves in this very situation right now, along with so many others we know. With around 40% of our income going to rent , along with raising three children, maxing out retirement accounts, keeping a decent emergency fund, along with all of the other expenses that go into day to day living, there is little left over to save for a home. We have no debt, either! We are trying to put away around 1,000.00-1500.00 per month in our house fund, but like you mentioned that would take us around 6-7 years to save 20% for a down payment. By that time our kids will be in high school and college, so its almost seems pointless.
Waiting this bubble out and hoping for the best. If we can never afford a home here in OC, then after the kids are grown, we'll take our savings and buy a nice little cabin in the mountains
It is not pointless to save. If your kids are grown then you have the option to buy here if you'd like, or move somewhere else and have far more buying opportunities there.
Save, buy a craphole in a decent area and use the cash to renovate it to your liking. You have to be waiting so you can be the first on the scene though. It takes planning.
When you think about it, a house is just like any other tangible object. The foundation, wood beams, tiles etc all get old and should depreciate in value. Of course you can renovate but shouldn't that just maintain or slightly increase its value? The only time I see a house appreciating value is when the neighborhood and surrounding area gets a makeover and new good schools etc., and when the supply is limited, however these factors don't justify the high price hikes.
Somewhere along the lines people treated houses as investments. The investments worked because people started buying into it, paying more and more as the years go buy (even when their salaries dictate otherwise) thinking prices will always go up, and it did, till bubble 1.0. Now, we see the same thing happening. Investors and flippers picking up houses left and right, overbidding the average Joe. Average Joe now buys a freshly HGTV upgraded house for 100k + more, this is after out bidding other average joes. This will continue till something happens and we get bubble 2.0.
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