1st time homebuyer - Not looking so good right now (Orange: short sales, condo)

[kettlepot]

Houses may depreciate, but land doesn't. They aren't making more coastal California real estate.

Regarding older houses, after a certain period of time, older houses do appreciate because of scarcity. Not many old Craftsman or Spanish revival bungalows out there in comparison to the demand, so they carry a 20% to 40% premium over a more modern similarly sized house.

First time homebuyers in coastal California should be buying a condominium. Nowadays, single family homes are for move up buyers.

It's like the outer boroughs of New York City, where over the past century first time buyers transitioned from single family homes, to two family homes, and finally to making their first purchase a unit in a highrise condominium. The U.S. is becoming more and more crowded. As tens of millions keep flooding into the country, eventually we will be living like the Chinese.

[k374]

More bad news for first time home buyers:

O.C. homes flying off the shelves; our market is the fifth-hottest in U.S.

O.C. homes flying off the shelves; our market is the fifth-hottest in U.S. - The Orange County Register

The uptick in home sales is bad news for first-time homebuyers, because the pace is fastest in the lowest-priced third of the market, Trulia reported.

“First-timers ... are already getting slammed by declining affordability and slow wage growth,” the Trulia report said. “Now, even the homes they might be able to afford seem to be disappearing in the blink of an eye.”

[Fiona8484]

Originally Posted by Electrician4you

I don't think anyone believes house prices will go in the 100,000k range. But I do believe the market is overpriced given the current wages to price ratios. You really think there are just that many people with 100,000 to 160,000 dollars for that 20% down today? Or do you think people are really doing the FHA 5% down? (Which to me is the new version of the old subprime loan)

You can't really say that. Unless wages go up none of that happens. You can ask a million dollars for a house but if nobody has the money or can't qualify might as well ask for 5 million. The only reason the highs will be higher is because of hedge/investors/speculators/some homebuyer demand. But homebuyer demand isn't there as much. And hedge funds have pulled back quite a bit. You CANT match affordability without raising wages or doing hocus pocus financing. You can pump up prices, move numbers around but eventually everything still hinges on what that buyer can afford in a monthly payment.

Loans are back in the 3% range again. It's literally almost free borrowed money. Right now dropping interest is the way they are getting the "affordability"

I have to say I think you are pretty spot on and made an excellent point about the FHA 5% becoming the new subprime.

I am from a reasonably priced area of NY, but currently live in the Bay Area. It's a real estate crap show in Silly (Silicon) Valley, I think it is even a smidgen worse than your area since we have the tech $$$ up here to compete with. I do realize that my area and your area are super hot markets, like you I agree that they aren't going down a ton, unless the big one hits.

IMO though, there is a lot hysteria going on right now and it scares me away from the market. I didn't follow the market much (until I moved to CA), but I do believe it's looking a wee bit bubbly.

I have spent the last 9 months thinking all of this through and analyzing this insane market that we have in the popular parts of CA. As some others have mentioned, it could still be hard to buy if the market does eventually end up in the dumps, but I guess if you build up a safety cushion that could help.

[Cardiff Kook]

Interesting that putting 5% down is now being compared to the zero down neg am loan days..

[Fiona8484]

Originally Posted by Cardiff Kook

Interesting that putting 5% down is now being compared to the zero down neg am loan days..

I don't think I would necessarily say that about lower COL areas in the USA. For example, if I was buying a small condo for $140k in my hometown and putting a very minimal amount down it wouldn't be as risky IMO.

However, I just read a post on the San Jose board, a guy was R-E-A-L-L-Y stretching it to buy a $800k home and putting a smaller amount down. Someone like that is going to be SOL to make the big mortgage payment if the economy tanks, that is what makes me come to the point I arrived at. Not a good situation to be in if stuff goes south.

[GO JACKETS]

Originally Posted by ocGuy714

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.

That's definitely true when the market is predominately locals but not in an international city. Many of the buyers in LA/OC are foreign and they pay cash. By international standards LA/OC is still very affordable. Try comparing our housing prices to Tokyo, Taipei, or London.

[Cardiff Kook]

Originally Posted by GO JACKETS

That's definitely true when the market is predominately locals but not in an international city. Many of the buyers in LA/OC are foreign and they pay cash. By international standards LA/OC is still very affordable. Try comparing our housing prices to Tokyo, Taipei, or London.

SD must look like an absolute steal then

[LuvSouthOC]

Originally Posted by Cardiff Kook

SD must look like an absolute steal then

Yes, actually, it does from the Canadian/UK/Taiwan/rich mainland China buyer perspective. That's why the desirable areas here (and there in SD) are not likely to take a big hit if the *&^% hits the fan...but the working class areas, on the other hand...

[ihatedcu]

Man, inventory is really low right now. Take away those overpriced homes that have been sitting on the market for over 30 days, on redfin and we got a serious shortage in the housing market.

[Joe Van Fossen]

Originally Posted by ihatedcu

Man, inventory is really low right now. Take away those overpriced homes that have been sitting on the market for over 30 days, on redfin and we got a serious shortage in the housing market.

Yeah, unfortunately that's been the norm for quite a while now. Inventory is starting to tick up a bit now that we're getting deeper into spring, but the good homes go fast.