Millennials simply can't afford to live in OC (San Jose, Sacramento: lenders, expense)

[LuvSouthOC]

Originally Posted by expatCA

Silly argument. The reason is ... Location, location, location, which is why inland areas are cheaper.

I agree and don’t see how the Times article even relates to be honest.

[k374]

Home ownership is one of the dumbest financial moves you can make in Southern California, especially now. There is a huge opportunity cost of capital in terms of down payment, ongoing expenses, seriously EYE POPPING taxes (I saw my colleagues tax bill here in Irvine and had to shake my head - now he is having buyers remorse geez!). that could be growing much faster in the markets. As Shiller says for the 1000th time, don't buy a home for financial reasons because it is s very poor performing asset class historically, buy it if you want to pay for the lifestyle.

Also, with rates going north of 5% watch out, these houses are going to be nothing but houses made out of cards. In the next recession OC is going to be foreclosure central...buy then at 40 cents on the dollar like in 2012.

[LuvSouthOC]

Originally Posted by k374

Home ownership is one of the dumbest financial moves you can make in Southern California, especially now. There is a huge opportunity cost of capital in terms of down payment, ongoing expenses, seriously EYE POPPING taxes (I saw my colleagues tax bill here in Irvine and had to shake my head - now he is having buyers remorse geez!). that could be growing much faster in the markets. As Shiller says for the 1000th time, don't buy a home for financial reasons because it is s very poor performing asset class historically, buy it if you want to pay for the lifestyle.

Also, with rates going north of 5% watch out, these houses are going to be nothing but houses made out of cards. In the next recession OC is going to be foreclosure central...buy then at 40 cents on the dollar like in 2012.

I tend to agree but if one is planning on staying at least 7 years, it *might* make sense under certain circumstances. In general, I agree that at these prices, it would be be imprudent to buy.

[expatCA]

Originally Posted by k374

how do you know that? do you have a crystal ball? I am not certain that is happening but it could happen.

Nope, too many people with money from all over the world would buy any house that dropped even 20%, as well as investors and this is happening even now The only way housing would drop 40% in OC would be an absolute collapse in the economy, major earthquake in CA and wildfires right down to the beach.

[k374]

Originally Posted by expatCA

Nope, too many people with money from all over the world would buy any house that dropped even 20%, as well as investors and this is happening even now The only way housing would drop 40% in OC would be an absolute collapse in the economy, major earthquake in CA and wildfires right down to the beach.

Not really, last downturn was 32% (median home price in 2006 of $718k to 2011 $494k). Housing prices could easily fall 50%, it really depends on various factors including where interest rates end up, how severe the next recession is and also what exactly is the leverage situation in terms of mortgages extended currently - a lot of mortgages these days are at very high DTIs and very low down payments, these will bust when there are job losses in the next recession. People these days are extending themselves to the moon to get into housing... this will most definitely end in tears!

[Caligirl8]

I completely agree! So many people are stretching their budget extremely thin. The amount of debt I see around where I live is pretty intense. I am unsure how much housing will go down but I do think there’s a downturn in the horizon. By end of 2020

[expatCA]

Originally Posted by k374

Not really, last downturn was 32% (median home price in 2006 of $718k to 2011 $494k). Housing prices could easily fall 50%, it really depends on various factors including where interest rates end up, how severe the next recession is and also what exactly is the leverage situation in terms of mortgages extended currently - a lot of mortgages these days are at very high DTIs and very low down payments, these will bust when there are job losses in the next recession. People these days are extending themselves to the moon to get into housing... this will most definitely end in tears!

The last drop was abnormal. Plus a huge number of houses were sold to people with no credit and no real job. I saw people in my neighborhood in the IE buy $600,000.00 homes while living in Oceanside and barely making any money. Visited once and they admitted it. Rarely made a payment after buying and ... went right into foreclosure. Yes High DTI's and low down payment BUT they have to have an income to support the payment or ... no loan. Plus a LOT of homes are selling for cash. If a major recession hits the prices will drop in some areas but no one will have the money to buy them except foreigners and investors and ... that will keep the prices from dropping much. IF a huge drop, no one will be buying.



Can a drop occur, yes, but more likely what we see a bit of now in some areas, a flattening of prices. On the other hand not enough homes are for sale to meet demand. That keeps prices up.

[expatCA]

Originally Posted by Caligirl8

I completely agree! So many people are stretching their budget extremely thin. The amount of debt I see around where I live is pretty intense. I am unsure how much housing will go down but I do think there’s a downturn in the horizon. By end of 2020

With the number of investors and foreign buyers any drop in prices will be brief as they buy them up. Those who stretch themselves too far lose, but those with cash will win by buying the house. Look how long a home stays on the market in a popular area VS a less than popular area. A couple of months is nothing.

[Tulemutt]

Originally Posted by Zitpop

No investor in his right mind is going to be 100% equity in a standard resi fix and flip deal. When an investor buys with cash it just looks like cash because they close escrow all cash, but there's usually a hard money loan involved giving them serious leverage. They are actually going to be some of the first to go if there's even a moderate (10%) drop in home prices. They're dealing with hot money, high leverage, and quick maturities.

Err ... the screen name ...

[expatCA]

Originally Posted by Zitpop;53173038[B

]No investor[/b] in his right mind is going to be 100% equity in a standard resi fix and flip deal. When an investor buys with cash it just looks like cash because they close escrow all cash, but there's usually a hard money loan involved giving them serious leverage. They are actually going to be some of the first to go if there's even a moderate (10%) drop in home prices. They're dealing with hot money, high leverage, and quick maturities.

They will buy like they did last time. If prices drop and people are forced to sell or go in foreclosure the home will be bought by investors and rented at a good price. Flipping is not an issue, rentals are and the prices will go up like they did last time as those now without a home must rent.