Home prices - Check out todays paper

[Axiom]

Originally Posted by 5FLgirls

So, why do people feel we should jump into it right now -- especially when we can't commit to the long haul??

I'd give people the benefit of the doubt and assume most of them have good intentions when they say you should buy.

After all, I'm sure they've seen the NAR commercials suggesting that you'll never build wealth if you're not a homeowner, and that this is a great time to buy, etc, etc.

Plus since there have been price declines, they're looking at the discount you'd be getting off the all time high prices of a couple of years ago.
What a deal!


It's easy to get caught up in the spin if you don't stop and think things through.
Just one example, taken directly from an NAR sponsored web site:

"Homeowners benefit from the power of leverage. Over 10 years, a $10,000 investment in the stock market at a normal 10% market rate of return would yield $23,600. The same investment as a down payment on a $200,000 home at a normal appreciation rate of 5% would return nearly 5 times the stock market return, at $110,300."

OK, sounds great, right? Except maybe they should mention that they're relying on the myth that prices never go down in their little example above.
But let's assume prices DO go down. The loss is just as magnified as the gain when you start playing with leverage.

Using their example (except bumping up the downpayment to $20,000 on a $200,000 house) What if the value of the house falls by 20% next year? Certainly not out of the realm of possibility. If you'd put that $20,000 in the stock market and watched it decline 20%, you'd still have $16,000. With the house, your $20,000 is wiped out entirely AND you owe an additional $20,000 on a mortgage over and above the continuing value of the house. Essentially, you've lost $40,000 of whatever "wealth" the house was supposed to be helping you build.


Personally I think your husband is right. I'd be very cautious about buying into what many feel is still a declining market.

[dfarmer002]

Amen.. we have relocated from the o.c selling in the begiinning of 07. At that time we had started to see the fall and cut and ran if you will. And each and everyone of those we consulted with in the real estate industry said "oh no, this isnt a bubble bursting, ..its just a plateau..real estate will never go down long term in o.c..its a downtrend etc etc."

Now I have several friends remaining there on the brink of losing homes and are in negative equity situations and although i miss so. cal, I am VERY glad I didnt take the opinions of the "experts" at the time as I figure our prior home is down about $150,000 since we sold.

Point is..dont believe those who are in denial about the realities of the real estate market, particulalry orange counties.

[Charles]

Originally Posted by k374

it is almost impossible that prices will go up so just wait!

O.C. homeowners raising asking prices - Lansner on Real Estate - The Orange County Register

[EscapeCalifornia]

Originally Posted by Charles

O.C. homeowners raising asking prices - Lansner on Real Estate - The Orange County Register

They can ask for anything they want. All the "sellers" sitting on their high prices with 300 days on market is evidence that a lot of people are delusional.

[EscapeCalifornia]

Forecast: O.C. home prices to dip 1.3% in year - Lansner on Real Estate - The Orange County Register

Prices are going up!
Prices are going down!
Prices are going up!
Prices are going down!
Prices are going up!
Prices are going down!
Prices are going up!
Prices are going down!
Prices are going up!
Prices are going down!
Prices are going up!
Prices are going down!
Prices are going up!
Prices are going down!

[Vascodagama]

Originally Posted by dfarmer002

Amen.. we have relocated from the o.c selling in the begiinning of 07. At that time we had started to see the fall and cut and ran if you will. And each and everyone of those we consulted with in the real estate industry said "oh no, this isnt a bubble bursting, ..its just a plateau..real estate will never go down long term in o.c..its a downtrend etc etc."

Now I have several friends remaining there on the brink of losing homes and are in negative equity situations and although i miss so. cal, I am VERY glad I didnt take the opinions of the "experts" at the time as I figure our prior home is down about $150,000 since we sold.

Point is..dont believe those who are in denial about the realities of the real estate market, particulalry orange counties.

I'm in a similar situation, sold in 2007 and renting until the smoke clears. The problem with SoCal is the smoke is not clearing, it keeps burning and some politicians are throwing fuel on the fires. Bottom line with the housing market is a home needs to be affordable to the buyer. Since subprime loans and all the mortgage shenanigans are gone the buyer actually needs to qualify the old fashion way, with good credit, 20% down and proof they can pay the mortgage. Couple these requirements with a bad economy with people worried about jobs and you have very few buyers. The statistics showed this over the past few months, no buyers! Home prices have to come down and come down significantly. The homes must be affordable to the buyers.

[metrodude]

Don't count on it. The housing crash has just started. You'll be able to buy oceanfront property in a few years for less than $400K.

[Charles]

People are still buying and the homes aren't really that discounted. These are for the dead of winter too.

Here are the recent sales for $600K to $850K, 5BR in south OC. Notice how the final sales price isn't too far out of line with the original asking price - in fact, notice in some cases, the final price was higher than original.

[RobE]

Charles, I follow a few of the OC beach cities (mainly the Laguna Beach/ Niguel areas and the Newport Beach/Coast vicinities, too) and here is what I have been seeing:

1. Some totally ignorant suckers, likely FCBs, recently way overpaying for houses that were worth hundreds of dollars/sq. ft. less according to nearby comps. I don't know if this is due to instability in the Middle East and some of the sheiks and their families are desperately seeking places to bail to or what. At the very least, their buyer's agents, if they had them, did those customers a huge disservice. Either that or the buyers' emotions overrode any advice they may have been getting from their agents and the myriad real estate blogs.

2. More and more homes are being realistically priced closer to comps and not that far off historical mean. While there are still quite a few WTF prices to be seen in Newport Coast and Laguna Beach, those are decreasing in number. The ones that insist on asking $1000/sq. foot are still on the market for a year or more or going into foreclosure while those home sellers that are cognizant of reality are pocketing cash.

Moreover, I have been seeing scads of price decreases, many of them in the $600-750,000 range. So while the asking/selling price gap may not appear that great now, it often only comes after a serious drop/s from initial asking. The luxury market right now is at about 2005 prices.

The question, then, becomes how much are the above folks going to lose in equity over the next five years. To me, the WTF buyers will get killed and many will see their home values as much as HALVED. The solid comp buyers will lose a minimum of $100/sq. ft and that would be optimistic. However, I think over a decade they will get that back (though that will obviously be in inflated dollars).

In other words, still an uncertain time to buy on the high end. The low end appears to be stabilizing, but there is just so much crap out there right now that prices in that segment will likely be stagnant and become largely the province of what they have become, for investors and flippers who can renovate quickly and turn them over for fast, though relatively low, profits.

[Charles]

Beach house mansions aren't really in the context of the overall OC real estate market. What Kobe buys and sells his homes for is pretty irrelevant to John Q. Paycheck.

$/sqft has indeed dropped in OC - $/sqft has fallen about 7% in the past six months for the homes in my region. Of course I'm not happy about it but I can accept it.

Originally Posted by RobE

1. Some totally ignorant suckers, likely FCBs, recently way overpaying for houses that were worth hundreds of dollars/sq. ft. less according to nearby comps. I don't know if this is due to instability in the Middle East and some of the sheiks and their families are desperately seeking places to bail to or what. At the very least, their buyer's agents, if they had them, did those customers a huge disservice. Either that or the buyers' emotions overrode any advice they may have been getting from their agents and the myriad real estate blogs.
Most buyers, like 99.9% of buyers don't pay hundreds of dollars/square foot over comps.

2. More and more homes are being realistically priced closer to comps and not that far off historical mean. While there are still quite a few WTF prices to be seen in Newport Coast and Laguna Beach, those are decreasing in number. The ones that insist on asking $1000/sq. foot are still on the market for a year or more or going into foreclosure while those home sellers that are cognizant of reality are pocketing cash.

$1000+/sqft homes in those areas are a small percentage of the overall OC home buying landscape - they're in the noise.

Moreover, I have been seeing scads of price decreases, many of them in the $600-750,000 range. So while the asking/selling price gap may not appear that great now, it often only comes after a serious drop/s from initial asking. The luxury market right now is at about 2005 prices.

The data I posted above show initial asking price versus sales price. I deliberately provided these data that way. Final asking price compared to sales price is meaningless.

The question, then, becomes how much are the above folks going to lose in equity over the next five years. To me, the WTF buyers will get killed and many will see their home values as much as HALVED. The solid comp buyers will lose a minimum of $100/sq. ft and that would be optimistic. However, I think over a decade they will get that back (though that will obviously be in inflated dollars).

A lot of predictions above.

In other words, still an uncertain time to buy on the high end. The low end appears to be stabilizing, but there is just so much crap out there right now that prices in that segment will likely be stagnant and become largely the province of what they have become, for investors and flippers who can renovate quickly and turn them over for fast, though relatively low, profits.

Nothing is ever certain except for the need to live somewhere.