CA Homes, Affordable Yet? (Sacramento, Santa Clara: foreclosure, lender, job market)

[sheri257]

Originally Posted by goodbyehollywood

Home prices are still not in line with incomes, so that would indicate that further declines are likely. While desirable parts of SoCal may always command premium pricing, a 5+ multiple is still too high. I believe there's more downside.

This is what people keep saying but ... I seriously doubt coastal prices are going to get down to 3 times income like a lot of people are hoping for in the decent neighborhoods.

An income multiplier is basically arbitrary. What matters is what people are willing to pay and if they can get the mortgage. If someone has a lot of cash to put down or, they don't have much debt and qualify for a higher mortgage and can afford the payment then ... that's what's going to drive the market.

It doesn't matter if a bunch of people move to Texas if there's just any many people willing to pay to stay in OC ... especially if there's only so much inventory left to buy anyway.

[sheri257]

Originally Posted by Charles

In Alabama the taxes are ridiculously low (though food is taxed). However, little things like community landscaping, underground utilities, lots of convenient roadway signs, are lacking. I hate to write this, but I wish my taxes were raised sometimes to benefit from more of these conveniences. May just be a cultural thing.

Yeah ... cheap also has it's price. I grew up in New Orleans where there were no property taxes so the infrastructure suffered and, of course, we all know what happened with Katrina. Even before that disaster the city was flooding on a routine basis.

[Charles]

1 in 3 buyers can afford O.C. home | percent, home, quarter - Business - The Orange County Register

[Joe Van Fossen]

Originally Posted by Charles

1 in 3 buyers can afford O.C. home | percent, home, quarter - Business - The Orange County Register

We've been seeing home prices skyrocket in Orange County this year. I've been talking to a lot of homeowners that didn't even realize their homes are worth what they are now.

[GoldenZephyr]

Originally Posted by Joe Van Fossen

We've been seeing home prices skyrocket in Orange County this year. I've been talking to a lot of homeowners that didn't even realize their homes are worth what they are now.

yep, skyrocket, all on cheap money and low inventory, nothing substantial or sustainable to support the rise otherwise. Skyrocketing prices are bad because they are a mark of instability.

Modest gains are sustainable. "Skyrocketing" prices are not, see every other boom bust cycle.

Once interest rates rise in a year or two most of the gains will be wiped out. Just going from 3% interest to 5% interest is like getting a 30% increase in home prices. Go from 3 to 7% and you'd see a 20% reduction from today's prices at best.

If you are buying for the long term, you should be ok, (long term means more than 5 years). Just understand the risk. Just don't buy expecting your home to be a personal ATM, or out of Realtor(TM) induced fear and bullying of "buy now or be priced out forever", "it's different this time", "we're special". RealtorsTM were singing those lines 7 years ago and drove many into homes they couldn't afford and hurt many families and an economy. An unprecedented fiscal crisis is approaching and their is nothing on the horizon to drive sales beyond interest rates and artificially low inventory. When prices only rise on a trillion dollar goose from the Federal Reserve, you have an unbalanced market. It won't happen forever and the demographics do not bear out over the next thirty years.

Adjusted for real terms (i.e. interest rate normalization, prices have not risen at all) Once interest rates rise, appreciation will likely stop and even reverse once again.


RealtorsTM, its always a good time to buy or sell a home (i.e. its always a good time to make a comission!)

[Youthanasia]

Originally Posted by Joe Van Fossen

We've been seeing home prices skyrocket in Orange County this year. I've been talking to a lot of homeowners that didn't even realize their homes are worth what they are now.

Guess what that means? HELOC time.. then more foreclosures... the cycle starts over. People never learn.

[Joe Van Fossen]

Originally Posted by GoldenZephyr

yep, skyrocket, all on cheap money and low inventory, nothing substantial or sustainable to support the rise otherwise. Skyrocketing prices are bad because they are a mark of instability.

Modest gains are sustainable. "Skyrocketing" prices are not, see every other boom bust cycle.

Once interest rates rise in a year or two most of the gains will be wiped out. Just going from 3% interest to 5% interest is like getting a 30% increase in home prices. Go from 3 to 7% and you'd see a 20% reduction from today's prices at best.

If you are buying for the long term, you should be ok, (long term means more than 5 years). Just understand the risk. Just don't buy expecting your home to be a personal ATM, or out of Realtor(TM) induced fear and bullying of "buy now or be priced out forever", "it's different this time", "we're special". RealtorsTM were singing those lines 7 years ago and drove many into homes they couldn't afford and hurt many families and an economy. An unprecedented fiscal crisis is approaching and their is nothing on the horizon to drive sales beyond interest rates and artificially low inventory. When prices only rise on a trillion dollar goose from the Federal Reserve, you have an unbalanced market. It won't happen forever and the demographics do not bear out over the next thirty years.

Adjusted for real terms (i.e. interest rate normalization, prices have not risen at all) Once interest rates rise, appreciation will likely stop and even reverse once again.


RealtorsTM, its always a good time to buy or sell a home (i.e. its always a good time to make a comission!)

All good points, and very true. Buying a home is a big responsibility and realtors should be there to give helpful, real world advice to buyers who need it. Another problem during the bubble was all of the free money. I knew several people with less-than-good credit who took out 0% down loans on overpriced homes in south county.

Home buying should always be a long term investment for anyone but savvy, experienced RE investors. I agree that we will see a slowdown once interest rates go back up, but I don't think we'll be in the same situation that led to the rapid decline in home values, simply because qualifying for a loan is much harder now than it was then.

[ducviloxi]

Supposedly the OC median home price has registered an annual gain of 16% from last year... makes me think we have another bubble in the making due to investor speculation, ridiculously low interest rates and artificial supply-shortage caused by banks and this will end badly.

Isn't this type of thing what we just went through? Apparently lessons have not been learned. People talk about this being a housing "recovery"! This is laughable. A true housing recovery is when people can afford home prices based on a solid job market and incomes, and by afford I mean having a stable job, putting a decent amount down (15-20%), having 8 months of reserves and not spending more than 25-30% of your gross income towards all housing related costs.

[EscapeCalifornia]

Originally Posted by ducviloxi

and by afford I mean having a stable job, putting a decent amount down (15-20%), having 8 months of reserves and not spending more than 25-30% of your gross income towards all housing related costs.

It hasn't been that way in OC in a long time and likely never will be again, not as long as the world's wealthy all want some property here.

[killer2021]

Isn't this type of thing what we just went through? Apparently lessons have not been learned. People talk about this being a housing "recovery"! This is laughable. A true housing recovery is when people can afford home prices based on a solid job market and incomes, and by afford I mean having a stable job, putting a decent amount down (15-20%), having 8 months of reserves and not spending more than 25-30% of your gross income towards all housing related costs.

Seems like most of the people I know spend 50% on housing related costs.