OC Real Estate-Where is it heading? (Irvine: sale, rent, condo)

[killer2021]

OC homeowners - good luck!

A second wave is coming ashore pretty soon. Once it starts in 2010 it will be all over the news. The alt-a, option arms loan balances were larger so people were able to buy into upper class areas. The total amount of resets are larger than the subprime and just look what the subprime crisis caused. Have fun with that! OC is the epicenter for this mess.

I am saving up to buy a home summer of 2012. Going to pay cash

[dfarmer002]

ive seen this chart..and agree actually that the real storm is still coming or at least the second wave. A question though..does anyone know if this chart represents the number for oc proper as compared to the whole us?/

[flo2900]

Originally Posted by killer2021

OC homeowners - good luck!

A second wave is coming ashore pretty soon. Once it starts in 2010 it will be all over the news. The alt-a, option arms loan balances were larger so people were able to buy into upper class areas. The total amount of resets are larger than the subprime and just look what the subprime crisis caused. Have fun with that! OC is the epicenter for this mess.

I am saving up to buy a home summer of 2012. Going to pay cash

Killer, looking to do the exact same thing
In your opinion what could it happen so the market won`t act the way you expect it to act, or is this A SURE thing ?....

[JohnG72]

There is another factor here at play....A number of homes are just sitting vacant because #1 the owner(bank, private owner, etc) is not selling right now and trying to wait and see if the market will rebound and #2 because recent investors who bought thinking the prices were good in the past 6 months are trying to rent the place out.

I can't speak to a specific OC neighborhood. I do know for a fact that this is happening in two medium-high priced good but not the best neighborhoods in Los Angeles. Valley Village is one and has inflated prices because of the Jewish population there needing to be near the Temple(no driving on Saturdays). There are a several completely vacant properties that are not on the market and a ton more that are being fixed up right now.

Encino/Tarzana is another area and also sees some of the same inflated price issue due to cultural reasons. I specifically know of one street in Tarzana where about 15-20 of the 40 homes on it are currently completely vacant and either available for rent or being worked on to be rented. The rents being sought are generally starting at $2K a month for 1200-1400 sq ft places.

I'm certain there are other neighborhoods like this were the owners won't sell and can't rent. At some point something has to give with the rents being lowered or the homes being sold, or the neighborhood being vacant enough that a bad element begins squatting the houses.

All contributes to downward pressures on all house prices. If these places drop 30% to 300-400K, what happens to the lower end homes at that price range right now? Yup, they drop too.

[dawnsearlylight]

My prediction for a bottoming-out of the OC market is 2012 as well. There's NO WAY it happens before that. The question is, how low do prices go????

[flo2900]

Originally Posted by dawnsearlylight

My prediction for a bottoming-out of the OC market is 2012 as well. There's NO WAY it happens before that. The question is, how low do prices go????

i think it will go to the pre-boom 1999 time plus 3% inflation per annum. If markets are to correct themselves this should be the correct assumption.
We are currently at 2003 levels on average.

[JohnG72]

Originally Posted by flo2900

i think it will go to the pre-boom 1999 time plus 3% inflation per annum. If markets are to correct themselves this should be the correct assumption.
We are currently at 2003 levels on average.

If thats correct, that is still quite a drop. Maybe as much as 30-40% off current prices.

[killer2021]

Originally Posted by flo2900

Killer, looking to do the exact same thing
In your opinion what could it happen so the market won`t act the way you expect it to act, or is this A SURE thing ?....

Just look at what happened during subprime. The loans reset, the people defaulted, the bank foreclosed on them, people began selling their properties, prices dropped 50% FAST, this lead to lots of people being underwater on their mortgages.

The exact same thing will happen in the alt-a. It is CLEARLY a predictable thing. It isn't like the stock market which is forward looking. These loans have already been written. We can look at the data on where these loans are concentrated. Early data is already showing that these loans are doing the EXACT same thing as subprime.

The question is, how low do prices go????

That is a good question. No one really knows. However all the data at this point is pointing down down down. Rising unemployment, consumers pulling back, foreclosures, interest rates at record lows (means interest rates eventually have to go back up, making homes even less affordable) and banks holding onto homes. All I know is that economic indicators are pointing down.

There might even be a fear discount during that time. Homes values declining even further because people don't want to buy a depreciating asset. The greed premium (idea that you don't want to be priced out) drove this bubble to its peak and the fear discount will run it into the ground.
http://www.chpc.biz/images/JapanCompare-9-27-06.jpg (broken link)

[EscapeCalifornia]

I'd like to know the average LTV for the subprimes vs these alt-a's that are soon to reset. Lots of subprimes were 100% financed and when the market slowed down and the loans reset, they had no equity cushion and no options. I imagine the alt-a loans originally had much lower LTVs when they were written but who knows what they're at now.

[flo2900]

Killer wrote:The exact same thing will happen in the alt-a. It is CLEARLY a predictable thing. It isn't like the stock market which is forward looking. These loans have already been written. We can look at the data on where these loans are concentrated. Early data is already showing that these loans are doing the EXACT same thing as subprime

Hard to argue with that!
But the greed premium didn`t go away and is well and alive in the IE especially. The bid wars are on. The bid wars were on last summer but that didn`t stop home values from tanking 20% since!!
Its interesting how there are less and less foreclosures on the market, less are hitting the market yet prices are STILL tanking slowly.....so...is that a sign of recovery?...pppplease!