Are there too many people on the sidelines waiting to buy???

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Kali_IHB

New member
<p>I own a home in Irvine and have considered selling now, renting for a few years and then buy my dream home in 2010. I think the market is slowing down and possibly crashing. But one thing that concerns me is the tens of thousands if not hundreds of thousands of people who are sitting on the sideline waiting to buy that foreclosed property for 50 cents on the dollar of todays value...</p>

<p>Yes the housing #s dont make sense in some cases and there will be a few people who will be foreclosed upon, but how many ??? Definitely not enough to fullfill the demand of all these people on the sidelines? Will housing prices go low enough so the average person who earns 80k afford it? </p>
 
<p>"I think the market is slowing down and possibly crashing."</p>

<p>Really? Now what would make you think that?!</p>

<p>"But one thing that concerns me is the tens of thousands if not hundreds of thousands of people who are sitting on the sideline waiting to buy ..."</p>

<p>Try millions. Don't forget all those rich people from foreign countries who want to live here with us too because we are so "hip and cool."</p>

<p>"Will housing prices go low enough so the average person who earns 80k afford it?"</p>

<p>No, probably never. The years 1995-1997 were just flukes and will never happen again. In fact, you should probably hang on to your house and sell it in a couple of years for twice what it is worth now because the market is starting to turn.</p>

<p>(Sarcasm off)</p>

<p>Read the "Analysis of a Credit Bubble" and other fine analyses by Irvine Renter. They should help detoxify all the Koolaid you've been drinking from the NAR and their paid mainstream media affiliates. Your statements are so funny that it is hard to determine if you are actually a troll.</p>

<p> </p>
 
<p>Yes please read the posts here at the blog and the forums before posting. This subject has been rehashed several times.</p>

<p>I highly recommend the foreclosure thread. From there you can see that the foreclosures are getting worse than any time in history. But hey us crazy nutter bubbleheads could be wrong. So far that hasn't been the case though.</p>
 
<p>No troll here guys and no I didnt drink the koolaid, just asking questions about the "residential" market which I am not 100% clear about. especially after coming into contact recently with soo many people on the sidelines lookng to buy entry level houses. NAR is a joke that is obvious as day, but there seems to be tons of future buyers and realisticly it doesnt seem there will not be enough supply (well in Irvine at least).</p>

<p>And I have no doubt there will be foreclosures, but will that be the exception rather than the norm?</p>

<p>I will look into the suggested post, thanks.</p>

<p> </p>

<p>Edit: Found the suggested link- <a href="http://www.irvinehousingblog.com/2007/05/14/the-anatomy-of-a-credit-bubble/">http://www.irvinehousingblog.com/2007/05/14/the-anatomy-of-a-credit-bubble/</a></p>

<p>Point well taken, thanks!</p>

<p> </p>
 
<p>Have you checked out the foreclosure thread? Seriously the foreclosures are breaking records faster than they can keep track of them. Look at it this way when NODs are 1 for every 2 sales it is the death of the market. Well we hit that it August. Guess what sales are decreasing for September and foreclosures are increasing. </p>

<p>Where is all this demand coming from that you speak of? Yeah there is always demand but are people going to buy? If there was so much demand then why are sales lower than anytime in 20 years and there is more housing stock and people living here? Do you know how much housing stock has grown and how much households have grown in Irvine? If you did you would know that housing has exceeded household growth. Did you see the GDP for LA/OC and how much has been RE dependent?</p>

<p>Sit back relax and watch this unfold. BTW did you live here from 87-96?</p>
 
<p>I've wondered this myself as well. Seems there are a lot of people who aren't home owners that are on the sidelines, saying they're just waiting to scoop up untold bargains. That's the cover story but I'm not sure I buy it. I think a lot of them are only envisioning prices falling to some mental target, at which point they're sure the purchase will be a shrewd move. I don't think they've got the full picture...they don't envision the other changes that have and will happen, such as downpayment requirements and interest rate hikes. Sure, 1999 prices would be AWESOME, especially with 2003 LTV requirements and interest rates. Don't forget the potential for economic shocks (the "R" word) and real black swans.</p>

<p>Coincidentally I also seem to run into more and more people (single guys, anyway) who have given up on the idea of home ownership, and who find that being a commited renter enables them to live a pretty lavish lifestyle when they're free to spend their incomes without having to worry about saving for a downpayment.</p>
 
<p>Truth be known, I have wondered the same thing about "all the folks waiting on the sidelines". And herein lies the rub, if they all wait, prices will come down and come down hard. But, many will not wait for too long. They will jump in as soon as they can afford it, and help keep prices from falling too far, too fast. Investors are much less apt to loan money to folks for the purchase of a depreciating asset. And investors are ultimately where mortgage funds come from. And many who are waiting will not be able to afford a home when prices have fallen, because credit will be scarce. And many will give up wanting to own. Part of the capitulation process is a capitulation by the potential buyers who by observation find owning to be much less attractive than during the mania. Renting will become much more acceptable and desireable again. It is all just a part of a normal asset, (real estate), cycle.</p>
 
Are there 5.1mm people on the sidelines waiting to buy?





That's the nationwide inventory level....toss in tougher lending standards, a larger downpayment (10-20% like the old days), and higher credit rating....





Yeah lots of people on the sidelines waiting to buy...too bad probably only 1/2 actually qualify under the new (OLD SCHOOL) format.





Hope that answers your question.
 
<p>Kali,</p>

<p>My wife and I are two of those "sitting on the sideline" people who are waiting to see what happens. We have been renting for the last 3-4 years and are now looking to rent for at least one more. I have the same worries as you at time about whether the prices will ever go down to a reasonable level. This type of mentality is normal considering what all of us have gone through in the past 5-7 years (the ever popular, you need to buy now or you are going to miss it view). </p>

<p>For us, I think we have resigned to the fact that a house is not the end all be all. Sure we would like a house, but we are not going to buy a 3 story 1700 sq ft townhouse that looks like the Winchester Mystery House for $700K. It is just not economically sound. If price never comes down to "reasonable" level, we will simply rent and take the excess money to do other things. Of course, we would love to buy a house but we do not want to make it our lives.</p>

<p>Objectively speaking, there is no way that the pace of housing can stay where it is. Go check out Cramer's comments, he is right on about the downpayment issue and the elimination fo the lower end mortgages. No one can afford a house now...seriously for a 700 K loan, you need to have somewhere between $70-140K (probably more the latter) to get in. Who the heck has that kinda of money laying around? It is crazy!!! </p>

<p> (BTW: IrvineRenter, I think you need to use Gnarles Barkeley's song (Crazy) in one of your blog post. . .love that song.)</p>

<p> </p>
 
Kali,


I don't think that anyone knows how many qualified buyers there are in Orange County. We do know that last year every citizen of orange county was qualified to purchase a home through some exotic mortgage product. So the number of qualified buyers has contracted substantially.
 
As awgee pointed out above, there is also a change in psychology that comes as the market deteriorates. All the people waiting on the sidelines will get slowly detoxed from the kool aid and they will lose their enthusiasm for buying. First comes the restriction of credit that prevents people from buying, then comes the voluntary aversion to credit that comes when prices trend downward for long periods of time.
 
<p>Exactly. When I bought in the mid-late 90s, it was a one way street. I knew and everybody else knew if you bought, you were going to have to stay there for <strong>years.</strong> Not one or two, but like five, six or seven to be able to break-even on the sale if you could sell. Sure the market was far enough down that you weren't likely to loose more money, or maybe just too much more, but still didn't mean you would ever be able to get your money back out. Houses were illiquid. </p>

<p>Buying a house meant signing up for 30 years of payments. Nobody was going to take it off your hands if you got in trouble and lost a job. HELOC? fat chance unless you owned it from the mid-80s. Refinance? Realtors didn't know the word. No money was coming from anywhere to help you. The only money you were going to get was the money you were already ready getting. That mortgage statement, it was coming every month just like rent, except there was no lease and no option for a 30 day notice and moving.</p>
 
<p>There is a lot of money out there. A lot. One of the branches I cover in Mission Viejo took in 10 million in deposits in one week! In the last 2 months our bank has raised 1.1 BILLION in deposits within our 31 branches in Southern California. Yes 1.1 Billion.</p>

<p>What does this mean for housing? Not much necessarily. Most of these people have already purchased homes years ago, or sold their real estate investments. You do not amass wealth buy taking on risky mortgages. The people with money may or may not decide to move up to a bigger house. Perhaps they realize they don't need a McMansion?</p>

<p>The people on the sidelines are those who have never owned or have been renting for the past 4 years or more. There is no guarantee that they will buy, even if prices fall.</p>
 
<p>That's $260 per household.</p>

<p>LA/OC has 4.1 million households. $1.1 billion in deposits (not savings), represents about $260/household. Deposits represent net take home pay. </p>

<p>If you are including SD, SB, and Riverside, it's even lower. </p>

<p> </p>

<p> </p>
 
LM, some from CFC bank...? I recently got out of the market (well, ok...I kept RIMM) and went into a CD. The fear of the "unknown" right now is big for me....not sure what's going on with the economy and not interested at keeping my money at "risk". So I cashed out. Perhaps this is a partial explanation of where some of the deposits are coming from.
 
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