Bowing Out Gracefully from the Irvine Housing Market

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Irvinecommuter said:
quattroporte said:
paperboyNC said:
High interest rates are relative. We were at 6.25% or so before the housing crash. If we project that we will eventually get there then it might make sense to lock in a 4.25% rate now.

I personally bought with an 7yr ARM since most people don't stay in their houses that long anyways. You can still get 3% on a 5/1 ARM for instance.
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I understand they were 6.25% or so before the housing crash. But back then, 9 out of 10 people I know, had interest only or ARM loans, that is why they were able to pay more for a house. Look what happened when the loans reset to higher interest rates and/or the principal payments kicked in, the home prices feel off a cliff.

EDIT: Also, 8 out of those 9 people who got interest only or ARMS loans either foreclosed or sold their homes short.
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But there were also a lot of people who had fixed rate loans that refinanced later.  Yes the interest jump is bad but you're still buying at a 15-20% discount from a normal market of 6-7% interest. 

Yes prices are high but they're not going to come down.  The buyers of homes now are mostly cash buyers or solid financiers...you are not going to have the glut of foreclosures that resulted in the deep drop in price.  I think that the market will just slow down and you have few transactions because the prices are too high to buy and sellers will just stay put.  You'll have a lot of renters as well. 

For my purposes, I know that I am buying high but it is unlikely that I will get into Irvine in the next 5-10 years especially if the rates get up to 6-7%.  Bite the bullet now...get a low rate and stay in the house for 20 years.
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If you are talking about a 15-20% discount from the 2006 normal market of 6-7% interest, then I will have to respectfully disagree. If it were a normal market, then we would not have a bubble burst and be in the situation we are in right now. Yes, most of them are cash buyers and solid buyers who have been buying even before the crazy run up in the past 6 to 9 months. A lot of them got homes about 10% or more percent cheaper than todays prices. They can still sell for what they bought for and break even. Then you will have some buyers that bought at the peak that would be left holding the bag. But, again I can be wrong. Only time will tell. Its good for the renters since more rentals out there from the investors.

Another reason for me to not get the house. I was only planning to stay there for 5 years tops, not 20 years.
 
@quatro:

I think you have to look at it more a more pragmatic approach, if you can afford it, and plan to stay in it for a while, buy it. If it's going to stretch you financially and you don't know if Irvine (or any other location/city) is where you are going to stay, rent.

If history has taught us anything, no one can predict the future. No one thought rates would drop as low as they did, no one thought home prices would bounce back so quickly, no one thought Lebron would repeat :) ... just make the decision that best suits your current situation.
 
UCIBiotech said:
I feel for all those who have a hard time finding the"perfect" home or the "right time" or simply can't pull the trigger until it's too late. I'm sure the "right time" was available to you over the past year or two you just didn't realize it. That's real estate for you. Rates have been under 4% for the past year and prices have been low since 2009. What have you been waiting for? You didn't think the rates/low prices could go on forever did you? Now you and I'm sure others feel defeated. I personally don't think prices will be going down significantly anytime soon because we have more qualified buyers now than during the peak. I also don't think investors buying up all the properties right now are planning on selling for a loss in a couple years so get used to the new reality of sustained prices and higher rates. But again who knows what the future holds. My point is stop thinking so hard about real estate and do what's right for your own situation. Maybe in the meantime you can save some more cash and in 5-10 years buy something you really can afford with cash. Best of luck.
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I wasnt looking for the "perfect" home or the "right time" to buy. I was looking for "a" house for my needs and needed when I "moved" to Irvine. I would have pulled the trigger if I was offered one to buy. I put in multiple offers and got on multiple priority. So its not about "cant" pull the trigger. Yes, the rates have been low for the past few years and the prices were low as well. But at that time I didnt need a house in Irvine since I was not looking to move from where I was. I wasnt trying to time the market nor wait for anything. The timing is what it is.
 
Just to clarify to everyone here. I am not trying to bash home prices in Irvine. I am just voicing my opinion and stating my reasoning behind it. I could be wrong and the home prices either increase or stay where they are. Only time will tell. Hindsight is always 20/20.
 
quattroporte said:
Irvinecommuter said:
quattroporte said:
paperboyNC said:
High interest rates are relative. We were at 6.25% or so before the housing crash. If we project that we will eventually get there then it might make sense to lock in a 4.25% rate now.

I personally bought with an 7yr ARM since most people don't stay in their houses that long anyways. You can still get 3% on a 5/1 ARM for instance.
Click to expand...

I understand they were 6.25% or so before the housing crash. But back then, 9 out of 10 people I know, had interest only or ARM loans, that is why they were able to pay more for a house. Look what happened when the loans reset to higher interest rates and/or the principal payments kicked in, the home prices feel off a cliff.

EDIT: Also, 8 out of those 9 people who got interest only or ARMS loans either foreclosed or sold their homes short.
Click to expand...

But there were also a lot of people who had fixed rate loans that refinanced later.  Yes the interest jump is bad but you're still buying at a 15-20% discount from a normal market of 6-7% interest. 

Yes prices are high but they're not going to come down.  The buyers of homes now are mostly cash buyers or solid financiers...you are not going to have the glut of foreclosures that resulted in the deep drop in price.  I think that the market will just slow down and you have few transactions because the prices are too high to buy and sellers will just stay put.  You'll have a lot of renters as well. 

For my purposes, I know that I am buying high but it is unlikely that I will get into Irvine in the next 5-10 years especially if the rates get up to 6-7%.  Bite the bullet now...get a low rate and stay in the house for 20 years.
Click to expand...

If you are talking about a 15-20% discount from the 2006 normal market of 6-7% interest, then I will have to respectfully disagree. If it were a normal market, then we would not have a bubble burst and be in the situation we are in right now. Yes, most of them are cash buyers and solid buyers who have been buying even before the crazy run up in the past 6 to 9 months. A lot of them got homes about 10% or more percent cheaper than todays prices. They can still sell for what they bought for and break even. Then you will have some buyers that bought at the peak that would be left holding the bag. But, again I can be wrong. Only time will tell. Its good for the renters since more rentals out there from the investors.

Another reason for me to not get the house. I was only planning to stay there for 5 years tops, not 20 years.
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I am talking about affordability being 15-20% discount...a $625,000 loan at 4.5% is monthly payments of $3166...a $500,000 loan at 6.5% is $3160.  Thus, you are able to buy a house that is 20% more in price for the same monthly payments.  There are other factors like tax deductions and property taxes but the monthly payments are the bulk of the expenses. 

The difference between 2006 and now is that a lot of people got in without proper loan qualifications.  People also took out a lot of cash with equity.  So, any changes in their financial status resulted in a foreclosure.  Now, the people with homes are 1) survived the worst of the economy fall and probably refinanced thus lower payments, 2) cash buyers, or 3) people with solid qualification.  Now, that doesn't mean that there will be no foreclosure, just that the risk is much much lower.  In a place like Irvine, most people don't need to sell.  They sell because the price is right.  If they don't get the price they want, they can either rent or just stay put. 

Finally, the issue isn't whether prices are too high now.  The question is whether the value will go down to counter act the increase in rates.  All likelihood, price will stay about the same while the rates will go up.  So you will have a situation where the price will remain high but that you will have to pay more interest to buy the house.

You are obviously in a different situation than me.  If I knew I was only going to stay for five year, I would not buy either.  But my move is permanent...or at least until my daughter moves out.
 
quattroporte said:
Just to clarify to everyone here. I am not trying to bash home prices in Irvine. I am just voicing my opinion and stating my reasoning behind it. I could be wrong and the home prices either increase or stay where they are. Only time will tell. Hindsight is always 20/20.
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I don't think you're bashing at all.  History does repeat itself but it doesn't mean that it always does.  The run up in prices in Irvine is due to a lack of supply after years of a glut of supply.  Supply will be restricted for several years to come because a significant number of people are underwater or at value to the point where they can't sell.  They can afford the payments but can't move else...so they stay put.
 
Irvinecommuter said:
Finally, the issue isn't whether prices are too high now.  The question is whether the value will go down to counter act the increase in rates.  All likelihood, price will stay about the same while the rates will go up.  So you will have a situation where the price will remain high but that you will have to pay more interest to buy the house.
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quattroporte isnt the only one in this situation, there are many like him, eventually this will impact demand.
 
quattroporte said:
paperboyNC said:
High interest rates are relative. We were at 6.25% or so before the housing crash. If we project that we will eventually get there then it might make sense to lock in a 4.25% rate now.

I personally bought with an 7yr ARM since most people don't stay in their houses that long anyways. You can still get 3% on a 5/1 ARM for instance.
Click to expand...

I understand they were 6.25% or so before the housing crash. But back then, 9 out of 10 people I know, had interest only or ARM loans, that is why they were able to pay more for a house. Look what happened when the loans reset to higher interest rates and/or the principal payments kicked in, the home prices feel off a cliff.

EDIT: Also, 8 out of those 9 people who got interest only or ARMS loans either foreclosed or sold their homes short. 6 of those 8 defaults were "strategic defaults".

"From Wikipedia: A strategic default is the decision by a borrower to stop making payments (i.e., to default) on a debt despite having the financial ability to make the payments."
Click to expand...
Those ARM loans reset to interest rates of around 3%.  You are talking about OPTION ARM loans where you paid less than the stated interest rate and the mortgage balance grew.  I have 2 ARMs on my rental properties and am very happy with the low rates.  Those interest rates are based upon a 1-year LIBOR rate plus 2.25% (currently 1-year LIBOR is about .69%). 
 
qwerty said:
Irvinecommuter said:
Finally, the issue isn't whether prices are too high now.  The question is whether the value will go down to counter act the increase in rates.  All likelihood, price will stay about the same while the rates will go up.  So you will have a situation where the price will remain high but that you will have to pay more interest to buy the house.
Click to expand...

quattroporte isnt the only one in this situation, there are many like him, eventually this will impact demand.
Click to expand...
I hate to say it, but quattroporte is in the minor of buyers in Irvine.  Irvine has 40%+ of transactions paid in all cash.  Then there are many buyers who put down 50%+ down.  Demand will decrease for sure, but it's all about supply and demand (use month's supply of homes on the market as a guide).
 
USCTrojanCPA said:
I hate to say it, but quattroporte is in the minor of buyers in Irvine.  Irvine has 40%+ of transactions paid in all cash.  Then there are many buyers who put down 50%+ down.  Demand will decrease for sure, but it's all about supply and demand (use month's supply of homes on the market as a guide).
Click to expand...

I'm sure many in Irvine are breathing a sigh of relief now that the riff raff are "bowing out".  Maybe quattroporte can look into some of the affordable housing options - http://www.talkirvine.com/index.php/topic,2797.0.html

 
test said:
USCTrojanCPA said:
I hate to say it, but quattroporte is in the minor of buyers in Irvine.  Irvine has 40%+ of transactions paid in all cash.  Then there are many buyers who put down 50%+ down.  Demand will decrease for sure, but it's all about supply and demand (use month's supply of homes on the market as a guide).
Click to expand...

I'm sure many in Irvine are breathing a sigh of relief now that the riff raff are "bowing out".  Maybe quattroporte can look into some of the affordable housing options - http://www.talkirvine.com/index.php/topic,2797.0.html
Click to expand...

Test - Thats kind of a low blow referring him to affordable housing options aka low income housing. Lol
 
eyephone said:
test said:
USCTrojanCPA said:
I hate to say it, but quattroporte is in the minor of buyers in Irvine.  Irvine has 40%+ of transactions paid in all cash.  Then there are many buyers who put down 50%+ down.  Demand will decrease for sure, but it's all about supply and demand (use month's supply of homes on the market as a guide).
Click to expand...

I'm sure many in Irvine are breathing a sigh of relief now that the riff raff are "bowing out".  Maybe quattroporte can look into some of the affordable housing options - http://www.talkirvine.com/index.php/topic,2797.0.html
Click to expand...

Test - Thats kind of a low blow referring him to affordable housing options aka low income housing. Lol
Click to expand...

I wouldn't expect anything less from Mr. Chicken Little....he maybe 100% negative... but he contributes to the forum...
 
ps9 said:
I wouldn't expect anything less from Mr. Chicken Little....he maybe 100% negative... but he contributes to the forum...
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Funny, I got the vibe Test is more likely a "she".
 
SoCal said:
ps9 said:
I wouldn't expect anything less from Mr. Chicken Little....he maybe 100% negative... but he contributes to the forum...
Click to expand...

Funny, I got the vibe Test is more likely a "she".
Click to expand...

Really?  His replies are curt.. more like a dude...but who knows..
 
ps9 said:
SoCal said:
ps9 said:
I wouldn't expect anything less from Mr. Chicken Little....he maybe 100% negative... but he contributes to the forum...
Click to expand...

Funny, I got the vibe Test is more likely a "she".
Click to expand...

Really?  His replies are curt.. more like a dude...but who knows..
Click to expand...

True. I am partially influenced by the frequency of use with emoticons and the tone. I have an idea. Let's test Test! We'll settle this once and for all.

Question 1:

How many volts is a car battery?

Question 2:

You're baking a Pineapple Upside Down Cake and have run out of buttermilk. Oh, no! Which two ingredients can you combine to make a substitute?

... We await your reply!

 
Good luck quattroporte. no matter where you end up settling, hopefully you don't end up being sour grapes toward Irvine like SoCal and Panda.
 
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