Housing Analysis

[fortune11]

2012 prices are not coming back . If you are waiting for that , you maybe be waiting forever.

Inflation is picking up , the builder cost to build a home is going up , land is not cheap and plentiful in Irvine anymore.  Rates are still very affordable.  Remember all those 0 percent loans you used to see for cars ?  Where did they disappear ? Automakers also know now that it is Better to focus on profitability than sheer volume .  You are unlikely to see drastic price cuts from home builders .

The best one can hope for in resale is maybe 2016 like prices but you will get those maybe on less desirable homes or areas.

We are all ?anchored? to our past in many ways . Need to shift the frame of reference . There was a time when 30y fixed was @ 6 percent and s&p500 was at 1700. Not anymore .

 

[eyephone]

National Sales Event - This is your moment to get more - September 8 - 30, 2018
https://www.tollbrothers.com

https://www.nasdaq.com/press-releas...-brothers-national-sales-event-20180904-00788

 

[irvinehomeowner]

Is 2016 prices a significant drop/savings?

If you wanted to buy in 2016 or last year and have been waiting, is the upcoming ?slowdown? even worth it?

 

[irvinebullhousing]

Enthusiasm is common, Endurance is rare. When homes prices sky rocketed like it did 4-5 years ago, most were over joy with the run up. Many were scare of pricing out and not able to afford. Now that it level off, the talk of the town is going down. Not so fast, in real estate, it?s all about endurance. If you buy a home for shelter and the purpose to raise a family, then go for it. Leverage the down talk to your advantage.

 

[zubs]

So it's probable someone waiting until 2020 to buy may get a house for 2017 prices.

 

[sell4u]

Just some numbers for any of you numbers guys

All Active Orange County residential properties this week, 6,661 vs 5398 same week last year.
City examples: Fountain Valley  74 active today, 36 active same week last year. Irvine 755/527.  Aliso Viejo 125/92. HB 375/307
All Pending/Back-up Orange County residential properties this week, 2877 vs 3529 same week last year.
Source: MLS

 

[fortune11]

Is 2016 prices a significant drop/savings?

If you wanted to buy in 2016 or last year and have been waiting, is the upcoming ?slowdown? even worth it?

I don?t know if your question is directed at me but it depends on individual situation

With perfect hindsight ? would I rather have invested all my investable cash in s&p500 back in feb 2016 ? You betcha

But I did the next best thing that I thought ? bought some stocks to hedge but put a meaningful portion of investable cash into leveraging up a residential property . No regrets on that front . You cannot live your life in Hindsight ...

 

[irvinehomeowner]

Is 2016 prices a significant drop/savings?

If you wanted to buy in 2016 or last year and have been waiting, is the upcoming ?slowdown? even worth it?

I don?t know if your question is directed at me but it depends on individual situation

With perfect hindsight ? would I rather have invested all my investable cash in s&p500 back in feb 2016 ? You betcha

But I did the next best thing that I thought ? bought some stocks to hedge but put a meaningful portion of investable cash into leveraging up a residential property . No regrets on that front . You cannot live your life in Hindsight ...

Not to you specifically but to anyone who thinks waiting would have been better than buying in 2016, last year or now. Posters like eyephone are giving advice to other members that they should wait because there will be a "slowdown" in pricing but how significant will those savings be?

I understand waiting for a home with a better location or floorplan, but to wait for a 5% (or 10%) drop in price doesn't seem to be that much of a savings compared to the stress of waiting and the question marks about where you will live.

I've been lucky to buy at a low point twice, but I also bought at a very high point and a middle point... and in the end, any time works out as long as you can afford it because if you purchase a good product in a high value area with demand, your losses will be minimal in case you need to sell and will have a good return after 5-10 years if you need to move up.

So when people say "buy now or be priced out"... I actually think that's marginally good advice (with the caveat of affordability) because it's better to be in and building equity rather than just hoping you guess the right lotto numbers and got into escrow on the one bargain everyone else is waiting for.

Just my opinion.

 

[Kenkoko]

Not to you specifically but to anyone who thinks waiting would have been better than buying in 2016, last year or now. Posters like eyephone are giving advice to other members that they should wait because there will be a "slowdown" in pricing but how significant will those savings be?

I understand waiting for a home with a better location or floorplan, but to wait for a 5% (or 10%) drop in price doesn't seem to be that much of a savings compared to the stress of waiting and the question marks about where you will live.

I've been lucky to buy at a low point twice, but I also bought at a very high point and a middle point... and in the end, any time works out as long as you can afford it because if you purchase a good product in a high value area with demand, your losses will be minimal in case you need to sell and will have a good return after 5-10 years if you need to move up.

So when people say "buy now or be priced out"... I actually think that's marginally good advice (with the caveat of affordability) because it's better to be in and building equity rather than just hoping you guess the right lotto numbers and got into escrow on the one bargain everyone else is waiting for.

Just my opinion.

IHO, it isn?t just about waiting for the price to come down. Irvine rent is so absurdly low, it makes financial sense to wait.

I recently talked my cousin out of buying ($1 million home with 20% down) in Delano in Eastwood because we broke down the numbers for the cost to own vs rent. It made too much financial sense to rent. It would cost about $5000 / month to own when we added up HOA, property tax, mello roos, insurance, and interest portion on his mortgage. (not counting principal) On top of that, his $200k down payment would just sit there getting 0 return, waiting to capture future appreciation.

He rented the same home for $3550 / month. He can drive down the cost to rent to about $3000 / month If he just invested his $200k down payment into something very safe and low risk like a 3% CD for 5 years. In 5 years, he would have saved over $120k by renting.

How much appreciation are you predicting in the next 5 years for buying to make financial sense? Are you taking into consideration the 4-6% transaction cost when selling in 5 years?

 

[Kings]

I recently talked my cousin out of buying ($1 million home with 20% down) in Delano in Eastwood because we broke down the numbers for the cost to own vs rent. It made too much financial sense to rent. It would cost about $5000 / month to own when we added up HOA, property tax, mello roos, insurance, and interest portion on his mortgage. (not counting principal) On top of that, his $200k down payment would just sit there getting 0 return, waiting to capture future appreciation.

He rented the same home for $3550 / month. He can drive down the cost to rent to about $3000 / month If he just invested his $200k down payment into something very safe and low risk like a 3% CD for 5 years. In 5 years, he would have saved over $120k by renting.

How much appreciation are you predicting in the next 5 years for buying to make financial sense? Are you taking into consideration the 4-6% transaction cost when selling in 5 years?

this is a good point. anyone have a graph on irvine increase in rents vs. home sale prices for the past 5 years?  it's definitely out of whack right now and i believe renting is much cheaper by comparison.

 

[Liar Loan]

Not to you specifically but to anyone who thinks waiting would have been better than buying in 2016, last year or now. Posters like eyephone are giving advice to other members that they should wait because there will be a "slowdown" in pricing but how significant will those savings be?

I understand waiting for a home with a better location or floorplan, but to wait for a 5% (or 10%) drop in price doesn't seem to be that much of a savings compared to the stress of waiting and the question marks about where you will live.

I've been lucky to buy at a low point twice, but I also bought at a very high point and a middle point... and in the end, any time works out as long as you can afford it because if you purchase a good product in a high value area with demand, your losses will be minimal in case you need to sell and will have a good return after 5-10 years if you need to move up.

So when people say "buy now or be priced out"... I actually think that's marginally good advice (with the caveat of affordability) because it's better to be in and building equity rather than just hoping you guess the right lotto numbers and got into escrow on the one bargain everyone else is waiting for.

Just my opinion.

IHO, it isn?t just about waiting for the price to come down. Irvine rent is so absurdly low, it makes financial sense to wait.

I recently talked my cousin out of buying ($1 million home with 20% down) in Delano in Eastwood because we broke down the numbers for the cost to own vs rent. It made too much financial sense to rent. It would cost about $5000 / month to own when we added up HOA, property tax, mello roos, insurance, and interest portion on his mortgage. (not counting principal) On top of that, his $200k down payment would just sit there getting 0 return, waiting to capture future appreciation.

He rented the same home for $3550 / month. He can drive down the cost to rent to about $3000 / month If he just invested his $200k down payment into something very safe and low risk like a 3% CD for 5 years. In 5 years, he would have saved over $120k by renting.

How much appreciation are you predicting in the next 5 years for buying to make financial sense? Are you taking into consideration the 4-6% transaction cost when selling in 5 years?

The house would only have to go up 2.4% per year to make up that monthly difference... and that's not including the rent increases that are likely to happen.  So I would say your advice only makes sense if you believe prices will remain flat or decline in the near term.

If your friend plans on moving in 3 years or less then renting makes sense.  If they plan on staying the full 5 years or longer, I would still put my money on buying.

 

[Kenkoko]

The house would only have to go up 2.4% per year to make up that monthly difference... and that's not including the rent increases that are likely to happen.  So I would say your advice only makes sense if you believe prices will remain flat or decline in the near term.

If your friend plans on moving in 3 years or less then renting makes sense.  If they plan on staying the full 5 years or longer, I would still put my money on buying.

You are not accounting for the 4-6% transaction cost when selling 5 years later. If you factor that in, that bring the break-even % to 3.4% per year.

I am already using the most conservative return (3% CD rate almost risk free) for the 200k down-payment that can be used to invest elsewhere to capture a much higher return.You are also comparing an unknown to an known. Even if home appreciate over 3.4% per year, say 5%, you are taking on more risk.

If you are anticipating 5% appreciation per year for Irvine RE, you must believe in the US economy, continued wage growth, and bullish on the marco economy. Why not then invest in equity if this is your view for the next 5 years?

 

[Liar Loan]

You are not accounting for the 4-6% transaction cost when selling 5 years later. If you factor that in, that bring the break-even % to 3.4% per year.

I am already using the most conservative return (3% CD rate almost risk free) for the 200k down-payment that can be used to invest elsewhere to capture a much higher return.You are also comparing an unknown to an known. Even if home appreciate over 3.4% per year, say 5%, you are taking on more risk.

If you are anticipating 5% appreciation per year for Irvine RE, you must believe in the US economy, continued wage growth, and bullish on the marco economy. Why not then invest in equity if this is your view for the next 5 years?

I agree everybody should account for the level of risk they are willing to take.  Either decision your friend makes involves some risk.

If you look at rentals in beach communities like CDM, the rent vs. own comparison has never made much sense, and yet those properties have made their owners very rich.  I would argue that Irvine has joined the ranks of some of these communities, where the fundamentals no longer apply.  It's become a market that self-perpetuates based on the perception that it's a safe place to "invest" for appreciation.

People should invest in both real estate and equity.  The asset diversification will work to minimize their portfolio risk.

 

[Bullsback]

When was the last year you could buy a new proper 4-br SFR house for $800k? 2011? 2012?

I can't remember but I think there was Maricopa(?) selling in Stonegate for around that price in in 2011... and by "proper" I mean on a street (not a motorcourt) with a driveway and a sidewalk in front of the house.

That same house is probably over $1m now... so does anyone think that in the next 1-3 years, homes similar to that will sell for even $900k?

Just writing this post is making me wonder how expensive Irvine got in the last 5 years.

The most I could see is a $1.2M house being on the market for $1M (so 20% decline) and I on my scale of inexact probabilities, I'd probably put that on the low-end. I definitely could envision a scenario where that home is at $1.1M, which if you bought a house expecting 2-3% appreciation a year and you go out 3 years and that same house is down $100K vs. up $100K, you could see an opportunity to wait.  I don't see any massive even that will drastically shift the supply and create a "panic" event. Plus, I think there are enough people who are capitalized who would jump in if the markets did soften a bit (which in and of itself would minimize a major price event). 

I?m pretty sure a 200k decline from 1.2M to 1M is more like a 16.7% drop. You must not be a USC grad

Haha...I knew someone would get me for throwing out very broad & rounded generalities. 

 

[Bullsback]

Is 2016 prices a significant drop/savings?

If you wanted to buy in 2016 or last year and have been waiting, is the upcoming ?slowdown? even worth it?

I don?t know if your question is directed at me but it depends on individual situation

With perfect hindsight ? would I rather have invested all my investable cash in s&p500 back in feb 2016 ? You betcha

But I did the next best thing that I thought ? bought some stocks to hedge but put a meaningful portion of investable cash into leveraging up a residential property . No regrets on that front . You cannot live your life in Hindsight ...

Not to you specifically but to anyone who thinks waiting would have been better than buying in 2016, last year or now. Posters like eyephone are giving advice to other members that they should wait because there will be a "slowdown" in pricing but how significant will those savings be?

I understand waiting for a home with a better location or floorplan, but to wait for a 5% (or 10%) drop in price doesn't seem to be that much of a savings compared to the stress of waiting and the question marks about where you will live.

I've been lucky to buy at a low point twice, but I also bought at a very high point and a middle point... and in the end, any time works out as long as you can afford it because if you purchase a good product in a high value area with demand, your losses will be minimal in case you need to sell and will have a good return after 5-10 years if you need to move up.

So when people say "buy now or be priced out"... I actually think that's marginally good advice (with the caveat of affordability) because it's better to be in and building equity rather than just hoping you guess the right lotto numbers and got into escrow on the one bargain everyone else is waiting for.

Just my opinion.

I think part of it depends on an individuals situation, but if you are an existing homeowner looking to move up, any benefits from "waiting" are even more muted since it is only the "differential" between your existing home and new home that is actually going to drive any benefit of market timing.  If you are not selling an existing house or a new home buyer, than it is a different story and timing can play a bigger factor, however, your point is very true...you need to live somewhere and if you have kids you to know where they will go to school (consistency of schools, etc). 

 

[irvinehomeowner]

Not sure if kenkeko took into account tax savings but I think you are missing my point.

Obv if your are on a renters budget, you are unsure of long term living in Irvine, or can?t afford it, then rent.

But if you have the financial capability, can stay for at least 5 years, then why wait? Like LL said, appreciation could make up for not being able to invest the down and not having to worry about timing has its own value.

Yes, everyone?s situation is different but I?m referring to those who want to buy and the only thing holding them back is conflation timing.

 

[freedomcm]

Not sure if kenkeko took into account tax savings but I think you are missing my point.

Do any meaningful tax savings for owning your residence remain after the latest changes to the tax code?

 

[usctrojancpa]

Not sure if kenkeko took into account tax savings but I think you are missing my point.

Do any meaningful tax savings for owning your residence remain after the latest changes to the tax code?

Tax deduction for interest on a loan amount of up to $750,000 and you still get to deduct property taxes on your CA tax return.

 

[eyephone]

Not sure if kenkeko took into account tax savings but I think you are missing my point.

Do any meaningful tax savings for owning your residence remain after the latest changes to the tax code?

Mortgage interest, Also, consider contributing to your 401k. (Max amount)

*This is not tax advice.

 

[eyephone]

I guess we are even lucky to reduce income by contributing to our 401k. (If you previously followed the tax dicussion/debate that was on the table.)