How low can we go? 30 yr fixed at 3.75% with no fees...

[sleepy5136]

So why do I care about my home price? In fact, if it does drop 20%, then I'm going to pay less property tax.

Yep...Losing $340k in order to pay less property tax sounds like a brilliant strategy.  Good math too.

You do realize it would be a paper loss and he would be using the home as a necessary commodity (i.e. a home to live in) so unless he needs to sell right away it doesn't matter what prices do in the short term. 

The crypto investors that are down 50-80% have also experienced paper losses of a "necessary" commodity.  In reality, their losses are very real and have a real world impact. 

They can no longer borrow against their holdings, their savings and net worth are decimated, and if they need to sell it's going to take a long time before they can write off their losses, which you as a CPA well know.  What is the rule on writing off losses on a principal residence again? 

Everybody thinks they are a long time owner and will never sell at a loss, but life has a way of punching people in the face and changing their plans.  There are almost too many people to count that were forced to sell at a loss only a dozen years ago.  Same deal in the 90's.

Any way you slice it, buying at the peak of a market cycle is a bad idea.  You will be paying higher taxes and financing costs on a depreciating asset that you could have gotten cheaper if you had only been a little more patient.

Comparing crypto to a primary residence is an apples to orange comparison.  One is a speculative investment while the other is mainly a commodity and housing prices are much less volatile than crypto prices.

Ah, but I wasn't comparing crypto to housing, just using it as an illustration to make the point:  Losing money on paper has real world impacts. 

When CalBears and I purchased our "commodity" homes near the '05-'06 peak, it eventually forced us into becoming involuntary landlords.  That in turn affected our ability to buy move up homes because our DTI's were negatively impacted by having rentals that, in the best-case scenario, were break even. In my case, it prevented me from loading up on investment properties until my balance sheet was sufficiently repaired.  I would have loved to have bought more properties from 2009-2011, but it wasn't until 2014 that I was in good enough shape to do so.  All because I purchased one property at the wrong time.

I've already recounted the huge pain it was appealing my property taxes year after year.  Thankfully, I was able to get a very good set of renters that stayed in my "involuntary" rental for seven years.  They saved me a bundle by keeping my repair and turnover costs lower, and always paying on time.  It sounds like CalBears' landlording experience wasn't as smooth as mine was.

CalBears and I have similar home buying histories, but there is a major difference between us because I learned the hard way that timing is probably the most important thing when buying real estate.  CalBears is set to repeat the same mistake as last time.

Calling real estate lower volatility than crypto is correct, but that doesn't mean real estate is a low volatility asset.  Anything that moves up or down by more than 20% per year is, by definition, high volatility.

That sounds more like poor diversification in your portfolio. Don't blame buying real estate at the top/bottom for your own financial mistakes. One should have savings and other investments to weather down downturns.

 

[CalBears96]

LL, tell me how me buying my new Irvine home is a mistake when:

1. I'm exchanging my Eastvale home for the Irvine home.
2. My wife wants a NEW home in Portola Springs. Will I find one in 1 or 2 years when the price stops dropping?

Like IHO said, when buying a home, you need to consider affordability, location and desired features. All three checked out for us. And then there's also availability. How is that a mistake?

 

[irvinebullhousing]

Best time to buy, is when you ready.

You don't need anybody making a case for it, but you.

 

[CalBears96]

Best time to buy, is when you ready.

You don't need anybody making a case for it, but you.

Exactly. That's what IHO and I are saying.

 

[Kenkoko]

That sounds more like poor diversification in your portfolio. Don't blame buying real estate at the top/bottom for your own financial mistakes. One should have savings and other investments to weather down downturns.

It sounds great in theory.

But in reality, how many first time homebuyers have the mental discipline to not stretch? especially given the recently escalated affordability problem

If you ever wonder how disciplined Americans are as a whole, look at our obesity numbers.

Percent of adults aged 20 and over with obesity: 41.9%.

Percent of adults aged 20 and over with overweight, including obesity: 73.6%.

People don't always follow best practice and often lack the discipline to avoid problems (like obesity) even knowing it could be detrimental.

 

[usctrojancpa]

That sounds more like poor diversification in your portfolio. Don't blame buying real estate at the top/bottom for your own financial mistakes. One should have savings and other investments to weather down downturns.

It sounds great in theory.

But in reality, how many first time homebuyers have the mental discipline to not stretch? especially given the recently escalated affordability problem

If you ever wonder how disciplined Americans are as a whole, look at our obesity numbers.

Percent of adults aged 20 and over with obesity: 41.9%.

Percent of adults aged 20 and over with overweight, including obesity: 73.6%.

People don't always follow best practice and often lack the discipline to avoid problems (like obesity) even knowing it could be detrimental.

Maybe in general that's true but the average Irvine buyer is very conservative.  I recently had a buyer who purchased a condo in the low $900s and was approved to purchase well over $1.2m, it's a case-by-case basis.

 

[irvinebullhousing]

I don't see this as an inventory problem, but one of too few owner occupants versus renters. People on the board won't like to hear it, but there are very few ways to "knock investors on their asses". Some could be:

1) If financed, require 50% down  US Sourced funds (12 month visibility) no matter the 1st loan provider.

2) If "All Cash" then 24 months of US Bank visible funds - reducing the velocity of laundered money that's parked in real estate.

2) Remove depreciation as a tax benefit for any (Mom + Pop, or Corporations) investment property holders after the 5th property is owned. 1 primary, 1 2nd home, 3 rentals) This might prevent Blackstone, etc al, from buying up properties, or builders producing SFR Rentals like Lewis Homes, etc.

3) A 50% surcharge on gross (not net) rental income that is $1.00 over the area median census tract rent. Keeps the rent moderated without specific neighborhoods becoming a rent controlled area. Yes, this might exempt large apartment complex owners, but the better outcome is more single unit owner occupied home owners.

These (unobtainable) changes might cause a land rush to sell. What then might be an incentive large enough for an investor to go along with this?

A) Government would create a "Land Bank" - common during the S+L Crisis and the 2008-2011 Great Recession. Sell the property to the Land Bank at a market price and the sellers Capital Gain would be zero. Sellers fees would be zero-ish, but low.

The Land Bank would resell the properties to anyone other than direct or extended family members of the previous owner (reducing most tax cheating) with a 7-10 year owner occupancy requirement, verified through tax returns.

Rent reduction, preservation of up to 5 single units owned by individuals. No penalties for 2-4 and up unit ownership, cash flush investment property owners, and many new 1st and 2nd time owners, rather than generational renting.

Radical change could reduce the"owner occupancy" gap in housing relatively quickly while admittedly pushing prices down and disrupting many industries.

At some point the price dam will break. I'd rather see some order imposed early on than witness an uncertain free fall caused by renters carrying pitchforks and torches. That kind of revolution is coming if change isn't imposed soon IMHO.

My .02c

@Soy,



Government in a nutshell:

Step 1: Create a problem
Step 2: Promise a solution
Step 3: Make problem worse
Step 4: Blame other party
Step 5: Distract people w/fear
Step 6: Collect revenue

Repeat.

Govern, is the problem . How else would we get here, he he......

 

[sleepy5136]

That sounds more like poor diversification in your portfolio. Don't blame buying real estate at the top/bottom for your own financial mistakes. One should have savings and other investments to weather down downturns.

It sounds great in theory.

But in reality, how many first time homebuyers have the mental discipline to not stretch? especially given the recently escalated affordability problem

If you ever wonder how disciplined Americans are as a whole, look at our obesity numbers.

Percent of adults aged 20 and over with obesity: 41.9%.

Percent of adults aged 20 and over with overweight, including obesity: 73.6%.

People don't always follow best practice and often lack the discipline to avoid problems (like obesity) even knowing it could be detrimental.

I cannot speak for others but I graduated with negative net worth going into my first job. I got no mommy/daddy help and bought my first home in April 2021. Bunch of FTHB are getting mommy/daddy help and I would argue are far ahead of me financially speaking. If you can't buy in one area, look at other areas. Sure, it's not ideal, but you can't complain when you got no money. There are options outside of California as well.

Point is, you gotta do what you gotta do to obtain what you want in life. Making excuses and saying the world/system is against you will only get you so far in life. Don't get me wrong, it sucks as a FTHB right now and I personally went through it last year.

 

[sgip]

@Compressed Village

True, but without the heavy hand of government in this case, we risk revolution (I believe). Private sector solutions only go so far.

My .02c

 

[irvinehomeowner]

Like IHO said, when buying a home, you need to consider affordability, location and desired features. All three checked out for us. And then there's also availability. How is that a mistake?

So true... when prices are cheap, the best homes are not available or are bid up so they are not cheap anymore. Why would people sell the good stock at the lowest prices?

This is what I observed... during the dip (or crash as some like to call it) between 2008 and 2012... we looked at probably over 100 Irvine homes (more if you count outside of Irvine)... both resale and new... and there were very few that were even close to 20% off from the peak. The ones that were... either had a bad location, were missing features (like a downstairs bedroom) or needed a lot of work. Most of these were 3CWGs and it wasn't until around 2012... when prices started ticking up that better homes in better locations were being listed. So even though we had been ready to buy for over 5 years... and had been actively looking... there was nothing good enough at a low price to consider getting back in. We ended having to pay more than what we had spent on our previous home but at least we ended up in a better location with a much better floorplan.

Granted, we are probably pickier than most... but after "settling" with our previous 2 homes (mainly location), we wanted to make sure we got mostly everything we wanted as it would probably be our last home until we retire.

So even when you know the time when it's best to buy... there may not be any inventory that you like. So availability is another key factor.

 

[irvinehomeowner]

But in reality, how many first time homebuyers have the mental discipline to not stretch? especially given the recently escalated affordability problem

So maybe I'm an optimist... I prefer to stretch because also motivates you to do more.

I bought my first home without any parental help... even made sure it was an SFR because my future father-in-law advised me never to buy an attached condo (which is why my first place wasn't in Irvine). But I eventually ended up back in Irvine and in retrospect, would have been okay with that attached condo in Irvine as my first home too (it appreciated more than my non-Irvine SFR!).

 

[CalBears96]

But in reality, how many first time homebuyers have the mental discipline to not stretch? especially given the recently escalated affordability problem

So maybe I'm an optimist... I prefer to stretch because also motivates you to do more.

I bought my first home without any parental help... even made sure it was an SFR because my future father-in-law advised me never to buy an attached condo (which is why my first place wasn't in Irvine). But I eventually ended up back in Irvine and in retrospect, would have been okay with that attached condo in Irvine as my first home too (it appreciated more than my non-Irvine SFR!).

We also bought our first home with our own money. We bought a new townhouse (since my wife would only buy new construction) instead of older SFR. Buying new construction also worked in our favor because we only needed to put down 3% deposit at the time we reserved the home and had 9 months to come up with the rest of the down payment. As a first time buyer, I wasn't even aware of that. We were very discouraged at the point as we didn't have the 10% down payment, but when I talked to my co-worker, he told me about the deposit. I had the money in ESPP that would become available 6 months later. That's how we were able to buy our first home.

As for financing, I was able to borrow 10% equity loan to make it 20% down payment to avoid PMI. We closed escrow 9 months after we reserved and 3 months later the house had already appreciated so much that we were able to refinance to cash out enough to pay off the equity loan.  ;D

 

[The Motor Court Company]

So IHO you finally got a 3WCG house in Irvine?
As I alluded before, I bought a 3WCG mainly inspired by your pursuit and every day I go home and park on the driveway I am happy I did.

 

[Cares]

I don't know why builders don't just build new homes with 3 car garages. I bet they can sell it for a pretty big premium even with a smaller sized home.

 

[sleepy5136]

I don't know why builders don't just build new homes with 3 car garages. I bet they can sell it for a pretty big premium even with a smaller sized home.

don't you need a pretty wide lot to do 3 car garage? if so, a row of 10 homes might end up being 6 or 7? You can only add so much premium on a 3 car garage. The premium won't outweigh selling 3-4 more homes.

 

[irvinehomeowner]

You can fit 3CWG into the current lot widths, but then bk/IHS will resurrect his TI account and tell us how full frontal garage is the ugliest house design in the world.

Who needs front yards anyways? We are in a drought!

 

[sleepy5136]

You can fit 3CWG into the current lot widths, but then bk/IHS will resurrect his TI account and tell us how full frontal garage is the ugliest house design in the world.

Who needs front yards anyways? We are in a drought!

mexican pebbles ftw. front yard is important though but could be argued it's more to please the outsiders than yourself

 

[Liar Loan]

Must be some of that good 'ol seasonality... right, IHO?

Weekly mortgage demand from homebuyers tumbles 12%, as higher interest rates take their toll

Mortgage rates actually fell slightly last week, but the damage has already been done to housing affordability. Both refinance and purchase loan demand dropped, pulling total mortgage application volume down 11% for the week, according to the Mortgage Bankers Association?s seasonally adjusted index.

Mortgage applications to purchase a home declined 12% week to week and were 15% lower compared with the same week one year ago.

 

[Liar Loan]

I'm listing my homes in Lake Elsinore and Eastvale soon. I just hope to sell them before housing price starts dropping.

You may want to get on that.

Homebuyer Competition Falls for Second-Straight Month, Hitting Lowest Level in Over a Year
Riverside, CA and Atlanta saw the biggest annual declines.

In Riverside, CA, 42.7% of home offers written by Redfin agents faced competition in April, down from 64.6% a year earlier. That 22-percentage-point decline was the largest among the 36 U.S. metropolitan areas in this analysis.

?Homes that would have received 10 offers several months ago are now getting two or three. That?s because the jump in mortgage rates has forced a huge pool of first-time buyers to drop out,? said Elizabeth Rodriguez, a seller?s agent with Redfin in Riverside. ?The buyers who are still in the market are those who are less sensitive to mortgage rates because they have big cash reserves.?

Rodriguez continued: ?Sellers are still in the driver?s seat, but I expect to see the market level out over the summer, giving buyers some long-awaited room for negotiation. Homes are starting to sit for longer and sellers are starting to accept contingencies. They will likely start accepting offers from buyers who come in at the asking price. I?m advising people to sell now if they?re considering it.?
https://www.redfin.com/news/real-estate-bidding-wars-april-2022/

 

[irvinehomeowner]

As seasonal as LL's Irvine pain predictions.

Poor guy... you lost your credibility so you are resorting to spamming other sites' content in hopes someone else gets it right for you.