I just might buy

NEW -> Contingent Buyer Assistance Program
IPO -



If money gets too expensive, then it is a definite no-go! No rush. Not a big deal. I need to be able to see a relative value in the purchase... not simply a purchase at any cost! I have however, been considering the 10-year ARM @ 5.5% vs the 30-year(now) @ 6.375%... the 7/8 spread makes the 10-year ARM look more and more attractive. Lets face it people, even I have my limits... and if the market causes interest rates to climb... I'd be waiting for a commensurate drop in home proces to re-establish the relative "value" of the purchase.
 
[quote author="GrewUpInIrvine" date=1208568813]IPO -



If money gets too expensive, then it is a definite no-go! No rush. Not a big deal. I need to be able to see a relative value in the purchase... not simply a purchase at any cost! I have however, been considering the 10-year ARM @ 5.5% vs the 30-year(now) @ 6.375%... the 7/8 spread makes the 10-year ARM look more and more attractive. Lets face it people, even I have my limits... and if the market causes interest rates to climb... I'd be waiting for a commensurate drop in home proces to re-establish the relative "value" of the purchase.</blockquote>


I see you are using DCU vs. PenFed. PenFed 10-year is 6.75% for a jumbo. Low retail is probably 7.125-7.25% right now. Do you think DCU can and will do that loan for 1.75 points below market? It seem unbelievable. They only require 20% down? My gosh, I need to become a DCU member as well...!



I like 10-year ARMs if used at the right time. Might be a little early in terms of refi risk. If prices fall through 2011 and then stay relatively flat for a year or two, you might only be at 90-100% LTV when your ARM is resetting. That could be quite unpleasant. I would consider the 10-year ARM if we were a bit deeper into the correction and then refi risk was lower...
 
[quote author="optimusprime" date=1208569215]You better do it fast since US Treasury yields have been going up and LIBOR is still high....I can't see rates going any lower.</blockquote>


Phew, thank god I locked and proceed with the refi when I did. Retail rates on the 3/1 IO conforming program have moved up .625 since I locked two weeks ago...
 
NSR, your calcs are biased toward the bear case. Here's my calculation for myself on a similar priced new lennar home in VOC bought in 2007. Price is 975K, downpayment of 225K.



Mortgage +4100 (30 year amort, 750K balance, 5/5 arm 5.125%)

Prop tax +1500 (includes mello roos)

Insurance +80

HOA +150

Principal contribution -900 (avg for the first year)

tax deduction -1500 (based on turbotax calc from LY income. Didn't get hit with AMT)

Interest lost on down payment(3% return taxed at 35% +350



NET monthly outlay - 3800.



Note that I was paying 2450 rent on a 2 bedroom apartment. For 1500 more, I get a 3800 sqft brand new house. I plan to stay here for 10 years or more, so no worries about any short term of equity loss.



I left out all that stuff for reserves. This is a brand new house and i'll be gone in 10 years, so any maintenance expense I will incur should be insignificant. Add whatever you'd like and I'm still nowhere near 7-8K.



I will note that like ipoplaya, I think prices may fall more than I thought last year. So I do agree that GUII will save money by waiting. I'm simply arguing the inflated monthly expense of purchasing for GUII. He will not be spending anywhere near 8K.
 
[quote author="rtlguru" date=1208571708]NSR, your calcs are biased toward the bear case. Here's my calculation for myself on a similar priced new lennar home in VOC bought in 2007. Price is 975K, downpayment of 225K.



Mortgage +4100 (30 year amort, 750K balance, 5/5 arm 5.125%)

Prop tax +1500 (includes mello roos)

Insurance +80

HOA +150

Principal contribution -900 (avg for the first year)

tax deduction -1500 (based on turbotax calc from LY income. Didn't get hit with AMT)

Interest lost on down payment(3% return taxed at 35% +350



NET monthly outlay - 3800.



Note that I was paying 2450 rent on a 2 bedroom apartment. For 1500 more, I get a 3800 sqft brand new house. I plan to stay here for 10 years or more, so no worries about any short term of equity loss.



I left out all that stuff for reserves. This is a brand new house and i'll be gone in 10 years, so any maintenance expense I will incur should be insignificant. Add whatever you'd like and I'm still nowhere near 7-8K.



I will note that like ipoplaya, I think prices may fall more than I thought last year. So I do agree that GUII will save money by waiting. I'm simply arguing the inflated monthly expense of purchasing for GUII. He will not be spending anywhere near 8K.</blockquote>


Dude, at your reset you are probably going to be underwater on your mortgage. Is the reset capped? In 2012 interest rates could be mighty high. If that 5.125% goes to 8%, your calcs don't look so favorable over years 5-10... Reset in year five to 8% on $700K balance would jack your payment $1500 per month.



You should refi that bad boy now while you've still got skin in the game. If GUII is right, you can get a 10-year for 5.5%. .375 more and 5 more years of rate secruity. That is a no-brainer...
 
[quote author="rtlguru" date=1208571708]Note that I was paying 2450 rent on a 2 bedroom apartment. For 1500 more, I get a 3800 sqft brand new house. I plan to stay here for 10 years or more, so no worries about any short term of equity loss.</blockquote>


Hey RT, where did you buy in VoC? I didn't think there were any 3800sf homes there. Gables goes that big but doesn't have a model that size I think. Astoria is not that big... Westbourne and Ciara go that large but they didn't cost $975K in 2007. Cantara ain't that big...
 
Ipo,



yeah, it's capped at 2%. I had a 30 fixed at 6.875% from lennar. Again, since I'm only going to be there 10 years max my worst case scenario is 5.125% for 5 years and 7.125% for 5 years. I would've done the penfed 30year fixed at 5.75%, but I had already locked in my refi on the 5/5 arm. If the 30 year does dip below 6% this year, i might refi again.



Regardless, I can payoff the house right now if needed, so the reset isn't really an issue for me.
 
[quote author="rtlguru" date=1208571708]NSR, your calcs are biased toward the bear case. Here's my calculation for myself on a similar priced new lennar home in VOC bought in 2007. Price is 975K, downpayment of 225K.



Mortgage +4100 (30 year amort, 750K balance, 5/5 arm 5.125%)

Prop tax +1500 (includes mello roos)

Insurance +80

HOA +150

Principal contribution -900 (avg for the first year)

tax deduction -1500 (based on turbotax calc from LY income. Didn't get hit with AMT)

Interest lost on down payment(3% return taxed at 35% +350



NET monthly outlay - 3800.

</blockquote>


Is the tax deduction just for the amount above the standard deduction ($10700 in 2007 for Married Filing Jointly)?
 
[quote author="rtlguru" date=1208582292]Ipo,



yeah, it's capped at 2%. I had a 30 fixed at 6.875% from lennar. Again, since I'm only going to be there 10 years max my worst case scenario is 5.125% for 5 years and 7.125% for 5 years. I would've done the penfed 30year fixed at 5.75%, but I had already locked in my refi on the 5/5 arm. If the 30 year does dip below 6% this year, i might refi again.



Regardless, I can payoff the house right now if needed, so the reset isn't really an issue for me.</blockquote>


The 2% cap is nice... If you have that kind of capital, might as well pay it off in 5 years after the low rate expires.
 
[quote author="Vinster" date=1208584682][quote author="rtlguru" date=1208571708]NSR, your calcs are biased toward the bear case. Here's my calculation for myself on a similar priced new lennar home in VOC bought in 2007. Price is 975K, downpayment of 225K.



Mortgage +4100 (30 year amort, 750K balance, 5/5 arm 5.125%)

Prop tax +1500 (includes mello roos)

Insurance +80

HOA +150

Principal contribution -900 (avg for the first year)

tax deduction -1500 (based on turbotax calc from LY income. Didn't get hit with AMT)

Interest lost on down payment(3% return taxed at 35% +350



NET monthly outlay - 3800.

</blockquote>


Is the tax deduction just for the amount above the standard deduction ($10700 in 2007 for Married Filing Jointly)?</blockquote>


RT was probably itemizing already so using the standard deduction to base tax savings wouldn't make sense. You make $150K and your state taxes will kick you into itemizing almost by itself.
 
[quote author="ipoplaya" date=1208586374][quote author="Vinster" date=1208584682][quote author="rtlguru" date=1208571708]NSR, your calcs are biased toward the bear case. Here's my calculation for myself on a similar priced new lennar home in VOC bought in 2007. Price is 975K, downpayment of 225K.



Mortgage +4100 (30 year amort, 750K balance, 5/5 arm 5.125%)

Prop tax +1500 (includes mello roos)

Insurance +80

HOA +150

Principal contribution -900 (avg for the first year)

tax deduction -1500 (based on turbotax calc from LY income. Didn't get hit with AMT)

Interest lost on down payment(3% return taxed at 35% +350



NET monthly outlay - 3800.

</blockquote>


Is the tax deduction just for the amount above the standard deduction ($10700 in 2007 for Married Filing Jointly)?</blockquote>


RT was probably itemizing already so using the standard deduction to base tax savings wouldn't make sense. You make $150K and your state taxes will kick you into itemizing almost by itself.</blockquote>


Yup, and I'm also single with no kids, so I don't really deduct anything besides my mortgage and prop tax.
 
Well I seem to have spurred conversation yesterday. :-)



Ipop, my bad, I said interest, I meant earnings, meaning both interest, dividends and capital gains. With these large downs, we're in that critical mass of money we've previously talked about. Here's the old link. http://www.irvinehousingblog.com/forums/viewthread/1394/#29427 (Quoting myself, bad form I know.)



I'm open to people using whatever opportunity cost they want for the missed earnings, but think it should be reflective of their overall portfolio expectations. If the best thing we have to do with our money is a money market, that's fine, but long term, which a house purchase is, I compare against long term stock returns, thus I use 8 -10%.



Back when I bought my first home, less than $20,000 was my down, it's negligible at that point, but $200,000+ is a different storing and over the term of a long hold 10-15+ years, is potentially $500K+ or so in lost earnings.



The other major missing cost is usually the repair, maintenance and reserves. The main blog had a debate on it what was realistic. As RTL points out, getting in, getting out on a new place may allow you to avoid many of the expenses, but you'll pay for it with lost future equity.



I also include the principal in the out of pocket since it's not optional unless you have an Option ARM or IO loan. you have to pay it and it is into a very illiquid investment. My comparison was looking at pre-tax benefit out of pocket hit, not expense cost.



Overall RTL, you sound like you're in good shape. With the rates so low, it's not as bad and much closer than one thinks.



Good to know about the rates, I hadn't realized they'd temporarily dipped that low for such large loans.
 
[quote author="GrewUpInIrvine" date=1208565525]The 8K/mo loss? I'm not sure where that monthly figure comes from (how you calculate it), but I tend to agree with the generic proposition that prices will continue to drop... and the weekends at the Ritz is a good point.</blockquote>


10% of 1 million in one year = 100,000/year = 8,000/month
 
[quote author="FairEconomist" date=1208642879][quote author="GrewUpInIrvine" date=1208565525]The 8K/mo loss? I'm not sure where that monthly figure comes from (how you calculate it), but I tend to agree with the generic proposition that prices will continue to drop... and the weekends at the Ritz is a good point.</blockquote>


10% of 1 million in one year = 100,000/year = 8,000/month</blockquote>


OK, I understand. You are essentially arguing the probability of a 100K reduction in 12 months - at which time, if I purchased, I'd have realized a "savings" of 8K/month. Sorry for being dense on that. But, what is the analysis for that 12mo = 100K... in my case, assuming that I insist on Villa Rosa, I'm hedging the liklihood of either (1) one of the remaining 25 homes selling for 100K less OR (2) one of the pre-existing homes selling at either a 10% or 20% price reduction. I do agree that we have however, seen jsut this in one or two Mill or Juliet properties in Woodbury... when I look at that "foreclosure" map on the OC Mortgage blog, all of the Irvine Zip codes seem to be in the "green" 1-2% zone for foreclosure... all the while the surrounding zipcodes (except newport) seem to be in the "red."... which for me, lends support to the "closed-economy" model of irvine company developments, and their general resistance to price reductions...



Don't get me wrong though, I'd love to see a housing bloodbath in Irvine...preferrably before I buy... but is Irvine just lagging behind other "leading indicator" zip-codes, or is it simply less susceptible to begin with.
 
[quote author="GrewUpInIrvine" date=1208652551][quote author="FairEconomist" date=1208642879][quote author="GrewUpInIrvine" date=1208565525]The 8K/mo loss? I'm not sure where that monthly figure comes from (how you calculate it), but I tend to agree with the generic proposition that prices will continue to drop... and the weekends at the Ritz is a good point.</blockquote>


10% of 1 million in one year = 100,000/year = 8,000/month</blockquote>


OK, I understand. You are essentially arguing the probability of a 100K reduction in 12 months - at which time, if I purchased, I'd have realized a "savings" of 8K/month. Sorry for being dense on that. But, what is the analysis for that 12mo = 100K... in my case, assuming that I insist on Villa Rosa, I'm hedging the liklihood of either (1) one of the remaining 25 homes selling for 100K less OR (2) one of the pre-existing homes selling at either a 10% or 20% price reduction. I do agree that we have however, seen jsut this in one or two Mill or Juliet properties in Woodbury... when I look at that "foreclosure" map on the OC Mortgage blog, all of the Irvine Zip codes seem to be in the "green" 1-2% zone for foreclosure... all the while the surrounding zipcodes (except newport) seem to be in the "red."... which for me, lends support to the "closed-economy" model of irvine company developments, and their general resistance to price reductions...



Don't get me wrong though, I'd love to see a housing bloodbath in Irvine...preferrably before I buy... but is Irvine just lagging behind other "leading indicator" zip-codes, or is it simply less susceptible to begin with.</blockquote>
According to the <a href="http://www2.newyorkfed.org/mortgagemaps/">Fed's Mortgage Map</a> Irvine homeowners are mostly current on their mortgages, but the entire city seems to have used alt-A ARMs to buy their homes. If the values continue to drop, in combination with stricter loan qualifications (for re/fi and new purchases) and the eventual reset on those adjustable rate mortgages, many homeowners will find themselves in trouble very quickly. Unable to refinance for what they owe, they will be stuck in an ARM with payments they can't make without severe financial pain. Based on that information, I think Irvine is lagging and not impervious to the downturn. While the residents make more money, they have the worst kind of mortgage to have in a crashing market.
 
Grewupinirvine,



I have been tracking the larger single family houses in woodbury for more than two years now. Here are the facts:



a. Both JB and MF has come down about 15% to 20% from their peak price depend on the lots (i.e. one of the MF recently sold for $1.2 million, but it backs to one of the major streets).



b. the price for MF has been stable since Nov / Dec of 2006 when builder cut the prices up to now - $1.25 up to $1.48 ( all three models sold in Jan, 2008 around $1.48mm, and one short sell for $1.425 in Feb 2008)



c. There are 12 homes for sale between MF and JB : 11 on the MLS and one bank owned but not listed (50 winding way).



d. It is very likely that 50 winding way will set a record low for the tracks.



e. there is currently no resell in VR.



If I were you, I will only consider buying right now if I can get a nice lot. Most of the lots in irvine regardless of tracks suck. My wife and I looked extensive for many years in the resell market, and was never able to find a house with a floor plan we like and a location we love. you can probably easily get any lot either in VR, or MF or JB in the next several years. However, if you want a larger lot, with some privacy - ie. a corner lot away from major roads, it is NOT going to be easy. I am sure you have noticed by now that in Irvine: when purchased from the builders, larger lots do not carry a premium, and corner private lots do not carry premium either. It always puzzles me that 30 to 35 deep corner lots carries the exact same price as a 15-ft lot that stuck in the middle of the row.
 
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