<p><em>"I think it depends on what your friend is looking for. As I've stated in previous posts, if he found a home that he really likes and can afford it with conventional loan, then sure, go ahead and buy it if he intends to live there for the next 20 years if it'd make him happy."
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<p>Let's approach this from the aspect of demographics of the two largest groups of employable people in Irvine.</p>
<p><strong>Mid/late-30's White Collar Professionals ("Early - mid career"):</strong> Most young people who buy homes for living in them have at least a 3 - 5 year horizon of commitment. (Just take an informal poll next time you are around a bunch of mid/late-30's white collar professional men or women.) The reason most people in this demographic can forecast 3 - 5 years out is that they are still gaining job experience and may or may not end up working in the same company or region (<em>caveat</em> - unless they are in sales, where regional expertise is paramount for developing long term relationships). A significant number of people (90% +) in this category are <em>not</em> flippers. They have one or two young children and need to have some semblance of stability in the early part of their children's lives and short-term flipping runs counter to that approach.</p>
<p><strong>For this specific demographic, of which there are a large number in the OC and especially in Irvine, and they constitute a large percentage of first time home buyers, the prospect of "instant equity evaporation" in the current housing market is disconcerting (or at least it should be, at any rate).</strong></p>
<p><strong>Mid/late 40's White Collar Professionals ("mid-career"): </strong>People in this category typically have longer time horizons 10-20 years to which they are willing to commit in considering home purchases. They typically have a little bit older kids in school and their stability is of paramount importance. They will do what they can to stay within the same region (same school district even) as long as they can reasonably afford to live there. There may be some "lateral movement" by people in this category as far as home purchase decisions are concerned (<em>in falsetto</em> - "...honey! that new development looks really good, it will only increase our payments by x-amount which we can easily afford, let's get a new home for a change!"). They may just be rolling over any equity they have already built up in their existing homes and will see little or no impact to their perceived monthly expenses when they make the move. I say "perceived" because everytime one moves or buys a new home, there are inevitable "moving expenses" and our consumerist culture places special emphasis on "brand new" items such as new appliances ("honey! stainless steel went out of style in the late 90's" ), drapes and furnishings, and furniture.</p>
<p><strong>For this specific demographic as in the previous one, of which there are a large number in the OC and especially in Irvine, and they constitute a large percentage of homeowners and social climbers alike, the prospect of "instant equity evaporation" in the current housing market is less of a threat because they feel that they can "ride out" the market because of their perceived long term horizon. This demographic, in my view, is the one most susceptible to changes in economic condictions such as industrial evolution (think socal base closures in the 90's), job security, and recession if it limits their ability to sell and move (find another job) once (if) the shite hits the fan.</strong></p>
<p>My overall recommendation would be to consider things a little more rationally before making decisions that have a major financial impact on your friend's lives. In the end your friend (not you, unless you are related or otherwise intimately involved) as an individual would have to live with the decision.</p>
