Las Ventanas by Taylor Morrison at Portola Springs
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That's because the market is full of debtors trying to unload their upside down homes across various markets. Demand is an important input, but income is more important.
Otherwise it would be all about hobos demanding $3.5m Shady Canyon homes who don't care about income.
Notice how the total monthly payment to own, including the principal and before the tax benefit, was even lower than the rental amount? that is how look at rental parity. IrvineRenter on his blog backs out the principal component and includes the tax benefit to get to rental parity. Hopefully we can get back to that someday. When the numbers play out like they do in the ad, that is when its time to buy.
That is the time to buy, when you and everyone else jumps in won't the huge surge in demand spike prices back up? Everyone thinks they can outsmart the market, everyone thinks they are smarter than everyone else. Market timing is hazardous to your financial health.
i wasnt saying i can outsmart the market, if i could outsmart the market id be rich, sitting on a beach some where drinking some grey goose and not be on a irvine related website on a sunday night. im just saying that from a financial perspective, the best time to buy is when the numbers play out like they do in the ad. i believe 96 was bottom of the last cycle, so there is a chance that it may bottom out to similar numbers as to what are in the ad (adjusted for inflation).
i have always believed that the bottoming process would be a two step process, the first being the tightening of credit, which has happened, and the second being rising interest rates, which has not happened.
im going off memory, but i dont think real estate as an investment has done much better than the rate of inflation? maybe someone else can chime in here. the main reason to buy real estate in my opinion is a hedge against inflation. if you rent, your rent may keep pace with inflation, so locking in your payment would make sense. im not purchasing my future home as an investment, but as a hedge against inflation. now investing in positive cash flow real estate, that is a whole other conversation.
IndieDev
New member
test said:
That's because the market is full of debtors trying to unload their upside down homes across various markets. Demand is an important input, but income is more important.
Otherwise it would be all about hobos demanding $3.5m Shady Canyon homes who don't care about income.
panda
Well-known member
Trojan. I know you are thinking about buying into Las Ventanas. I agree with you that Portola Springs provides the best value in Irvine for new homes. My crystal ball also tells me that Northwood HS will become the #1 Irvine school over University High within this decade.
However, if you are thinking about buying into Las Ventanas plan #2, it is still atleast $100,000 over priced. I wouldn't touch Las Ventanas plan 2 at $650,000. IndieDev, is right on.... in terms of valuation. The correct valuation of this homes is $524,000 as a base price and maybe $560,000 with modest upgrades.
If we are going to compare apples to apples to 1997 prices we need compare the Irvine homes prices when mortgages rates were 7% like it was in 1997, not 4.25%. Where mortgage rates will be is the biggest wildcard.
Would you rather:
option A: Buy Las Ventanas plan 2 at $700,000 with 20% down 4.25% 30 year fixed?
option B: Buy Las Ventanas plan 2 at $550,000 with 35% down 7% 30 year fixed?
I would take option B any time. ")
However, if you are thinking about buying into Las Ventanas plan #2, it is still atleast $100,000 over priced. I wouldn't touch Las Ventanas plan 2 at $650,000. IndieDev, is right on.... in terms of valuation. The correct valuation of this homes is $524,000 as a base price and maybe $560,000 with modest upgrades.
If we are going to compare apples to apples to 1997 prices we need compare the Irvine homes prices when mortgages rates were 7% like it was in 1997, not 4.25%. Where mortgage rates will be is the biggest wildcard.
Would you rather:
option A: Buy Las Ventanas plan 2 at $700,000 with 20% down 4.25% 30 year fixed?
option B: Buy Las Ventanas plan 2 at $550,000 with 35% down 7% 30 year fixed?
I would take option B any time. ")
qwerty
Well-known member
Panda said:What about rental parity? Isn't that more important than income or demand?
Right from the Irvine Company Ad in 1996.
Notice how the total monthly payment to own, including the principal and before the tax benefit, was even lower than the rental amount? that is how look at rental parity. IrvineRenter on his blog backs out the principal component and includes the tax benefit to get to rental parity. Hopefully we can get back to that someday. When the numbers play out like they do in the ad, that is when its time to buy.
qwerty said:
That is the time to buy, when you and everyone else jumps in won't the huge surge in demand spike prices back up? Everyone thinks they can outsmart the market, everyone thinks they are smarter than everyone else. Market timing is hazardous to your financial health.
qwerty
Well-known member
test said:
i wasnt saying i can outsmart the market, if i could outsmart the market id be rich, sitting on a beach some where drinking some grey goose and not be on a irvine related website on a sunday night. im just saying that from a financial perspective, the best time to buy is when the numbers play out like they do in the ad. i believe 96 was bottom of the last cycle, so there is a chance that it may bottom out to similar numbers as to what are in the ad (adjusted for inflation).
i have always believed that the bottoming process would be a two step process, the first being the tightening of credit, which has happened, and the second being rising interest rates, which has not happened.
if everything plays out how some of you say it is, i am going to be a happy person... purchase a brand new 2K sq ft home in irvine for $520K. I'm guessing that means I can then buy a 2K sq ft home in other cities like Yorba or Aliso in the low 400's. Wow! Does that also mean I'll be able to buy a 2K sq ft home at a "premium" in Newport Beach? Maybe I'll have to pay $700K for a nice home in Eastbluff or Dover Shores? Excellent! I'm a bit hesitant that it may be wishful thinking, but I will be estatic if it actually happens. Hmmm... maybe $650K for a nice home with a view in Quail or $750K for Turtle Ridge?
I'm glad we have so many financial wizards on the board who crunch their numbers using their Ivy League MBAs and CFAs... Unfortunately, the analyst mentality has caused large errors in the business world. We, as a society, for some reason grant any one coming out of a top school with an MBA, a license to predict, advise, and manage based on certain theories. I'm not as smart as all you wizards, but I'm am smart enough to apply the smell test to any thing I would claim. Does it really make sense? Do you REALLY think prices in Irvine will go so low that I will be able to buy at '93-96 prices, adjusted for inflation? Are you saying that real estate should be a zero-real rate of return asset? If you claim that you should purchase real estate based on its merits as an investment, why would anyone purchase a non-appreciating, illiquid asset? Does this mean that we should view real estate as a consumable good, and if so, what dynamic has changed such that we are challenging the historical view of real estate?
I'm glad we have so many financial wizards on the board who crunch their numbers using their Ivy League MBAs and CFAs... Unfortunately, the analyst mentality has caused large errors in the business world. We, as a society, for some reason grant any one coming out of a top school with an MBA, a license to predict, advise, and manage based on certain theories. I'm not as smart as all you wizards, but I'm am smart enough to apply the smell test to any thing I would claim. Does it really make sense? Do you REALLY think prices in Irvine will go so low that I will be able to buy at '93-96 prices, adjusted for inflation? Are you saying that real estate should be a zero-real rate of return asset? If you claim that you should purchase real estate based on its merits as an investment, why would anyone purchase a non-appreciating, illiquid asset? Does this mean that we should view real estate as a consumable good, and if so, what dynamic has changed such that we are challenging the historical view of real estate?
qwerty
Well-known member
akim997 said:
im going off memory, but i dont think real estate as an investment has done much better than the rate of inflation? maybe someone else can chime in here. the main reason to buy real estate in my opinion is a hedge against inflation. if you rent, your rent may keep pace with inflation, so locking in your payment would make sense. im not purchasing my future home as an investment, but as a hedge against inflation. now investing in positive cash flow real estate, that is a whole other conversation.
usctrojancpa
Well-known member
I agree with you that purchasing a home can not only be a mathematical exercise because emotion can play a big role in purchasing a home to live in. We can all agree that emotion can not be calculated or have a set value placed on it. I would argue that residential real estate is more irrational (especially in desirable cities like Irvine and Newport Beach to name a few) while commercial real estate is more objective. Can Irvine get back to rental parity? Sure it can, but the is it likely in my opinion? Unless something changed, I would say probably not because of the strong demand for it from many buyers (including FCBers).akim997 said:
usctrojancpa
Well-known member
I would too, but when is option B going to present itself? 2 years from now? 5 years from now? 10 years from now? It's easy to throw out there WHAT IF scenarios but I personally don't see interest rates going that high in the near term future. I still believe that we will experience a similar fate as Japan did with our version of a lost decade which will keep interest rates low for longer than most people think. To me it is a mathematical exercise but there is also some level of intangible that goes into buying a home that gives it additional value for me. I realize that if I buy at the end of this year or next year, at some point in time the value of the home may be 10-20% but I'm OK with that and will probably not sell the home.Panda said: