Looks like the IPO family are going to be renters...

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ipoplaya_IHB

ipoplaya_IHB

New member
After a week of consideration and debate, the IPO family has decided to move to a rental and put our lovely condo on the market... Weird to be leaving our place and not moving to the desired 20-year house, but we're pulling the trigger anyway. Man, it was an agonizing tough call to make. We really love our home but it was time for a change and there just isn't much on the market now that interests us.



Our place is a <a href="http://floorplans.irvinerealtorsite.com/WestIrvine/Wisteria/WisteriaC1622.JPG">plan 3 Wisteria model </a>(1622sf 3/2.5) in West Irvine, fronting directly to a single-loaded street, much like <a href="http://www.redfin.com/CA/Irvine/Undisclosed-address-92602/home/12525463">this one</a> but with more upgrades. This particular listing is supposed to be hitting escrow this coming week.



IR2 will be representing us on the transaction. For any would-be detached condo buyers, feel free to PM either myself or <a href="http://www.irvinehousingblog.com/forums/member/1052/">irvinerealtor</a> for more details.
 
IPO, I sort of wish we could do the same. Pulling out equity seems like a smart thing to do. Ya better make Mrs. Ipo happy that this was worth the hassle and inconvenience ;)
 
[quote author="Bubblegum" date=1212904648]IPO, I sort of wish we could do the same. Pulling out equity seems like a smart thing to do. Ya better make Mrs. Ipo happy that this was worth the hassle and inconvenience ;)</blockquote>


Ms IPO gets a larger house (+800sf) with a big yard in a neighborhood she likes. The master bedroom has a monster-sized walk-in closet too! Her family lives out of the area so when they visit now, they'll get a guest bedroom with a bed vs. a futon in the office or the family room couch...
 
IPO,

You are not going to regret your decision. I think it is an excellent move on your part which is exactly what I would of done if I were in your shoes. I'm really glad that you convinced Ms IPO to follow your lead.



I really hope that you can get the maximum equity out of that house while you still have time. From everything I am reading and seeing on the news, I am getting the feeling that it is going to get really, really ugly here soon.



Just curious? How much is your rent on a 2450 square feet place? I am assuming it is 4bed/3bath? I am also planning on renting a place from early '09 to early '10. I really hope that I can buy a quality home in Northwood II for $250/square feet by then.
 
Best of luck IPO. We bought in '97, sold 3 years ago and rented a smaller place. I love renting whereas my wife have been longing for us to buy. We will probably buy in 12 to 18 months after another 10% to 20% price cut.



Sounds like you guys are stepping up buy renting so it shouldn't be too hard of an adjustment.



It's still amazing to me that I make good money (90 percentile) and have a chunk of cash but still cannot afford a newer dream home in North Park/North Wood. From what I have read, you're a VP of a company and still struggle with buying a decent single-family home. Something is wrong with this picture.



Again, good luck in selling your place and moving.
 
Surprise it took you so long to come to this decision. Put an advert in the local newspaper:



Knife catcher wanted. Beautiful house guaranteed to be worth 100K less next year
 
[quote author="Stuff It" date=1212919301]Surprise it took you so long to come to this decision. Put an advert in the local newspaper:



Knife catcher wanted. Beautiful house guaranteed to be worth 100K less next year</blockquote>


90% of the battle was convincing my wife. Last summer, when I first tried to persuade her, our youngest was only six months old or so. She couldn't picture heading to a rental at the time and I kind of agreed with her. He's walking, talking, sleeping nicely, etc. now so it's much more feasible. My almost 4-year old is fired up to have a big backyard and a big play area downstairs at the rental house.



If it's worth $100K less in a year I will be doing cartwheels! I don't think it will fall nearly that much... Prices around my development appear to have actually ticked up a smidge recently or at least flattened out. We had the weight of REOs driving down comps last year, much more so than this year. A poorly located and thrashed on bank version of my home sold for $550K a few months back. The same model on the market now has had a number of offers and is supposed to be hitting escrow at $600K. They were all set to go to escrow with a different buyer at $600K but the relo company took quite some time to approve the deal and the buyers ended up going for another property.
 
[quote author="PANDA" date=1212906668]IPO,

You are not going to regret your decision. I think it is an excellent move on your part which is exactly what I would of done if I were in your shoes. I'm really glad that you convinced Ms IPO to follow your lead.



I really hope that you can get the maximum equity out of that house while you still have time. From everything I am reading and seeing on the news, I am getting the feeling that it is going to get really, really ugly here soon.



Just curious? How much is your rent on a 2450 square feet place? I am assuming it is 4bed/3bath? I am also planning on renting a place from early '09 to early '10. I really hope that I can buy a quality home in Northwood II for $250/square feet by then.</blockquote>


Thanks for the kind words Panda. Rent is $3200 on a 4/2.5. I'd say its middle of the road in terms of price. Big lot on a nice culdesac. We tried to buy the house right across the street from it last year as a matter of fact. I'm going to enjoy sitting on my rental porch and flipping the bird to the crazy sellers across the way! They ended up giving up and delisting. Their house is probably worth $100K less today than my last and final offer back in July.
 
IPO,



Here is where i am a little bit confused. If your rent is $3200, that would be an equivalent of a $417,000 loan at 6% on a 80% loan. IR states that we will eventually get to the point where rent will be the same amount as the 80% mortgage amount (Priincipal + Interest + TAX + HOA + Insurance). That would put the TRUE value of house you are renting at $521,250 ($104250 (20%down) + $417,000 mortgage at 6%). Obviously if the mortgage rate is between 7% - 8%, which I think is definitely possible in 2010-2011, this would but the value higher than $521,250.



A 2450 square feet SFR 4/2.5 in Irvine is currently selling in the $850k - $950k range. There is just so much of gap between $900k and $550k. What do you think is the realistic "Bottom Price" of the value of the home you will be renting?



Assuming the true value of the home is $550,000 for a 2450 sq/ft home (rent = buy), then $/square ft is $224.50. Is my calculation correct when the rent = buy for the particular home you will be renting, the correct price of the home should be $550,000? $600,000 at the most assuming mortgage rate is 8-9%.



IPO, let me know if my calculations are off. Dude. I would die to buy a nice Irvine 2450 sq/ft SFR for $224.50 per square foot.



Panda
 
[quote author="PANDA" date=1212927346]IPO,



Here is where i am a little bit confused. If your rent is $3200, that would be an equivalent of a $417,000 loan at 6% on a 80% loan. IR states that we will eventually get to the point where rent will be the same amount as the 80% mortgage amount (Priincipal + Interest + TAX + HOA + Insurance). That would put the TRUE value of house you are renting at $521,250 ($104250 (20%down) + $417,000 mortgage at 6%). Obviously if the mortgage rate is between 7% - 8%, which I think is definitely possible in 2010-2011, this would but the value higher than $521,250.



A 2450 square feet SFR 4/2.5 in Irvine is currently selling in the $850k - $950k range. There is just so much of gap between $900k and $550k. What do you think is the realistic "Bottom Price" of the value of the home you will be renting?



Assuming the true value of the home is $550,000 for a 2450 sq/ft home (rent = buy), then $/square ft is $224.50. Is my calculation correct when the rent = buy for the particular home you will be renting, the correct price of the home should be $550,000? $600,000 at the most assuming mortgage rate is 8-9%.



IPO, let me know if my calculations are off. Dude. I would die to buy a nice Irvine 2450 sq/ft SFR for $224.50 per square foot.



Panda</blockquote>


I think the value of the home I am renting will likely fall to around $625-650K, which would be another 20-25% down. It wouldn't sell at $900K today. More like $800-825K as its not in a premium Irvine development such as NP, NW Pointe, or WB.



Price per sf is a misleading measure. Some places will likely fall to $225 per sf. In Tustin Field for instance, another 15% down will get you to $225 per sf on some properties. It all depends on where you are looking to buy... You'll be able to find $225 per sf in older Irivne neighborhoods. I think somewhere like NW Pointe will probably make it down to $275-300 per sf but not much lower than that.
 
[quote author="ipoplaya" date=1212922867]We tried to buy the house right across the street from it last year as a matter of fact. I'm going to enjoy sitting on my rental porch and flipping the bird to the crazy sellers across the way! They ended up giving up and delisting. Their house is probably worth $100K less today than my last and final offer back in July.</blockquote>


That will be awesome. Make sure you get an IHB t-shirt and have IR2 take a picture. If you want, you could have a small IHB gathering, and we can all wear our IHB gear, get a picture, and flip them the bird.



Anyway, it is good to hear that you are taking this route. I hope, er I know it will work out for the best for you and your family.
 
[quote author="PANDA" date=1212928229][quote author="ipoplaya" date=1212927346]IPO,



I think the value of the home I am renting will likely fall to around $625-650K, which would be another 20-25% down. It wouldn't sell at $900K today. More like $800-825K as its not in a premium Irvine development such as NP, NW Pointe, or WB.



Price per sf is a misleading measure. Some places will likely fall to $225 per sf. In Tustin Field for instance, another 15% down will get you to $225 per sf on some properties. It all depends on where you are looking to buy... You'll be able to find $225 per sf in older Irivne neighborhoods. I think somewhere like NW Pointe will probably make it down to $275-300 per sf but not much lower than that.</blockquote>


IPO,



I am assuming that you don't believe that the rent will equal buy at the bottom of the market that IR predicts in the premium neighborhoods like WB, Northwood point, NW II, NP, and PS. The reason I came up with the $550k figure is that my current rental property in Atlanta, rents for the same amount as the rent you are paying your landlord every month. I purchased the home for $550,000. Rent covers my entire mortgage, HOA, Taxes, and insurance with 20% down. Atlanta's real estate currently has no bubble.



If the home that you are renting would sell at $800k at this time, that means that there is a bubble of $250,000, and a 30% drop would be needed to get to the rent = buy parity that Irvine Renter predicts we will hit at the bottom in 2010 - 2012. Again this number changes as the mortgage rates rises to 8-9% which then a $625-$650k may be possible with the rent = buy. Graph and IPO, do you guys have an educated guess of where 30 year fixed mortgage rates would be in 2009/2010/2011? Though I am excited about the fact that home prices in Irvine can drop another 20 - 25%, my greatest fear is that the mortgage rates will sky rocket to 8-10% between now until 2010/2011, and that we will never see mortgage rate at 5-6% again in our lifetime.



I am also afraid that the FEDs do not have all power in setting the rates as they used to. China, USA's greatest creditor, can potentially have US's balls to the wall.



IR2, if we see start seeing mortgage rates in the near future at 8 - 10%, can we predict that Irvine home buyers will put more down on their home purchase: 30 - 40% down compared to 10% - 20% down?



Please let me know what your thoughts are to what i am saying.
 
Congrats on the decision, IPO. Here's to you taking advantage of the "pent-up demand" that is "through the roof" and causing "multiple offers to rule the day!"
 
[quote author="PANDA" date=1212927346]Obviously if the mortgage rate is between 7% - 8%, which I think is definitely possible in 2010-2011, this would but the value higher than $521,250. </blockquote>


Panda, I don't get this part. Why would a higher interest rate increase the rent parity value? Higher interest means smaller principal for a given payment amount.



Also, China won't misuse their $trillion+ holdings as long as their factories are dependent on US consumers. They are still a ways off from having a strong enough domestic consumer base of their own. Things may be a lot different in 2020.
 
[quote author="Daedalus" date=1212988171][quote author="PANDA" date=1212927346]Obviously if the mortgage rate is between 7% - 8%, which I think is definitely possible in 2010-2011, this would but the value higher than $521,250.

Again this number changes as the mortgage rates rises to 8-9% which then a $625-$650k may be possible with the rent = buy.

</blockquote>


Panda, I don't get this part. Why would a higher interest rate increase the rent parity value? Higher interest means smaller principal for a given payment amount.



Also, China won't misuse their $trillion+ holdings as long as their factories are dependent on US consumers. They are still a ways off from having a strong enough domestic consumer base of their own. Things may be a lot different in 2020.</blockquote>


Daedalus,



Thanks for pointing out the error,



IPO stated that he thinks the bottom of the home he is renting is probably going to be valued at $625k - $650k. The point I was try to make is that in order for "rent = buy" the mortgage rates would have to be lower (4 - 5%) than higher (8 - 9%) to get to that number, and I am predicting that the mortgage rate will be much higher in 2010 than where the 30 year fixed mortgage rate currently stands at 6%. Therefore, I am trying to point out that if IR theory holds true that RENT = BUY at the bottom, then the 2450 sq/ft house in a desirable part of Irvine would be more in the $525k - $550k range than $625k - $650k range. If IPO turns out to be correct at his prediction of $625k - $650k, then I am trying to make the point that the bottom will STILL be at a point where buying is more expensive than renting in the premium neighborhoods of Irvine.



Your statement on China is also correct in that what I am stating is not going to happen tomorrow, but in the future. China is like USA's fake friend, we are both using each other. Soon there will be a time where China will be tired of cooking and feeding the lazy Americans, and they will have their domestic consumer base where they will no longer be dependent on the Americans. You are right that there is a lot that can happen from now to 2020. Couple things that I do predict is that the EURO will replace our worthless U.S. dollar as the world standard currency. Also, when the Chinese decides not to subsidize the American's extravagent lifestyle and no longer contributes to the Marshall Plan, therefore cutting off the dependency with the U.S., China will misuse their $1trillion and will let the Americans fall. This is when the China man will have the Americans' balls to the wall.



Again this will not happen tomorrow, but concerns Panda quite a bit. Our U.S. Government loves inflation. It's a way for them to take money from the Americans without the us realizing they took it. Though I hate to admit this, but because of our government's carelessness, soon our CASH will become will become TRASH.
 
Daedalus,

Believe me, I am a proud Asian American/U.S. Citizen and I am on your side 100%. I really do hope what I am saying is "WRONG" that the Euro will replace the US Dollar as the world currency, however if our US Dollar continues to fall and collapse, the foreigners will dump our currency. I manufacture my products from China, and outsource Indians. I cannot tell you how much my costs have gone up in the past 5 years just from how weak our dollar has gotten.



The US Dollar has been our world currency for over 100 years, and if what i am predicting about the EURO is correct, we will breaking a precedence of over 100 years.

Panda
 
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