Why wait for prices to drop?

NEW -> Contingent Buyer Assistance Program
[quote author="IrvineRenter" date=1223966214][quote author="25w100k+" date=1223962863][quote author="IrvineRenter" date=1223951794]

Also, it only takes a small fraction of homeowners in distress to drive down property values in the whole neighborhood. Market prices are determined on the fringes. If 10% of homeowners are in distress, market pricing will suffer greatly.</blockquote>


Isn't this only true if inventory is high also?



The problem is you need low comps and a <em>need to sell</em> to drive prices lower. I know more then a few people who have their houses up for sale right now, and are basically just 'make me move' prices. They are more then prepared to stay in their homes for the next 5-10 years.



Unless the option ARM resets just *kill* everyone and banks are forced to dump foreclosed properties en mass, I don't think Irvine has another huge crash coming. Sure prices will slowly inch down, and the high end might crash (shady canyon looks insane), but for the most part foreclosure levels just arn't high enough.



In my opinion, the best hope for another huge pricecut in irvine is tohope places such as santa ana, aliso, and ladera become *so* much of a bargain that Irvine's appeal isn't worth the price difference. Who knows if that will happen...</blockquote>


Actually, both forces will be at work. The substitution effect will siphon off buyers to other markets as prices continue to fall, and the ARM resets will make for more foreclosures.



Right now you are seeing the last of the knife-catcher activity at these price levels. As the credit crunch worsens, the amounts buyers can finance will continue to decline, and as the recession worsens, there will be fewer qualified buyers and more distressed sellers. Inventories do not have to be huge, there just needs to be more sellers than buyers, and the sellers need to be motivated.</blockquote>


I am waiting to see what happens this spring. I don't have the luxury of waiting until prices bottom, so I hope prices continue to decline for a while. When are these option ARM resets going to stop?
 
Man, some of you guys are so impatient. Give it some time, home prices don't move as fast as stock prices do. Inventory may be low in Irvine, but the reality is that the market is hitting some major headwinds. It's just a matter of time before home prices in Irvine take another step down.
 
[quote author="IrvineRenter" date=1223966214][quote author="25w100k+" date=1223962863][quote author="IrvineRenter" date=1223951794]

Also, it only takes a small fraction of homeowners in distress to drive down property values in the whole neighborhood. Market prices are determined on the fringes. If 10% of homeowners are in distress, market pricing will suffer greatly.</blockquote>


Isn't this only true if inventory is high also?



The problem is you need low comps and a <em>need to sell</em> to drive prices lower. I know more then a few people who have their houses up for sale right now, and are basically just 'make me move' prices. They are more then prepared to stay in their homes for the next 5-10 years.



Unless the option ARM resets just *kill* everyone and banks are forced to dump foreclosed properties en mass, I don't think Irvine has another huge crash coming. Sure prices will slowly inch down, and the high end might crash (shady canyon looks insane), but for the most part foreclosure levels just arn't high enough.



In my opinion, the best hope for another huge pricecut in irvine is tohope places such as santa ana, aliso, and ladera become *so* much of a bargain that Irvine's appeal isn't worth the price difference. Who knows if that will happen...</blockquote>


Actually, both forces will be at work. The substitution effect will siphon off buyers to other markets as prices continue to fall, and the ARM resets will make for more foreclosures.



Right now you are seeing the last of the knife-catcher activity at these price levels. As the credit crunch worsens, the amounts buyers can finance will continue to decline, and as the recession worsens, there will be fewer qualified buyers and more distressed sellers. Inventories do not have to be huge, there just needs to be more sellers than buyers, and the sellers need to be motivated.</blockquote>


I certainly hope the laws of economics prevail and the situation plays out with significant price drops as you indicate. I have begun to feel a bit of doubt myself as I have closely monitored my 2 target Irvine neighborhoods (Quail Hill and Turtle Ridge) over the past few months and become depressed at the low inventory levels and properties that would have been in my "sweet spot" going into escrow or closing at prices that still appear to be inflated. For instance, the following TR property

http://www.redfin.com/CA/Irvine/34-Gardenpath-92603/home/5978099went on the market toward the end of September and was already in escrow last week, with a list price of $480/sf!



As I understand it, the following 3 conditions need to exist to bring the anticipated price reductions:

- ARM resets hit in large numbers, substantially increasing the number of owners that must sell, resulting in inventory increases at lower prices

- Home financing must continue to have high hurdles, with banks requiring 20% down and excellent FICO scores

- Volume of buyers that can afford to buy under today's stricter financing rules (i.e. true demand) must be smaller than supply



If any one of these does not exist, then significant price reductions would likely not happen. For instance, if ARM resets or other distress-causing factors do not materially increase supply, then the market could remain stagnant with a low trickle of non-distressed sellers that can hold out for higher prices and qualified buyers that can pay higher prices (seemingly the situation for the past few months).



I think it's safe to say that banks are not going to relax lending practices anytime in the foreseeable future. I don't have educated knowledge on the other 2 factors. Are there any data or reasonably accurate forecasts available on ARM resets and the volume of qualified buyers in Irvine? Data is always the best defense when week-to-week market conditions don't seem to support the direction that economic rules indicate we should be heading.
 
[quote author="Roscoe" date=1223973259]I have begun to feel a bit of doubt myself as I have closely monitored my 2 target Irvine neighborhoods (Quail Hill and Turtle Ridge) over the past few months and become depressed at the low inventory levels and properties that would have been in my "sweet spot" going into escrow or closing at prices that still appear to be inflated.</blockquote>


Not Everyone Should Own a Home



http://online.wsj.com/article/SB122325772150706655.html
 
[quote author="usctrojanman29" date=1223973023]Man, some of you guys are so impatient. Give it some time, home prices don't move as fast as stock prices do. Inventory may be low in Irvine, but the reality is that the market is hitting some major headwinds. It's just a matter of time before home prices in Irvine take another step down.</blockquote>
Inventory maybe low but check out the rental section. Lots of houses are for rent.
 
[quote author="asianinvasian" date=1223974783][quote author="Roscoe" date=1223973259]I have begun to feel a bit of doubt myself as I have closely monitored my 2 target Irvine neighborhoods (Quail Hill and Turtle Ridge) over the past few months and become depressed at the low inventory levels and properties that would have been in my "sweet spot" going into escrow or closing at prices that still appear to be inflated.</blockquote>


Not Everyone Should Own a Home



http://online.wsj.com/article/SB122325772150706655.html</blockquote>


Not according to Barney Frank.
 
[quote author="asianinvasian" date=1223974783][quote author="Roscoe" date=1223973259]I have begun to feel a bit of doubt myself as I have closely monitored my 2 target Irvine neighborhoods (Quail Hill and Turtle Ridge) over the past few months and become depressed at the low inventory levels and properties that would have been in my "sweet spot" going into escrow or closing at prices that still appear to be inflated.</blockquote>


Not Everyone Should Own a Home



http://online.wsj.com/article/SB122325772150706655.html</blockquote>
It'd be very interesting to see how things would be different if mortgage loans were recourse here in the US....
 
Comes down to this...



"To Each His Own"



[quote author="WestparkRenter" date=1223975427][quote author="asianinvasian" date=1223974783][quote author="Roscoe" date=1223973259]I have begun to feel a bit of doubt myself as I have closely monitored my 2 target Irvine neighborhoods (Quail Hill and Turtle Ridge) over the past few months and become depressed at the low inventory levels and properties that would have been in my "sweet spot" going into escrow or closing at prices that still appear to be inflated.</blockquote>


Not Everyone Should Own a Home



http://online.wsj.com/article/SB122325772150706655.html</blockquote>


Not according to Barney Frank.</blockquote>
 
[quote author="rickhunter" date=1223975990]Comes down to this...



"To Each His Own"



[quote author="WestparkRenter" date=1223975427][quote author="asianinvasian" date=1223974783][quote author="Roscoe" date=1223973259]I have begun to feel a bit of doubt myself as I have closely monitored my 2 target Irvine neighborhoods (Quail Hill and Turtle Ridge) over the past few months and become depressed at the low inventory levels and properties that would have been in my "sweet spot" going into escrow or closing at prices that still appear to be inflated.</blockquote>


Not Everyone Should Own a Home



http://online.wsj.com/article/SB122325772150706655.html</blockquote>


Not according to Barney Frank.</blockquote></blockquote>
haha, I was being sarcastic.
 
I am watching prices continue to drop 2% a month in Malibu, Calabasas, Agoura. You would have to have quite a savings rate to save $20k/month. At current interest rates, that means the matching house payment is dropping $125 for every month you wait. The 20% downpayment is dropping by $4,000 per month.



What has suddenly started to happen is homes for $2 mil+ coming on the market in droves. Typically built 2003 or later. When I saw them sell the first time, I wondered "who the hell can afford these mortgage payments?" Of course, the answer was often "They can't. The lenders are irresponsible".
 
[quote author="MalibuRenter" date=1224396812]I am watching prices continue to drop 2% a month in Malibu, Calabasas, Agoura. You would have to have quite a savings rate to save $20k/month. At current interest rates, that means the matching house payment is dropping $125 for every month you wait. The 20% downpayment is dropping by $4,000 per month.



What has suddenly started to happen is homes for $2 mil+ coming on the market in droves. Typically built 2003 or later. When I saw them sell the first time, I wondered "who the hell can afford these mortgage payments?" Of course, the answer was often "They can't. The lenders are irresponsible".</blockquote>


BuRenter - What are the public schools up there?
 
[quote author="MalibuRenter" date=1224421503]Excellent schools, both Malibu and Calabasas. Far better than LAUSD, that's why homes 1/4 mile away from LAUSD are worth more than twice as much.</blockquote>


Do you know the names of the individual schools or the name of the school district?
 
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