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<p>"<em>And who knows once the democrats get in, how long the interest rates will remain low."</em></p>

<p>Isn't it better to buy when prices are low and interest rates are high than when prices are high and interest rates are low? True the interest rate is reflected in your monthly PITI and part of the affordability equation, but I can refinance to a lower rate if rate drops after I buy. I can't lower the purchase price of the house once I sign papers. </p>

<p>True, if he finds/buys his dream home in 8-12 months and is happy there, it doesn't matter if the price goes down the next year. But if it's anything short of a "dream home" in which he will reside for many years to come, waiting a year or two in a bear market could mean getting more for his money.</p>
 
<em>"Isn't it better to buy when prices are low and interest rates are high than when prices are high and interest rates are low? "</em>





Exactly.
 
<p>Wow, some idiot bought an 1800sf home in Ladera for $700K this year? From my calculations you took a $25,000 investment and moved into a 3000sf house, and proceeded to make $200K in the process. That is great for you, it is better to be lucky than good. I know, I also used blind luck to make some money on the market. But that's all it was, blind luck. I decided to buy in 2001, and before I knew it, I was swimming in money. But man, that feels uncomfortable sitting in it, when it is only yours when you take it home. So I took it home.</p>

<p>My calculation also tells me you have a $5300/mo mortgage, IF you used all your proceeds as down. If you only put down 20%, it's about $6000. No wonder you had to sell the Benz and the Volvo. You don't "gotta do it".</p>

<p>I don't know, maybe you're a 30 year-old phenom making $250K a year, but then I suppose you wouldn't have needed to sell the car in that case. Fact of the matter is that real estate is traditionally a horrible investment "(in) the long run", unless you happen to catch a bull market. You'd be a classic case of that. And too bad you're not heeding your own "long term" advice. You've flipped it 3 times in 7 years, and I'm thinking it was 1 time too many. I'm seeing ~3000 sf homes in Ladera for low to mid-800's and they've been on the market for a few months. Suppose that won't matter too much as long as you can afford the $5-6K mortgage, since the third time's the charm, and now you're in for the "long run"? Good luck with that, and let us know when you are able to reclaim those cars back.</p>
 
<p>ladera1,</p>

<p>At the top of the forums here there is an entire (sticky) thread dedicated to foreclosures. Read it and ask any questions you have about foreclosures there. </p>

<p>IR said: <em>"I don't mean to pick on you, but you are in need of a kool aid detox." </em>As hard as I laughed at that and it may seem rude but he is right. </p>
 
<p>ladera1</p>

<p>Congratualations on riding the rollercoaster up and doing well. But this downturn will be a bit longer than you may expect. We have 10 months of overpriced inventory and the bottom has yet to occur. I would look at the Japan experience of the last 7-9 years of corrections in the RE market as a point of reference. It may not be that extreme here in OC. But I agree with the prices going back to about 2000 levels. And the other issue is the devaluation of the dollar. Sure u bought your house for $ 899K. But that has been devalued 30% thanks to your friends at the federal reserve and the inability of our government to live within its means. Gas will be $ 5.00. Diapers twice what you are paying now. Milk twice. Etc Etc. Health insurance will go up another 30%. Will your paycheck keep pace ? Will the value of your house keep up with that pace too? More than likely not. </p>

<p> </p>
 
<p>ladera, I am happy for you that you did so well for yourself. However, it is not indicative of many people's experiences. For example, my parents bought a house for $280K near SF in the 1990s. Prices remained around $300-350K until about 2002 when it jumped to about $900K. While that is a fantastic investment return, there was no way that anyone could have expected such a jump back in 1990. It was pure luck. You also fail to account for the costs of ownership that go along with owning a house and the cost of selling of home. No other investments I know loses 6 percent immediately when you sell.</p>

<p>What is your house worth today? </p>

<p>Some articles on the topic:</p>

<p><a href="http://www.fool.com/news/foth/2002/foth020404.htm?terms=investment+house&vstest=search_042607_linkdefault">www.fool.com/news/foth/2002/foth020404.htm</a></p>

<p><a href="http://www.fool.com/personal-finance/home/2007/05/16/the-best-investment-ever.aspx?terms=investment+house&vstest=search_042607_linkdefault">www.fool.com/personal-finance/home/2007/05/16/the-best-investment-ever.aspx</a></p>

<p><a href="http://www.fool.com/personal-finance/home/2007/05/18/the-worst-investment-ever.aspx?terms=investment+house+worst&vstest=search_042607_linkdefault">www.fool.com/personal-finance/home/2007/05/18/the-worst-investment-ever.aspx</a></p>
 
<p>Irvine renter...</p>

<p>You put a lot of effort in your report. But with all due respect, there were also tons of analysts who predicted a bear market would start in 2002-2004. Matter of fact, when I purchased my first condo in 2000, I worked for a very well known national Brokerage and Financial Planning firm. When I put my down payment on my condo, not one, but ALL the brokers in my office scoffed and laughed. They said that real estate was not the way to go and that I could not be buying at a worse time. They laughed that I spent "over $100,000 on a CONDO!" and that when the market would turn, condos are the first to get hit the hardest. They gave me 3 news articles that backed their argument. So there is no way to calculate or predict the future. </p>

<p>In 2002, my neighbor at my condo, sold his condo and then rented to wait for prices to fall because of the information he was getting. He ended up waiting for 2 years watching the prices go up and then purchasing at DOUBLE what he anticipated. Im not saying that will happen now, but here is no mathematical formula, or magic graph that will tell you when the perfect time is to buy. All I know, is that prices are lower than they have been right NOW. And my guess (based on what I have seen) is that in 1 years time it will be more condusive to buy. Beyond that, who knows? We live in a great place that will always be the envy of the rest of the nation. And that's why CA real estate is a great investment IN THE LONG RUN.</p>

<p>And why is it important to keep up in OC? I will tell you. I grew up in the high desert where you have the complete opposite of the OC mentality. There, you are happy to have a house and a dog... maybe even your front teeth. j/k. :) But seriously. Its just as going to a better university, you strive to achieve all you can when you are in an environment who feels the same way. A wise man once said, surround yourself with excellence. Or with people you admire. Not that I admire all fellow OCians, but if you surround yourself with excellence, you cannot help but try harder and be all you can be! So in that case, living in OC and keeping up is not such a bad thing.</p>
 
I take it you didn't live in OC from 87 to 96? And don't even think about giving me the aerospace excuse because I have gone over that myth in ad nauseum.
 
<p><em>Not that I admire all fellow OCians, but if you surround yourself with excellence, you cannot help but try harder and be all you can be!</em></p>

<p>My OC neighbors can have their "excellence" pissing contest. Mine is in my savings account.</p>
 
<em>"But with all due respect, there were also tons of analysts who predicted a bear market would start in 2002-2004."</em>





Yes, it should have. Without the Option ARM, the market would have started the crash in 2004 when it would have only taken a 25% correction to get back to fundamentals.





<strong><a title="Permanent Link to The Anatomy of a Credit Bubble" rel="bookmark" href="http://www.irvinehousingblog.com/2007/05/14/the-anatomy-of-a-credit-bubble/" linkindex="11" set="yes">The Anatomy of a Credit Bubble</a></strong>





Now, sadly, it will take a 40% or greater correction before we hit the bottom.





<em>"We live in a great place that will always be the envy of the rest of the nation. And that's why CA real estate is a great investment IN THE LONG RUN."</em>





California was the envy of the nation in 1997 when you could buy a house for 4 times income. Now it takes 8. Envy had nothing to do with that change.





Try this one: <a title="Permanent Link to Appreciation is Dead" rel="bookmark" href="http://www.irvinehousingblog.com/2007/04/30/appreciation-is-dead/" linkindex="14" set="yes">Appreciation is Dead</a>





<em>"but here is no mathematical formula, or magic graph that will tell you when the perfect time is to buy."





</em>True, but there are methods for calculating what a property is really worth, and what it will be selling for at the bottom of the bear cycle: <strong> <a title="Permanent Link to How Inflated are House Prices?" rel="bookmark" linkindex="24" href="http://www.irvinehousingblog.com/2007/03/03/how-inflated-are-house-prices/" set="yes">How Inflated are House Prices?</a></strong>


<strong><a title="Permanent Link to How Inflated are House Prices?" rel="bookmark" linkindex="24" href="http://www.irvinehousingblog.com/2007/03/03/how-inflated-are-house-prices/" set="yes"></a></strong><em>"when the market would turn, condos are the first to get hit the hardest."</em>





This is true. If you have been reading the posts here, we are documenting this phenomenon.








Where is Nirvinerealtor? She would support everything you are saying.
 
I am unsure what to say or do when someone says "You can't time the market". Would it not be more accurate for them to say that they can not time the market? I make over half our family income by timing markets.<p>


Ladera1 - We sold our home in the summer of 2005 and are now renting. I don't know if that was the exact top, but I think we timed the market fairly well, and we plan to buy again when the market is close to the bottom. Isn't that market timing? Or can it not be done? Maybe it is just luck?
 
<p><em>"My OC neighbors can have their "excellence" pissing contest. Mine is in my savings account"</em></p>

<p>Have fun with your 3 1/2 % taxable savings account. I'm sure that interest will compound at the speed of light.</p>

<p><em>"I take it you didn't live in OC from 87 to 96?"</em></p>

<p>Sorry, I was completing my Jr. High & High School education then.</p>

<p><em>"I think 1700 sq. ft. is big enough for a family of 4"</em></p>

<p>I agree.</p>

<p><em>"California was the envy of the nation in 1997 when you could buy a house for 4 times income. Now it takes 8. Envy had nothing to do with that change."</em></p>

<p>California will ALWAYS be the envy of the rest of the US. Even with all of our problems. As soon as those house prices fall within other's reach, they'll be here.</p>

<p>A QUESTION FOR ALL OF YOU NAYSAYERS:</p>

<p>If you don't invest in real estate, what is <u>your</u> optimal choice for long term investing?


</p>
 
<p>Historically stocks are the best investments. . .</p>

<p>"<em>The Economist</em> agrees. In its March 28, 2002 issue, it started a regular survey of housing prices in 13 countries, beginning with annual data starting in 1980. The results were that U.S. residential real estate from 1980-2001 returned a nominal 158% and a real (inflation-adjusted) 20%. That's a nominal compound annual growth rate (CAGR) of 5.11% and real of -- gulp! -- 0.87%. Let's line this up with the S&P 500 over the same period:</p>

<pre><strong><u>1980-2001 Housing S&P 500 (w/o div.)</u></strong>
Total return 185.00% 961.40%
CAGR 5.11% 11.09%
</pre>

<p> These averages strongly suggest that investors would have been far better off investing in stocks than housing for the last 21 years, and that's not even allowing that we buy houses sort of "on margin" -- paying huge amounts of interest on loans for years."</p>

<p>Houses are good to live in, not as investments. Rental units are a complete different issue.</p>
 
<em>"If you don't invest in real estate, what is <u>your</u> optimal choice for long term investing?"</em>





We are in unique times right now. Real estate can be a good hedge against inflation, and if you are a trader, you can make commodity market profits in it: <a href="http://www.irvinehousingblog.com/2007/06/25/houses-should-not-be-a-commodity/" set="yes" linkindex="18" rel="bookmark" title="Permanent Link to Houses Should Not Be a Commodity">Houses Should Not Be a Commodity</a>





Real Estate is not a good long-term investment as it only appreciates at 1% over inflation when it is not in a bubble. You can do better with bonds or CDs.





Stocks have historically been the best investment vehicle, but that market probably will not do well either as the real estate bubble unwinds. Although if the FED continues to dramatically cut rates, stocks may be the next asset bubble.





Right now cash is king because all other asset classes will depreciate relative to cash over the next couple of years.





Personally, I trade stocks and futures and spend most evenings completely in cash. Like awgee, I make a good supplemental income by timing the market.
 
<p><em>Have fun with your 3 1/2 % taxable savings account. I'm sure that interest will compound at the speed of light.</em></p>

<p>No, it won't. It's a safe storage of wealth until I'm ready to invest in <em>your</em> favorite asset class. Either way, it provides a better return than buying up all that OC status-climbing excellence you espouse.</p>
 
<p><em>"I take it you didn't live in OC from 87 to 96?"</em></p>

<p>Sorry, I was completing my Jr. High & High School education then.</p>

<p>Well might I suggest that you do a little research into history. This is by far lamest excuse I have heard in response to the previous bubble bursting. Ask my family what it was like to have a home that was valued at $300k to $350k for six years straight. Then you can ask my best friend's family what it was like to lose their home to foreclosure. Ding dong that is history is repeating itself at your door. So what you are saying is you personally have never experienced a down market. Well get ready because it has only begun.</p>

<p>BTW what makes you think that the people here do not own real estate or have not owned real estate in the past? </p>

<p>Yes you can time the market. It is those who don't know what they are doing that think that you can't. I hope you have cash like Effen because there is going to be some awesome opportunity in the next few years.</p>
 
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