Posted on 12/13/2006 4:40:07 AM PST by GodGunsGuts
Wednesday, December 13, 2006
Falling prices trap new homebuyers
Neighbors in a new Garden Grove tract say a developer's plan to slash prices by about $140,000 has left them owing more for their homes than they're now worth.
By JEFF COLLINS
The Orange County Register
(Excerpt) Read more at ocregister.com ...
True. Me and my wife have been fortunate in that we have been able to buy and sell in different geographical areas. We have no problem selling high and moving to different parts of the country which we have seen to be better suited to buy and sell. We took advantage of the West coast market, sold at the right time and moved east at the right time. We are about to sell and move again. There is money to be made if you are willing to follow the opportunities.
I don’t know a realtor that said it “couldn’t happen” – that’s the nature of real estate. It’s up, it’s down. Overall it’s *way* up and will continue to go up more, IMO. Just watch.
Sales have slowed somewhat here. Keep in mind that it’s pretty late in the year. Not really prime house hunting season.
So what happens as residential properties slow?
Commercial developers start ramping up – that’s particularly true here in Irvine.
As those projects are completed and companies hire/move people to their new location what happens?
For one thing, people want to live close to their job – or at least within a reasonable commuting distance.
What happens to home prices in the area?
They begin to rise as demand rises (again).
It helps if you have good schools and decent safety. Irvine really isn’t Garden Grove – nor is Newport Beach, Laguna Hills/Beach/Niguel etc - so probably not the best comparison… I don't own any property in Garden Grove so I'm not really up on what's going on there.
They will have a senate hearing with photo ops and speeches while they pretend to tear into the big shot developers and realtors that are stealing everyone's money. Harry Reed will chair this hearing.
Bookmark for future vindication (I think you nailed it).
They will have a senate hearing with photo ops and speeches while they pretend to tear into the big shot developers and realtors that are stealing everyone's money. Harry Reed will chair this hearing.
Bookmark for future vindication (I think you nailed it).
Sorry for the double post... my browser is only running on 1 cylinder.
They haven't really dropped any in my area of Texas but they are just now beginning to sit a little longer than last spring when it was nuts with home sales.
My wife & I purchased our small 2 BR home w/3.5 acres in 1973 for $9,900.00. As we could afford we made improvements one at a time and paid off each improvement before starting the next. We were able to help our two sons get through college (University of Michigan & Hillsdale College), and our house has been paid for for many years. We concentrated on living within our means.
Our property recently appraised for $175,000.00. We may sell soon to move to the warmth.
Good heavens! That kind of cash would buy you a city block in Houston.
That is alot of money, per month, for 30 years for an average house...
There was something economically wrong with your information -- if it's much cheaper to rent than own, it would mean that everybody who is running rental property in San Fransisco is losing tons of money, and would be better off selling out.
So I did a quick google search for actual rental prices in San Fransisco, and here was the first set of 10 listings:
1 Bedroom, 1 Bath = $2,950
2 Bedroom, 2 Bath = $2,600
2 Bedroom, 2 Bath = $1,700
3 Bedroom, 2 Bath = $3,300
3 Bedroom, 2 Bath = $3,800
3 Bedroom, 2 Bath = $3,500
4 Bedroom, 3 Bath = $4,800
3 Bedroom, 2 Bath = $2,400
5 Bedroom, 3 Bath = $6,000
3 Bedroom, 1 Bath = $2,950
That averages to a 3-bedroom, 2-bath house (not large by any means) at about $3400, or about twice what your article suggested a rental would go for.
But that doesn't mean you are wrong. One advantage to buying that isn't listed is that, while it might be a negative cash flow now, you have locked in your costs. Rental costs could double in the next 10 years, and home prices could double as well, but you will be paying about the same 10 years from now as you do today (of course, your real estate taxes will be higher, as will your insurance payments).
In a housing market with known falling prices, it almost never is better to buy (if the price is cheap enough, it is possible that the loss of capital doesn't outweigh the savings of rental), but who knows WHEN the housing prices are going to fall, or when they will stop.
The pundits have been predicting the real estate price collapse for 3 years now. At the moment, people in OUR area who decided not to buy 3 years ago, but to wait for the collapse to "buy cheap", are looking at spending 20-50% more for their houses than if thy had bought then.
However, I don't think I'd buy a home right now, because I'd expect a lot of people are wondering like I would be, and would be hesitant, which should drive prices down a bit.
Of course, in our particular area there are not a LOT of empty houses waiting to be purchased, and we have increasing population AND employment, so people DO have to buy houses, and the supply is not outstripping the demand as badly as other areas.
I don't expect my property taxes to drop. When housing prices went up, they lowered our RATES so the increases were under 10%, mostly. I'm pretty sure they are addicted to the money, and as prices drop they will RAISE the rates to keep the tax money flowing.
I hate property taxes, they don't reflect either the cost to the government for providing services to your house, OR the ability of you to pay for those services. I don't think you should have to pay taxes based on how much stuff you bought is worth.
A "square-footage" tax might be better, or a "residence" tax, although they also have the problem of not reflecting people's ability to pay. But a "residence" tax would also discourage large groups of unrelated adults from living in a house.
Am I misreading, or did it only take the flipper family 17 days to do $80 large worth of renovations on a house?
They are on FIRE and I have to have their help for my living room! That should only take 'em a couple hours.
its not just Orange County
You are right about mountain land in North Carolina.
Land that sold for $500 an acre a few years ago is up ten and twenty fold.
The Ginn development company has a new gated community outside of Blowing Rock. They've got their helicopters flying over constantly with prospective buyers picking out their half-million dollar lots. Not houses, lots.
In a bubble market (like this one) you can easily loose a lot more than just the rent money, especially financing with weird mortgages which "save" you big money or taking out home equity loans for that super vacation to France and the new SUV in the driveway!
Am I be the first to claim it's all George Bush's and the GOP's fault? By the time this is all over, it will be if it isn't already!
Ohhh, it's everyone else's fault YOU bought an overpriced stucco box with little or no money down, and with financing that was neither affordable nor wise.
Watch it, it's on A&E. They bought it for $65k, did $18.5k worth of renovations and sold it without a broker (with a front yard auction) 17 days later for $140k. The place was an absolute dump. The grass was brown and they spray painted it to look like a golf course. These guys are incredible.
That's a nice, clear summation that mortgage lenders should be required by Federal law to hang on the walls of their offices. ;)
Good post, but FR's resident money-lenders might give you grief for it. I actually do rent in the San Francisco Bay Area at 50-60% discount over what my monthly mortgage payment would otherwise be. I bought my house in Las Vegas in 2004 - paid cash using (rapidly depreciating) US dollars - and avoided all of the California market chaos. Maybe in a few years when higher-end properties tumble, California real estate will be worth another look...but by then, L.A. Mayor Villa-La-Raza will have been promoted to Governor, and I expect Californians with home equity will be facing some sort of state-wide special assessment tax to "Save Our Schools" or some other BS Democrat excuse.
Outstanding point. I challenged my assessment and the assessor knocked $5K off the AV. I asked him how many people challenge and he told me less than 55.
I'd suggest to folks that to not only do the work on comparables, but also to find one or two "trump cards" - properties that are clearly underassesed and have been for years. There's one about 2 miles down the road who has a house that is newer, 60% larger and has 3 times the acreage I do (with producing apple trees), yet his assessment is $4K less. That's my trump card and I'll use it to leverage my assessment going down.
Of course, the assessor could raise the other guy's AV, but that rarely happens.
Toll Brothers is on the verge of collapse in NJ, and Kara declared bankruptcy, $900k homes are selling for ~$750k now. Those who bought in this year are upside down.
The entire market in NJ for $1 million + houses sagged since summer, but it's expected to rebound now as Wall Street makes these huge bonus payouts. Some million dollar plus towns in NJ will see the average home price increase $300 PER DAY for the next few months as the Wall Street money feeding frenzy is absorbed.
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