All the realtors that said this couldn't happen in Orange County were quite simply wrong...
Same as in some parts of northern Virginia (e.g. western Prince William County). Some home prices are off $100-200K from last year.
The house I sold 10 years ago in Mission Viejo (CA) for $210K sold last summer resold for $800K.
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.
Keyvan Samini, an attorney for some of the buyers, said the purchasers relied on the lender and its appraiser to confirm the homes' $800,000-plus price tags. But appraisers ended up using homes about three miles away as a guide for the first appraisal, and subsequent loan appraisals were based on the first one, Samini said. The appraisals "were way too high," Samini said. "I believe that the builder knew they were too high, or should have known. And it's not the fault of the buyers. They rely on the expertise of those appraisers." Barisic, Brandywine's sales VP, said he doesn't know anything about the comparable homes used in the appraisals. "The appraisers are not hired by Brandywine Homes," Barisic said. "They're hired by the lenders, which the homebuyers chose themselves."
And oh that sound of the worlds smallest violin can be heard all over OC now. It's not my fault, it's the builders fault, they made me buy more house than I can afford! Everyone said I could make a ton of money buying a house! They are not making any more land! Prices will never go down!
One of Samini's clients said he's facing the possibility of foreclosure because of the price cuts. Dunn said he's in a financial bind because he's using an exotic mortgage called an Option ARM, an adjustable-rate loan in which the homeowner can pick his monthly payment from a variety of options. Eventually, he'll be responsible for making full payments of $6,000 a month, he said, adding, "I don't know how we'll be able to pay that." "It's not just the financial aspect. It's the emotional," Dunn said. "We can't eat, can't sleep. I can't concentrate on work. This is all I think about."
Here are all of the factors that are creating a 'Perfect Storm' housing bubble:
1. No more buyers. 1st time buyers are exhausted, and unable and unwilling to take on ridiculous unaffordable mortgages to buy a home when they can rent for half the price.
2. A tightening sub-prime mortgage market. As companies like Ownit have gone under due to bad loans defaulting back to them, watch the others tighten their lending standards. Without the ability to pay for hyper-inflated real estate with 'suicide' loans, the pons scheme revenue source is over.
3. Without new buyers, current owners can't sell to move up to bigger homes. It's like those fan rooms where you wear a billowing suit under a giant fan and are supported by the air. The fan has been turned off, and prices must fall.
4. Owners are tapped out credit wise and many have indeed ATMed their house to the point they owe more than its worth. These people are already in deep doo doo, and are 1 job loss away from foreclosure as they have no savings and would have to bring cash to the sale, if they could sell.
5. Watch the Spring sales season become a 'Silent Spring'. I expect to see a flood of home sales unlike anything seen last year.
6. Job losses in construction and real estate are mounting and are a major part of the economy. This will lead to further pressures to sell existing homes and raise inventory.
7. No likelihood that the Fed will lower interest rates any time soon. However, I do not believe rising interest rates have anything to do with the housing slowdown. The issue is affability and mortgage rates are still ridiculously low.
8. Equity locusts are taking their gains if they can sell and bailing from unaffordable areas such as California. The gains are being banked or sank into areas like Texas. this itself is creating another bubble in this relocation areas.
Keyvan Samini, an attorney for some of the buyers, said the purchasers relied on the lender and its appraiser to confirm the homes' $800,000-plus price tags. But appraisers ended up using homes about three miles away as a guide for the first appraisal, and subsequent loan appraisals were based on the first one, Samini said. The appraisals "were way too high," Samini said. "I believe that the builder knew they were too high, or should have known. And it's not the fault of the buyers. They rely on the expertise of those appraisers." Barisic, Brandywine's sales VP, said he doesn't know anything about the comparable homes used in the appraisals. "The appraisers are not hired by Brandywine Homes," Barisic said. "They're hired by the lenders, which the homebuyers chose themselves."
And oh that sound of the worlds smallest violin can be heard all over OC now. It's not my fault, it's the builders fault, they made me buy more house than I can afford! Everyone said I could make a ton of money buying a house! They are not making any more land! Prices will never go down!
One of Samini's clients said he's facing the possibility of foreclosure because of the price cuts. Dunn said he's in a financial bind because he's using an exotic mortgage called an Option ARM, an adjustable-rate loan in which the homeowner can pick his monthly payment from a variety of options. Eventually, he'll be responsible for making full payments of $6,000 a month, he said, adding, "I don't know how we'll be able to pay that." "It's not just the financial aspect. It's the emotional," Dunn said. "We can't eat, can't sleep. I can't concentrate on work. This is all I think about."
Here are all of the factors that are creating a 'Perfect Storm' housing bubble:
1. No more buyers. 1st time buyers are exhausted, and unable and unwilling to take on ridiculous unaffordable mortgages to buy a home when they can rent for half the price.
2. A tightening sub-prime mortgage market. As companies like Ownit have gone under due to bad loans defaulting back to them, watch the others tighten their lending standards. Without the ability to pay for hyper-inflated real estate with 'suicide' loans, the pons scheme revenue source is over.
3. Without new buyers, current owners can't sell to move up to bigger homes. It's like those fan rooms where you wear a billowing suit under a giant fan and are supported by the air. The fan has been turned off, and prices must fall.
4. Owners are tapped out credit wise and many have indeed ATMed their house to the point they owe more than its worth. These people are already in deep doo doo, and are 1 job loss away from foreclosure as they have no savings and would have to bring cash to the sale, if they could sell.
5. Watch the Spring sales season become a 'Silent Spring'. I expect to see a flood of home sales unlike anything seen last year.
6. Job losses in construction and real estate are mounting and are a major part of the economy. This will lead to further pressures to sell existing homes and raise inventory.
7. No likelihood that the Fed will lower interest rates any time soon. However, I do not believe rising interest rates have anything to do with the housing slowdown. The issue is affordability and mortgage rates are still ridiculously low.
8. Equity locusts are taking their gains if they can sell and bailing from unaffordable areas such as California. The gains are being banked or sank into areas like Texas. this itself is creating another bubble in this relocation areas.
Realtors are just salespeople. It's the *job* of salespeople to utter whatever words will make a sale. On the other hand, listening to such people is little more than a crutch for the indecisive.
The people who were *wrong*, however, were the doom and gloomers of "inflation."
Inflation means things cost more, like houses. In contrast, when housing prices decline, that's *deflation*. That means that each Dollar is worth more, making prices fall.
Deflation is a very bad thing, which is why people don't like to see home prices decline.
You can't imagine how many times I've heard "Orange County is different. There's too many people who want to move here for prices to come down."
More of your financial genius? You don't have any understanding... will you stop already or do you intend to show that passing the GED really doesn't amount to much?
Relax, it's just a little correction. Ten years from now no one will remember this little bump on the road.