LongIrvine
Member
most income numbers tend to be household income, so 2 people making 75k each seems plausible
Feeling like 2006...
- Thread starter Lallo
- Start date
sgip
Well-known member
I see lots of buyers unwilling to sell their departure residence, preferring to s...t....r...e...t...c...h as far as possible to buy while simultaneously renting out their departure home. That's a reasonable way forward for some (but it also contributes to lack of housing stock, another big issue). Many, but clearly not all, have only 401k funds for their emergencies. If stocks correct 10-15%, a major employer moves out of the area, or some other disruption occurs, as we saw in 1991, 2001, and 2007, the thinly stretched will snap and a cascading event may come bubbling up to the surface.
In my line of work back in 2007 it was "I can always refinance out of this loan...." In 2017 it's "I can always count on appreciation"... or "I can always count on finding a renter". No one knows about appreciation, but with IAC building a gazillion rental units, should there be a disruption, can one always find a renter?
All I'm saying is that this rally in stocks and home prices is getting historically thin and toppy. Not enough people are looking at "what if's" as I hope they would. This sort of mass stampeding on a single direction rarely works out well IMHO
My .02c
Soylent Green Is People.
In my line of work back in 2007 it was "I can always refinance out of this loan...." In 2017 it's "I can always count on appreciation"... or "I can always count on finding a renter". No one knows about appreciation, but with IAC building a gazillion rental units, should there be a disruption, can one always find a renter?
All I'm saying is that this rally in stocks and home prices is getting historically thin and toppy. Not enough people are looking at "what if's" as I hope they would. This sort of mass stampeding on a single direction rarely works out well IMHO
My .02c
Soylent Green Is People.
Loco_local
Active member
I wonder if the H1-B visa crackdown will impact the local economy.
usctrojancpa
Well-known member
eyephone said:
This is true BUT most buyers in Irvine put more than 20% down too.
usctrojancpa
Well-known member
Soylent Green Is People said:
Agree with you and that is why I tell my client who are looking for rentals to focus on 3+ bedroom units which do not compete against most all apartment complexes that only offer up 2 bedroom units.
zubs
Well-known member
Soylent Green Is People said:
I can understand why they stretch. I'm in the same boat. If I sell my house, I can live in a bigger better monstrosity. However, I bought my current house 5 years ago right before the run up. Selling it seems like such a waste as I will not find another house at those prices again, plus prop 13 keeps my taxes down.
irvinebullhousing
Well-known member
zubs said:
Rentals FTW
irvinehomeowner
Well-known member
I haven't checked but I don't think there are as many people selling like back in 2006.
J
jmoney74
Guest
I dunno. Never saw the rich guy who invested well in his 401k and ira. Rentals give you good income while holding your principal.
paperboyNC
New member
I personally have under 50% LTV and under 20% DTI.
I think my situation is more common in Irvine than FHA 3% down borrowers.
As others have said, housing prices may start to down soon, but the trigger is going to be a recession, not anything else.
I think my situation is more common in Irvine than FHA 3% down borrowers.
As others have said, housing prices may start to down soon, but the trigger is going to be a recession, not anything else.
paperboyNC said:
This is a good example of the majority of non-cash Irvine home buyer I've encountered.
Significant numbers of home buyer are fiscally conservative with significant monetary reserve and tend to under buy. This might explain why with the continuing price increase, buyers are still able to absorb the price increases and continuing buying.
And totally agree on the precursor of next housing downturn. Most of the time the housing downturn with the exception of the great housing bubble 10 years ago, are due to recession.
If there's no recession, most likely no housing downturn.
usctrojancpa
Well-known member
lnc said:
+1 About half of the offers that I've received on my listings in the past few years were from buyers putting down 30-70%. The other half were cash buyers and people putting down 20-30%....I could count the number of offers with less than 20% on one hand (this is on 30+ listings).
With my buyers, they tend to under buy by 10-20% meaning that if they are approved to buy a $1m home we are shopping only for a $800k-$900k home. Again, I can count on one hand the number of buyers who stretch themselves to the limit.
newtoirvine2017
New member
USCTrojanCPA said:
That was our situation when we just bought in Irvine in the last 6 months. We decided on a West park area home and there was literally no inventory at all. In the end we got approved for 1.4MM but only bought a 700k a house with 50% down , all the offers against us were 2 cash offers and they had a total of 8 offers in the first weekend... So maybe that's a bubble? but it seems like our competition could all afford the houses easily and had tons of downpayment.
So very similar to the other posters case LTV 50% , DTI under 15%. We put 50% down to be competitive to the seller it's definitely a seller's market out there
wow - just checked inventory of SFR <=$900K in Irvine - 114 active listings!! Wish I could move my job there.
I then checked 95120 (best San Jose zip) for that same price range - 1 that is not pending. Median here is ~$1.3M (rough!) Tale of 2 job markets?
Regarding the calcs from $1M financing example, I don't think $178K is quite enough to qualify unless putting 30%+ down.
I tend to agree that the passive income from rentals is awfully appealing, and provide a great vehicle for leverage. That said, SEPs or "top hat" deferred comp plans are awfully attractive and make it easy to rapidly scale the 401K/IRA balance.
I then checked 95120 (best San Jose zip) for that same price range - 1 that is not pending. Median here is ~$1.3M (rough!) Tale of 2 job markets?
Regarding the calcs from $1M financing example, I don't think $178K is quite enough to qualify unless putting 30%+ down.
I tend to agree that the passive income from rentals is awfully appealing, and provide a great vehicle for leverage. That said, SEPs or "top hat" deferred comp plans are awfully attractive and make it easy to rapidly scale the 401K/IRA balance.
paperboyNC
New member
Also, let's look at an example that I'm personally familiar with:https://www.redfin.com/CA/San-Marcos/217-Westlake-Dr-92069/unit-3/home/12158101
2007: Sold for $375k with an 80/20 piggyback loan
300k primary mortgage at 6.25%: $1,847/mo
75k interest only loan at 7%: $437.5/mo
property tax at 1.05%: $328/mo
HOA: $329/mo
home insurance: $50/mo
PMI at 1%: $250/mo
Total: $3,241/mo ($3,808 in today's dollars)
I personally leased one that was brand-new for $1,450/mo way back then
Note: the actual buyers used teaser rates with negative amortization to avoid paying that much
2016: Sold for $262k (after selling for $135k in 2009) with a traditional loan
$210k mortgage at 4%: $1,002/mo
property tax at 1.05%: $229/mo
HOA: $329/mo
home insurance: $50/mo
Tota: $1,610/mo
Going lease rate: $1,700/mo
No - this is not 2006.
2007: Sold for $375k with an 80/20 piggyback loan
300k primary mortgage at 6.25%: $1,847/mo
75k interest only loan at 7%: $437.5/mo
property tax at 1.05%: $328/mo
HOA: $329/mo
home insurance: $50/mo
PMI at 1%: $250/mo
Total: $3,241/mo ($3,808 in today's dollars)
I personally leased one that was brand-new for $1,450/mo way back then
Note: the actual buyers used teaser rates with negative amortization to avoid paying that much
2016: Sold for $262k (after selling for $135k in 2009) with a traditional loan
$210k mortgage at 4%: $1,002/mo
property tax at 1.05%: $229/mo
HOA: $329/mo
home insurance: $50/mo
Tota: $1,610/mo
Going lease rate: $1,700/mo
No - this is not 2006.
irvinehomeowner
Well-known member
lnc said:
And this was why Irvine didn't crash as hard as people thought it would. As much as Larry liked to profile the Irvine homeowner who over leveraged, ninja loaned, cashed out or squatted, there were many more who bought all-cash or high-down and could ride the drop.
When prices tank but you are still positive equity, you don't have to sell. And when people aren't listing their homes out of fear, prices tend to stay more stable.
Just buy what you can afford and what you like... in 5-10 years, it won't matter how many "40% drops" there were.
We were dumb. The house we sold during the "crash" for 6% less than what we bought it for is now probably 15% higher. Our only positives are it wasn't in the we wanted to be, we weren't happy with the location, the floorplan wasn't exactly what we wanted and after we sold, the difference in mortgage was put into private schools and 401ks.
And I'm probably atypical for Irvine, we stretch as much as we can, that's the only way a 99%er can live here.
irvinebullhousing
Well-known member
Soylent Green Is People said:
This is exactly our path. When we purchase our homes 3 years ago, its base on our growing need of additional space with more kids on the way. Our previous home is not small, 2100 sqft and 4 bedrooms, but the yard is a typical Irvine yard, small. It took us nearly 3 years when we decided to move. We certainly did not have to sell our home to buy the next home, since bank pays nothing for your cash and the equity market wobbled, the best and surest for us is to keep it as a rental. The home is paid off and we consider ourselves to be lucky with hard work and discipline with our finance and never ever dip into the tempting cashout refi during the craziness of Great Housing bubbles. I believe that I will never see another crash like we saw in the last housing crisis, because many measures put into place to prevent the bad behaviors. Sure there will be a correction but the correction will be in the demands for a home with ever increasing price. The interest rate may spike further before it slowly drift down. People have to live somewhere and with the stringent loan underwriting today, only people truly qualify may buy a home. Rental market is great for those still saving for purchasing their home.