Poll: Is the better value in resale or new?

[Cornflakes]

Is ever increasing MR really that bad as some folks make it sound? It could be $100-200 increase per year depending up on the home you buy. One would not think twice before dropping $100 at a restaurant to feed family every now and then, or spend much more than $100 on itunes account each year. Yet, the small increase in MR each year makes it deal breaker for buying a home?

Makes no sense to me.

Compare a ~$1.2M Orchard Hills house with a fixed $4K in mello roos to a ~$1.2M Beacon Park house with $8K in mello roos that compounds annually at 2%. In twenty years, the Orchard Hills homeowner will still be paying $4K in mello roos while the Beacon Park homeowner could be paying nearly $12K in mello roos.

What does 1.2M buy you in each community? Are those same size homes?

 

[gasman]

Is ever increasing MR really that bad as some folks make it sound? It could be $100-200 increase per year depending up on the home you buy. One would not think twice before dropping $100 at a restaurant to feed family every now and then, or spend much more than $100 on itunes account each year. Yet, the small increase in MR each year makes it deal breaker for buying a home?

Makes no sense to me.

Here's the 2% YOY compound based on a $6K starting point:

Year  Mello Roos Diff (YOY) Diff (from ORIG)
=== =======  ======  ===========
1   $6,000.00
2   $6,120.00 $120.00 $120.00
3   $6,242.40 $122.40 $242.40
4   $6,367.25 $124.85 $367.25
5   $6,494.59 $127.34 $494.59
6   $6,624.48 $129.89 $624.48
7   $6,756.97 $132.49 $756.97
8   $6,892.11 $135.14 $892.11
9   $7,029.96 $137.84 $1,029.96
10 $7,170.56 $140.60 $1,170.56
11 $7,313.97 $143.41 $1,313.97
12 $7,460.25 $146.28 $1,460.25
13 $7,609.45 $149.20 $1,609.45
14 $7,761.64 $152.19 $1,761.64
15 $7,916.87 $155.23 $1,916.87
16 $8,075.21 $158.34 $2,075.21
17 $8,236.71 $161.50 $2,236.71
18 $8,401.45 $164.73 $2,401.45
19 $8,569.48 $168.03 $2,569.48
20 $8,740.87 $171.39 $2,740.87

YOY, it's not a big deal.  However, if you look at the lifetime difference many years down the line, it adds up to much more than a nice dinner.  If I'm buying in a compound MR area, I would base a decision on a 10-15 year span.  At year 10 I'd be paying $1170/year more than when we first moved in.  At year 15 I'm paying $1969/year more than year 1.  It's not a number you can ignore, but I don't think it's a dealbreaker either.

FWIW, I would pay that for Beacon or Pavilion Park.  I would NOT pay that for Greenwood in Tustin.  Yeah, I said it.

 

[Perspective]

Compare a ~$1.2M Orchard Hills house with a fixed $4K in mello roos to a ~$1.2M Beacon Park house with $8K in mello roos that compounds annually at 2%. In twenty years, the Orchard Hills homeowner will still be paying $4K in mello roos while the Beacon Park homeowner could be paying nearly $12K in mello roos.

Are you sure the strada mello roos is not subject to potential 2% increase?  The houses on the gated side have potential for 2% increase (atleast that is what I was told a while back by Capella, Messina, and Saviero) so I don't understand  why Strada is exempt.

I read my disclosures carefully, especially after learning about Beacon Park's mello roos. Nowhere is a 2% potential annual increase disclosed.

 

[Perspective]

Is ever increasing MR really that bad as some folks make it sound? It could be $100-200 increase per year depending up on the home you buy. One would not think twice before dropping $100 at a restaurant to feed family every now and then, or spend much more than $100 on itunes account each year. Yet, the small increase in MR each year makes it deal breaker for buying a home?

Makes no sense to me.

Compare a ~$1.2M Orchard Hills house with a fixed $4K in mello roos to a ~$1.2M Beacon Park house with $8K in mello roos that compounds annually at 2%. In twenty years, the Orchard Hills homeowner will still be paying $4K in mello roos while the Beacon Park homeowner could be paying nearly $12K in mello roos.

What does 1.2M buy you in each community? Are those same size homes?

Today, Beacon Park prices have come down a bit from their aggressive grand opening prices in May 2015. So, $1.2M probably gets you a ~2,700 sq ft house in both neighborhoods. The Beacon Park house could have a bigger setback/lot (Oakmont won't, but Juniper would). I haven't followed Beacon Park pricing closely enough to give exact comps.

 

[Cornflakes]

I don't know too much about OH but here is what I just pulled up.

Ready to move in homes:

Stonegate - Palo Alto home on KB website - $1286134 for 3002 sqft ($428/sqft) - Fixed MR (I doubt it will be just $4k though).
Beacon Park - Rosemont home on KHov site - $1196517 for 3031 sqft ($394/sqft) - Variable MR.

We can ignore the $/sqft diff for now. Who knows the homes might fetch similar diff 20 years from now.
Ignore sqft diff as 29 sqft is negligible.

A buyer today pays 90k higher in SG to avoid ever increasing MR.
Another buyer says, heck I am not paying 90k higher. I will buy in BP and put 90k in Treasury bonds earning 2% a year to account for MR increase next year.

Comes end of 2016 - Buyer 2 receives $1800 in dividends, pays $240 increase in MR, reinvests $1560 in T-Bonds.
Lather, rinse, repeat for 20 years. 

I would not even dare to calculate what if the buyer 1 is paying interest on some or all of that 90k. Also, buyer 1 will pay $900 extra to OC every year for property tax.

 

[Irvine Dream]

I don't know too much about OH but here is what I just pulled up.

Ready to move in homes:

Stonegate - Palo Alto home on KB website - $1286134 for 3002 sqft ($428/sqft) - Fixed MR (I doubt it will be just $4k though).
Beacon Park - Rosemont home on KHov site - $1196517 for 3031 sqft ($394/sqft) - Variable MR.

We can ignore the $/sqft diff for now. Who knows the homes might fetch similar diff 20 years from now.
Ignore sqft diff as 29 sqft is negligible.

A buyer today pays 90k higher in SG to avoid ever increasing MR.
Another buyer says, heck I am not paying 90k higher. I will buy in BP and put 90k in Treasury bonds earning 2% a year to account for MR increase next year.

Comes end of 2016 - Buyer 2 receives $1800 in dividends, pays $240 increase in MR, reinvests $1560 in T-Bonds.
Lather, rinse, repeat for 20 years. 

I would not even dare to calculate what if the buyer 1 is paying interest on some or all of that 90k. Also, buyer 1 will pay $900 extra to OC every year for property tax.

Cornflakes

Please pull up the Mello Roos amount on both properties as well.  Based on previous threads the Mello Roos amount at Beacon Park was significantly higher than a house of similar sq ft in other developments

 

[Cornflakes]

I don't know too much about OH but here is what I just pulled up.

Ready to move in homes:

Stonegate - Palo Alto home on KB website - $1286134 for 3002 sqft ($428/sqft) - Fixed MR (I doubt it will be just $4k though).
Beacon Park - Rosemont home on KHov site - $1196517 for 3031 sqft ($394/sqft) - Variable MR.

We can ignore the $/sqft diff for now. Who knows the homes might fetch similar diff 20 years from now.
Ignore sqft diff as 29 sqft is negligible.

A buyer today pays 90k higher in SG to avoid ever increasing MR.
Another buyer says, heck I am not paying 90k higher. I will buy in BP and put 90k in Treasury bonds earning 2% a year to account for MR increase next year.

Comes end of 2016 - Buyer 2 receives $1800 in dividends, pays $240 increase in MR, reinvests $1560 in T-Bonds.
Lather, rinse, repeat for 20 years. 

I would not even dare to calculate what if the buyer 1 is paying interest on some or all of that 90k. Also, buyer 1 will pay $900 extra to OC every year for property tax.

Cornflakes

Please pull up the Mello Roos amount on both properties as well.  Based on previous threads the Mello Roos amount at Beacon Park was significantly higher than a house of similar sq ft in other developments

Can someone post MR amount for Palo Alto home and Rosemont home?

 

[Goriot]

I don't know too much about OH but here is what I just pulled up.

Ready to move in homes:

Stonegate - Palo Alto home on KB website - $1286134 for 3002 sqft ($428/sqft) - Fixed MR (I doubt it will be just $4k though).
Beacon Park - Rosemont home on KHov site - $1196517 for 3031 sqft ($394/sqft) - Variable MR.

We can ignore the $/sqft diff for now. Who knows the homes might fetch similar diff 20 years from now.
Ignore sqft diff as 29 sqft is negligible.

A buyer today pays 90k higher in SG to avoid ever increasing MR.
Another buyer says, heck I am not paying 90k higher. I will buy in BP and put 90k in Treasury bonds earning 2% a year to account for MR increase next year.

Comes end of 2016 - Buyer 2 receives $1800 in dividends, pays $240 increase in MR, reinvests $1560 in T-Bonds.
Lather, rinse, repeat for 20 years. 

I would not even dare to calculate what if the buyer 1 is paying interest on some or all of that 90k. Also, buyer 1 will pay $900 extra to OC every year for property tax.

Just for clarification, Plan 1 home for Palo Alto at SG starts at $1.21 or $1.21 million / 3002 = $403 per sqft (not $428) or $399 for plan 2 and $389 for plan 3, which is on par with starting price for Rosemont.  $1.28 million is fully move-in ready home with pre-plotted options.  Stonegate MR is around $4k for this size home.  Recently MR at SG declined slightly due to refinancing.

below is Beacon Park MR

Here are the MR's for most of the tracts

Rowland: 4762?5450
Harper: 5112?6041
Ellwood: 6041?7532
Welton: 6041?7532
Melody: 6592?8190
Lakespur: 6041?9027
Rosemont: 5328?9027
Silvermist: 8190?12303
Torrey: 9961?10478

or by SQFT at Beacon

Here is the comparison of MR
HOUSE SIZE            PP  BP
--  --  >5,700      $12,356  $17,004
5460  to  5699      $11,858  $16,422
5200  to  5459      $11,359  $15,554
4950  to  5199      $10,861  $14,973
4700  to  4949      $10,363  $14,105
4450  to  4699      $9,864  $13,614
4200  to  4449      $9,366  $12,944
3950  to  4449      $8,874  $12,303
3700  to  3949      $8,587  $11,891
3450  to  3949      $8,352  $10,478
3200  to  3449      $7,479  $9,961
2950  to  3199      $6,934  $9,027
2700  to  2949      $6,474  $8,190
2450  to  2699      $5,902  $7,532
2200  to  2449      $5,380  $6,592
1950  to  2199      $4,981  $6,041
1700  to  1949      $4,443  $5,328
<1700  --  --      $4,385  $5,112

 

[Cornflakes]

I'd imaging that low 1.2M would be phase 1 lowest price.

What they have available to sell today is priced at $1,286,134. I looked up similarly for K Hov.

 

[Bullsback]

I'd imaging that low 1.2M would be phase 1 lowest price.

What they have available to sell today is priced at $1,286,134. I looked up similarly for K Hov.

I think what they had available for sale was a quick-move in home that has flooring, etc, installed. THe phase 1 pricing was 1.199 so there website is relatively accurate what the base price is. 

 

[Perspective]

You have to increase the Beacon Park $1.2M home's price $60K-$70K to account for the double mello roos, and that fails to consider the 2% compounding feature. It's a pretty big f'n deal.

 

[AW]

Bacon Pork...

Crane, turtle, next should be pig

 

[Cornflakes]

Did some calculation with basic assumptions for my own sanity.

Numbers wrestling - BP vs. EW.

Attached the file.

If my assumptions are reasonable, higher MR in BP does not matter at the end of the day.
1. If borrowing costs are higher, BP is winner.
2. The bigger the price diff between similar homes, BP comes out winner.
3. If tax assessment roll is more than 1% increase a year, BP wins.

Someone please challenge these numbers and tell me what I might have overlooked.

 

[Cornflakes]

Did some calculation with basic assumptions for my own sanity.

Numbers wrestling - BP vs. EW.

Attached the file.

If my assumptions are reasonable, higher MR in BP does not matter at the end of the day.
1. If borrowing costs are higher, BP is winner.
2. The bigger the price diff between similar homes, BP comes out winner.
3. If tax assessment roll is more than 1% increase a year, BP wins.

Someone please challenge these numbers and tell me what I might have overlooked.

Ignoring HOA as the diff is Potato PoTAAto

 

[aquabliss]

Well done Mr. Flakes.  I also think that lower priced home with higher MR beats higher priced home with lower MR, at least if you plan to live there 5-10 years. 

Not sure though how this will work out in year 20 when EW MR feels like peanuts at $3k and BP will be nearly triple that, but I think I'll bail before that happens.

 

[Cornflakes]

Well done Mr. Flakes.  I also think that lower priced home with higher MR beats higher priced home with lower MR, at least if you plan to live there 5-10 years. 

Not sure though how this will work out in year 20 when EW MR feels like peanuts at $3k and BP will be nearly triple that, but I think I'll bail before that happens.

I did not calculate year 8 onwards but you can see that the cost diff is shrinking as years pass by. In fact, in year 8 itself the cumulative cost of BP will exceed EW and it is down the hill from there. Too many variables here. I don't even know what's gonna happen in 2 years. I am definitely not thinking 20 years.

One would think that with those 2% increases, multiplied by 1000 some homes would payoff the bonds faster, no? Wish I could get more data on those bonds.

 

[eyephone]

Well done Mr. Flakes.  I also think that lower priced home with higher MR beats higher priced home with lower MR, at least if you plan to live there 5-10 years. 

Not sure though how this will work out in year 20 when EW MR feels like peanuts at $3k and BP will be nearly triple that, but I think I'll bail before that happens.

I did not calculate year 8 onwards but you can see that the cost diff is shrinking as years pass by. In fact, in year 8 itself the cumulative cost of BP will exceed EW and it is down the hill from there. Too many variables here. I don't even know what's gonna happen in 2 years. I am definitely not thinking 20 years.

One would think that with those 2% increases, multiplied by 1000 some homes would payoff the bonds faster, no? Wish I could get more data on those bonds.

I think you should factor the slow sales of BP.

 

[Cornflakes]

Well done Mr. Flakes.  I also think that lower priced home with higher MR beats higher priced home with lower MR, at least if you plan to live there 5-10 years. 

Not sure though how this will work out in year 20 when EW MR feels like peanuts at $3k and BP will be nearly triple that, but I think I'll bail before that happens.

I did not calculate year 8 onwards but you can see that the cost diff is shrinking as years pass by. In fact, in year 8 itself the cumulative cost of BP will exceed EW and it is down the hill from there. Too many variables here. I don't even know what's gonna happen in 2 years. I am definitely not thinking 20 years.

One would think that with those 2% increases, multiplied by 1000 some homes would payoff the bonds faster, no? Wish I could get more data on those bonds.

I think you should factor the slow sales of BP.

Not sure what do you mean by that. If I factor in slow sales as downward pressure on BP prices, it only helps the BP case as the cost of ownership goes even lower.

If you meant slow sales and its effect on MR paydown, you have a point. There are too many unknowns for me to analyze anything on that front.

 

[irvinehomeowner]

I don't think MRs go up or down depending on number of homes sold.

If you buy a home in 2016 with a 20-year bond, it's paid off in 2036. If someone buys a new home in the same area a year or two later, they don't expire until 2037 or 2038, not 2036 like all the early phase buyers.