Tough times out there for FTHB trying to find a property. First, to your questions.
1) In terms of qualifying, as long as the loan is an Agency Conforming mortgage with at least 10% down, on average 50% of gross income is enough to qualify. $12,000 = $6,000 PITIHOA providing there is no debt. Your question has to to with "take-home pay". $12,000 per month is roughly $8,400 net. Some buyers are OK then with a $6,000 payment and $1,000 worth of utilities because they are getting $2,500 or so from a roommate. Generally speaking with $8,400 net, most buyers I meet are good up to $4,000 per month - even though they may qualify for $6,000 per month.
2) Very few people care all that much about principal reduction. They are counting on appreciation and low payments to sustain them until their kids are out of the house. They'd rather pay $500 towards principal on a very low 30 year fixed rate and $1,500 towards "amenities" like mello roos subsidized roads and schools, plus HOA's that take care of the quality of life in the community. This is a very broad generalization, but one that fits many of the buyers I interact with (other than those who take out 15 year loans for example)
3) Barring a galactic catastrophe of some sort, prices are not falling. Example - If there is a "rush to the exits" for sales because of an economic calamity, there is an equal amount of investor cash waiting to be deployed to buy up these homes before they even hit the market. High investor demand means stable prices. Inventory will still be constrained because of the refinance activity going on now. Why sell a home with a 1.99% rate that can become an income producing unit as you ladder up to you next property? My guess - and that's all it is - is that with very low payments, the incentive to liquidate property is going to be extinguished. Some areas built in the 1990's will soon see their mello roos taxes paid off, making the cost of home ownership even lower.
Now some hard stuff - and possible solutions.
It's time for FTHB's to ask "What is my compelling reason to live in Irvine?" If it's the commute... that issue is going by the wayside what with all of the new building. Also, work from home is the future, eliminating 3/4 of the "commute distance" question. Is it the schools? OK, but if you don't have kids now, is "the schools" really a reason? Is it that "new home" feeling? Possibly, but with high HOA and Mello Roos, or travelling up 3 stories every day in your new home, does that benefit sustain itself or is your lifestyle at sufferance? Is it "appreciation of irvine homes" AKA the MAX ROI!!!! That benefit is great, but if you can't even get in the game to begin with, it's not a reason to live in Irvine. There are plenty of reasons to live in Irvine and every buyer has specific needs to do so - many that I can't list here. The question though must be asked first - Is it a want, or a need to live in Irvine?
As the Rolling Stones put it so well:
You can't always get what you want,
You can't always get what you want,
But if you try sometimes, well, you might find
You get what you need
[youtube]https://www.youtube.com/watch?v=jv9sDn_2XkI[/youtube]
Some thoughts on yours and other FTHB's predicament in this current housing market:
If you plan on staying in Irvine,
you'll need to expand your risk tolerance. Perhaps a $4,000 payment is comfortable, but you can't find anything in that range. You may qualify for a $6,000 payment so look in that price range. Be sure you have a "Plan B" in case your $2,500 per month tenant doesn't come through. I'd also recommend a Plan C, and have 12 months of ready cash on hand to subsidize the payment for that time period.
That listing on Rush Lilly you posted is a 2br/2ba Condo. The payment with 20% down will come close to $3,300 per month. This home
https://www.redfin.com/CA/Irvine/23-Woodpine-Dr-92604/home/4685938 is priced higher than Rush Lilly, but the payment is $300 additional per month. $300 is $300 but not really all that much in the grand scheme of things. The property is not new, but it's larger and with a yard, and still in Irvine. This home is $350 more per month
https://www.redfin.com/CA/Irvine/6-Del-Italia-92614/home/4659190 compared to the Rush Lilly home because of the lower HOA. There are places still in Irvine that with some compromise can still get close to a FTHB budget.
"Irvine Adjacent" area homes are larger, no longer just Condo's, and about the same commute time (20 min door to door). Examples include:
https://www.redfin.com/CA/Lake-Forest/21372-Falkirk-Ln-92630/home/4817233 https://www.redfin.com/CA/Foothill-Ranch/32-Carriage-Dr-92610/home/4810269 or
https://www.redfin.com/CA/Mission-Viejo/26575-Via-Cuervo-92691/home/5082925
Finally, there are "radical" choices to consider. In the Bay Area there is a trend called "Tenant In Common" buying (TIC). Prices are sooooo high up there that rather than settling for a $700,000 home, two unrelated buyers (co-workers, etc) will purchase a $1,400,000 priced duplex or a property with an ADU, even "two on a lot". These multifamily properties are very common in the Bay area but rarely found in Irvine. There are some in surrounding areas. Some examples:
Irvine:
https://www.redfin.com/CA/Irvine/17541-Manchester-Ave-92614/home/4655867
Newport Beach/Costa Mesa:
https://www.redfin.com/CA/Costa-Mesa/382-E-18th-St-92627/home/3557347
Tustin:
https://www.redfin.com/CA/Tustin/14652-Carfax-Dr-92780/home/4610360
Some food for thought as your home search continues. Best wishes for success.
My .02c
