Selling Home In North OC and Buying in Irvine

OCMommy

New member
I am a longtime lurker and started on the IHB and then followed everyone here.  When we bought our house almost ten years ago, we looked in Irvine (gosh how I wish we bought there) and ended up deciding on North Orange county.  Over the years, we have thought about selling our house many times and never pulled the trigger.  When prices were high, we thought about selling and renting for awhile, but my husband was totally against the idea of renting after owning.  Here we are in 2010 and now thinking it might be the time to sell and buy.  Of course our area has decreased in home value more than Irvine, but we figure we sell low and buy low.  What do you guys think about selling a home now?  Most of the posts I read are about people who are renting and waiting for the right time to buy.  What about sellers?  We are also wondering about contigencies and how realistic it is to sell our house in one area and buy one in another area when inventory is so low.  I have friends who have done this but they were selling in Irvine and buying in Irvine.  My kids are getting older and our life is mostly in South OC - I am sick of the commute and think I am ready to do it! 
 
If i was a seller i would price aggressively to make sure im not chasing down the market.  I think there will be further price declines in OC so selling now to take some of that equity off the table makes sense to me.  You constantly here about potential sellers not wanting to sell now and wait for the market to turn around. When i hear that i get the feeling that these potential sellers see a return to 2005/2006 pricing some time soon, which is absolutely ludicrous given that the lending conditions that allowed that to happen in the first place no longer exists. So even after we bottom out, i think there will only be the 3-4% annual increases.  None of the macroeconomic factors point to a real estate rebound. 

This is what the real estate market has to deal with in the next 3 to 5 years:
- shadow inventory
- higher income taxes or other types of taxes to support insane govt spending
- higher interest rates

All of the logical arguments point to lower prices, so sell now, rent and buy later.  I just finished listening to Michael Lewis' "The Big Short" who is also the author of Liars Poker.  The argument to short mortgage backed securities that was being made by some fund managers back in 2003-2005 was so logical and made so much sense that it is amazing that most professional investors could not see the obvious.  Right now most people dont see what is the most logical and obvious thing, that real estate prices are going to go down further, are going to stay there for a while, then increase at 3% a year.
 
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qwerty said:
All of the logical arguments point to lower prices, so sell now, rent and buy later.
How much lower?  and how much later? Aren't these details important, too?

qwerty said:
Right now most people dont see what is the most logical and obvious thing, that real estate prices are going to go down further, are going to stay there for a while, then increase at 3% a year. nobody knows exactly what will happen.

There are variable factors on all sides.  Interest rates, unemployment, savings reserves, stock market activity, government intervention a la "homebuyer credits", record # of foreclosures, lending/underwriting requirements and more.  To say that this environment is "logical and obvious" in my humble opinion is dangerous in that it fails to see the bigger picture. 

Remember Keynes: The market can stay irrational longer than you can stay solvent.

My suggestion would be instead to consider what's best for her specific situation, and go from there.  Whether that is to stay or go is totally up to her own personal details, that go beyond pure financials, as she's stated.

-IR2
 
"How much lower?  and how much later? Aren't these details important, too?"

The details are important but given that they didnt give many im guessing they are asking more regarding whether right now is a good time in general or not, it appears the question revolves around timing the market to me. How much lower, depends on the individual property and doing a cash flow analysis on it. Im looking in Serrano Heights, im guessing that area has another 10-15% drop to go. How much later? Im guessing in the next two to three years.

"nobody knows exactly what will happen"

This is very true, but not to use all of the available data and not make an educated guess is what i typically view as a cop out (im not saying you are copping out). At work i get paid very well to make decisions, if i went with the "nobody knows what will happen" view i would be fired.

"There are variable factors on all sides.  Interest rates, unemployment, savings reserves, stock market activity, government intervention a la "homebuyer credits", record # of foreclosures, lending/underwriting requirements and more.  To say that this environment is "logical and obvious" in my humble opinion is dangerous in that it fails to see the bigger picture.  "

I am looking at the bigger picture and the big picture indicates it is not a good time to buy for all of the reasons you mentioned. If i wasnt looking at the bigger picture i would just say sell and buy.

"Remember Keynes: The market can stay irrational longer than you can stay solvent"

Completely agree, and buying in an irrational market can make you insolvent. A lot of people buying right now that put 20% down and have to sell for whatever reason on three to five years are going to take it right in the shorts.

"My suggestion would be instead to consider what's best for her specific situation, and go from there.  Whether that is to stay or go is totally up to her own personal details, that go beyond pure financials, as she's stated. "

Agree, but i formulated my response based on what i was given to work with in the original post. Im guessing from a non-financial perspective they already know what is best for them from a non-financial perspective. Your response is formulated from the perspective of an honest realtor, which is how you should look at it and why you are respected by many, myself included. Im a CPA so i typically only concern myself with the financial side.

 
The intelligent response above is appreciated q.

You make excellent points and I think you're being unnecessarily generous with me.  The response I've repeatedly given is the "nobody knows" answer and it smells very much like a cop-out.  It is, in fact, a very intentional cop-out.  As people here have previously pointed out, asking a sales person if it is a good time to buy or sell right now is the same as asking if he or she is interested in a paycheck.  I have to guard against the perception that I'm trying to get someone to do something with every post I make. 

Once they decide, that's a different story... I'm in it to win it and work to be the best option out there.

There are a litany of questions that can/should be asked of the decision-maker to determine what she wants to do for herself. Consulting with a professional and getting access to all of the information is the most helpful advice I can give.

-IR2
 
Is Irvine ever financially the best choice?  I have come to accept that moving to Irvine will never make financial sense.  Our house was bought relatively new 10 years ago and we live very comfortably on the mortgage that we have and have a lot of options with what to do with our money.  In times of financial uneasiness and unemployment on the rise, etc ... my mind tells me staying put is best.  Moving to Irvine will not be as easy financially - mello roos, triple the taxes that we are currently paying, additional mortgage, etc., but we can do it by being reasonable and not going overboard. My reasons for moving are mostly desire and the fact that I believe it will make life easier to no longer have to commute.  I believe no one really knows what will happen because Irvine tends to be a little different that the other parts of OC.  I do fear if we do not sell our area will keep going down and Irvine will be hard to predict.
 
OCMommy said:
Is Irvine ever financially the best choice?  I have come to accept that moving to Irvine will never make financial sense.  Our house was bought relatively new 10 years ago and we live very comfortably on the mortgage that we have and have a lot of options with what to do with our money.  In times of financial uneasiness and unemployment on the rise, etc ... my mind tells me staying put is best.  Moving to Irvine will not be as easy financially - mello roos, triple the taxes that we are currently paying, additional mortgage, etc., but we can do it by being reasonable and not going overboard. My reasons for moving are mostly desire and the fact that I believe it will make life easier to no longer have to commute.  I believe no one really knows what will happen because Irvine tends to be a little different that the other parts of OC.  I do fear if we do not sell our area will keep going down and Irvine will be hard to predict.
Welcome to Talk Irvine and thanks for posting.  As mentioned above, trying to predict where home prices will be in the future is almost impossible to do.  There are a lot of potential headwinds that the current real estate market will have to get past (primarily the 3 mentioned above by qwerty).  We are currently in a very unique real estate market with many distressed sellers (short sales & REOs) with a lack of organic equity sellers (many of these equity sellers are asking for the moon because the see there is a lack of inventory).  The other intangible that we have in the market is gov't (both at the federal and state levels) intervention which is "juicing" the market by offering home buyer tax credits and buying MBS bonds to keep mortgage rates low.  I've very surprised how much power the gov't has had in turning the market, but the question will be....will it last once they stop their intervention.  The lack of organic inventory in most cities in Orange County has pushed up prices in the past 6-9 months.  Irvine has held up a lot better than most cities in the real estate downturn due to the efforts of TIC maintaining the strong brand name of Irvine with many buyers and I don't see this changing in the near future. 

All that being said, there are buyers in the market who are buying for various reasons today....some financial/analytical and some personal/emotional or a mix of the two.  I don't think anyone of us can tell you what the right decision is for you.  You probably have more choices than your think....1. stay where you are, 2. sell now and rent until you are ready to buy an Irvine home, 3. sell now and buy an Irvine home right away, 4. rent your home and buy or rent an Irvine home, etc.  You'll have to weigh both the financial and the non-financial pluses and minuses with each choice.  What we can do is give you as much information as possible so you can make your decision as informed as possible.
 
If your life is mostly in South OC... have you thought about looking more towards there instead of Irvine?

I don't know where you work, but there are areas of South OC that have "better" homes and lower prices. If we worked down there, we would probably be living there right now... but our relatives/work are split between central and south so Irvine is right in the middle.
 
I guess what I meant to say is that our life is in Irvine.  We both work in Irvine, my kids go to school in Irvine, all of our friends live in Irvine, etc etc.  We only lived up here because of family, but as our family grows, living in OC just doesn't make much sense anymore.  I think we are going to bite the bullet and just sell and move on.  I guess it all depends on what we can get for our house and what we can buy in Irvine.  I think we just really need to crunch the numbers.  I think when we bought it made sense for our family, but we broke the major rule of home buying - location, location, location.  We can argue if Irvine is worth the premium, but for whatever reason this is a location that is in demand.

Thanks to all for their input.  Now that I have registered, I think I will finally be a poster instead of a lurker. :D
 
OCMommy said:
I guess what I meant to say is that our life is in Irvine.  We both work in Irvine, my kids go to school in Irvine, all of our friends live in Irvine, etc etc.  We only lived up here because of family, but as our family grows, living in OC just doesn't make much sense anymore.  I think we are going to bite the bullet and just sell and move on.  I guess it all depends on what we can get for our house and what we can buy in Irvine.  I think we just really need to crunch the numbers.  I think when we bought it made sense for our family, but we broke the major rule of home buying - location, location, location.  We can argue if Irvine is worth the premium, but for whatever reason this is a location that is in demand.

Thanks to all for their input.  Now that I have registered, I think I will finally be a poster instead of a lurker. :D

OCMommy, welcome to TI. Purchasing a home in Irvine right now is probably not the wisest financial decision. There are many other OC alternative cities with better value right now. Having said that, I love living in Irvine and can understand why someone would want to purchase here. As long as you purchase with your eyes wide open and you have other pressing issues for purchasing now versus renting, then more power to you. Looking forward to seeing more posts from you.
 
You know, I capitulate on this... but renting in Irvine is still a viable option as long as you know your landlord is financially okay and you are okay with where you are renting. It's hard on the kids... but depending on age, it could work and could be less of a financial burden.

You may want to crunch numbers for you husband. Figure out where you want to buy and compare rents for that same area to see if there would be a significant difference. Usually, numbers work with us dudes.

And welcome to TI... lurkers and posters welcome.
 
IrvineRealtor said:
I have to guard against the perception that I'm trying to get someone to do something with every post I make.

Your response to OC Mommy in the form of a criticism to qwerty's methodology for evaluating her question was unhelpful. You could simply give her a direct reply with your own take instead of down talking others. That and the above quote appear self serving as though you are saying your own response was formulated primarily to make yourself look good rather than help her. It is not an uncommon tactic for realtors but it is uncommon for them to admit it so freely; and before you tell me I do not understand the personalities here well enough to assess the situation, I will tell you I have lurked on IHB a long time and certainly long enough to understand the nuances with certain groups of individuals.

OC Mommy, before I bought my home in Bikini Bottom, I met with a number of people to mull over the choices that I had. Take any advice received on the internet with a grain of salt. I am curious... how much equity do you have in your current house and what price range are you scoping out in Irvine?
 
I see nothing wrong with the responses between qwerty and IR2... and as you read the rest of it, you see it resolved quite well with all parties benefiting from the opinions tendered.

I'm not sure what Squid's intent was to bring it back up (and I find it ironic that you are criticizing a response for criticizing a response) but I welcome the candor and hope you plan to participate more often.

My takeaway is that real estate is so fluid right now that any questions pertaining to it are really hard to answer. Even the experts can't tell you to buy or not to buy. While during the height of the bubble, it was quite easy to say "2x rental parity... are you crazy?" or "8x income? Nutso!" or "60% DTI... good luck!", where we are at is very fuzzy. The bears will either tell you "There is still a ways to go" or now "Too much gov't intervention and bank shenanigans to guess" while the bulls will always say "Now is the best time to buy".

While it is true that advice on the internet is suspect, you will find that many of the regulars on various RE sites who have been following the market for the last X years probably have more knowledge than most of an average person's friend. I can attest to that fact as most of my friends know very little in regards to RE, which includes lawyers, accountants, engineers and even realtors and mortgage brokers. All very smart people and even some that are in the industry but sometimes even being in the industry can be detrimental as it may influence your perspective. So maybe I'm the anomaly as I've learned more from the Internet about housing than I have from my previous realtor and other people around me.

Welcome to TI, Squidward, maybe you can fill the void that Patrick Star left.
 
Squidward said:
Your response to OC Mommy in the form of a criticism to qwerty's methodology for evaluating her question was unhelpful. You could simply give her a direct reply with your own take instead of down talking others. That and the above quote appear self serving as though you are saying your own response was formulated primarily to make yourself look good rather than help her. It is not an uncommon tactic for realtors but it is uncommon for them to admit it so freely; and before you tell me I do not understand the personalities here well enough to assess the situation, I will tell you I have lurked on IHB a long time and certainly long enough to understand the nuances with certain groups of individuals.

OC Mommy, before I bought my home in Bikini Bottom, I met with a number of people to mull over the choices that I had. Take any advice received on the internet with a grain of salt. I am curious... how much equity do you have in your current house and what price range are you scoping out in Irvine?

Welcome squidward,

Sorry for the sentiment.  A lot gets lost in transcription.  My message to OCMommy was intended to be the same as yours... "Take any advice received on the internet with a grain of salt. "

My message @ qwerty was intended to be helpful to the OP, qwerty, and all here; not "down talking" anyone. I respect qwerty's opinions and have mentioned it before, but thought it necessary to quote the particular sections that I could clarify instead of making an ambiguous general statement.  No offense was intended, and actually quite the contrary. If I didn't care, I would have left well enough alone. Likewise, I've taken the time to respond to you and I hope you stick around and continue to share your opinions, as well.

-IR2
 
So everyone is telling me to buy in Irvine. If I was going by my friends' opinons, I would have bought a long time ago.  Part of me just can't get over the fact about how much I will have to pay.  I really liked Villa Rosa, but I just was not willing to pay what they were going for and now I have friends who bought there and have noticed that all sold out.  Maybe I need to rethink the way I think about Irvine.  It is just going to be expensive and if I want to live there, I have to pay.

We have a good amount of equity in the house, but a few years ago when I encouraged dh to sell and rent, we would have had about $250K more in equity.  Many friends who sold at that time have now moved to Irvine.  I also have friends who bought at the height and are now not doing so great.  However, there seems to be an acceptance of this and the fact that it is worth it in Irvine and prices will eventually go up.  Honestly, they are already.

After reading IHB, do I dare admit that I am considering Columbus Grove (the Irvine part).  It is much cheaper than other parts of Irvine and I basically get the same area.  Here are my concerns:

1.)  The toxic land issue that I have read about on IHB
2.)  The Tustin Legacy Project
3.)  Being rezoned in the future out of Irvine schools

I know people who bought in Columbus Grove who are happy .... but everyone else advises against it.

On a separate note, does anyone in Irvine on these boards have kids in Middle School?  What ,if any, are the after school care options?
 
Which Columbus Grove, Irvine or Tustin?

I actually liked that area and *almost* bought there... No_Vas opinions aside, it's not that bad and from what I remember, they feed into Stonecreek Elementary and Lakeside Middle School which both were rated highly just recently. I questioned why they districted them in schools so far from the neighborhood but I guess with the reported quality of those schools, it's hard to complain.

I really liked the Lennar Alexandria homes (the model 3 is almost the same as Rossmoor 3 and Villa Rosa 2 in Woodbury) and the KB ones aren't bad. There is the Waste Management facility, the concrete factory and power lines close by which are cons (not sure if the Irvine part was on base... I think that was the military housing area) but it's close to the District. And yes, it is one of the newer areas that don't seem to be holding their prices too well.

Keep us updated.
 
OCMommy said:
So everyone is telling me to buy in Irvine. If I was going by my friends' opinons, I would have bought a long time ago.  Part of me just can't get over the fact about how much I will have to pay.  I really liked Villa Rosa, but I just was not willing to pay what they were going for and now I have friends who bought there and have noticed that all sold out.  Maybe I need to rethink the way I think about Irvine.  It is just going to be expensive and if I want to live there, I have to pay.

We have a good amount of equity in the house, but a few years ago when I encouraged dh to sell and rent, we would have had about $250K more in equity.  Many friends who sold at that time have now moved to Irvine.  I also have friends who bought at the height and are now not doing so great.  However, there seems to be an acceptance of this and the fact that it is worth it in Irvine and prices will eventually go up.  Honestly, they are already.

After reading IHB, do I dare admit that I am considering Columbus Grove (the Irvine part).  It is much cheaper than other parts of Irvine and I basically get the same area.  Here are my concerns:

1.)  The toxic land issue that I have read about on IHB
2.)  The Tustin Legacy Project
3.)  Being rezoned in the future out of Irvine schools

I know people who bought in Columbus Grove who are happy .... but everyone else advises against it.

On a separate note, does anyone in Irvine on these boards have kids in Middle School?  What ,if any, are the after school care options?
Both the Irvine and Tustin side of Columbus Grove are nice.  One of my buyers bought a home over there last summer.  I actually like the location a lot, but the biggest downside is the high Mello Roos and some homes are next to the power lines.  The lack of inventory is also a problem at the moment.  If you guys really have your hearts set on Irvine, think about renting so you guys aren't rushed into buying just any home (it's also a cheap preview of a neighborhood to see if you guys will like it or not).
 
Columbus Grove is one of my favorite locations in Irvine, its close to everything. The big drawback as Trojan said is the very high mello roos, the lack of inventory is sure not helping either.
 
usctrojancpa said:
Both the Irvine and Tustin side of Columbus Grove are nice.  One of my buyers bought a home over there last summer.  I actually like the location a lot, but the biggest downside is the high Mello Roos and some homes are next to the power lines.  The lack of inventory is also a problem at the moment.  If you guys really have your hearts set on Irvine, think about renting so you guys aren't rushed into buying just any home (it's also a cheap preview of a neighborhood to see if you guys will like it or not).

One of my neighbors moved the Tustin-side of Columbus Grove into the Ciara tract.  We seriously considered buying one until I we looked through the mello-roos.  For Ciara tract it was around $9200+ a year in mello roos, subject to INCREASE based on the annual CPI.  I've never seen a mello-roos that increased yearly.  After that we said foh-gettit. It was higher than Woodbury or Portola Springs.
 
shokunin said:
usctrojancpa said:
Both the Irvine and Tustin side of Columbus Grove are nice.  One of my buyers bought a home over there last summer.  I actually like the location a lot, but the biggest downside is the high Mello Roos and some homes are next to the power lines.  The lack of inventory is also a problem at the moment.  If you guys really have your hearts set on Irvine, think about renting so you guys aren't rushed into buying just any home (it's also a cheap preview of a neighborhood to see if you guys will like it or not).

One of my neighbors moved the Tustin-side of Columbus Grove into the Ciara tract.  We seriously considered buying one until I we looked through the mello-roos.  For Ciara tract it was around $9200+ a year in mello roos, subject to INCREASE based on the annual CPI.  I've never seen a mello-roos that increased yearly.  After that we said foh-gettit. It was higher than Woodbury or Portola Springs.
I hear you...the prices on the Tustin side are in the mid-to-high $200/sf but when you include the Mello Roos they quickly get above $300/sf.  I always thought that the Mello Roos was a fixed dollar amount that didn't adjust annually because it was based upon a bond with a fixed payment.

The rule of thumb that I tell my buyers to use when comparing properties that have Mello Roos and/or HOA with other ones that do not is that for every $600/month in HOA fees and Mello Roos it translates to approx. $100,000 in sales price.  For example, a Columbus Grove home that has a sales price of $700,000 with Mello Roos and HOA fees of $600/month would be equal to buying an $800,000 home without any Mello Roos and HOA fees.
 
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