I cant' decide to buy or wait?

E

ecchan_IHB

New member
I have been following the blog for quite a few months. But I have a difficult decision to make. Please provide your honest advice.



We are renting an apartment and can't wait to leave. The apartment is just too small for our family. We have been looking and really like a house in a good location with turnkey condition, except the backyard is small. We basically agree verbally at a price which is in line with the most recent closed price in the neighborhood with the seller's agent. However, I still have some doubts. And here are my questions for all your experts out there:



1) Realistically, is the prices going to go down more than 10% in Irvine in the next year or so, except those areas such as Turtle Ridge, Turtle Rock, Shady Canyon area, which prices are still out of control.

2) Is the government going to rescue the potential Alt-A/Option Arm disaster and save the further collapse of the housing market?

3) Is there a real demand for Irvine housing that will keep it from collapsing more than 10-20% from now?

4) Even if foreclosures and NODs are still looming, are these inventories going to show up in the next year?

5) If I buy now and plan to live in the house for the next 5 years, do you think I can at least break even or make a small profit?



Thank you so much and I learned so much from the blog.
 
[quote author="Look4house" date=1240062768]I have been following the blog for quite a few months. But I have a difficult decision to make. Please provide your honest advice.



We are renting an apartment and can't wait to leave. The apartment is just too small for our family. We have been looking and really like a house in a good location with turnkey condition, except the backyard is small. We basically agree verbally at a price which is in line with the most recent closed price in the neighborhood with the seller's agent. However, I still have some doubts. And here are my questions for all your experts out there:



1) Realistically, is the prices going to go down more than 10% in Irvine in the next year or so, except those areas such as Turtle Ridge, Turtle Rock, Shady Canyon area, which prices are still out of control.

2) Is the government going to rescue the potential Alt-A/Option Arm disaster and save the further collapse of the housing market?

3) Is there a real demand for Irvine housing that will keep it from collapsing more than 10-20% from now?

4) Even if foreclosures and NODs are still looming, are these inventories going to show up in the next year?

5) If I buy now and plan to live in the house for the next 5 years, do you think I can at least break even or make a small profit?



Thank you so much and I learned so much from the blog.</blockquote>
There are many variables that go into determining whether it is a good time to buy for you or not. What percentage of your combined income will you spend on the home (mortgage, property tax, and association)? Here are my answers to your questions:



1) Yes, I believe that prices of Irvine homes and condos will decrease more than 10% over the next year or two (Irvine prices have only come down about 15-20% while other cities in OC have experienced 30-50% declines)

2) The gov't can try to rescue those Alt-A/Option Arm holders but they will fail and those properties will become REOs eventually.

3) See 1) above. I do believe that Irvine will continue to maintain a pricing premium over other cities in the OC due to the schools, safety, and other family friendly features

4) Yes, inventories will most likely grow as the wave of foreclosed homes file up in the que.

5) Honestly, if you are going to buy now you should be ready to live in the home for 7-10+ years before you may see even a small profit (if you aren't comfortable with buying a home knowing that you may have a loss in 5 years then it's not the right time for you to buy)



Also, I highly advise you against having a seller's agent represent you as the buyer. If you think realtors are pushy, wait till you deal with an agent who might make a 6% commission. Definitely get yourself a buyer's agent to represent you and look over for your best interests. That being said, if you want me to pull you an sales comps just let me know.
 
L4H, welcome...



You are asking all the right questions, and these are all the factors that each one of us has to determine on our own, based on our personal situation and risk tolerance. Just as an observation, you sound way too cautious to take the plunge right now. The people jumping in right now, have no idea, have not done the research and prefer it that way. They will buy and just deal with the reactive consequences of their decision for years and years to come. There is nothing wrong with that; it's just that housing, unlike say, car maintenance, is an important decision that will impact our financial future more than anything else. You sound more cautions and conservative than to buy right now. We all understand the space argument, the renting argument; all I know is, if things seem cramp; that just means we have too much junk around the house. We don't have a sofa, TV, coffee table and most furniture/appliances people think are necessities. My wife, child, cat and I live very comfortably in a one bedroom rental. We will be waiting; and my timeline after buying will not just be 5 year but 15+ at least. All real estate is local; and no one can pin point exactly where Irvine will end up; however most indications point that things will continue to fall.
 
[quote author="roundcorners" date=1240092302] <strong>We don't have a sofa</strong>, TV, coffee table and most furniture/appliances people think are necessities. </blockquote>


Off topic: Where do you sit??
 
[quote author="SoCal78" date=1240092595][quote author="roundcorners" date=1240092302] <strong>We don't have a sofa</strong>, TV, coffee table and most furniture/appliances people think are necessities. </blockquote>


Off topic: Where do you sit??</blockquote>


On the floor, the living room is basically the extension of the bedroom with swings, bouncers, play mats, changing table and a glider. No we don't mind making our guests sit on the carpet; or move the conversation to the dining table...
 
[quote author="roundcorners" date=1240092302]We don't have a sofa, TV, coffee table and most furniture/appliances which are necessities. My wife, child, cat and I live very uncomfortably in a one bedroom rental.

</blockquote>


ROFLMAO
 
[quote author="roundcorners" date=1240093503][quote author="SoCal78" date=1240092595][quote author="roundcorners" date=1240092302] <strong>We don't have a sofa</strong>, TV, coffee table and most furniture/appliances people think are necessities. </blockquote>


Off topic: Where do you sit??</blockquote>


On the floor, the living room is basically the extension of the bedroom with swings, bouncers, play mats, changing table and a glider. No we don't mind making our guests sit on the floor; or move the conversation to the dining table...</blockquote>


Oh, so it sounds like you're in a studio.



Looking4Home: It seems like you are not pleased with the size of patio/yard in the house you're looking at. Why not wait and see if you find something larger in your price range as prices come down over time. I know it is hard waiting. Set mini-milestones for yourself to make it easier. Try the end of the year and re-evaluate. It is easier mentally than committing to wait two years or whatever. I have a feeling the winter months are going to show some change. I think 5 years is too soon to expect an easy-out, though. A home purchase at this time will be a very big commitment. Good luck.
 
Thanks, Trojan and roundcorners. BTW, I do have an agent.



I think I will be spending no more than 20% of my gross income after my down payment for mortgages, taxes and HOAs. The reason that I feel the urge to take the next step is because some houses are becoming relative affordable and the prices are back to 2003/2004 range. In addition, the houses that are in good location with "reasonable" asking prices are selling quickly with multiple offers. I don't see enough foreclosures that significantly brought down the Irvine housing market at this time. I don't think I want to wait for the 20% drop if that is going to take 2-3 years. Perhaps, some areas may not see a 20% drop in Irvine?
 
[quote author="Look4house" date=1240094886]Thanks, Trojan and roundcorners. BTW, I do have an agent.



I think I will be spending no more than 20% of my gross income after my down payment for mortgages, taxes and HOAs. The reason that I feel the urge to take the next step is because some houses are becoming relative affordable and the prices are back to 2003/2004 range. In addition, the houses that are in good location with "reasonable" asking prices are selling quickly with multiple offers. I don't see enough foreclosures that significantly brought down the Irvine housing market at this time. I don't think I want to wait for the 20% drop if that is going to take 2-3 years. Perhaps, some areas may not see a 20% drop in Irvine?</blockquote>


Your comment reminds me very much of <a href="http://www.irvinehousingblog.com/blog/comments/open-thread-4-18-2009/#more">today's post</a> on the main blog. The denial runs deep. If you haven't checked out the blog yet, you might like to look through some of the posts and then see if you still feel the same.
 
[quote author="Look4house" date=1240094886]In addition, the houses that are in good location with "reasonable" asking prices are selling quickly with multiple offers. I don't see enough foreclosures that significantly brought down the Irvine housing market at this time. I don't think I want to wait for the 20% drop if that is going to take 2-3 years. Perhaps, some areas may not see a 20% drop in Irvine?</blockquote>


Location is everything. Prices have not dropped at all in the chinese communities in socal. Why? Because they pay all cash and have no mortgages to be delinquent on. Irvine isn't quite there yet but eventually will be, all the foreclosures there are from the white boys and korean wannabees, and they will eventually get squeezed out.
 
Since you can't decide, I will decide for you. Now is the time to buy. You don't want to wait until everyone else is buying. You want to have first choice or you might get stuck with a house with an unlucky 4.
 
[quote author="ABC123" date=1240099345] Now is the time to buy. You don't want to wait until everyone else is buying. You want to have first choice or you might get stuck with a house with an unlucky 4.</blockquote>


Is this a joke or a constructive comment?
 
I'm sure it was a joke.



seriously L4H, why not use a good real estate salesman (like IR2, or your buyer's agent) to find a nice house to lease for a year in the neighborhood you want to live in?



That way, you can see if you really like the area, have more space, and not jump in the knife-catcher pool too soon.



(personally, I think that prices have another 30+% to drop, but if your total housing costs were you to buy to be only 20% of gross, you will probably be OK. But you will lose your 20% downpayment)
 
[quote author="Look4house" date=1240094886]Thanks, Trojan and roundcorners. BTW, I do have an agent.



I think I will be spending no more than 20% of my gross income after my down payment for mortgages, taxes and HOAs. The reason that I feel the urge to take the next step is because some houses are becoming relative affordable and the prices are back to 2003/2004 range. In addition, the houses that are in good location with "reasonable" asking prices are selling quickly with multiple offers. I don't see enough foreclosures that significantly brought down the Irvine housing market at this time. I don't think I want to wait for the 20% drop if that is going to take 2-3 years. Perhaps, some areas may not see a 20% drop in Irvine?</blockquote>
So homes are "relatively affordable" because they are getting back to the 2003/2004 range? That is the wrong benchmark to use, the two best parameter to use to determine affordability are rental parity AND price-to-income parity (prices are no higher than 4 times the median income of the city). We still got room to go before we hit both parameters.
 
I agree with most of the above comments. The Irvine market has more room to fall over the next couple years, at least 10-15%, but hopefully a lot more. I think all the Obama housing market mettling will cause a temporary stabilization or even bounce in Irvine home prices this spring and summer. Fast forward to Fall/Winter 2009 and prices should hopefully continue to slide and as more REO inventory hits the market this should create more pressure.



I recently decided to rent for another year and reduced some of the pressure to buy by renting a single family home instead. I enjoy the increased space without the fear of losing my downpayment. It was a good choice for me but it may not be for everyone.



Think long and hard before committing your precious cash to a rapidly depreciating asset in this major economic downturn.



Best of luck with your decision.
 
No way would I buy in Irvine right now. There's a lot of room to drop. Just watching the property tax, preforeclosure, and NOD activity in my neighborhood would scare me to death if I wanted to buy one of those houses. There will be 10 new ones coming up every month and that will drive the prices down on the previous ones. I've heard chatter among my neighbors that are prime examples of living the high life on HELOC money about "moving to Arizona" and "moving to Utah" because the economy and lifestyle are so much better for them and their kids. They seemed to LOVE the lifestyle here when they were taking limos to the Spectrum for nights on the town every weekend. Read between the lines - they're losing their houses and are priced out of SoCal with their bad credit so they create these delusional scenarios of how green it is elsewhere. I guarantee you I'll get emails from all of them about the "ten acres with a pond" they live on and how much their kids like hunting and fishing. And guess what, all their houses will be for sale in 9 months to be snapped up by prudent waiters like yourself.



Don't buy now. Rent. Try again in a year. Just one moron's opinion so take it for what it's worth.
 
[quote author="Look4house" date=1240100315][quote author="ABC123" date=1240099345] Now is the time to buy. You don't want to wait until everyone else is buying. You want to have first choice or you might get stuck with a house with an unlucky 4.</blockquote>


Is this a joke or a constructive comment?</blockquote>


I wasn't kidding, but I will try to answer your questions



<em>1) Realistically, is the prices going to go down more than 10% in Irvine in the next year or so, except those areas such as Turtle Ridge, Turtle Rock, Shady Canyon area, which prices are still out of control.</em>



In my opinion, yes



<em>2) Is the government going to rescue the potential Alt-A/Option Arm disaster and save the further collapse of the housing market?</em>



In my opinion, no. They are done with their rescuing unless they wish to start a revolution.



<em>3) Is there a real demand for Irvine housing that will keep it from collapsing more than 10-20% from now?</em>



Yes, there is a real demand. It is my belief that most housing prices in Irvine will not fall more than 15% except for some of the newer developments which may fall 20%.

<em>

4) Even if foreclosures and NODs are still looming, are these inventories going to show up in the next year?</em>



Yes foreclosures will show up next year.



<em>5) If I buy now and plan to live in the house for the next 5 years, do you think I can at least break even or make a small profit?</em>



That depends entirely on the house you buy and at what price you buy it. I think there are some houses you can buy now that will sell for a higher price in 5 years and some houses where you will lose money.
 
Look,



Prices are definitely overvalued. But prices can correct itself by falling immediately or not increasing for a long time until rental parity comes back inline. Therefore, you have to determine which one it is going to be. If you think flatline, then buying now is not bad given low interest rates. If you think it will fall, don't buy.



WSJ last week on front page that banks are now purposely forclosing more. Maybe they know somethinkg we don't. Sure sure sure, they could be dumb but banks are totally risk adverse right now and they are purposely forclosing more.
 
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