Long time bear ready to "flip"

R

rtlguru_IHB

New member
Hello everyone. Long time lurker.





Quick background. I think i was born a bear, but also lived through the 90s decline that only reinforced my bearish thinking. My parents bought a house in OC in 1991 for 350K and watched it drop to as low as 230K. They wanted to upgrade, but I convinced them to sell in 2004 for 700K and wait out the bubble.





So, I am renting in Orange for 2300/month and my parents are renting in Cerritos for 2750/month in a gated community. They got impatient and almost bought a place for 930K in March, but I managed to talk them out of it. They are somewhat content to wait now, because of all the negative news they are hearing.





With all the negative news, I thought I'd see some progress downward by now, but prices seems to be sticking. It's so frustrating for me. I visited the Villages of Columbus and Vista Del Verde in Yorba Linda and there was plenty of traffic and homes still going under contract. Maybe I'm too close to the action but I'm starting to think that builders have cut down supply to the point where they can just hang on and eventually find buyers. I've done extensive research on VOC and it appears that most of the communities are priced much higher than the low last winter when builders were caught with alot of inventory and had to dump at lower prices. With less supply, they are slowly raises prices again. So, with all this bearish news, new homes are more expensive and rates are much higher than they were 7-8 months ago!





I am now beginning to doubt whether we're going to see more than a 10-15% drop in prices in the nicer areas like Irvine. Prices will drop slowly, then stagnant for years. In other words, I think I'm beginning to think the bulls may be right. Sure, the less desirable places like riverside will get killed, but I see too much foreign money coming into the nicer parts of Irvine. It is clear to me the central banks are simply pumping liquidity to stave off a financial crises, leading to inflation and perhaps supporting housing.





Help everyone. I'm running out of patience. I'm 32, I've rented most of my life, and I'm tired of renting. I'm tired of hearing my neighbors walking above me and I want my own garage and driveway. I have more than enough money for a 20% downpayment, make well into 6 figures and just don't see much benefit of waiting much longer. This is more of a way of me venting my frustrations, but I'd still love to hear other people's thoughts. Am I talking to too many sales reps and becoming brainwashed? Are all the people I see touring models just lookie loos, or is there a huge number of people just itching to buy.
 
Just think of how many people who can put 20% down and actually get jumbo financing...... there's your answer.





Real estate doesn't just blow up overnite like equities can...so it's a drawn out process. Patience is the key but if you feel like you can't wait out anymore, it's your decision in the end.
 
Yay! There's my favorite bull argument!





"I see too much foreign money coming into the nicer parts of Irvine."





It would take such a ridiculous influx of foreign money to prop up Irvine, and the stats on sales show this to be a fallacy.
 
<p>rtl.....just take a deeeeep breath.....breathe in, breathe out......repeat to yourself. "I will not get suckered into this.....I AM a smart person..... I will be patient". Make it your mantra for the next couple of years....you will be 100K ahead of the game, if not more.</p>

<p>That's a years salary.</p>
 
rtl - Just think how sick you'd be in two years if you buy now, before the impact from the Great ARM Reset is felt. Also, within the next 3 years expect to see a ton of new houses built in Irvine: Orchard Hills, Laguna Crossing, Stonegate, Woodbury East, the PA between Woodbury and the 5, etc. And let's not even mention the thousands of Lennar homes around the Great Park. This is what's stopping me now, even more than the bubble. It's knowing that the house I really, really want, in the location I want, hasn't even been built yet! I'm even older than you are, and I make a nice income just like you. My ex and his wife bought this spring in Coto, and I definitely feel pressure to get into my own SFH. But I'm not stupid, and I am patient. So, I wait. I am also saving, but not as much as I would be if I didn't do stuff like take my kid to DisneyWorld, etc. I'm living life to the fullest, but not beyond my means, and my son and I have a great life.
 
<p>"I'm tired of hearing my neighbors walking above me"</p>

<p>I hear that! Every time I deal with the inconveniences of apartment living, it just steels my resolve to low ball my offers in the next few years when no one else will be buying and everyone will be numb to the latest bad news about SoCal RE.</p>

<p>Oh, and I also look forward to walking around the malls this Christmas time sporting my IHB T-shirt. It will be my way of saying, "Yeah, I'm a dumb renter who has real CASH to buy gifts this year. How you doin?!"</p>
 
Thanks for all the support guys.





I think my situation is a little unique because I work in downtown LA and cannot go further south to all the new developments in Irvine. My gf works in Orange, so Tustin is perfect for her as well. I guess I'm operating in a smaller universe - I need a new SFH home in a decent area. That leaves me with VOC. Based on these limitations, supply is getting smaller for ME and I do think there is enough money competing with me on these larger new homes in Tustin. Well, I'll sit tight and see what things look like in 3 months. Thanks again.
 
You are renting in <strong><em>ORANGE</em></strong> for $2300 per. month and can hear your neighbors above, and don't have your own garage? Sounds like you might want to rethink your rental strategy.
 
<p>why don't you rent a single family house in Tustin? For sure will cost you a lot more...but still will be cheaper than buying...</p>

<p>I would have said something different but you are 32, not married, and no kids...what is the downside of waiting? One thing for sure: the price won't go up anytime soon. </p>

<p> </p>
 
<p>"within the next 3 years expect to see a ton of new houses built in Irvine: Orchard Hills, Laguna Crossing, Stonegate, Woodbury East, the PA between Woodbury and the 5, etc. And let's not even mention the thousands of Lennar homes around the Great Park."</p>

<p>Builders are running low on both cash and credit. Retension of Cash and available credit line in order to ensure balance sheet won't deteriorate further is the absolute number one priority for the builder CEOs and CFOs in the coming years. This means we are not likey to see too many developments until the market start to improve. </p>
 
<p>RTL,</p>

<p>I am in a similar housing dilemma. Both my wife and I have very stable careers and can afford to buy with a substantial down payment. We were fortunate to own separate starter homes right after college in the late 90'. We sold both homes early last year hoping to buy a larger long-term home at Columbus Grove. The central location of VoC seems most ideal given that I work in downtown LA and the Metrolink station is less than five minutes away. We were seriously considering one of the two particular plans (2 or 4) at Ciara in VoC, but decided to wait and let the RE market plays out at the last minute after running into this very informative site. In the meantime, we are unhappy renter and have put certain parts of our lives on hold while hoping the RE market gets more stabilized.</p>

<p>But despite a broad declining RE market and noticeable price reductions in some of the less attractive VoC developments, the two plans that we are interested are continued to sell relatively well and their prices are actually edging up during this past phase. From my understand, there is still a priority list for some the popular plans in this development to our surprise. But because we are willing to pay a premium to get the house that we love (nice floor plan, personal inteior options, lot location, etc), I am beginning to worry that we might not be able to get the right house in the final two phases. I understand that homes in the area might be going for less in the next few years, but given that we plan to stay in our next house for at least ten years and while I don't think the builder will drop their price for more than 10% for the remaining releases, I seriouly don't know if the wait is worth it in our sitaution, especially if the borrowing cost continues to go higher. While the financial part in me wants to hold out, I also want to resume our life and not having to constantly worry about the short-term market condition. The wife definitely does not think our strategy is working well for us. But at this point, I am not sure if we should change our course. </p>

<p>-EP</p>
 
Are you married? Do you have children? I personally don't see the point of waiting if you find a house that you love and you plan on staying there until your kids finish school. That is, if you can truly afford to buy without sacrificing. Would it really make a difference if prices fall 20% two years from now if they appreciate 100% over the next 15 years? I wouldn't buy a house just for the sake of buying a house but rather finding a home that you want to live in for a long time.
 
<p>You guys sound like you are able and willing to buy right now. If you understand the risks, then go for it and be happy.</p>

<p>>>>But despite a broad declining RE market...<<<</p>

<p>I would not say that we have had a broad decline. So far, I have only seen two things. Speculation fueled areas (inland valleys, condo overbuilding, etc), for example, like Naples, FL and Stockton, CA, have seen solid price declines. Those are fairly local conditions. The rest of the country has seen a tremendous surge in inventory (foreclosure, resale, etc) and decline in demand but only minor price declines. If you believe with that recipe, that these prices are sustainable or will only see minimal price declines, then buy and be happy.</p>

<p>However, things are a lot worse than even the data shows. <em>I know that a top RE team in OC was approached to help sell Countrywide properties that are approaching foreclosure. And these properties total over 15,000 in south OC alone and not all of them are on the market yet.</em></p>

<p>My advice is to wait. If you have already waited, then it will serve you well to wait for 4 more months because the adjustable rate resets will be peaking this Oct-Jan. It will put a tremendous amount of additional pressure on the real estate market.</p>

<p>But this all takes time. If some people believe it is pointless to watch stock prices everyday, it is even more absurd to read about real estate everyday and expect prices to fall everyday.</p>
 
I could recommend a great place to rent in Downtown Fullerton, walking distance to rail station, for less than $2300...





Look at corner of Chapman & Harbor Blvd.
 
<p>Hi RTL and Entry:</p>

<p>1. If you want to buy in VOC (which my SO and I were considering as well), wait until William Lyon's fiscal year end (Dec). That should get you more leverage in price negotiation. Yes, they are a private company, but even they have #'s they got to meet, and when you go tour these new homes, please bring a realtor/broker with you so you can re-coup some if not all of the 3% co-op fee. I'm on the VoC promotion emails and every Friday they send out info about the latest pricing. Prices haven't really moved too much (in the last quarter), but my feeling is that by Dec 07 or Jan 08, you will see a much bigger discount. These companies have to pay rent and make payroll as well. They will get desperate soon.</p>

<p>2. My SO and I both make pretty good money, and we know a few people in the area that are working in the financial, mortgage, and real estate industry. These guys are either friends, friends of the family, or neighbors. Anyhow, every one of them have advised us to not purchase a house until at least mid-end 2008. Like your parents, mine bought in OC in 1990. The prices declined for 7 years and didn't stablize until 1998. We have the 20% downpayment to put down for a nice SFR, but we seriously don't want to get locked down by a house this early in life (late 20's, no debt, no kids). Put more money into retirement, or put more money into smart investments (share cert, money market, etc) and enjoy compound interests. They are certainly better values than RE right now.</p>

<p>3. The RE cycles usually repeat every 7 years. We are barely 1.5-2 years into this current one. I think you have quite a bit to go. If you are looking to purchase a house for quality of life, living standard, and plan to hold on to the house for many years then it really doesn't matter when you buy. If you want to maximize your potential gain, and consider your house as an investment, then wait. In the end, its your life. :)</p>
 
I live in one of the new "luxury apartments" in Orange. Brand new, 2 bedroom, with 1 car attached garage. Not my ideal, but my gf works at the UCI medical center, so it was her top choice.





Entrypoint,





nice to see someone else in a similar situation. Ironically, Ciara is my gf's top choice too. She likes the plan 2, which seems to be popular and hasn't come down at all at 1.47 mill. One of my best friends also loves the Ciara and would buy if they dropped the price 300k. He owns a home and has 400k in equity there. I bet there are many others like us who would jump on Ciara if the price dropped 100-200K. With only a few homes in the popular plans left, I too wonder how many people who cashed out like yourself are just itching to buy back in. Have you looked at Columbus square at all? Or are you only interested in the Irvine address?
 
<p>RTL -</p>

<p>Check out <a href="http://www.lyonapartments.com">www.lyonapartments.com</a></p>

<p>Dana Point is not too far to UCI and for $2300/month you could be near/have a coast view.</p>
 
<p>rtlguru,</p>

<p>What are you a guru of?</p>

<p>I have many clients who are renting and all wish to come homeowners because renting is not fun. Almost all are too afraid to buy. So I guess that is the general feeling of home buyers.</p>

<p>So the question to ask yourself is should you do what everyone does, or listen to your heart? </p>
 
Laing, thanks for the suggestion, but the medical center is located in Orange, so it would be quite a drive.








Nirvinerealtor,





I work in the retail industry.





Thanks for the perspective on your buyers.
 
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