Long time lurker and bear finally bites the bullet in Mission Viejo

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mk3gtr_IHB

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I've been a long time lurker of this blog (~2006) and just want to say this is one of the best forums/blogs about housing in south OC. Some background about myself:



I got married 2 years ago and have been renting a townhouse since. In 2005-2006 I was predicting the collapse of the real estate market while all my friends laughed at me for throwing my money away renting. Fast forward 3 years and most of my friends view me as someone who knows one thing or two about the RE market ;)



Anyways, I've been watching prices and trends like a hawk for this past year. My criteria is basically the following:



- SFR

- 1980 or newer

- +3 bedrooms, and +2 baths

- +1800sq ft

- Would really like 3 car garage

- Nice looking community (some cheaper neighborhoods have a blue collarish feel to them. Sorry...I know it sounds really classist :P)

- Anywhere in OC pretty much.

- Good schools a must.

- Low or No HOA and Mello Roos.

- Plan to live for +8 years in it.

- Around 400K



As you can imagine there are not many homes for sale in the market that meet my criteria. Not really bothering with short sales. I still think that in 2011-2012 I should be able to find something like that, but I don't really want to live in my townhouse for 3 more years. Last week we found a home that sort of meets our criteria:



http://www.redfin.com/CA/Mission-Viejo/35-Risero-Dr-92692/home/5050865



Pacific Hills its a really nice community. Basically that house is one of the smallest ones in there, which is basically what we are looking for. MV is a little far out, but I think the commute will be bearable. The price is obviously a lot more than what I was budgeting, but I think the lowest possible that that house could drop at is ~400K. Interest rates would probably be higher in 2012, so the monthly payment would be similar. We went to check out the house last Thursday like at 6:30pm and in 10 minutes there we already like 4 different parties there as well. We put our first ever offer for a house yesterday for 520K. The realtor didn't feel very optimistic about my offer, but I really don't want to overextend myself. There seems to be a lot of bidding going on on properties that are a lot cheaper than the average of a neighborhood. It does make me wonder sometimes how long RE will continue to drop if there are so many people with 100K in downpayments full doc ready to buy houses.





UPDATE: Just sent in our offer. The realtor said that they already have <strong>35 Offers</strong>!!! ROTMFFLMAO!!!! I'm still sticking to my 520k guns! Oh well....:)
 
[quote author="mk3gtr" date=1249338057]I've been a long time lurker of this blog (~2006) and just want to say this is one of the best forums/blogs about housing in south OC. Some background about myself:



I got married 2 years ago and have been renting a townhouse since. In 2005-2006 I was predicting the collapse of the real estate market while all my friends laughed at me for throwing my money away renting. Fast forward 3 years and most of my friends view me as someone who knows one thing or two about the RE market ;)



Anyways, I've been watching prices and trends like a hawk for this past year. My criteria is basically the following:



- SFR

- 1980 or newer

- +3 bedrooms, and +2 baths

- +1800sq ft

- Would really like 3 car garage

- Nice looking community (some cheaper neighborhoods have a blue collarish feel to them. Sorry...I know it sounds really classist :P)

- Anywhere in OC pretty much.

- Good schools a must.

- Low or No HOA and Mello Roos.

- Plan to live for +8 years in it.

- Around 400K



As you can imagine there are not many homes for sale in the market that meet my criteria. Not really bothering with short sales. I still think that in 2011-2012 I should be able to find something like that, but I don't really want to live in my townhouse for 3 more years. Last week we found a home that sort of meets our criteria:



http://www.redfin.com/CA/Mission-Viejo/35-Risero-Dr-92692/home/5050865



Pacific Hills its a really nice community. Basically that house is one of the smallest ones in there, which is basically what we are looking for. MV is a little far out, but I think the commute will be bearable. The price is obviously a lot more than what I was budgeting, but I think the lowest possible that that house could drop at is ~400K. Interest rates would probably be higher in 2012, so the monthly payment would be similar. We went to check out the house last Thursday like at 6:30pm and in 10 minutes there we already like 4 different parties there as well. We put our first ever offer for a house yesterday for 520K. The realtor didn't feel very optimistic about my offer, but I really don't want to overextend myself. There seems to be a lot of bidding going on on properties that are a lot cheaper than the average of a neighborhood. It does make me wonder sometimes how long RE will continue to drop if there are so many people with 100K in downpayments full doc ready to buy houses.</blockquote>
DO NOT, I repeat DO NOT settle for buying a condo/townhouse. I've been helping one of my friends look for a home in the RSM/MV area and what we've been finding is that prices are around the $250-$275/sf range depending upon the location and the size of the lot. Most of these homes have low HOA and Mello Roos on them. I think you could easily see prices head down another 10-15% from the current prices because there is just no organic inventory on the market right now.
 
If you think prices are too high and will drop further, you could always rent a house for a few years. However, right now, prices aren't dropping much at all-the lack of inventory is keeping things stable. I can tell you that there isn't a single house anywhere in the OC that meets you criteria and price range. In fact, you found the cheapest one as far as I can tell. Second place would be this one:



<a href="http://www.redfin.com/CA/Rancho-Santa-Margarita/28-Reata-92688/home/5064529">28 Reata, Rancho Santa Margarita</a>



Third would be this one:



<a href="http://www.redfin.com/CA/Trabuco-Canyon/5-Moccasin-Trl-92679/home/5118813">5 Moccasion Trail, Trabuco Canyon</a>



Everything else is listed at $595k or above.
 
Yep...no condos or townhouse. Thus, no Irvine, Tustin or Tustin Ranch :P. Ridiculous HOA and Mello Roos. What do you think about the property in MV? I sort of feel that I won't get it at 520K. I dunno....I don't really feel like I just "bought" a house. I think I can live with a 10% drop. Moreover, there's that 8K stimulus that helps a little bit.
 
[quote author="Geotpf" date=1249340323]If you think prices are too high and will drop further, you could always rent a house for a few years. However, right now, prices aren't dropping much at all-the lack of inventory is keeping things stable. I can tell you that there isn't a single house anywhere in the OC that meets you criteria and price range. In fact, you found the cheapest one as far as I can tell. Second place would be this one:



<a href="http://www.redfin.com/CA/Rancho-Santa-Margarita/28-Reata-92688/home/5064529">28 Reata, Rancho Santa Margarita</a>



Third would be this one:



<a href="http://www.redfin.com/CA/Trabuco-Canyon/5-Moccasin-Trl-92679/home/5118813">5 Moccasion Trail, Trabuco Canyon</a>



Everything else is listed at $595k or above.</blockquote>


I know....my redfin map looks more like google maps when I enter my criteria haha.



I take back about searching all over OC. Mission Viejo is the southern most city I'm willing to live. I am not looking at the cities around the 241 freeway either.
 
[quote author="mk3gtr" date=1249340372]Yep...no condos or townhouse. Thus, no Irvine, Tustin or Tustin Ranch :P. Ridiculous HOA and Mello Roos. What do you think about the property in MV? I sort of feel that I won't get it at 520K. I dunno....I don't really feel like I just "bought" a house. I think I can live with a 10% drop. Moreover, there's that 8K stimulus that helps a little bit.</blockquote>
I like the house, but what's up with the concert picture? haha I think that home will probably sell or maybe a little under if it gets enough buyers swarming to it and all depends on if the owner has an equity left since the owner paid $549k (so knowing the debt load will be the key on this property). You got me curious, I'll look it up when I get home from work and PM you the details.
 
[quote author="mk3gtr" date=1249338057]

- Would really like 3 car garage

</blockquote>
You had me at this sentence.



Pacific Hills is actually a very nice area (not just because they have 3-car garages)... it's the most Irvinesque area of MV other than Quail Run and some of the other newer places in MV.



I'm just concerned that if you think it could go as low a $400k, that's more than 10% from $520k and are you willing to lose that equity?



The other thing is you don't want to bother with short sales but Redfin lists this property as an REO which explains the listing shenanigans:



Jul 29, 2009 Price Changed $512,800 -- SoCalMLS #S572977

Jul 29, 2009 Relisted -- -- SoCalMLS #S572977

Jun 23, 2009 Delisted -- -- SoCalMLS #S572977

May 08, 2009 Price Changed $582,800 -- SoCalMLS #S572977

May 02, 2009 Listed $512,800 -- SoCalMLS #S572977

Oct 30, 2008 Sold $549,000 -3.0%/yr Public Records

Feb 11, 2004 Sold $635,000 17.7%/yr Public Records

Jul 31, 2001 Sold $420,000 8.8%/yr Public Records

Apr 12, 1994 Sold $227,000 -- Public Records



I think the $512k is a bait list price and will probably sell for more than your $520k bid based on area comps and because many KCs feel that RE has bottomed or is close to it (which I don't think is true).



Have you considered renting an SFR instead?
 
[quote author="usctrojanman29" date=1249345770][quote author="mk3gtr" date=1249340372]Yep...no condos or townhouse. Thus, no Irvine, Tustin or Tustin Ranch :P. Ridiculous HOA and Mello Roos. What do you think about the property in MV? I sort of feel that I won't get it at 520K. I dunno....I don't really feel like I just "bought" a house. I think I can live with a 10% drop. Moreover, there's that 8K stimulus that helps a little bit.</blockquote>
I like the house, but what's up with the concert picture? haha I think that home will probably sell or maybe a little under if it gets enough buyers swarming to it and all depends on if the owner has an equity left since the owner paid $549k (so knowing the debt load will be the key on this property). You got me curious, I'll look it up when I get home from work and PM you the details.</blockquote>


The house is already an REO owned by some bank in NY. Could you do me a favor? I want to find out when the Mello Roos expires for this property. People on different forums say that the avg length for properties built in the 90's is 20-25 years. That would potentially mean only 5 more years of Mello Roos for this property ($1200 a year). I guess there is no precedence yet, but how likely is it that the Mello Roos gets extended?
 
[quote author="irvine_home_owner" date=1249346974][quote author="mk3gtr" date=1249338057]

- Would really like 3 car garage

</blockquote>
You had me at this sentence.



Pacific Hills is actually a very nice area (not just because they have 3-car garages)... it's the most Irvinesque area of MV other than Quail Run and some of the other newer places in MV.



I'm just concerned that if you think it could go as low a $400k, that's more than 10% from $520k and are you willing to lose that equity?



The other thing is you don't want to bother with short sales but Redfin lists this property as an REO which explains the listing shenanigans:



Jul 29, 2009 Price Changed $512,800 -- SoCalMLS #S572977

Jul 29, 2009 Relisted -- -- SoCalMLS #S572977

Jun 23, 2009 Delisted -- -- SoCalMLS #S572977

May 08, 2009 Price Changed $582,800 -- SoCalMLS #S572977

May 02, 2009 Listed $512,800 -- SoCalMLS #S572977

Oct 30, 2008 Sold $549,000 -3.0%/yr Public Records

Feb 11, 2004 Sold $635,000 17.7%/yr Public Records

Jul 31, 2001 Sold $420,000 8.8%/yr Public Records

Apr 12, 1994 Sold $227,000 -- Public Records



I think the $512k is a bait list price and will probably sell for more than your $520k bid based on area comps and because many KCs feel that RE has bottomed or is close to it (which I don't think is true).



Have you considered renting an SFR instead?</blockquote>


Yes, I am aware of the pricing listing history. That's why me and my agent are not overly optimistic about it haha. Based on comps I think would have a good chance of getting it at $550K. I pulled the 400K number out of thin air. I think that would be a "fair" price for a house like that, but that would also mean that less disereable areas in MV/Tustin would have to drop to ~350K, which sound kind of low. I just don't know how so many people are able to document $100K in downpayment, but I guess there are a lot of them out there. 500K for a house like that is still a lot IMO. I just dont see how regular people with a household income of $200K could save up $100K in downpayment. The fundamentals simply do not support this in the long run. I guess in the short term there a lot of flippers who profited in these past 3 years and have cash stashed. The good thing about MV is that you don't need to compete with all the FCB out there.



We've considered renting. If we do that it would probably be a condo in Tustin/Irvine, but I really don't want to pay +$2000 a month in rent (I currently pay $1400 in Diamond Bar with attached 2 car garage)
 
[quote author="mk3gtr" date=1249347157][quote author="usctrojanman29" date=1249345770][quote author="mk3gtr" date=1249340372]Yep...no condos or townhouse. Thus, no Irvine, Tustin or Tustin Ranch :P. Ridiculous HOA and Mello Roos. What do you think about the property in MV? I sort of feel that I won't get it at 520K. I dunno....I don't really feel like I just "bought" a house. I think I can live with a 10% drop. Moreover, there's that 8K stimulus that helps a little bit.</blockquote>
I like the house, but what's up with the concert picture? haha I think that home will probably sell or maybe a little under if it gets enough buyers swarming to it and all depends on if the owner has an equity left since the owner paid $549k (so knowing the debt load will be the key on this property). You got me curious, I'll look it up when I get home from work and PM you the details.</blockquote>


The house is already an REO owned by some bank in NY. Could you do me a favor? I want to find out when the Mello Roos expires for this property. People on different forums say that the avg length for properties built in the 90's is 20-25 years. That would potentially mean only 5 more years of Mello Roos for this property ($1200 a year). I guess there is no precedence yet, but how likely is it that the Mello Roos gets extended?</blockquote>


Mello Roos shouldn't get extended. The MR payments go directly to paying off bonds that were issued to fund the infrastructure improvements in the area. Once the MR period expires, the bonds are paid off as they are fully amortizing (I am 90% sure of this, somebody correct me if I am wrong). I guess the residents of the area could get together and vote to issue new MR bonds to fund new infrastructure improvements, but that is highly unlikely.
 
[quote author="mk3gtr" date=1249347763]We've considered renting. If we do that it would probably be a condo in Tustin/Irvine, but I really don't want to pay +$2000 a month in rent (I currently pay $1400 in Diamond Bar with attached 2 car garage)</blockquote>


I'm paying a little more than I'd like on rent, but even if it's an extra $500/month, it's only $6,000/year. I don't need prices on a $600,000 home drop much to make up for it. That's how I justified paying more on rent and being able to wait 2 or 3 more years.
 
[quote author="mk3gtr" date=1249338057]It does make me wonder sometimes how long RE will continue to drop if there are so many people with 100K in downpayments full doc ready to buy houses.</blockquote>


That's the point, there is NOT that many people. A lot of people have been waiting and now jump in, which will create a shortage in 1 or 2 years when REO really kicks in and unemployment keep hurting the economy and housing recovery.



You make $200k and plan on buying a $400k ($520k in this case). This is a very low leverage ratio...not a bad thing, but very conservative.
 
You don't need a $100K DP... FHA will do it with 3.5% down. By putting 20% down you get a lower rate and don't have to pay PMI. I had always thought 20% was the way to go and so we did actually manage to save $100K on much FAR less than $200K/yr. But, it was not easy. It took quite a few years and it was really painful making that huge wire transfer. That being said, if you want an offer accepted on what is considered a bargain property these days the folks with the most down will get theirs accepted.
 
What are the limits on FHA loans? I thought it was $417k. You would need to go with private lender if you buy at $520k, so likely need 20%.
 
[quote author="Roo" date=1249701079]What are the limits on FHA loans? I thought it was $417k. You would need to go with private lender if you buy at $520k, so likely need 20%.</blockquote>
FHA loan limits in Orange County is $729k.
 
20% is hard to muster, but as this gets dragged out - more people like myself will be there! Three people I know who bought recently did FHA, which if you look at the details is an awfully expensive way to finance a home purchase.



There is an insurance premium of 1.5% fees upfront, plus 0.04% of the loan amount insurance per month added. Typically a higher interest rate by 0.25-0.5%.



Unlike a traditional PMI that can eliminate once you have 22% equity of appraised value, FHA does requires you pay PMI for 5 years minimum. As far as loans go - FHA are pretty junky.







I believe that home will drop to around 440K or so within 3 years, the only thing stopping it is the potential of lenders to restart up the junk mortgages. If option arms, and ninja loans come back within the next three years, all bets are off.







On a side-note, interest rates will likely be higher but if you look at historical precedent for what is unfolding now - Japan's 1990's deflationary spiral, and the 1930's depression. They shouldn't be too much higher, maybe 6-6.5%. Interest rates stayed low for ten+ years as deflation increased people's desire to lend money, rather then to borrow it. Some people think we're looking at inflation, or hyperinflation and that will cause interest rates to spike - I disagree since the printing/government spending has barely dented the credit destruction caused by all this defaulting.
 
[quote author="mk3gtr" date=1252717350]The property closed escrow this week. Final price *drum rolls* 570K!!</blockquote>


The question is, do you feel better or worse?
 
Congrats! It looks like a great place.







[quote author="mk3gtr" date=1249338057]





UPDATE: Just sent in our offer. The realtor said that they already have <strong>35 Offers</strong>!!! ROTMFFLMAO!!!! I'm still sticking to my 520k guns! Oh well....:)</blockquote>




So what happened to 35 offers? Did you just counter above them all? Or was there never really 35?



Just curious...Can you give the story of how many times you countered and how the process went? Like did you offer at 520, then 530 a week later, then 540 a week later, etc. etc. What was the timetable like?



Any other interesting bits from your experience would be helpful. I have never bought an REO and I'm sure many people here haven't so wondering if the experience is much different from a traditional purchase.



PS. You really stuck to your guns :)





edit: oops, maybe I misunderstood. Were you the buyer at 570k or someone else?
 
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