Newport Beach analysis

Personally, if I buy a home and it drops 10%, I do not care much either.

If I buy a home and it drops 30%, I will probably care a lot less than most folks in that situation because I plan to buy our next home for cash, live in it for the rest of our lives, and the resale value is relevant only after I die.



I have no idea when a good time to buy is for anybody else, but I think that anybody who makes their money off of commission from selling homes or mortgages and tells folks that the bottom is in or close to in, is someone not to be trusted.



On prices in NB, I would wait. The chances of much larger price drops are greater than the bottom being close.
 
[quote author="awgee" date=1249787870][quote author="RobertLarsen" date=1249777391][quote author="awgee" date=1249774209][quote author="garrison" date=1249731179]I'm not in any rush, I just wonder where the floor could realistically reset to. Like I mentioned, I'm willing to accept a little loss (maybe 10% max) if the house and location felt right. I'm just not willing to lose a good portion of my downpayment in order to secure it.



Thanks for the replies folks, please keep 'em coming...</blockquote>How are you going to feel when all your equity is gone and you are another 10% underwater? What fundamental evidence is there that home prices will drop another 10% and stop?









I have been hearing realtors call the bottom for the last three years, non stop. Why is now any different?</blockquote>


I don't think he was saying they will drop 10% and stop or even that they will drop. He was just asking when the correct time to buy would be and that he has a 10% cushion if it wasn't exactly at the bottom.</blockquote>
I did not say that he said they would only drop another 10%. I asked how he was going to feel when they dropped much more than 10%. His calculations of his comfort level include a possible drop of 10%. Why 10%? Why is he not including a drop of much more than 10%? Does he have evidence that they will only drop another 10%?</blockquote>


I think I get the gist of what you're trying to say...that if I'm already accepting the fact that I'm entering the market at the wrong time (knowingly accepting a 10% loss), I'm absolutely entering at the wrong time, and more likely letting emotional decisions overpower logical (financial) ones. I'm setting myself up for an entry too early in the "bubble pop" and stand to have an equity loss much larger than I would intend...is that right?



Believe me, I hear you and appreciate the advice. That's why I frequent these boards so often; to allow those smarter than I to provide me logical fact-based arguments and squelch the emotional stuff whispering in my ear([cough/]wife's proddings[/end cough])
 
[quote author="garrison" date=1249789917][quote author="awgee" date=1249787870][quote author="RobertLarsen" date=1249777391][quote author="awgee" date=1249774209][quote author="garrison" date=1249731179]I'm not in any rush, I just wonder where the floor could realistically reset to. Like I mentioned, I'm willing to accept a little loss (maybe 10% max) if the house and location felt right. I'm just not willing to lose a good portion of my downpayment in order to secure it.



Thanks for the replies folks, please keep 'em coming...</blockquote>How are you going to feel when all your equity is gone and you are another 10% underwater? What fundamental evidence is there that home prices will drop another 10% and stop?









I have been hearing realtors call the bottom for the last three years, non stop. Why is now any different?</blockquote>


I don't think he was saying they will drop 10% and stop or even that they will drop. He was just asking when the correct time to buy would be and that he has a 10% cushion if it wasn't exactly at the bottom.</blockquote>
I did not say that he said they would only drop another 10%. I asked how he was going to feel when they dropped much more than 10%. His calculations of his comfort level include a possible drop of 10%. Why 10%? Why is he not including a drop of much more than 10%? Does he have evidence that they will only drop another 10%?</blockquote>


I think I get the gist of what you're trying to say...that if I'm already accepting the fact that I'm entering the market at the wrong time (knowingly accepting a 10% loss), I'm absolutely entering at the wrong time, and more likely letting emotional decisions overpower logical (financial) ones. I'm setting myself up for an entry too early in the "bubble pop" and stand to have an equity loss much larger than I would intend...is that right?



Believe me, I hear you and appreciate the advice. That's why I frequent these boards so often; to allow those smarter than I to provide me logical fact-based arguments and squelch the emotional stuff whispering in my ear([cough/]wife's proddings[/end cough])</blockquote>


I do not know how much more the market will fall, but I have my opinion based on fundamentals and history. So far I have been right when all the experts were dead wrong, so for the time being I will trust my own judgment rather than the experts. The fundamentals that affect the residential real estate market have not changed for the better. If anything, they have gotten worse. Employment and income increase, (presently decrease), are the biggest factors. The psychology of the last cycle and where we presently sit the the cycle is important. The trend of interest rates, rather than the actual interest rate, is important. Which way are interest rates headed? Do you really think they will be trending down?



Quite the contrary to the oft voiced opinion, one does NOT have to time the real estate market perfectly at the top and perfectly at the bottom. One has only to wait until the market has turned one way or the other and then hop on the trend. In the present day case, that would mean wait until prices start going up.

Scary, huh? You might miss the bottom?

Okay, so what? So prices head up by 5% or 10% by the time you buy?

You miss the bottom by 10%, but you have for sure missed the majority of the decline.

Right now, the market may stabilize, or it may head down for another 10%, or 20%, or 30%, or more.

If you buy now, you take the chance of big losses. If you buy when the market has already turned up, you lose out on a max of 10%. I am not big on risk.



What I find fascinating is that the majority of people will do just the opposite of what the above may suggest is the most prudent thing to do. IrvineRenter, Graphrix, IR2, and others can scream from the top of their lungs why this may not best time to buy from a financial standpoint and it will make a difference to only a few who can hear it.
 
Awgee,



Thanks for the input. I made a lucky series of plays, buying and 'flipping' my first few houses in '99-'00. It was nothing more than being at the right place at the right time. It's scary to think how little I really knew about real estate. And while I've been fortunate and gained a lot of equity through sheer luck and timing, I don't want to lose it by being foolish and impatient.
 
[quote author="awgee" date=1249801662][quote author="garrison" date=1249789917][quote author="awgee" date=1249787870][quote author="RobertLarsen" date=1249777391][quote author="awgee" date=1249774209][quote author="garrison" date=1249731179]I'm not in any rush, I just wonder where the floor could realistically reset to. Like I mentioned, I'm willing to accept a little loss (maybe 10% max) if the house and location felt right. I'm just not willing to lose a good portion of my downpayment in order to secure it.



Thanks for the replies folks, please keep 'em coming...</blockquote>How are you going to feel when all your equity is gone and you are another 10% underwater? What fundamental evidence is there that home prices will drop another 10% and stop?









I have been hearing realtors call the bottom for the last three years, non stop. Why is now any different?</blockquote>


I don't think he was saying they will drop 10% and stop or even that they will drop. He was just asking when the correct time to buy would be and that he has a 10% cushion if it wasn't exactly at the bottom.</blockquote>
I did not say that he said they would only drop another 10%. I asked how he was going to feel when they dropped much more than 10%. His calculations of his comfort level include a possible drop of 10%. Why 10%? Why is he not including a drop of much more than 10%? Does he have evidence that they will only drop another 10%?</blockquote>


I think I get the gist of what you're trying to say...that if I'm already accepting the fact that I'm entering the market at the wrong time (knowingly accepting a 10% loss), I'm absolutely entering at the wrong time, and more likely letting emotional decisions overpower logical (financial) ones. I'm setting myself up for an entry too early in the "bubble pop" and stand to have an equity loss much larger than I would intend...is that right?



Believe me, I hear you and appreciate the advice. That's why I frequent these boards so often; to allow those smarter than I to provide me logical fact-based arguments and squelch the emotional stuff whispering in my ear([cough/]wife's proddings[/end cough])</blockquote>


I do not know how much more the market will fall, but I have my opinion based on fundamentals and history. So far I have been right when all the experts were dead wrong, so for the time being I will trust my own judgment rather than the experts. The fundamentals that affect the residential real estate market have not changed for the better. If anything, they have gotten worse. Employment and income increase, (presently decrease), are the biggest factors. The psychology of the last cycle and where we presently sit the the cycle is important. The trend of interest rates, rather than the actual interest rate, is important. Which way are interest rates headed? Do you really think they will be trending down?



Quite the contrary to the oft voiced opinion, one does NOT have to time the real estate market perfectly at the top and perfectly at the bottom. One has only to wait until the market has turned one way or the other and then hop on the trend. In the present day case, that would mean wait until prices start going up.

Scary, huh? You might miss the bottom?

Okay, so what? So prices head up by 5% or 10% by the time you buy?

You miss the bottom by 10%, but you have for sure missed the majority of the decline.

Right now, the market may stabilize, or it may head down for another 10%, or 20%, or 30%, or more.

If you buy now, you take the chance of big losses. If you buy when the market has already turned up, you lose out on a max of 10%. I am not big on risk.



What I find fascinating is that the majority of people will do just the opposite of what the above may suggest is the most prudent thing to do. IrvineRenter, Graphrix, IR2, and others can scream from the top of their lungs why this may not best time to buy from a financial standpoint and it will make a difference to only a few who can hear it.</blockquote>


Sorry, you claim to still be "right." But you have been wrong about the last 4-6 months. Weren't you the one that also said PIMCO was about to collapse and bring down the entire Newport Beach and Irvine real estate market? Anytime anyone has tried to talk specifics about the market, they have been wrong on both sides.
 
Yeah, I was wrong about Pimco. I thought I said that. I think I was the one to bring it up. Do you have a point?

Are you saying that because I was wrong about Pimco that I am wrong about my other prognostications?
 
This is an old story. Awgee and I went round the bend on this one already, and assuming everything goes as planned he will be buying me a cup of coffee in ~20 months.



Awgee's predictions of a collapse in Newport Beach prices has not yet come to fruition, however based on Graph's foreclosure maps, falling incomes, rising unemployment, lack of government support for home aimed at high wage earners, closed price trends, asking price trends, etc. Well, you get the point. There is no point in fighting the tape. I would much rather wait for the rise off the bottom supported by fundamentals before risk 6-7 figure losses. I am not alone.



A long time ago (ahem mid 2007) I believed that prices could fall no further than 15% from peak in "prime" areas. Though I recognized that fundamentals based metric indicated a much large potential decline, I felt that the problems generated by such a decline would spur the Fed/Treasury/Feds to unprecedented action in terms of low rates, sweetheart financing though FNMA/FHA expansion, etc. What I failed to realize at that time was just how massive and pervasive the ongoing problems are. Though the government has put up a valiant effort, in fact delaying the ultimate decline, it is impossible for prices to be maintained at current levels as the debt service costs (even at historically low rates) are simply not achievable by the owners.



At the end of the day cost of carry will determine home prices. Excacerbated by rising unemployment (probably ending in the 10.5% range), and based ased on this very simple and intuitive metric, it is inevitable that prices will continue to fall.
 
I still think NB prices will continue to fall, but only based on the fundamentals that CapWorks mentions, not on Pimco going under. I misinterpreted a statement Bill Gross made on how Pimco would be investing, and my interpretation was 180 degrees wrong. I would rather not say exactly what the statement or interpretation was to keep from embarrassing myself further.



Cappy - I owe you a coffee, no need to wait 20 more months.
 
[quote author="no_vaseline" date=1249945264][quote author="awgee" date=1249944961]Cappy - I owe you a coffee, no need to wait 20 more months.</blockquote>


I'll host!</blockquote>


I will bring some foreclosure stats that I don't post on IHB if you guys include me. I've been thinking I need to get together with awgee soon, and then I saw this thread and thought it would be cool CW could join us too. no_vas will provide tomatoes and his love for all things VOC.
 
[quote author="awgee" date=1249944961]I still think NB prices will continue to fall, but only based on the fundamentals that CapWorks mentions, not on Pimco going under. I misinterpreted a statement Bill Gross made on how Pimco would be investing, and my interpretation was 180 degrees wrong.

Cappy - I owe you a coffee, no need to wait 20 more months.</blockquote>


The govt would not let PIMCO fail. Gross buys billions in govt issued debt. He was right on with interest rate predictions, better than anyone I've seen or read. PIMCO is too big and smart to fail. Besides, smart money knows its the debt trader, not equity traders, who run Wall Street and make the big bucks.
 
[quote author="graphrix" date=1249954258][quote author="no_vaseline" date=1249945264][quote author="awgee" date=1249944961]Cappy - I owe you a coffee, no need to wait 20 more months.</blockquote>


I'll host!</blockquote>


I will bring some foreclosure stats that I don't post on IHB if you guys include me. I've been thinking I need to get together with awgee soon, and then I saw this thread and thought it would be cool CW could join us too. no_vas will provide tomatoes and his love for all things VOC.</blockquote>


I'm game. Just about anytime, allowing that my wife could go into labor at any minute.
 
[quote author="CapitalismWorks" date=1249961739]I'm game. Just about anytime, allowing that my wife could go into labor at any minute.</blockquote>


Bleh... giving birth... What's the big deal? I mean really, you're not the doctor, you won't be helping, you'll just be getting in the way. It's not everyday that you get to hang out with a bunch of nutters like us. I'm sure your wife will understand after she hears all the stories of just how nutty we all really are.



No_vas, I believe this is your queue to take this via PM.
 
Here are some of my experiences:



In the area of Newport Coast that I've been looking, asking prices from regular sales aren't even worth looking at. They have been 20% (at least) higher than asking prices for short sales and REOs.



The short sales and REOs move and they are often to CASH buyers. I have a house I was close to getting a steal on but a buyer came in and offer 15% more than me. Not only was I surprised, the selling agent was shocked. I really wish I could have nabbed this one. There was a shady part to the deal which made me way less aggressive than I might have been.



Another home that was listed at 2.19 was in escrow, fell out, and was scooped up within hours and bought for all cash at 2.15. Stunning lot, great house.



In any case, in the areas that I'm looking, there are many home owners who are in the NOD phase and many homes headed for foreclosure. Still, when they are priced "right", the homes move and move quickly.



Frankly, I'm disappointed. I sold my condo at the peak, made a great return on that home. I rented and waited it out. I'm a solid buyer in the 2M range. There are tons of foreclosures and I'm STILL competing with other buyers. Granted, it's on short sales and they are still selling below asking (usually 5% under).



Anyway, that's my story.
 
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