OK to Buy in NEWPORT Coast??

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Potential Buyer_IHB

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<p>Folks, so sorry to bother you once again with essentially the same subject. I have found a 2950 SF home in NEWPORT Coast (as opposed to Turtle Ridge) that is off of Bonita Canyon Drive (not off Newport Coast Drive) and has a major panaramic view of Newport Beach generally, i.e., Fashion Island in the distance and the ocean even further behind, with a nice, private back yard and spa, BBQ, etc. We've agreed on $650 per SF. I'm sorry for asking the same question again: Do you think this is safe from the current and upcoming price/value erosion? Clearly a Newport address with a panaromic view is much, much safer than Turtle Ridge. But still, I need to gauge this, since this is NOT our "dream home" (god I am tired of that expression) so we would want/hope to move to something better in 2-4 years. Thanks in advance for your comments. </p>
 
I once asked my mechanic if the costs of maintenance on the new Audi A4 was very high. He replied, "If you have to ask how expensive the maintenance will be, you probably cannot and should not buy that car".





If you are unsure of the costs associated with the biggest purchase in your life, I think you might want to reconsider. If you're also looking for reassurances that this is the right thing to do with all the mortgage financing news that came out this week, I doubt you will get supporting voices.
 
<p>Hell No</p>

<p>Please check out ocrealestatefinder.com for newport coast rentals.</p>

<p>If you have the money to buy that home, you should keep it in a safe investment for at least one year. Your interest income will help offset your rent. You can rent some nice homes right now in NC. That price per sq ft is way too high. Even at 500 bucks per sq ft is high, even with a premium for being in NC.</p>

<p>If you haven't been following the market please check out my thread "most important post ever". Massive ratechanges have occurred that will drastically effect prices. Others will confirm.</p>
 
<i>"Do you think this is safe from the current and upcoming price/value erosion?</i>
<p>



I don't understand. Why would this home be safe from the current and upcoming price/value erosion? Why would any home in So Cal be safe from the current and upcoming price/value erosion? Am I missing something? Are there some homes which do not participate in normal and historical So Cal real estate cycles?
<p>

If you want to be reassured that homes in this neighborhood are safe from the current and upcoming price/value erosion, I suggest that you ask the folks who own homes in this neighborhood and realtors (TM) who do business in this neighborhood. I am positive they will tell you exactly what you want to hear.
<p>

Potential Buyer - What do you think? If you think you can find a home which will not greatly depreciate in value in the next couple years, I would be very curious to see if you are correct and hope that you keep us informed. Personally, I am not clever enough to find such a property and will put my money on the trend.
 
<p>Potential Buyer:</p>

<p>From your previous Turtle Ridge post, you mentioned that you were a relocation buyer.</p>

<p>My friend who relocated from Irvine to Thousand Oaks was in a similar situation in 2006. She sold her Irvine home for a $350K profit. She rented in Thousand Oaks because she was having difficulties with her husband. After 9 months she "had" to take advantage of the relo package. So she purchased a house for $800K, it promptly fell by $100K by 2007. The stress of being upside down didn' t help the marriage, so they are going thru a divorce now.</p>

<p>If only she had rented? </p>

<p>An almost $2 million house? No sense carrying a mortgage bigger than $1 mil since it will not be deductible. With Jumbos now at 8% , that is a payment of $7337.65 for PI for $1 mil. You could rent a 3789 sqft home in Newport Coast for $7000/mo.</p>

<p>Use your $500k downpayment invest in the high quaility junk bonds that Barron's recommended this Sat issue, returning 10%+ a year giving you ~ $4381/mo income which makes your net rental cost about $2618/mo for a Newport Coast 3789sqft house.</p>

<p>Much less risk.</p>

<p> </p>
 
Thanks for the feedback. Some cities and some areas and some neighborhoods don't get hit as hard when there is a downturn (that's not to say they avoid the downturn entirely). Also, homes with a fabulous view do better on resale, which also helps them weather a downturn storm. Lastly, if one hammers a seller and gets a good price, that too creates room to weather a downturn storm. I guess the bottom line is that none of us can look into a crystal ball and tell if the home purchase I described in my post would be "relatively safe." To me, the pure, objective economic analysis is so dang persuasive . . . especially since we all know the home, at best, will remain flat in value for several years. I'll keep looking at rental homes!
 
<p>One year is all we ask, it will make a huge difference. Look at the chart from John Maudlin's new letter.</p>

<p>http://www.2000wave.com/article.asp?id=mwo080307</p>

<p>"But it will take longer than you might think for that negative influence to decrease. Let's take a look at the following table. This shows the amount of adjustable rate mortgages that reset each month for the first half of this year and will reset for the next 18 months. Note that these reset numbers are a driving factor in the increasing rise in foreclosures. Pay attention to the numbers I highlight in red for January through June of 2008. The largest portion of mortgage resets is not until next year. </p>

<p><img alt="" src="http://www.2000wave.com/images/080307/image003.gif" /></p>

<p>We have just seen $197 billion of mortgage resets so far this year. That is less than we will see in two months (February and March) of next year. The first six months of next year will see more than the total for 2007 or $521 billion. This suggests to me that the number of foreclosures is due to rise dramatically from the already high current levels, putting more homes into a weak housing environment. "</p>

<p>It takes about 6 months after the loan resets, and the buyer can't pay to have the home foreclosed....so next Sept will be a good time to negotiate for a house.</p>
 
Hmm... Not to knock Maudlin, because this is his life's work, but the Credit Suisse chart I saw shows the largest number of resets occurring in Nov & Dec of this year.





The general advice to wait a year is good, though. No point in taking the relo benefits if they will actually <em>cost</em> you money in the end.
 
<p>>>>But still, I need to gauge this, since this is NOT our "dream home" (god I am tired of that expression) so we would want/hope to move to something better in 2-4 years.<<<</p>

<p>I would not buy anything today if you know that your duration will be 2-4 yrs. It doesn't make sense in any respect in today's market unless you are absolutely willing to lose a signicant amount in transaction costs (since 2-4 yrs is not enough time for appreciation to recoup that) and in equity (since risks are high given inventory levels, affordability, credit availability, etc).</p>

<p>>>>Use your $500k downpayment invest in the high quaility junk bonds that Barron's recommended this Sat issue, returning 10%+ a year giving you ~ $4381/mo income which makes your net rental cost about $2618/mo for a Newport Coast 3789sqft house.</p>

<p>Much less risk.<<<</p>

<p>I highly disagree. Unless you have a portfolio over $5M to make that $500k less than 10% of the total value of your investments, investing the entire $500k in "high quality" junk bonds is not "much less risk."</p>
 
<p>>>>Some cities and some areas and some neighborhoods don't get hit as hard when there is a downturn (that's not to say they avoid the downturn entirely). Also, homes with a fabulous view do better on resale, which also helps them weather a downturn storm. Lastly, if one hammers a seller and gets a good price, that too creates room to weather a downturn storm. I guess the bottom line is that none of us can look into a crystal ball and tell if the home purchase I described in my post would be "relatively safe." <<<</p>

<p>These points are true and positive. But, in today's market, the negative points far far outweigh the positives.</p>
 
It's so easy to say that some neighborhoods are immune to price drops, but you can't really prove that. As I see it, there is a continuum of move-ups that has to occur for money to trickle up to the higher priced properties in the form of demand. Even wealthy people are not going to pay more than they have to to get something just out of reach of the next less-wealthy guy. The next less-wealthy guy would spend only enough to get something out of range of the guy below him, all the way down to the entry level buyer. Our entry level buyers now have no easy access to capital, essentially taking the bottom row of stone blocks out of a wall. The whole wall will eventually shift downwards. It's just going to take time for the demand drought to make its way up through the chain of transactions to the top-priced properties.



If I were you, I'd buy something that had already been kicked in the teeth and suffered a 20% drop. But, it's human nature to chase something of increasing value, somehow feeling that its rich price is proof that it's not going to drop in the future.
 
Is this house in 92660 or 92657? Truly only 92657 is considered Newport Coast. There are signs indicating the Newport Coast boundaries on San Joaquin Hills and Newport Coast Drive. My husband and I thought that Bonita Canyon was Newport Coast, but were informed differently by our neighbors upon moving into our townhome. The only area off of Bonita Canyon that is considered Newport Coast is off of Chambord (sp?) and that is a great neighborhood. We have looked in there a bit.
 
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