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<strong>A pause in the cause of home ownership</strong>
REAL ESTATE: Renting-vs.-buying debates among county residents heat up in a cool housing market.
September 13, 1993
<strong>Byline: KELLY BARRON </strong>
<strong>The Orange County Register</strong>
Home prices and mortgage rates are down, so now's a super time to buy a house. Right?
Jay Krigsman, for one, doesn't think so.
Krigsman has become an avowed renter after recently selling his Mission Viejo condominium at a $30,000 loss.
Krigsman and his wife bought the property three years ago with the hope of parlaying the purchase into a larger home. But with home prices falling and their dream of a bigger home dying, the Krigsmans cut their losses rather than make do with their small condo for several more years.
"We're really not in the market for a home anymore," said Krigsman, who now rents a larger town home in Laguna Niguel. "We don't miss our home at all."
The Krigsmans aren't alone. Orange County homeowners and would-be homebuyers anxious about declining home prices and their economic futures are looking more favorably at renting these days.
Orange County's overbuilt apartment market isn't exactly being overwhelmed with new renters as a result. But for the first time in eight years, apartment occupancies in the county have increased this year, according to Research Network Ltd. in Laguna Hills.
Pam Wooldridge, a Research Network principal, said the 96 percent countywide occupancy rate would be significantly lower were it not for the influx of renters from the housing market.
And some of the county's landlords report that turnover is down substantially, meaning that many renters are choosing to stay put.
Mark Jefferies, a vice president with Western National Properties Group in Orange, said turnover in the 8,300 apartment units he oversees is down 20 percent from four years ago.
"It continues to boggle the mind, with interest rates as low as they are, that our turnover rates don't go through the roof," Jefferies said.
But sagging home values and layoffs shake confidence.
"The chronic, pervasive fear this recession has left on the psyche of the go-go, '80s baby boomers can't be underestimated," said Matt Disston of DMG Economics in Trabuco Canyon. "In a nutshell, this has scared us to death."
Despite bargain prices and low rates, homes sales in the county remain sluggish, falling 9.4 percent during the first seven months of 1993 from a year ago, according to TRW Redi Property Data.
Home values in some parts of the county have fallen as much as 28 percent in the past three years, according to Dataquick Information Systems Inc.
And Chapman University forecasts that home prices will depreciate another 3.5 percent this year.
All that's giving would-be buyers pause and turning the accepted wisdom about home ownership as a moneymaker on its head.
"A house is not an investment to me; it's just a house," said Sheldon Fleming, a real estate attorney who rents an apartment overlooking Newport Bay. "I've put my money in other investments rather than rely on a house to make me money."
Some financial planners are advising their clients to think hard before buying a home.
"There are the tax advantages to weigh with how other assets in the person's portfolio are positioned, along with getting a favorable loan," said Daralee Barbera, division manager with Waddell & Reed in Irvine. "We're looking for those three things to be in balance before recommending whether a person should buy a home."
Real estate has become even more of an illiquid asset as home sales have continued to limp along. And with prices falling, homeowners must commit to retaining the asset far longer before realizing any appreciation.
Still, Barbera says, given her qualifiers, buying a home in today's market is worth it.
Kaufman & Broad Home Corp., for example, is selling
single-family homes in its California Ridge project in Trabuco Canyon in south county starting at $204,000.
To buy that home, it would cost about $44,000 for a 20 percent down payment and loan fees. Assuming a 30-year fixed home loan at 7 percent, monthly mortgage payments would be about $1,192 after adding 10 percent to cover taxes and operating expenses. For a middle-income taxpayer, that's actually $775 a month after tax savings from mortgage interest deduction equal to county rents.
There also are bargains to be found in the county's apartment market.
Apartment rents average $775 a month and have declined the past two years. Nearly 70 percent of the landlords surveyed by Research Network are offering rental discounts. Homeowners, unable to unload their properties, are opting to rent them on the cheap. A rental house in Anaheim Hills recently was advertised for $1,500 a month. "By renting now, I don't believe you're foreclosing on any of your options; if anything you're increasing them," said Jim Skorheim, a financial planner in Laguna Niguel.
Skorheim believes Orange County's housing market has farther to fall. For that reason, he recommends that would-be buyers hold onto their down payments and put them into other investments. The $44,000 spent for a down payment, for example, could be invested in stock. Assuming an annual return of 8 percent, that money could earn about $25,000 in seven years about the same time you'd hold onto a house. Skorheim has peppered his parents with that advice, stopping them from buying a new home twice.
"I'd rather see them err on the side of conservatism than rush in," he said.
REAL ESTATE: Renting-vs.-buying debates among county residents heat up in a cool housing market.
September 13, 1993
<strong>Byline: KELLY BARRON </strong>
<strong>The Orange County Register</strong>
Home prices and mortgage rates are down, so now's a super time to buy a house. Right?
Jay Krigsman, for one, doesn't think so.
Krigsman has become an avowed renter after recently selling his Mission Viejo condominium at a $30,000 loss.
Krigsman and his wife bought the property three years ago with the hope of parlaying the purchase into a larger home. But with home prices falling and their dream of a bigger home dying, the Krigsmans cut their losses rather than make do with their small condo for several more years.
"We're really not in the market for a home anymore," said Krigsman, who now rents a larger town home in Laguna Niguel. "We don't miss our home at all."
The Krigsmans aren't alone. Orange County homeowners and would-be homebuyers anxious about declining home prices and their economic futures are looking more favorably at renting these days.
Orange County's overbuilt apartment market isn't exactly being overwhelmed with new renters as a result. But for the first time in eight years, apartment occupancies in the county have increased this year, according to Research Network Ltd. in Laguna Hills.
Pam Wooldridge, a Research Network principal, said the 96 percent countywide occupancy rate would be significantly lower were it not for the influx of renters from the housing market.
And some of the county's landlords report that turnover is down substantially, meaning that many renters are choosing to stay put.
Mark Jefferies, a vice president with Western National Properties Group in Orange, said turnover in the 8,300 apartment units he oversees is down 20 percent from four years ago.
"It continues to boggle the mind, with interest rates as low as they are, that our turnover rates don't go through the roof," Jefferies said.
But sagging home values and layoffs shake confidence.
"The chronic, pervasive fear this recession has left on the psyche of the go-go, '80s baby boomers can't be underestimated," said Matt Disston of DMG Economics in Trabuco Canyon. "In a nutshell, this has scared us to death."
Despite bargain prices and low rates, homes sales in the county remain sluggish, falling 9.4 percent during the first seven months of 1993 from a year ago, according to TRW Redi Property Data.
Home values in some parts of the county have fallen as much as 28 percent in the past three years, according to Dataquick Information Systems Inc.
And Chapman University forecasts that home prices will depreciate another 3.5 percent this year.
All that's giving would-be buyers pause and turning the accepted wisdom about home ownership as a moneymaker on its head.
"A house is not an investment to me; it's just a house," said Sheldon Fleming, a real estate attorney who rents an apartment overlooking Newport Bay. "I've put my money in other investments rather than rely on a house to make me money."
Some financial planners are advising their clients to think hard before buying a home.
"There are the tax advantages to weigh with how other assets in the person's portfolio are positioned, along with getting a favorable loan," said Daralee Barbera, division manager with Waddell & Reed in Irvine. "We're looking for those three things to be in balance before recommending whether a person should buy a home."
Real estate has become even more of an illiquid asset as home sales have continued to limp along. And with prices falling, homeowners must commit to retaining the asset far longer before realizing any appreciation.
Still, Barbera says, given her qualifiers, buying a home in today's market is worth it.
Kaufman & Broad Home Corp., for example, is selling
single-family homes in its California Ridge project in Trabuco Canyon in south county starting at $204,000.
To buy that home, it would cost about $44,000 for a 20 percent down payment and loan fees. Assuming a 30-year fixed home loan at 7 percent, monthly mortgage payments would be about $1,192 after adding 10 percent to cover taxes and operating expenses. For a middle-income taxpayer, that's actually $775 a month after tax savings from mortgage interest deduction equal to county rents.
There also are bargains to be found in the county's apartment market.
Apartment rents average $775 a month and have declined the past two years. Nearly 70 percent of the landlords surveyed by Research Network are offering rental discounts. Homeowners, unable to unload their properties, are opting to rent them on the cheap. A rental house in Anaheim Hills recently was advertised for $1,500 a month. "By renting now, I don't believe you're foreclosing on any of your options; if anything you're increasing them," said Jim Skorheim, a financial planner in Laguna Niguel.
Skorheim believes Orange County's housing market has farther to fall. For that reason, he recommends that would-be buyers hold onto their down payments and put them into other investments. The $44,000 spent for a down payment, for example, could be invested in stock. Assuming an annual return of 8 percent, that money could earn about $25,000 in seven years about the same time you'd hold onto a house. Skorheim has peppered his parents with that advice, stopping them from buying a new home twice.
"I'd rather see them err on the side of conservatism than rush in," he said.
