DataQuick’s latest sales update reveals a serious disruption to the O.C. housing market created by the mid-summer credit crunch. These new stats — for the 22 business days through Sept. 21 — show an O.C. median selling price of $590,000. If that held for the full month, that would be the lowest since April ‘05. (ZIP data HERE) In addition, that price would mark a 8.1% drop from August, the biggest one-month drop in DataQuick’s 20-year history of O.C. buying patterns. (Oh, by the way, the typical August-to-September price drop is 0.67%!) And the 6.3% decline from a year ago would be the biggest year-to-year drop since Dec. ‘95.
The sales activity news is no better with house buying through Sept. 21 off 36% vs. the ‘06 pace. If that pattern holds for the full month, September will be the slowest selling month since Jan. 1995 (and the second slowest in DataQuick’s 20-year record.) Did we mention that September’s a lock to be the 24th straight month that home buying failed to beat the year-ago pace?
Here’s a wrap, by key market slice, for the 22 business days ended Sept. 21 …
| Slice | Price | Vs. ‘06 | Sales | Vs. ‘06 |
|---|---|---|---|---|
| Single-family houses | $675,000 | -1.5% | 1,240 | -40.2% |
| Condos | $430,000 | -4.0% | 519 | -38.0% |
| New, all residences | $537,750 | -34.7% | 301 | -5.6% |
| All combined |
$590,000 | -6.3% | 2,060 | -36.2% |
• COMPARE: To see how other indexes measure O.C. pricing, CLICK HERE
• ZIPS: CLICK HERE to see the results by ZIP code.
Per DataQuick, Single Family Median Home Price for the 22 business days ending:
6/26 = $735,000
6/30 = $734,000
7/12 = $725,000
7/17 = $725,000
7/25 = $720,000
7/31 = $718,000
8/07 = $719,000
8/15 = $712,750
8/22 = $710,000
8/30 = $710,000
9/11 = $700,000
9/14 = $689,000
9/21 = $675,000 ~ NEW
That’s a $60,000 or 8.2% decline in less than 3 months.
I want to make a point. I knew that when the inevitable drop eventually started, it would be serious, but I didn’t expect such ruthless drops, like the one’s we’re presently seeing in asking prices. And to think, that some dolt tried to explain this drop as seasonal, right in the heart of the summer buying season … what an idiot.
[...] unknown wrote an interesting post today onHere’s a quick excerptDataQuick’s latest sales update reveals a serious disruption to the OC housing market created by the mid-summer credit crunch. These new stats — for the 22 business days through Sept. 21 — show an OC median selling price of $590000. … [...]
Question for the bears: If the median is a worthless indicator while prices are climbing or holding, shouldn’t it also be considered worthless when the numbers point downward?
This is only to very beginning of a massive correction. Home prices will drop a total of 40 to 50% when it is all said and done over the next 4 years. The market needs this correction anyway. The median income in OC is around 75k. Stated loans are gone. So, it is not hard to look see where the market is headed. There is only one place, down down down.
Resale family median down by 1.5%? That means the big mortgage crisis, which nearly gone, did almost no damage to house prices. This is an amazing story. Not that the mortgage market is mostly recovered, the credit crunch is a non story. I just don’t understand how anyone can be worried about a 1.5% price slip after a 400% runup. Lee in irvine, all your example displays is a pattern in prices that exists every year. Prices are always highest in late spring and early summer, then lowest just after the holiday. That is a well known pattern. So what is your point?
I think Jimmy is smoking some credit-crunch dope. 400% runup? When? Not any house I’ve ever followed. Anyway, it’s obvious this guy just enjoys arguing. Who is right or wrong doesn’t change reality. If you are happy with the way the housing market is dropping then be happy. If it makes you mad then smoke some Jimmy-credit-crunch dope and you’ll see blue skies forever - no matter what happens!
“shouldn’t it also be considered worthless when the numbers point downward?”
The DataQuick median is a lagging, unreliable, indicator. Single family homes are clearly down more than DataQuick reports on a YoY basis (-1.5%). I’m seeing homes on the MLS that are right in the heart of Orange County’s most desirable neighborhoods, with declining asking prices of $200,000 or more. And yet, these homes just sit on the MLS (no sales), kinda like Christmas ornaments hang from the tree. They’re still way too high.
I think you should look at the most recent comps in your neighborhood to help give you a more accurate figure. That is, if you have any recent comps.
By the way, I’ve seen houses drop about 100k since Aug 2005 and they are still not selling. Very few sales, very stale. Same houses just sit there month after month. So regardless of what people or the news is reporting it’s obvious just from a simple observation that things have taken quite a big change for the worse if you want your home to sell or go up in value. If things aren’t so bad these homes would be selling and the price would remain firm.
Jimmy, Jimmy Jimmy, Yes a 400% runup for the people that bought 10 years ago. Of course with a projected 20% drop predicted (so much for your 400% increase) and the fact that a bunch of people bought on speculation within the last 3 years the bottom is far from in sight. And if you think the mortgage fiasco is over read the papers. Everyone including the Fed is holding their breath waiting for the impending implosion!
“all your example displays is a pattern in prices that exists every year”
Oh Really.
Can you please provide that data that would give your point credibility. In other words, please go back the last 6 years, and show me if we’ve seen an 8.2% decline in the prime summer months … or anything even close to an 8.2% decline.
I’ve already looked, and we’ve haven’t seen anything like this, since the mid nineties.
It’s Over!
No it is NOT EVEN a 400% runup for people that bought 10 years ago! 1997. So if you paid 200k it’s now worth 800k with only a 1.5% dip on that? No way! Very few people saw that happen - that is the exception not the rule. Then again certain types of people like to use that tactic to make people think reality isn’t what it really is. Not entirely sure why though… The way I see it, the tip of the iceburg is starting to show and it’s name is “dropping fast”
The mortgage crisis is NOT nearly over. The fallout will continue for another 12 to 18 months at a minimum! There are tens of thousands of loans in Southern California alone where the borrowers were all “A paper” and went stated income and refinanced in the past 6 to 9 months before the crackdown by lenders on lenient lending policies. Those borrowers all went into a payoption ARM which will adjust sooner or later. Just wait until all of these “A paper” borrowers begin defaulting, then you will see the real crisis.
I am not sure why many talk of what happened in the credit market as a “crunch”. I believe it was a change in the credit market. A change from a time when anyone could get financing to buy a home to a time when it requires an income and down payment..
This change in credit is of course, is creating a change in the values of homes. Homes are now worth far less than they were 6 months or a year ago. It is still uncertain how much less, the market will dictate that. I would not be surprised if by this time next hear the median home price in Orange County was $500,00.
Oddly, I have to agree with Jimmy here. The decrease in home pricing during the fall compared to the summer is seasonal. We saw exactly the same thing last year. You will also notice a decrease in inventory until late November-Jan when it will pick up again.
Even so, there are two salient issues to consider. Median home prices are down YOY, which means that even with continued buying of higher end homes that skew the numbers, the market is slowing down and it’s having an effect on sales prices. Jimmy is completely dilusional if he believes this is all over. Second, while inventory of existing properties has stopped growing for now, it hasn’t dropped as precipitously as it did last fall (August 07 ~ 19700, Oct 07 ~ 19500, per Ziprealty.com). I guess there must be more properties out there that just cannot be taken off the market. Looks like about 11 months inventory for existing properties.
In 98, you could purchase tear downs just west of newport high school in the mid 300’s. Those same teardowns are currently selling for 1.3 million. That is the picture.
Shut up already.
I cannot believe that people are still trying to defend this ponzi scheme … using the argument that home prices normally decline in the summer months.
People need to read what Lansner wrote above:
“that price would mark a 8.1% drop from August, the biggest one-month drop in DataQuick’s 20-year history of O.C. buying patterns”
NO permabulls, this IS NOT NORMAL!
Jimmy Said:
hat means the big mortgage crisis, which nearly gone,
Jimmy you like baseball? If you do you might want to understand this, right now as far as this crises is concerned we are in the top of the first inning. We have barely begun, hence why the depression in housing is being claimed and expected 50% drops.
Anyway, good luck with holding onto “we are different”.
Nano,
Yes, there is/was a “credit crunch”. There were weeks where lenders stopped taking submission entirely - who are funding loans today. You don’t have to claim every point.
These are totally expected numbers. Frankly, I’m suprised existing held up as well as it did. And if you look deeply into new sales, you will see that they are “skewing” all right - to the low side. People are buying smaller products right now.
People wanting to buy should be jumping for joy - and would we wise to get their ducks lined up.
Lee’s a moron. You can’t have a rational argument with a moron. Yes he’s right. there’s been an 8.1% drop OK. But Mr. Lansner in his original post shows Y-O-Y (That’s Year Over Year Lee). Its a drop of 1.5% for SFR (Single Family Homes — would you like it in phonetics?). So yes there’s been a drop in median price of home sales. yes prices are falling. And yes Lee’s a moron who can’t understand which data is relevant and which isn’t.
“There are tens of thousands of loans in Southern California alone where the borrowers were all “A paper” and went stated income and refinanced in the past 6 to 9 months before the crackdown by lenders on lenient lending policies. Those borrowers all went into a payoption ARM which will adjust sooner or later.”
Proof please.
This is completely absurd.
And since when does an “A” paper borrower need to go stated income to get into an option arm.
Geesh.
We should have a test to post (beyond adding two numbers).
When are people going to wake up and realize that asking prices are being cut out of fear.
Fear will not stay forever.
Smart people should use it to their advantage.
ROC, you’re hilarious. If prices started going up today this would be the shortest housing bust ever recorded!
You need to step back from your emotional attachment to increasing property values a little bit.
eprobert,
No attachment to anything here.
Show me where I said prices will go up.
We won’t see 2005 numbers for at least 3-5 years.
I don’t have to agree to 1997 prices either.
Jimmy, I think you need to be just a little bit better at the math to understand this better. Either that, or you are a front for the NAR.
By invidual area, prices are down: Anaheim is down 5%, Brea almost 7%, Irvine over 8%, Buena Park over 13%, Orange almost 16%.
What is skewing the numbers are the Newport Beach numbers where one area is up 305%.
Your kind of comments are examples of why the NAR has no credibility anymore. While I don’t think that is your intention, it is an example of the type of spin Realtors are still trying to fool buyers with.
ROC said…
“When are people going to wake up and realize that asking prices are being cut out of fear.”
When are people going to realize that median OC home prices and median OC incomes will eventually have to mesh to reach equilibrium? At this point in the game, we are still WAY off from equilibrium. How we reach that equilibrium is a matter of debate (e.g. decreased home prices, income inflation, or both). I still can’t understand the logic that says that someone with above median OC income can only afford a “starter” home. After all, this is the median, not the “starter” income.
Those who seem to see a light at the end of the tunnel here are ignoring the facts of high inventory, historically low sales, and financial troubles in the lending industry. Those of you seeing this near term recovery, please cite some points to back up your assertions.
I think it depends on which side of the fence we’re on. The guys on here projecting a rosy future and that the impending doom and gloom is over and things will get better are probably the ones holding a couple of investment properties or in the real estate business, i.e. Jimmy. Pick and choose where your data is coming from. A lot of these supposedly neutral unbias reports are actually being spoon fed by those in the real estate industry. Things are bad and if you read an article that says otherwise chances are the writer is being given some incentive to write a favorable outlook.
“I still can’t understand the logic that says that someone with above median OC income can only afford a “starter” home. After all, this is the median, not the “starter” income.”
A first-time buyer should be happy with a starter home. This is not a novel idea. This is the way it’s done.
“When are people going to realize that median OC home prices and median OC incomes will eventually have to mesh to reach equilibrium?”
Please show me your rent versus own calculations. Rents are not that far off from prices - and the gap is narrowing every day (from both directions).
I did some rent versus own calculations on my own home yesterday.
I live in a very large (2,800 sq. fl.), very elegant townhome.
The most I could save by renting is $2,000.
In exchange, I would have to squeeze into an 1,800-2,000 sq. ft. townhome or apartment.
Not exactly a fair comparison.
And, by the way, the $2,000 advantage does not even include the tax benefit I have in realtiy as an owner.
Funny how no one remarked on Jon’s story showing a rent in Irvine of $3,500.
Undoubtedly, on a 3 bedroom apartment. My guess is squeezed into 1,500 sq. ft. or so.
Rabbit (crying permabull),
Quit babbling and make your point. Show me how prices declined 8.2% or more in the summer of 2001, 2002, 2003, 2004, or 2005. Provide some data to prove your point!
You’re problem isn’t with me, but rather the real estate market.
LoL
““When are people going to realize that median OC home prices and median OC incomes will eventually have to mesh to reach equilibrium?”
This will never, ever happen.
Median income includes a whole lot of low-wage renters.
The median income of owners, or would-be owners, is the only thing that counts.
I guess the median is sort of a tool that can be used to see where the market is as a whole, but I dont think it is very representative of the market.
That being said, people like Jimmy loved the median when it was going up and now pretend that the drop is nothing when it is going down. He is one that had always says prices never drop. I also think Jimmy just likes to stir the pot, so arguing with him is pointless.
What I see as I do my daily searches of homes in my price range are homes asking prices have dropped 10-20% or more in some cases.
Some are right at the price the current owners paid and in some cases less. I guess you can call the price drop fear, but I think it is where the market as at this time.
As I always say it is about affordability prices and income need to come more into line with each other. The lending industry has changed, for now the easy money is going. Once the correction has occured and most of the subprime fallout has passed, they may go back to more risky lending. The only problem with that is those in Sacramento and DC are tightening standards, so the hay day of easy money is likely gone forever.
I am glad to see prices falling, for me it gives me a chance to get into something I can truly afford. I still think prices need to fall a bit more for it to make sense. I dont need a 2,100 sq. ft. on 6K sq. ft. A nice 1,000 sq. ft. condo with a couple of bedrooms and a garage detached or otherwise is fine with me. My income is far above median, but even most entry level places are not affordable.
Im my conversations with others looking to buy, most say next spring is about the earliest they will jump. I think prices will be down another 10% by than the median will probably reflect a drop of another 50K by than. Not that it means anything.
Lee:
I absolutely agree that prices have declined and will likely continue to do so. I readily admit that I was wrong–not about the price declines, but in the timing–I anticipated it happening several years ago. As I’ve stated to you previously, I have no plans to sell anything I currently own but will likely take advantage of buying opportunities in the future. I don’t fit into the label of “bull” or “permabull”.
I am in agreement with Anonymouse’s post far back in this thread. I have trouble with the hypocrisy of your repeated use of the median price as the measure of price changes. You have consistently been one of the biggest critics of this measure and blasted it repeatedly as the median increased. Now, though, it supports your personal opinion so you post it over and over again.
You’ve exhibited your intelligence in many prior posts, now please show some character and quit being hypocritical in using data that you previously branded inaccurate to support your position.
Samson,
I love it. A man with a plan - and specific wishes.
Best of luck to you.
Not Buying It,
Thanks.
In my case - it was absurdly simple.
I compared my mortgage, taxes, mello-roos and hoa (2) to the rent on a 3 bedroom place.
No interest calculations, no appreciation/dereciation, no tax advantages.
Too simple, really.
Do you know why I did it?
Because I am open to the possibility that I could be wrong, and that it might make sense to rent.
It’s not worth it for me at this time, because the savings don’t justify the change in lifestyle it would take (for me).
Well the good news is that this report will make it much harder for next years report to show lower sales
Roc, so they are reducing because of fear currently? So, what do you think they will do when panic sets in? Then after that we have a few more levels to go through, interesting times.
Realist:
You really shouldn’t post comments. You obviously have no idea.
I agree with ROC here,
people who think that Median Income will equate to Median house price are totally insane
you need to look at the supply of houses…… there is not a house for everyone in Orange County
you need to take the supply of houses and then divide by the total population in Orange County
let’s say, just to stupid here, that percentage is 50%……. then you need to look at the top 50% of wage earners….. take that median salary…. and then determine their affordability….. then you have a way more realistic median for where home prices should equilibrate to…..
unfortunately this still does not take into account all the people who will never leave southern california living in houses……. you really need to take them out of supply……….
in addition you also have to take into account all of the hotshots from other places moving to southern california with good salaries….. let’s face it this is a desirable place to live… there will always be an influx of people
I think that the Median home price will continue to drop….. that is pretty clear
but thinking that it will drop to a poing that equlibrates to median income of 75K is not very realistic
Patricio,
Is that a real question? Panic has set in - for some.
I like Samson’s take on this whole thing. He knows what he wants and what he wants to pay for it. I admire that he put some work into arriving at his conclusion, rather than holding out hope that a broad-based decline will drop something great into his lap.
I don’t care what state a market may be in, finding real estate is never an easy task. It takes planning, searching, budgeting, etc.
There is one hell of an opportunity coming - better get ready.
All I’m saying!
ROC,
I have been an underwriter for the last 4 years for “A-paper” and Alt A loans. Out of the last 1200 loans I have underwritten, 36 of them were fixed!!! So there is your proof. People cannot afford a fixed loan, therefore a pay option ARM is all they can get into. When all of the ARM’s from 2 years start adjusting in the next couple of months we are going to see some drastic problems…
Kim,
I don’t believe that for one second.
You work at an option-arm shop, apparently.
The true “A” paper client is not coming to your firm.
I would have accepted your answer if it didn’t sound so extreme.
Who are these people who do not understand the terms of an option-arm?
I was in lending for many years, and I can tell you that 98% of people know their loan’s terms.
Are you telling me that bright people are going into homes knowing that they will use the negative amotization feature?
I simply do not believe this is a broad-based fact
I knew to stay out of the market when our realtor and mortgage broker both told me that no-one gets fixed rate loans anymore, and that we didn’t need a down payment. After a little research I found out they were right, so we decided to rent a little longer, thinking (correctly) that what other people do definitely affects us.
As to the fear thing, fear is what drove prices up. Fear will drive them back down again.
As far as my personal entry point, our 2-year lease ends in March. We’ll not renew for another year, instead going month-to-month. When I find a nice house that seems like a good deal compared to renting the same house (less than 50% more per month), in a neighborhood where other people with similar income to us live, I’ll buy it. Ultimately the price of the house is irrelevant - if it seems like a good deal and we can afford it we’ll buy it. It’s simply not possible for a couple making almost double the median income to be priced out.
Roc,
No, what I am telling you is that 90% or more of borrowers are getting into ARM loans because fixed loans are out of the question. And NO most people dont know what the hell type of loan they even have because we go through only brokers, not borrowers. We are not retail, but wholesale. I’m not arguing with you, I am stating a fact.
Most borrowers with great credit and money down normally go to banks with great rates, not lenders like Ameriquest, Argent, Countrywide and SFC. But I have worked for all of them and they all operate the same.
We’ll see what happens….
“As far as my personal entry point, our 2-year lease ends in March. We’ll not renew for another year, instead going month-to-month. When I find a nice house that seems like a good deal compared to renting the same house (less than 50% more per month), in a neighborhood where other people with similar income to us live, I’ll buy it. Ultimately the price of the house is irrelevant - if it seems like a good deal and we can afford it we’ll buy it. It’s simply not possible for a couple making almost double the median income to be priced out.”
Well said. This too is a plan.
John raised the bloody red flag! What happened to my green arrow?
The most important number in this set is volumes. The new homes are priced almost 35% lower than last year, and their volumes are off by less than 6%, which means they are realistically priced to sell in the current market.. Resale SFR home volume is down over 40%, which indicates that SFR pricing doesn’t match market conditions.
Very clearly, the new home volumes show that there are plenty of buyers out there, provided the pricing is right.
Kim,
What do you believe the mortgage co’s are going to do if the government changes the bankruptcy laws, and allows judges to markdown mortgages to affordable levels?
BTW, I am for the most part, a libertarian type a guy, but I actually think this is probably the best way to keep people in their homes, and make certain that the loose lending standards don’t come back. Make the investors in the CDO’s the bagholders.
ROC is our new ezbabbler he would babble on for hours
saying nothing of relevance- just unsubstantiated rhetoric
hell even he finally saw the writing on the wall and has since
departed- probably to his favorite place the salton sea-
I predict that the same with ROC (realtor on crack)- I’ll
give him six months from today 03-05-08 ROC will be
a fond memory gone like a fart in the wind- I would say
3 months but some people are really slow learners and ROC
obviously falls into that category
meltdown,
don’t you see the Big Orange Index is still green !!!!
haha
for now
after that one goes red, i’m sure there will be a new “green” index……
Patricio,
OK, maybe many do not.
I suspect that what they really don’t know is the lingo, not the rate and payment terms.
Interesting that the chart shows 0% option-arms and 3% interest-only.
Since those facts are clearly understated, I don’t know what to make of the entire article.
Lee,
As for BK, I have no idea what will happen. The BK laws wont change for some time. However, I do feel the government will start making these shady ass lenders accept responsibility for the fraudulent loans they have funded, but for how much and how long is anyone’s guess. Even if the government marks down the homes to an affordable level, think of the all the neg AM and interest only payments they have been receiving…do you really think the banks are losing money???
I do not work for the mortgage industry anymore, I couldnt fund loans anymore for borrowers that I knew couldnt make their payments and ultimately foreclose. And thats exactly what is happening.
As I’ve said before, we can all guess as to the way of the market will go, but its just a matter of time until we know!
You claim people cant afford a fixed loan?
come on!
Anyone who does some shopping can still get fixed 30 year loans for about the same terms, interest rate as when I last refinanced 5 years ago!
ARMs arent much cheaper, and if you do shop around you’ll find a fixed from one lender might actually be lower than some of these ARMs.
I dont know anyone who has an ARM loan and no-one in their right mind would take one out today.
Maybe we should all be waiting for median prices to fall to under $100k?
Not happening without a disruptive cause like a 9.0 earthquake, or san onofre melting down.
Look at prices elsewhere — in one of greenspans many interviews recently he pointed out that the U.S. RE market actually underperformed versus most other countries RE markets - our increases have been limited versus the U.K. for example and their median incomes are a tiny fraction versus that found round here.
This is what Lennar, the biggest builder in Orange County is funding:
Are we assuming they too do not understand loan types?
“This quarter our mortgage capture rate increased from 67% to 72% and this quarter as you know, the mortgage market experienced tremendous volatility and following our mortgage statistics for the loans that we originated and funded during the quarter. The average FICO score remains in the low 700s. Our fixed rate loan percentage increased to 88% from 63% in the prior year. Jumbo loans were approximately 16% of the total loans and the percentage of FHA or VA loans increased to 25% in the current quarter from 12% in the third quarter of last year. Sub-prime loans are about 1% of total loan volume and these are agency eligible products in that 1%. Alt-A product has been reduced considerably from 41% in the prior year to 25% of the originations in the current quarter. And the Alt-A product has changed significantly. The days of no verification, no down payment and low credit scores are past. Alt-A product in today’s market requires credit scores over 680 along with a higher down payment and partial or full verification of income.”
And thank you Rants, you’re comments always make my day.
Jimmy, we are only in the first 7 months of the decline (since the mortgage crunch in February) - this thing is going to last at least 2 years before we are at a true bottom. Although a 40% drop from peak to trough is a bit excessive, 25% is definitely likely. So a $1.0 million home bought in 2006 in Fullerton will now sell for $750,000 in 2009? Sure, I think that’s very likely.
Will a Newport Beach home go from $2.0 million in 2006 to $1.5 million in 2009? I don’t think so. The drops will vary from zip code to zip code.
“your”
There is only one point that matters.
The time to buy is:
2010
SCWolf,
I put a home on the market in January 2006 at $2,300,000 and sold it in December 2006 at $2,000,000.
The decline is pushing two years, not seven months.
rants,
you’re my hero…!
btw, my own database of condos I have been looking at throughout OC has seen an average price from of 6.1% from Feb 07. I’m tracking 90 condos, and an additional 126 I was watching have been taken off the MLS. Out of those, 6 have sold. Wow.
Now I expect to be harassed by the bulls talking about how condos are worthless, they cater to poorer potential buyers, they never hold value, etc. etc.
Oh and if you didnt know this…
Home builders have “in’s” with lenders to only offer them specific products and if borrowers go through them, then the homebuilder will give them a closing cost credit. What Lennar is quoting are the stats from the lender reporting that they have the agreement with.
Be very wary is you buy a new build and the home builder says that if you go through there lender you get a better deal, what it means is you get roughly a 1-2 point higher rate in exchange for money on the back end to the builder. (so there credit they give you, is actually your money to begin with)
Just FYI
ROC says:
“We won’t see 2005 numbers for at least 3-5 years”
That would make it 2010-2012. Geez, after disputing my assumptions, you’re starting to sound like me when I said 2006 prices in 2013. Now how does that rent vs own sound?
“Obviously the borrowers that have good credit and money down dont get ARM loans, but what about the other 70% of the population that dont have that??”
This contradicts your earlier post.
And if you think that 70% of the populations has crap credit, you need to get out more.
This month, I finally broke through to a credit grade of “excellent” with the three bureuas. I always had 720-like numbers, but that was only good enough to be called “good”. At 775, I am finally considered “excellent”.
“Be very wary is you buy a new build and the home builder says that if you go through there lender you get a better deal, what it means is you get roughly a 1-2 point higher rate in exchange for money on the back end to the builder. (so there credit they give you, is actually your money to begin with) ”
This is bogus.
I just closed through a builder in December. I paid a flat fee of 1 point. I could do the loan myself, but it wasn’t worth having to deal with the arms-length issue.
Kim and ROC
Daily I am arguing with home owners that are in NEGAM payments and they think that the 1% payment is the interest only option.
I have to make them physically get their mortgage statement and go through it with me. Only then do they realize that the payments are not covering the full interest of the home. I ask them if they are ready for the fully ammortized payment or I/O payment? They state that there is no way they can afford that. You have 2 options. Sell, or Forclose. The ARM has 2yrs or less depending on the fully indexed rate. The subprime cedit issue is just the spigot. it has yet to flow into the ALT or A yet. Watch out.
Rants:
You are still alive. Your name was being taken in vain repeatedly yesterday on a thread and I was anticipating your response.
Sorry to go off topic, but I saw your comment on another thread about Ron Paul so I read about him on his web site. From what I’ve seen so far, the guy is too good to be true. Play devil’s advocate and give me the Reader’s Digest version of his faults.
Wonderful, you have great credit. I have a 805 mid FICO and I worked in the Mortgage Industry and yet still couldnt afford a home.
However, I was not one of the people that got an interest only or ARM loan just to get my foot in the door.
Like I said before. I worked for basically subprime lenders so my facts come from personal experience. I do not work for B of A or those other guys, I am telling you the majority of loans I underwrite and I fund, not what other lenders do…
Do you work in the mortgage industry or are you just preaching to the choir?
And yes, I did get par pricing.
The builder did a table funding in the lender’s name - Chase, to be exact.
ROC has mistaken us as someone who cares about his credit score- earth to ROC we dont care
never listen to anyone who brags about his credit score
on a housing blog its called being TACKY
What a great loan. One that lets you pay less than interest only! I can hardly believe that people don’t even know what they are paying on or what they got themselves into. That’s pretty sad. I guess the lender never explained it to them and/or they didn’t really listen. What a mess!!
You are right in the nose Kim.
All files that I dig through from 1yr back or more are Option ARMS with Hard 3yr ppp. That is what the lenders were pushing their LO’s to make. The Banks outside of mainstream (BofA and Wells) are going to get hammered soon. WAMU, Downey, Fist Fed Of CA, Counrtywide. Mark it in your little book ROC, you heard it here 1st
“BR Says:
October 5th, 2007 at 10:07 am
ROC says:
“We won’t see 2005 numbers for at least 3-5 years”
That would make it 2010-2012. Geez, after disputing my assumptions, you’re starting to sound like me when I said 2006 prices in 2013. Now how does that rent vs own sound?”
BR, what did you think I was thinking?
I totally agree with you.
The rent versus own is what it is. Rents are high. Unless they come down the equation will narrow.
Historically speaking Scwolf we are looking more than 2 years for sure.
In the wholesale business it is not a requirement that the lender explain anything to the borrow. That is what the borrower pays a broker to do. So basically…you better have a broker you trust.
Out office had to cap the points on the back that we would pay to brokers because they wanted like 5%, which could be anywhere from 5K to 80K. So we capped it at 2% depending on the loan amount.
Hello…didnt anyone follow the million dollar lawsuit that Ameriquest settled??
This problem manifested because of greedy lenders, realtors and brokers…period, not what Greenspan lowered the rates too, however it helped.
i bought a home 6 months ago. should have waited. kim can i refi from you?
“ROC has mistaken us as someone who cares about his credit score- earth to ROC we dont care
never listen to anyone who brags about his credit score
on a housing blog its called being TACKY”
The subject is credit.
Get a life.
Ur late,
I couldn’t have said it better myself!
Thanks
“The rent versus own is what it is. Rents are high. Unless they come down the equation will narrow.”
I’m slow, but maybe if I think hard enough I will understand this.
“period, not what Greenspan lowered the rates too, however it helped”
Kim, you couldn’t have said it better. Its very fashionable to blame Greenspan for everything these days and I’m sure I will get brickbats for that here also.
“Kim Says:
October 5th, 2007 at 9:25 am
ROC,
I have been an underwriter for the last 4 years for “A-paper” and Alt A loans. Out of the last 1200 loans I have underwritten, 36 of them were fixed!!! So there is your proof. People cannot afford a fixed loan, therefore a pay option ARM is all they can get into. When all of the ARM’s from 2 years start adjusting in the next couple of months we are going to see some drastic problems…”
Kim, your initial statement didn’t mention that you work in subprime. Can you understand why I challenged this?
I think we actually agree on what’s out there.
Plain and simple…lenders did what they wanted, because there was no one there to babysit them!
“BR Says:
October 5th, 2007 at 10:23 am
“The rent versus own is what it is. Rents are high. Unless they come down the equation will narrow.”
“I’m slow, but maybe if I think hard enough I will understand this.”
BR, what is confusing here? I’m not trying to be rude.
If you look at rent versus own calculations, you may be suprised at how close they are.
Regarding the DECREASE in OC home prices…here is letter to Supervisor Pat Bates:
Supervisor Bates,
I spoke with your assistant Jeff Corliss this date regarding the train wreck that is occurring as a direct result of the Tax Assessor’s County-wide increase in residential property values.
I have asked Jeff to schedule and appointment for you and I to talk so that you can fully understand the Tax Assessor needs to remedy this problem directly, immediately and effectively. Jeff has stated effectively the ticket of admission to meet with you is to write this e-mail, so here we are.
As a side-note, Jeff has stated that one may appeal his/her assessment and/or vote the individual out of office. Obviously these are not relevant solutions to this problem. Why?
Answers:
1. A VERY simple cost-benefit calculation will quickly demonstrate the silliness of having tens of thousands, perhaps hundreds of thousands, of O.C. residents petition to have their taxes properly assessed, when the man in-charge, with his Team, could fix the Tax Assessor’s error in a short period of time–using significantly fewer resources.
2. Voting the, perhaps incompetent, Tax Assessor out of office is too little, too late–we need competence and action today (literally) not at some point in the distant future.
3. Most importantly, very many O.C. residents do not speak english. You will agree the fact that many O.C. folks do not speak the english language and likely do not come from this country makes it unlikely, on the whole, that many of these folks will know to petition or feel culturally comfortable petitioning.
I am available to meet 24 hours a day, seven days a week.
ROC,
Well great!! I was trying to make a point that people that have money dont understand…..not everyone has it. And that this is the reason we are in the mess we are is because of mainly the shady lenders, and partly the borrowers as well getting loans they didnt understand and still dont.
My aunt just got a Neg am loan with Countrywide that she was told was a 30 year fixed. After signing 300 pages of conflicting info, she believed her broker. Well need I say her home just foreclosed on her last month. So if you dont understand it… DONT SIGN IT!!!!
ROC,
“If you look at rent versus own calculations, you may be suprised at how close they are.”
Put simply, there are a lot of people renting close to the ocean who do not want to live in Rancho Santa Margarita
Samson:
I agree with you.
The Nation Medium is a great “model” to gauge a purchase.
We are living in a two bedroom condo with attached garage.
Purchased in Aliso as close to the “National Medium” at the time.
Some Advice:
When the mortgage is paid down to accomidate “Market rents”
rent in out, and buy your starter house. You will be in fine shape!
Roc:
You know your stuff.
Credit is everything, you cant purchase a home without 700 credit
If you do, your a moron, as a buyer you would be paying way more.
If you dont have good credit dont even think about a $650,000 OC prop
OC Native:
No curve ball on Lenars profits.
I just think Lennar like John Lang
K–Bee and all the others….Should take a step back right now.
Did you know the planned community of Aliso Viejo was delayed
for over 8 years during the recession of the 90’s??
The tustin and El toro Air Bases alone bringing in 30,000 new units.
What do you think that will do to the already bad housing market??
As far as bieng obsessed with the almighty dollar??
You are wrong. I am a god fearing man and put him first.
I am a family man with a wife, two Kids, a dog and 4 homes.
I am only 33 & started with nothing here in the OC at 18 back in 1992.
To pull that off, I have got to hussle up.
Rants:
To the real rants:
I bet I have passed by you in Aliso Creek Wilderness park,
Riding mountain bikes down the trails.
This is my stomping grounds,
I like the Summit starter track on top of the hill.
Comps in that tract were as high as 850,000 for the view homes.
Hoping to go there, or Laguna Niguel for $650,000 3bdrm 2 bath
God willing.
I personally dont think that someone with a median household income should be able to afford a medain price home. That doesnt make sense. I do think that someone with a median household income which I believe is around 76K should be able to afford and entry level 2 bedroom condo. Which isnt really the case depending on the neighborhood. So I feel that prices need to come to a point where more than 20% of the population can afford a median priced home or better say closer to 30 to 35%.
I would venture to guess that 20 to 30% of the population that are in the lower end of the income bracket will never be able to afford a condo or house. I do feel home ownership should be available for at least 60 to70% of the population.
Thanks ROC for the compliment. I do feel that I have a plan in motion. I think most waiting do. It just has to make sense for me.
Another question for anyone. I am not very savy on the tax savings related to home ownership. What is the approx. amount of taxes that a person would get back. I am sure it depends on a lot of factors.
A simple break down would be fine.
I’ll give it a try.
Assuming you are employed, not self employed it works like this.
If you don’t have a mortgare and you make 80,000 a year. Assuming you are not able to itemize you get standard deduction of between 4 and 8 thousand (depends on marital status). Then your income tax is 30% of say 75,000 . Tax due is $22,500.
Now once you have a mortgage the interest paid and the property taxes come off of your income. If you pay $3,000 a month on a payment then 2500 of that is interest. That gives you 30000 off the taxable income. Add in the 7000 property taxes and now you have a decuction of $37000 off your income. Now the taxable income is 43000. This drops you to only a 25% bracket. So 43000 x 25% leaves you a new income tax bill of $10,750.
Net tax savings of $11750 or approx $1000.00 per month.
Ok that makes sense to me. So basically you take the interest payments and the property tax off you your gross income. That sounds about right to me. That does help a lot in relation to the rent vs. own arguement. To be able at least for a while to get nearly a third of what you are paying out in a loan back can help pay a portion of that loan. The difficulty would be that first year or so when you havent gotten that rebate check yet.
What alot of people do is change their withholding so they don’t withhold as much of your tax payments so you can use that throughout the year.
Stupid quote of the year by e probert. “Price doesn’t mean much to me.” What a stupid idiot. Price is everything, moron.
ROC stands for retarded obnoxious c unt.
use the w4 form. adjust your deduction up to 4.
Renter,
You are nasty.
You will never, ever achieve any success in life with your attitude.
I agree..renter in Newport. What a wafe you are. So obnoxious.
Samson,
“I would venture to guess that 20 to 30% of the population that are in the lower end of the income bracket will never be able to afford a condo or house. I do feel home ownership should be available for at least 60 to70% of the population.”
I agree with you on the principal…….
but I don’t think that’s realistic in the Orange County Market….
there are plenty of other markets where those people can buy a house, around the country
Excuse me???? A median wage earner shouldn’t be able to afford a median priced home? Okay, so what you are effectively saying is that you want the middle class to be forced out of what they have rightfully earned. You snob. I am above the median wage, and I still cannot afford a median priced home. Hey, here’s a newsflash for you, people like me have been watching all the idiots run out and buy these overpriced properties like they were new iPods on the day after Thanksgiving….. while they have been buying and driving up the market, we have been staying put, saving, saving, saving…. and when it all comes down, we will have our way….. nice home, nice REASONABLE mortgage…. and we won’t have to take some toll road to get to work. Just the way it should be.
Kim,
Who did you mean?
Mav,
The problem with that is, the jobs in OC pay. I was thinking about moving, but the pay doesnt even come close. So yes, you can buy a beautiful home for $250K, but you make $12.00 and hour!
The housing basically goes with the median income. If you make 100K then your house is a million. So who knows, hopefully it will come down enough for 60-70% of the population to be able to afford a home, but I dont see that happening.
Renter:
You said in your post:
” What a stupid idiot…”
How does that contrast with an intelligent one?
Kim,
I never heard that word before.
Was that directed at me?
Kim,
There are some places in Texas and North Carolina where salaries are almost the same but houses are MUCH MUCH cheaper.
I’m not saying everyone fits into a profession / industry that works in those locations.
Living here comes at a premium……….. prices will drop …… but someone making $75K (or the median at the time) will never be able to afford a house in Orange County in a half decent neighborhood
Kim,
“If you make 100K then your house is a million”
I don’t think anyone should consider a $1M house unless their household income is greater than $300K / year….. or they are sitting on serious wealth
this is why we have a problem, some fools making only $100K actually did this
ROC,
No it was not directed at you. It was directed at renter in newport. Wafe is another term for an ignorant, shrewd person.
Thanks Kim,
What a relief!
What I saw in the Urban Dictionary was awful!
That’s a new one.
Yuck!
Newport Renter: What an ass. And here I thought it was only the realtors(TM) and housing permabulls that insulted people.
You’re the one renting in an overpriced area, and probably paying too much for the privelege of not saving anything.
Ultimately price doesn’t mean anything - value does. Housing is an income producing asset so as long as the income & cost to hold are nearly comparable that’s all that matters.
Of course right now I agree that relationship is totally out of whack for average houses in average areas, but the price still is not the thing to focus on.
As my favorite blogger, Calculated Risk always says, “Housing always seems expensive, the problem is sometimes it really is”
Mav,
I have looked there, but cant live with the hurricanes. Plus I work for a general contractor and the business isn’t all that great out there. But they do have beautiful homes there.
Too bad, I cant pick one up and move it here. Then I would have to pay another million for the land to put it on. lol
And before you jump all over me for being inaccurate with my statement about investing, consider that I still think housing is wildly overvalued. I’m just smart enough to know that it doesn’t have to fall 50% to make it attractive.
I don’t plan on getting rich off real estate so all that matters to me is that I can get a 30 year mortgage that I can afford. Then in 30 years my house will be paid for and I won’t need to earn so much money in retirement. Everything else is just noise and doesn’t matter.
Kim,
I’m with you…… life here is good…..
save money
get ready for another 10-20% drop in prices
the end result of this housing downturn will be a mass exhcange of wealth from the poor to the wealthy
i think this is awful, but a fact
eprobert,
I agree with you 100%.
Funny how when the soundbites turn into real discussion, we find we are not all at the polar opposite postions we presume.
I have a lot of optimism that once the dust settles, we will all be in a much healthier place.
Someone mentioned awhile back about gearing-up to take on our oil dependence issue. Wouldn’t it be great if we could be a part of that?
I think we have an exciting future here behind the Orange curtain.
Notwithstanding those numbnuts in Washington.
Great ending.
And I’m out.
Both up today.
Not really news there.
Rants,
Many of us are in agreement about the outlook for housing.
What is your opinion?
Please be specific.
kim please don’t go, you are the only woman here!
Hey ROC, kim and eprobert maybe you should all get together. Since your all out of work half wits who spend all day reading blogs.
Oc native you’re such a brilliant wit. oscar wilde has nothing you dip sh it.
Thank you Renter. I can’t tell you how much it means to be recognized as a brilliant wit by someone with your obvious intelligence and class.
Renter in Newport:
Hey you twit. I do have a job thanks you. I am on this blog to express my opinion. Obviously you yourself have nothing better to do than give your worthless two sense about something you know dick about. Maybe if you could put your dirty mouth to work, you could buy something instead of rent in Newport!!
So before you rant and rave, get your facts straight.
kim you are back! i have no question, just glad that a woman is in the forum. i have been watching this unix server right now so i have time to read your blog.
honky,
I’m sure renter from newport is a female as well. However, she doesn’t have anything nice or classy to say, so I guess I am the only classy woman here. Thanks
kim i have a feeling that this ranting renter is either matt or fedup from the other crazy forum.
Why do we need DataQuick to tell us what any 30-second MLS search will show us. Anywho, as far as the results, will we ever hit rock bottom? Of course not. Housing is not as much of a commodity as it is a necessity. Also, life is fluid. So, something’s got to give.
I dont care who IT is, they need to be respectful of the other bloggers. I am not attacking anyone (well until that comment).
If you need help refi your house let me know, I can get you in with some very good people. However, I would wait until the end of the month when I think the Feds will drop rates a quarter. But that’s just my prediction.
kim i actually have a 30 years fixed with a respectable credit union at 6.1% and 0 point. i am just kidding when i say i need a refi. although the house i bought in fountain valley has dropped in price by about 50k since i bought it. this is a zillow estimate anyway.
Well as long as you keep the house for the long haul, I’m sure it will be great investment.
600,000 or more than half a million dollars will get you
20 years old house with a nice neighbor.
OR
1 bedroom in a high rise tower.
OR
1 townhouse or condo in a very good location.
AND
SLAVERY MORTGAGE FOR THE NEXT 30 YEARS.
carlos, the sky is not falling. i am doing well enough in the stock market to pay off my mortgage if i want to. long term investor always win in the end right kim?
OMG this thread just gave me a headache.
NODs are going to be close to 1 for each sale of resale homes.
Jon - When is history has that happened? Dust off the trusty spread sheets because I am curious.
mav - Your growth numbers are all out of wack. You need to use household growth and job growth for housing needs. Then you need to factor in the amount of people commuting to OC from the IE for their jobs. Then calculate the housing stock growth and you will see that there is no shortage of housing in OC. BTW population is not growing and neither are jobs. And why has there been several years where adjusting for interest rates has OC been affordable for the median household income? Typically it rarely goes over 40% of the household median income in relation to the median price and even it the last bust it barely got over 40%. So really is OC so much more desirable in 2007 than it was in 1997 that people should spend over 60% of the median household income on a mortgage for the the median prices home when in 97 it was 30%? Sorry buddy but you need to take an econ 101 class because if that doesn’t spell crash I don’t know what you are smoking.
I am surprised that I am saying this, but Jimmy is right on the 400% (nominal value) increase in SFR prices. I know for a fact (I bought a couple in ‘96-’97 and sold in ‘2005) that prices in places like Laguna Beach, CDM, etc. increased 400% from 1996 to 2006. But, as any reasonalbe observer would realize, this 400% increase was never based on fundamentals like price/rent or price/income.
However, as the old saying goes, the bigger they are, the harder they fall. Now that people have to undergo real underwriting to get a loan and investors are out of the market, it will only continue to go down from here. How much and how soon are the question, but I don’t see it being less than 20% and probably closer to 30-40% (real value) depending on the area, with a bottom no sooner than 2009. Then things should be back to being closer to a realistic value based on historic norms.
brad, i have traveled to europe and asia as part of my job. over there a house that cost 700k is considered cheap. population growth and density is part of the factor. if i use the same old logic when i buy my google stock, i would have sold them all by now. i do not use conventional logic when it come to investing in stock.
The dollar has steadily lost value compared with other major currencies since the end of 2002. The euro has risen more than 70 percent against the dollar, yen is up about 19 percent, and Canadian dollar is up more than 60 percent.
Housing in Orange County is a riskiest investment. Your hard earned dollars are gone and inflated house price has no way but down.
It is going to get dark before the light goes out in Orange County.
carlos your scenario can only happen if a major disaster hit the oc. otherwise, i am getting a nice tax break while not having to pay 1500 a month in rent for a 1 bedroom apartment. my return on investment in the stock market exceed the 6% mortgage i am paying right now.
honky, I didn’t say that the housing market in OC (specifically coastal south OC) is like stock investing, one is a liquid and one isn’t, but there are common aspects to investing in both.
And as far as Google stock goes, I am assuming you are still holding the stock becuse you expect future earnings to support an increase in the stock price.
Could you say the same thing for a home in CDM or Laguna Beach over the next few years? I don’t think so, therefore, you shouldn’t own/buy a home there. 10 years ago, a house in Laguna or CDM was like Google stock a few years ago.
Do you agree with my reasoning now?
I missed this earilier:
“taking it in Says:
October 5th, 2007 at 11:40 am
Excuse me???? A median wage earner shouldn’t be able to afford a median priced home? Okay, so what you are effectively saying is that you want the middle class to be forced out of what they have rightfully earned. You snob. …”
Taking it in,
I’m afraid you misunderstand the dynamics of the argument.
The median home price will not mesh with the median income for two reasons.
The first has to do with low wages pulling down the median income - this one is not the big factor.
The big factor is that the median home purchaser has equity built up over decades. This allows people to buy ever higher priced homes, which pulls the median home price up.
It is most certainly not a slur, nor is it snobbish. It is how real estate markets work. House values go up over time and therefore downpayments (or equity) increase.
Please don’t think these comments are a class judgement.
Everyone have a good weekend!
Bye
Well…let me say this. I just relocated (transfered) to the OC from the midwest where my 3600 sqft house on a half acre is listed at $595k.
I’ve been looking at houses now for the last four months and can tell you that I get emails from my realtor every day where a house we looked at in July has just had a 365k price reduction. One was even a 495k reduction. The end is near…I don’t think so.
A co-worker of mine just bought a house in Irvine that was on the market for 622 days. She got it for 925k less than the original list price.
By the time this is over, houses in crystal cove are going to be worth half of what they are now.
It’s going to happen…if you think it isn’t you’re obviously living at Disneyland.
Sometimes you have to be careful what you wish for. I can certainly understand the hope of many who are waiting for prices to drop substantially so they can finally afford to buy; if I didn’t already own real estate, I would, too.
But, given the reverberating effects of the elimination of many construction/real estate/financial services related jobs and the spillover to the economy as a whole, things could potentially turn very dark across the board. If and when the prices fall to levels considered affordable by today’s measures, how many will still have their jobs to take advantage of it? Congratulations to many of you who are in somewhat recession-proof jobs; many of us, and I include myself in that group, are not.
[...] Comments squatters_right on Late-Sept. home prices at April ‘05 levelOC Appraiser on Housing slump slams county’s mid-sectionOCNative on Late-Sept. home prices at April [...]
OCNative - well said. I couldn’t agree more.
Greg: Your decription of how income tax is calculated and how the mortgage interest deduction work are so far off as to be laughable. Seriously. I strongly encourage to seek professional advice when preparing your taxes, because you certainly couldn’t do the work yourself.
Wake me when we get to the half-off sale price. Until then, it’s just denial.
Speculators and panicked buyers set the price on the way up, and liquidators will set the price on the way down. Prices are always set at the margin, always have been, always will be. Comps, anyone?
Reversion to the old sensible lending protocols means most folks can only buy half the house for the ’same’ monthly payment they could at the bubble peak. Subtract also the pool of buyers now excluded from this paradigm. Factor in the multi-year overhang of surplus inventory. Consider the price at which a house makes sense as an investment on a cash-flow basis, completely apart from ‘equity gains.’
No salvation for sellers in waiting. Are the bears yelling ‘fire!’ when they suggest you sell now? Meditate on this very carefully. It might be the best advice many of you are getting at this point in time… perhaps in your life… and your financial condition for years to come may depend upon your deep consideration of the risk/reward of your actions.
Good luck to the unlucky sellers.
Sell NOW!
There’s a huge lie that keeps getting perpetuated…that somehow OC incomes are “really high.” This simply isn’t true. The salary for most jobs in OC are marginally higher than they would be elsewhere in the country. Don’t confuse a high median income with generally higher paychecks. It’s not that professionals make all that much more in OC, it’s just that there are more of them. That characteristic defines an affluent area.
OC is a relatively affluent area. But there are affluent areas all over this country. A median household income of $75K is high, yes, higher than many places. But as an affluent suburb, it’s just OK. Take Plano, Texas. There’s a city that probably is similar to Irvine in many respects (size, population, etc). The median household income in Plano is probably higher than Irvine (I think I’ve read ~$95K). But for $300K you could buy a 3,000 sqft home with a pool.
OC home prices will ALWAYS be higher than those in most of the rest of the country. But if you want to understand where OC home prices are going, all you have to know is that in 1996 the OC median was about 1.5 times the national media, and today it’s nearly 3 times the (overinflated) national median.
From what I have read it sounds like only 5% of people at most can afford a 30 yr conventional loan in O.C. The amount of rent these homes can generate is roughly 1/3 of PITI. Its the P/E its always been the P/E. Look for at least 50% off and possibly close to 75% off due to overcorrection. Thinking this will be over in a year is totally delusional.
According to my personal banker at BOA, only 11% of the residents of Orange County can actually afford to live here.
Didn’t he get fired yet?
WOW and ROC: right on. Thanks, I needed that laugh. That was funny.
What happens next? The major damage is probably already done, and the present situation will likely settle out over the coming year. Lenders will stop pulling products off the shelf, and the rates on products that have moved so significantly higher now should trend lower down the road as delinquency rates stabilize.
Look for me at http://www.contactherrick.com
Greg’s estimated tax savings he listed above are off a bit —
The standard deduction is 10,300 for married.
Using assumed 80K -10,300= 69,700 @ 30% tax bracket: tax is 20,910.
Assuming 500K loan @ 6% = 3000 pmnt & 2500 month interest or 30,000/yr interest..
Property Taxes more likely 6000, so we have 36K write off .
80,000-36,000=44,000×25%=taxes of 11,000.
Taxes of 20,910-taxes of 11,000=9,910 or 825/month difference.
Carry this a step or two and let’s see why no one is buying……..
3000/mo pmt + 500/mo taxes+100/mo insurance + HO association (?) $150 + maintenance/upkeep $200/mo plus. We’re at about $4000/mo for a depreciating asset that can be rented for $2000/mo.
Pass the popcorn while we watch the reality unfold; a closing of the ratio of purchase vs. rental costs.
For Jimmy’s benefit: if the price of a house goes up 4X, you say that it has increased 400%. If it then drops back to its original price, it will only be going down 80%. (And if it goes to zero, it’ll only drop 100%.)
ie, your number on the upside gives an inflated picture vs. the downside.
But hey, what’s the difference if you tap through life with a dog and a white cane?
Helen
I think something bad is happening,
I have been looking to buy for the last year and I am seeing houses that were over 500k being cut in half in short sales, I’m afraid to buy now because I think this may be just the begining.
I would like to be a bull but what I’m seeing from a buyers perspective is a little alarming, I knew prices would correct, but I was not expecting asking prices to be cut in half.
And the ones that have not adjusted their prices, I keep seeing their same houses for sale, after a year, still for sale, I ignore them at look at the new listings.
John:
People who are bullish on the OC housing market short-term are few and far between. The pendulum of public opinion has finally swung the opposite direction after years of rapidly escalating prices. It may take years for the dust to finally settle. In the meantime, people will continue to buy and sell real estate for a variety of reasons, but in substantially reduced numbers from previous years.
Some of us saw the writing on the wall, while others were apparently caught unaware. Personally, I had previously been an active Realtor who transitioned out of the business several years ago. It got to the point where nothing was making any sense; logic often gets tossed out the window during a frenzy.
If I were either still in real estate sales or looking for a place to buy for myself, I would be very patient and do a lot of homework. There may be deals out there that make sense, depending upon the motivation and circumstances of the individual homeowners. After being involved in the REO business in the 1990s, I can tell you first-hand that something being “bank owned” doesn’t neccesarily imply that it is a good buy; we had some great buys and some horribly over-priced properties (prices forced upon us by our lender clients).
Since you mentioned short sales, please remember that a short sale is only an offer by the current homeowner to sell their house at a certain price; but, it is completely contingent upon the acceptance of that price by the entity holding the loan on the property. Not being currently involved in the business, I don’t know the current climate within the lending institutions. But, I saw a large number of short sales rejected by banks in the 1990s. In some cases, it was very short-sighted of the bank(s), but they hard their own internal requirements that were often not conveyed to us.
Daria Werbowy Pic
I Googled for something completely different, but found your page…and have to say thanks. nice read.