DataQuick’s first-half O.C. homebuying stats shows:
- Just two of O.C.’s 83 ZIP codes — Buena Park 90620 and Newport Beach 92662– reported sales above the January-to-June period in 2007.Pricing was equally challenged this year vs. ‘07.
- Only four of 83 ZIPs — Corona del Mar 92625, Laguna Beach 92651, Newport Coast 92657 and Newport Beach 92662 — had first-half gains in their median selling price.
(More Zip data HERE! And look for more analysis in Sunday’s Register print edition!)
A regional analysis of the first-half report by your blogger shows the buying sluggishness was pretty evenly spread throughout the county, though pricing was weakest in the middle of the county and relatively strongest near the ocean:
- DataQuick identified 1,936 homes selling in beach cities’ ZIP codes in the first half, a 32% drop from a year ago. In these 17 ZIPs, last month’s median price change was -9.2% vs. a year ago.
- South inland ZIPs had 3,279 sales in the first half, a drop of 29% from a year ago. In these 19 ZIPs, the first half’s median price change was -13.6% vs. a year ago.
- North inland ZIPs had 2,590 sales, a drop of 32% from a year ago. In these 23 ZIPs, the first half’s median price change was -18.7% vs. a year ago.
- Mid-county ZIPs had 2,728 sales, a drop of 23% from a year ago. In these 24 ZIPs, the first half’s median price change was -23.4% vs. a year ago.
- All told, countywide sales in the first half were off -33% vs. ‘07; the median selling price fell 20% in the past year.
Other news about neighborhood real estate …
Steve Thomas will use data from Buena Park only this month. Sales are increasing!
The reality is, with the tightened lending standards requiring full documentation of income, that a family with $100,000 a year can only afford total PITI of a max of $38,000 a year or $3,167 a month. That translates into a loan payment of approximately $2,533 a month. At 6.0% (which is probably low at this point) that translates into a loan of $425K, or around the old $417K limit. If they happen to have 20% down, and most don’t, then the house price is $531K.
If they only have 3% down, which they need to have themselves now, then we are talking a house price of $438K.
That’s it.
How many families in the OC have $100K a year in combined income? Well, if they have dual incomes, probably quite a few. Stats indicate the median is closer to $90K though. I’m assuming entry level buyer has to be at or above the median for the county, otherwise they remain renters.
I think we still have aways to go here.
Which side are you on, Marc? You just showed that even first timers can find something in today’s market.
All of you renters out there, enjoy the summer and let sellers keep their homes on the market while paying mortgage, property taxes, hoa, insurance, etc, etc.
If you really want to buy, always offer 15 to 20% under the asking prices. If the seller doesn’t take it, he will in a couple of months. In the meantime, enjoy the summer. Time is on your side.
NationalBubble,
I plan to buy late this year and will do what you suggest: offer 15 to 20% under asking. I am in no hurry and time is on my side. Thank you for your links and good advice.
Marcia,
My husband makes about $55K a year and I make $61K. We could not afford that high of a payment. We pay $1650 right now for rent, and there is no way we could double that to $3167. I think couples/individuals making $100K a year can realistically only afford about a 250-300K mortgage. Not $425K.
but but but but… my CDM cottage is worth billions!!!!
Also when I saw we “make” $100K a year, that’s before taxes. After taxes (401K, health insurance etc), we only bring home about $5000 a month. I couldn’t possibly imagine $3167 of that going to a mortgage. What about utilities, car payments, food, gas, repairs to the house, savings, LIVING?
Marcia… my girlfriend and I make about $145K combined. I have no consumer debt and hers is relatively low and by the end of this year she’d probably be done paying it down. even so, cutting our expenses about 20% and with student loans, 2 car payments, etc, I really think there’s no way we could afford $3200 a month. for fairly young people like us, first time buyers, even with the tax break I’d say $3000 would be the absolute max in PITI
bottom line, prices are still at least 25% too high
they are down, nationalbubble: you are right. people need to remember PITI is really PITI(MH) for Maintenance and HOA. yuck
Correction *say* not saw, sorry
Also when I saw we “make” $100K a year
Should read “Also when I *say* we “make” $100K a year
Yeah, we were just looking at this condo complex in LH. Big places and the prices are coming down but then we checked out the HOA dues, $340 a month! That’s not small change. So you’d have to add that to the $3167 which would bring you to $3507 a month. No thank you.
that is a very good point, marcia’s numbers assume that you have absolutely no debt, which is not the case for most people.
when you see a vacant home for sale, just think about how much the seller is losing every day by keep that home on the market. As I said before, homes are not like a stock that you can keep until the market comes back and it doesn’t cost you a penny. Homes on the other hand, cost you real money just to put them up for sale.
You can use that to your advantage by offering much less than the asking price and never get emotional about buying a home. There is always a better house for you to buy in the future. So take it easy, and just offer whatever you feel comfortable with. Keep in mind that home prices will most likely go down at least another 20% so account for that in your offer. if you are thinking about buying in the beach communities, I’d wait another year or so since we just started seeing the big discounts there. You need to give the sellers time to understand who is in charge now.
As a buyer, you are in the driver seat my friend.
I know there will be some that will disagree and say it isnt so.
Old school standards state that no more than 28% of your income should go to housing. This will allow you to actually save and pay for what you really need.
So a family that makes 100K shouldnt pay more than 28K in a year, or 2,333 a month. Since it is CA lets knock it up to 30K a year so 2,500 a month.
That’s it. That is probably 1/2 of the take home pay for someone who makes 100K a year. Leaving only 2500 a month for everything else including saving for retirement.
Things need to drop further, thats the bottom line. It is still all about affordability.
Bubbs, people get emotional about buying homes all of the time. We have gone over this. EVERY purchase is emotional…all of them. Human beings cannot keep emotions out of their needs or wants. Even the most basic needs, like toilet paper or deodorant (think of how you will FEEL if you need either of them and you DO NOT have it) are purchased based on emotion.
Now, you add the stress of buying the home, moving, packing, coordinating with multiple people just in the transaction alone is enough to send many people right to the edge…I have witnessed it my entire career. It is all emotion all of the time.
Provider-
I know you hate it when we post facts here. It is so much harder to garner support for unsupportable logic. But on this blog you actually got to hear from two OC renters who confirm what I’m saying. Paying $2500 a month for a place that charges $1500 will not fly, I don’t care how much you think I’m totally out of it.
So go back to your RE desk, tell your sellers they can hold the line on their prices, and have them watch as their equity continues to shrink while they ride this market down.
You are in the service business after all. And you will have done a service to your sellers and buyers by doing this. And I am sure they will come back to you when they have the opportunity to move up or out, because you were so honest and forthright with them in this turbulent market.
By the way, we sold in 2005 and have been renting because we had to move. Not because of any brilliance. My spouse doesn’t work. My gross is in the low $100’s. The bank qualified us for $500K loan, qualifying us at 45% of our gross. 45%!!!
But we, like the renters above, we take home about $5K/month. That loan, including PITI would be over $4K/month. Gas for our two cars is between $700-$800 a month. What are we going to live on?
So we won’t buy anything in this market. And we have the down to do it, having gotten over $300K in equity out of our sale.
And if we won’t buy, I can’t see the first time buyers above jumping in.
We’ve got another $100K-$150K to go before this market stabilizes. That’s just how I see it.
So 4 big coastal areas saw gains? I thought the sky was falling there too.
the sky is not falling. it just look depressing…
Apparently the affordability argument is dead if you modify your lifestyle. With no surprise, the ongoing entitlement argument comes roaring back.
Marc,
I’m just wondering how your spouse manages to burn $700/mo worth of gas if she doesn’t have a job to commute to. Just curious.
Sampson,
I would argue 28% if IR were 10% and you were doing a 15 year fixed. That is a thing of the past.
(I meant $350-400 mo for that one car.) Those are some long shopping trips??
SoCal78
It’s $700 a month for 2 cars, because our family, unlike yours evidently, has 2 cars. My car is the heavy burner, since it is an SUV type car. That one goes avg $100+/wk in fuel. The other car avgs 1/2 that. So depending on how much I drive will depend on whether we burn past $700 a month. My commute is approx 1 hour a day. I’ll let you do the math on that one. And yes, we are re-considering whether a job closer to home would be more economical. Of course this is a great time to be thinking about a job change. So we, like alot of families our there, are suffering from the gas hikes.
Well I guess I will join along and share my side too. We gross about $105k’ish a year. That is on one income. We have no childcare expenses. We have two fully paid off cars so no car payments and we like it that way. (One car is over 10 years old — ooooh we’re such OC rebels.) We have no credit card debt. No student loans. We can afford some nicer things but purposely shop at inexpensive places, don’t dine out much, rarely take a vacation, and never pay retail. We take the “pay ourselves first” approach - contribute to employer-matched pension, life insurance, add to our savings account, blah blah blah. When we buy we will put down about $80-90k (which compared to some people, feels like peanuts.) We would be comfortable paying $3k/mo but not some of the outlandish mello-roos you see on newer homes here ($419/mo - what is THAT?!) and no freakishly high hoa dues. I basically don’t care what the bank says we are qualified for - if it’s more than we want to spend, we won’t. I refuse to put all my eggs in one basket.
P.S. - We use the other car on the weekends, so that’s where the miles pile up on that car.
And yes, I know, I should take a gas-saver car to work, but they hurt my back driving for that long, and yes, I know I shouldn’t drive so far…I get it. I do. And we are adjusting our choices accordingly.
Marc,
We have two cars also. No SUV’s though. We choose the more fuel efficient one for “commuting” to work. (The drive was about 45 min but we just moved much closer to work and is now 10 min.) The gas needle on the other car barely moves - we just use it for around-the-town trips but try to stay close to home with it.
Sorry - my posts keep getting delayed when posted so I can’t see the updated screen until it’s too late.
SoCal78
For us, it’s driving the kids to/from school, practices, grocery shopping, sitting in traffic waiting to pick up dry cleaning, I do twice as much running around as a stay at home Mom than I did when I worked. And it’s not shopping- I’m not a shopper at all and would buy everything at Target if I could. I also drive into Costa Mesa to do grocery shopping because it’s cheaper than the stores here.
Scott,
How could we modify our lifestyle to afford $3507 a month when we bring home around $5000? Do you pay your utility bills, do you pay for gas, and do you go grocery shopping? Do you know how much anything costs? If we paid $3507 a month for our mortgage we’d have $1493 left over for EVERYTHING else. Right now my utilities run about $230 a month. My husband and I carpool to work so we spend about $65 a week on gas. (Our cars are paid off and we don’t use credit cards). So after the $3507 a month mortgage (PIPIH – H for HOA’s), utilities and gas, that gives us $250 a week for everything else; food, savings, pet food, etc. Can you tell me how it’s still not an affordability issue but an entitlement issue?
Scott,
I’m talking about being financially wise. I don’t care what kind of loans people can get. Anything more than 30% is foolish if you plan to live past the year you retire.
You can’t save 10% of your income for retirement, save money for your children’s education, travel, etc….if you start putting 40+% into a home.
It is just insane. What is going to happen to all these people who put more than 40% into a home? Who will take care of them when they have no retirement? Are they all to get reverse mortgages?
As a nation we have a savings rate of less than 1%. Which means there a lot that are saving more than 10% and even more that are negative with 10’s of thousands of dollars of debt and no pension?
You think the economy is bad now….just wait as all the baby boomers start to retire and in 20 years when the Gen Xers retire with zero saved.
I am certain there are plenty of people who can “afford” to live in the OC based upon what the banks are willing to “give” to people, that doesn’t mean it is a smart thing to do.
Samson,
Very true. I always enjoy reading your pearls of wisdom. (Not being sarcastic there.) It is nice to see that there are people out there who “get it” and do not try to live beyond their means. Slow and steady wins the race.
Pay yourselves first, people.
they are down,
Your take home will be higher since you will be paying less fed/state tax. I am not going to do it for you to make my point.
I have a question for all those who are condo owners. How do you feel about the HOA dues you have to pay each month? Do you feel you get value for that instead of having a home without it, and then hiring a gardener? There is a trade off I know for having to pay someone to manage the gardeners, etc. There is value in that. I’m just wondering at what point it is no longer worth it?
And who in their right minds would buy a place that had mello-roos? Yikes! Good for you SoCal for not falling for that one. That’s where developers shove the cost of putting in the sewer and utility lines for the houses onto the homeowners. What a crock! I can’t believe homeowners actually agree to that.
I guess I think one of the biggest problem with our society is as a whole we hardly look past what is happening to us now. We are bombarded with the the need to consume. The mantra is always buy buy buy. Keep up with your neighbor, etc…
So the youth of America are not taught to save and look to the future. Its all about what can have now. I was reading about how 25% of kids in CA are dropping out of HS. I can only imagine that it is a lot higher in other states and lower in some.
That is almost 130,000 kids that really have little to no future. What will happen to them? Who will support them when they are 60+?
We dont make anything in this country, the jobs for the least educated are going overseas or south of the border….what is to happen to this segment of society.
I know that this doesnt relate directly to housing, but it does relate to where our society is headed. This is very sobbering to me, this is at least 25% of our future residents who will never be able to buy, there is probably another 20-40% on top of that, that are educated but dont make enough or will never make enough to purchase anything at current values.
That being said, where are the future homeowners to come from? With a society that is becoming poorer and poorer, who is going to purchase the overpriced homes in OC and California in the future?
Those are the things I dont think most think about. There may be a lot of wealth now, but it is slowly dissappearing.
Sampson,
Keep in mind your mortgage is constant. Income goes up and that % will keep decreasing.
Scott-
Adjusting for Fed and State helps, but not as much as you think.
Assume 30% benefit, but everyone gets $10,000 deduction anyway, so you have to subtract $10,000 from the write-off, which doesn’t include the “P” or the last “I” in “PITI” (Principal-Interest-(Property) Taxes - (Home) Insurance).
But for giggles, let’s just assume 100% of the $38,000 is deductible. Then that means the write-off is $38K-$10K or $28K. 30% of $28K is $8,400 or $700/month. Take away $100/month for insurance, and you have an additional $600/month.
But wait a second. What about the interest you were earning on your down payment?
Say you had a 20% down, or $100,000. At 5%, that’s $5K/year. You have to pay tax on that, so tax will be same 30% or $1.5K, so net is $3,500 or approx $300/month.
So actual savings is going to be $300/month.
But what were you paying for rent before?
So you can see that if your rent was $1000/month less, there’s no real “tax” benefit to owning even now.
Where the benefit comes into play is down the line, because your house payment (assuming a fixed rate loan) doesn’t go up like your rental payments will (eventually).
Scott,
Yes, I know that our take home will be higher once we buy a place because we are able to write off our interest. But that money will go into the bucket for home repairs and maintenance. We don’t want to rely on that money to pay the mortgage.
“they are down Says:
July 18th, 2008 at 8:55 am
Marcia,
My husband makes about $55K a year and I make $61K. We could not afford that high of a payment. We pay $1650 right now for rent, and there is no way we could double that to $3167. I think couples/individuals making $100K a year can realistically only afford about a 250-300K mortgage. Not $425K.”
I suggest going back to school and updating your skills or moving to the IE. It’s not that prices are too high, your salary is too low to afford anything more than a condo. There’s nothing wrong with a condo, just dont expect to move up anytime soon.
“I have a question for all those who are condo owners. How do you feel about the HOA dues you have to pay each month? Do you feel you get value for that instead of having a home without it, and then hiring a gardener? There is a trade off I know for having to pay someone to manage the gardeners, etc. There is value in that. I’m just wondering at what point it is no longer worth it?”
The home I just moved from had hoa dues of about $150/mo. It included maintenance of all common areas and the hoa pool, spa, etc. It did not cover maintenance of the structure itself such as painting /roofing. But for me personally I would only buy a home again that is part of an HOA. I enjoy the consistency that comes with this type of arrangement. You don’t get neighbors who decide not to mow their grass for a few months or choose to paint their house a lovely shade of lime green. Also the community ammenities such as pool are less expensive than me putting in my own pool and the headache of maintaining it (impossible on these small lots anyway.) That said, yes I do care about the cost and a fee of over a couple hundred a month would be a turn-off for me. I would also have to examine at what rate the increases have been or if any additional bills have been sent to the owners for things that the dues don’t cover. I guess you have to draw the line somewhere. Overall, I would say my experience owning in an HOA has been fairly good.
Novaseline, the median income is a worhtless measure in OC. All the dishwashers and retail workers get lumped into that figure and we know that most of these people at the bottom of the food chain will never own a home.
huh?
—# Marc Says:
July 18th, 2008 at 11:17 am
SoCal78
It’s $700 a month for 2 cars, because our family, unlike yours evidently, has 2 cars. My car is the heavy burner, since it is an SUV type car. That one goes avg $100+/wk in fuel. The other car avgs 1/2 that. So depending on how much I drive will depend on whether we burn past $700 a month. My commute is approx 1 hour a day. I’ll let you do the math on that one. And yes, we are re-considering whether a job closer to home would be more economical. Of course this is a great time to be thinking about a job change. So we, like alot of families our there, are suffering from the gas hikes.—
Last time I checked, this is America. If you want an SUV, buy one! I hear you can pick one up with 72 months 0%!! Now that is a nice trade-off for the gas hike. Moreover, I just hate the Prius and Civic hybrid…perhaps ok for the Berkeley crowd regarding the Prius, and the Civic I can see teens and early 20 somethings scooting around town in those. But those of us here who are Gen X or prior, not a chance. They just do not facilitate the every day needs of hauling kids etc. to their destinations with their friends etc. You want me to buy a hybrid mr. automaker? Give one some style!
Mulli:
Just when I start to like you, you throw us another “if you want it, buy it! line.
I’m not trying to dictate to anyone, including Marc, what kind of car they should drive. I was simply curious how his gas bill is so high. We are 2-car family also and we spend $200/mo on gas. Yes, I will agree with you that there really aren’t enough incentives today for the buyer to choose a hybrid (the cost of these cars often exceeds the savings on fuel) - I know because I was faced with this choice when buying our newest car two years ago. But if you want me to be honest, I feel if you are going to choose a gas-guzzler (as far as standard combustion engine vehicles go) as your primary mode of transportation, that is all fine and well but I think you sort of lose the right to squawk about gas prices. Just my .02. P.S. I don’t need a lesson on carting kids around - I have two of my own and keep the gas bill in check.
Shockg,
I do agree. The combined income is on the lower side compared to the average OC family that will be buying.
I’m perfectly happy to have mullli drive a gas guzzler….that way, he can pay a greater share of the fed/state gas taxes..I love it!
What measure would be best for income than? The median isnt an average…it is the middle income. So 50% of those in Irvine make over 88K so maybe 40% make over 100K. If you know of a better way to measure income, maybe you should consider writing an econ bookl.
As far as the hybrids. I like both the Civic and the Prius. The Prius is actually fairly roomy in the back. If you have more than 2 kids, I can see it being a problem. There are some more stylish hybrids coming on board including a revamped Prius.
Also more hybrid suv’s (seems like an oxymoron to me) and hybrid cross overs will be out sooner than you think.
OH and Scott, I understand my income will go up…but so will the size of my non-exsitent family and their needs….I am talking big picture stuff, not just about the individual.
SoCal-
You did the right thing moving 10 minutes from your job. Unfortunately that is not the reality for most folks. But it is the future. And I think it makes sense.
I just heard on the radio that I can buy a brand new full size GM pickup (no back seat I am sure) for $13,999, which includes a $3,000 rebate.
Hybrids are going for $10K more than that easily. Question is whether you will be paying $2,500 more a year for gas. That’s $50/wk approx. So it is a push, only if gas prices stay the same…like that’s going to happen.
Marcia,
Nice work on the numbers. Now work the same numbers backward for $1.5M home and it becomes more than obvious that homes in the $1M-3M market have to few potential buyers and will have to drop significantly in price.
I always enjoy your posts.
i try to buy a prius but the dealer want 10k over msrp.
so i buy the honda fit instead. so far so good no complaint.
i used to drive a ford by the way.
marcia you are good with math. cpa i guess?
Shockg,
I was talking about a condo. We know that if we want to buy a SFR, we’d have to move to the IE. We prefer to stay here close to work, so we know we’ll have to buy a condo first. That is what most people who have always lived in South OC have had to do. I don’t feel entitled to own a SFR first. But we have saved up a lot for our down payment, and would like to buy in here. We are both professionals, we don’t work at McDonalds…
BTW, this is where we were born and raised, we do feel that we should be able to stay in our “home town”.
Mulliganville - Agreed that a home purchase to live in involves much emotion, but that does not mean that the emotions rule the decision making process. We sold a home that we loved, in a neighborhood that we loved, in the summer of 2005 and are now renting. It was difficult to sell and involved alot of emotion, but we did it anyway. Waiting and renting can be emotional at times and takes patience, but we do it anyways. We are letting our home buying and selling decisions be guided more by intellect than emotion, at least the timing aspect of it.
seekingalfafa - Why would you deem the IHB bloggers to be communists?
Communist? I thought that was the Beatles
Awgee…good for you. If the Mrs. (assuming you are not the Mrs.) did not have tears in her eyes, I would be a little surprised. My only point was emotion usually rules the day. Now, can some sanity come into play? Sure. Was there greed (emotion) involved with the scooping up of properties? You bet. Were the banks greedy (emotional) about loaning the money as they could just sell it later for a profit in that market? You bet. My point to Bubbs was in his posts, it is all business. And while the housing market is a business, emotions rule the day with respect to purchasing.
SoCal…I was certainly not trying to provide you with a kid transport lesson. The hybrid is all well and good…but it is a band-aid for our energy sore. Their impact will be minimal over time. I suspect that under the guise that 98% of our energy consumption is petroleum related. We might dent it to 90% if we all drove hybrids…as cars are just one aspect of oil consumption. Please continue to like me…as I like you.
Mav – good article, but the writer lost a little credibility at the conclusion – if the mind set described was solely a SoCal phenomenon why was there a national bubble?
Would have been better to draw on the desire of people to live in sun shine instead of rain and snow – with a little thought could have tied that nicely back to the need for instant gratification – and then to the whole savings argument separating the poor from the rich.
Just love playing with spin.
…… it was/is a national bubble….. but places like SoCal, Florida, Nevada……… are getting slaugtered…… other places might have only been 20% over valued……. places like Orange County 40-50% over valued…. look at the Map of Misery in the article….
Look at the price hits (declines) in other states like Fl and AZ with nice weather. Seems those hits are much bigger than ours.
I was just saying my conclusion also worked - just having a little fun.
…….. where do you think we are headed?…..
…… take a look at San Diego….
….. the OC has at least an additional 20% drop in housing prices to get back to fundamentals….. if you buy now you will be under water big time for years..
Of course since those areas fell so fast and so far, the difference between values and income must have been much larger than here - so on average people here must have been a ltttle richer than those areas, and that might still be the case.
Whoops! I am spinning again - sorry.
I really do not care too much where we are going - short of a complete goverment . I do have a
whoops again - hit the submit button when I put my computer down.
After gov’t should be “meltdown”.
Was going to say - I do have a feeling that things are going to bottom a lot higher than many on this blog would like. I keep seeing discussion on median prices vs. average OC income, and reading about $1500/month rent for the SF in the nicest zips.
My observation is average income is significantly higher than many would like to believe in may areas, and in the nicest zips you may get a room for $1500/month, but you are not going to get a SF.
Mullie-
AWGEE did what most families should do…put their long term welfare ahead of their immediate gratification needs.
AWGEE captured hundreds of thousands of tax-free dollars in equity by selling in 2005. That will now buy them more home for less money in 2008, which I am sure they will enjoy even more than their last place. How is that not an emotional decision? It just happens to be one that was prudent for the whole family, and a good lesson for the children, so when they see the same thing happening 20-40 years out, they too know how to protect their future livelihood.
I don’t know what can be more emotional than knowing you have money to live on in retirement.
Ranting Renter-
To answer your question…I’m in finance.
nvest 80 and Ranting Renter-
Thanks for the compliment by the way.
Mullie-
It really burns me that women (”the Mrs”) are cow-towed to for emotional decisions. And realtors play that up to the hilt.
One of the reasons these messes happen is the ignorance of the buyers and homeowners.
If we taught our children in high school some of the basics of Economics and Accounting, I think they’d be a much better prepared when making such huge financial decisions as buying a quarter or half million dollar asset.
For all those who have children, especially daughters, as the song says, “Teach your children well.” It will be the greatest gift you can give them, even when they complain about how boring it is and how much they dislike it.
-nuff said.
Marcia,
We have had this discussion several times and it is starting to sound like a broken record.
I’ll keep it plain and simple.
Your math leaves out other variables that are not included in a standard deduction. These are state taxes, DMV fees, job expenses, charitable contributions, and the list goes on and on.
Scott-
I agree there are other deductions to take advantage of, but most folks don’t pay close to $5000 in state taxes. At a 30% benefit, that’s about $125/month.
DMV fees and job expenses for most are nominal, again applying the 30% benefit.
Charitable contributions you have to put cash out to get something back at more than 2-to-1. ($100 donation costs you $70 and you get $30 back…not a savings, but an actual cost).
So yes there are nominal additional deductions, but nothing close to the $1000 differential between renting and owning at this point.
And, as ‘they are down’ pointed out, most tax benefits will be wiped out by the cost of upkeep on a home, so then we are back to the rent vs. own differential once again.
Until prices come down to where the benefits outweigh the costs, this market has farther to fall, I believe.
But that and $2.00 will still only get you a cup of coffee. As we all know here on this blog, you get what you pay for.
And, a SFR will cost you about $4K a month to own and $1800 a month to rent.
My daughter and hubbie make about 150k, 780+ credit, 20% down with some reserves and a car note with no other bills. All three lender/bank commitments came in at 510k, 520k and 525K. While almost ready to pull the trigger they look at the total payments, the quality, size, schools etc…and have no problem putting home buying on the back burner until they like what they see and feel it’s worth the money.
If you’re going to spend 100k of your own money and be stuck for years in a half million dollar home, common sense (NOW) tells us it better be worth it. They don’t think its worth it right now and anything less that 500k is crap.
We still have a bubble mentality which is why prices are somewhat sticky, just like many here said they would be.
no-vas - where are you talking about? Assuming 20% down $4k represents a $600k house - where can you rent that house for $1500/month?
I have been watching a few areas very closely - looking for the fire sale. In all of the areas the houses are moving well above $300/sq ft. Looking at the area reports (school ratings, population breakdown, and on on) I calculate an average income well towards $200k. Based on this I have come to the conclusion that $275/sq ft is fire sale territory. They do come up in this range but go fast and over asking. Both the banks and the people selling (equity owners) know what the area is worth and are playing the game using todays rules.
My point - life is not as simpe as the 28% rule, or any of the formula being thrown around here.
“$3,261 Total Cost of Ownership”
Thanks, Marc. This house costs the same as renting it. Good job.
Marc–
You misread me. More women see the home as an emotional attachment…that is where I was coming from. Realtors play that up to the hilt? How about if the Mrs. does not like the home, he ain’t buying it. Sorry, but psychology is what it is.
“Provider Says:
July 19th, 2008 at 6:59 am
“$3,261 Total Cost of Ownership”
“Thanks, Marc. This house costs the same as renting it. Good job.”
Somehow I don’t think a $500,000 home in Irvine rents for $3,261/month. $500K gets you a 1,200 sq ft house.
Anyone out there renting a 1,200 sq ft house for $3,200/month?
Here’s a listing in Irvine.
It is 1,200 sq ft on a 5,700 sq ft lot:
MLS #: S533374
4942 GAINSPORT CIRCLE Irvine, 92604 $499,000
Beds: 4 | Baths: 2 | Sq. Ft.: 1,200 | Lot Size: 5,700 Sq. Ft.
Year Built: 1971 | Listing Date: 05/20/08
Of course Provider, if you want to tell me this listing is over-priced, guess what…
THAT”S THE WHOLE POINT!!!
$1.50 per foot minimum to rent a decent home…higher on the low s.f. end.
Here are the absolute cheapest (non-Craigslist) rents for a 2,000 square foot home. Homes this size in these cities can be had for between $400,000 to $600,000. I believe the “median” Orange County home exceeds 2,000 sq ft.
The cheapest rental over 2,000 sq ft in Mission Viejo is $2,500
The cheapest rental over 2,000 sq ft in Laguna Niguel is $2,600
The cheapest rental over 2,000 sq ft in Irvine is $2,750
The cheapest rental over 2,000 sq ft in Huntington Beach is $3,000
The cheapest rental over 2,000 sq ft in Rancho Santa Margarita is $2,500
The cheapest rental over 2,000 sq ft feet in Orange is $2,650
The cheapest rental over 2,000 sq ft in Yorba Linda is $2,500
The cheapest rental over 2,000 sq ft in Lake Forest is $2,550
……. looks like a $1.25 / foot in the half decent areas…..
……. Provider, not to worry, another 20-30% drop in prices and we will be at rental equivalent….. your absolute worst nightmare…
…….. homes that are desperately trying to be rented for $3000/month now………
….. will be selling for $480K, in 2-3 years…… you and Gilligan are gonna love it……
$500,000 gets you an almost new 2,000+ sq ft, 3/3 townhome in Irvine or a small sfr in an older neighborhood. And that is in relatively expensive Irvine. Your 1,200 sq ft example is a cherry picked anomoly.
Math isn’t your strong suit mavvo.
Your funny, marc. You overlooked much bigger properties when you found that cherry.
………….800 Math SAT and 800 Math GMAT…..
…… Provider, you are wrong here so routinely it’s just plain silly…..
…….. when will the drivel end?…..
….. how did you do on the realtor / mortgage borker exam….. and what do you do now?……
This is why this blog doesn’t work. No one wants to deal in facts. When presented with verifiable facts, the conversation turns to insults. Pathetic. And no, we don’t believe you are 1,600 SAT material. As if.
……. thanks for assuming I got a 800 on english…. LOL…. i didn’t ….
….. so what do you do now provider?…. waiting for the boom to come back to make your payments?…..
….. most of the people I know who were in the mortgage broker industry…… are now working at places like best buy, macy’s, nordstrom…… some even at super markets and fast food……
…… these are people that were making at least 80K per year…… and most of them were making 6 figures…..
….. this is not BS…. it’s reality…. the party is over….
I rest my case.
Mulligan,
Emotion is always involved in a purchase decision.
The lender used to be there (and is now again) to help check that emotion and instill some common sense when a borrower fails to recognize when they aren’t thinking clearly.
The sales person incites the emotion to facilitate the sale. Perhaps if they were making the actual loan to the “emotional buyer” they might use some wisdom and “compassion” and guide the would-be buyer into something that they actually might be able to pay for.
Interesting when we think of how it was a few short years ago - compared to today. Interesting and enlightening, as it makes clear why the credit markets have imploded.
Just a few years ago the banks turned people down for auto loans they couldn’t afford and required a downpayment — I was astounded when shopping for a car three years ago when the MB dealer told me I needed no down and they would finance 6 or 7 years! Sign here and drive away.
There have always been, and always will be, people who will buy any and everything they can without any thought to how they will pay for it.
That is emotional buying. Coupled with indiscriminate lending standards the realtors had a heyday.
Ok Provider-
I plugged in 2,000 sq ft, and pulled the lowest I could find, so if you call that cherry picking, I don’t know what to say:
17551 WAYNE AVENUE Irvine, 92614 $629,000
Est. Monthly Payment: $3,016*
Beds: 4 | Baths: 3 | Sq. Ft.: 2,099 | Lot Size: 6,737 Sq. Ft.
Year Built: 1971 | Listing Date: 03/24/08
Add property taxes of $500/month, plus insurance of $100/month, plus upkeep that equals the tax write off, and we are back up to $3,800 a month for your $2500 a month example.
If you want to discuss Mission Viejo, we will. But you were the one who brought up Irvine, not I.
And by the way, maybe a 3/3 townhome is the same as an SFR to you, but it sure as heck isn’t the same to me…I would never consider renting a townhome for the same price as an SFR.
Cheapest 2000 sq ft home in Mission Viejo is:
25562 MAXIMUS STREET Mission Viejo, 92691 $490,000
Est. Monthly Payment: $2,350*
Beds: 3 | Baths: 2 | Sq. Ft.: 2,225 | Lot Size: 9,798 Sq. Ft.
Year Built: 1972 | Listing Date: 05/28/08
Of course this literally backs up to the freeway, so no problem spending time in your backyard with you the family and 3 million drivers along with all that noise.
Here’s a bank short sale, but it is a short sale, not some over-priced listing by sellers who still don’t get it:
23702 VIA POTES Mission Viejo, 92691 $525,000
Beds: 3 | Baths: 2 | Sq. Ft.: 2,130 | Lot Size: 9,900 Sq. Ft.
Year Built: 1973 | Listing Date: 09/25/07
But look at the listing date. This one started at $679K and finally had to lower the price to a bank short sale price.
This one sold in July 2003 for $460,000. So it is still overpriced at $525,000. (The lot size is deceiving as most of it is an upslope in the backyard, so really only a 5,000 sq ft usable lot).
I would never buy this house at $525K knowing that by this winter it will be off another $50K. I’d rather rent it for $2500 and save $500 a month towards buying it $100K cheaper.
I guess when your livelihood depends on buyers being stupid, I can see why you’d be so passionate about your comments here. But they still don’t hold water.
“Add property taxes of $500/month, plus insurance of $100/month, plus upkeep that equals the tax write off, and we are back up to $3,800 a month for your $2500 a month example.”
Ridiculous. First, the absolute cheapest rent in Irvine was $2,750, not $2,500. Second, the tax writeoff is worth far, far more than the costs of upkeep. This is a breakeven scenario. You are shamelessly manipulative. And third, and finally, are you choosing a property of the quality of the cheapest rental to buy? Shameless, just shameless.
Then wise one…give us a real example instead of just platitudes.
You say the cheapest rent in Irvine is $2,750, not $2,500, but the rental I showed you is pulled from the internet. Where, pray, are you pulling your information from? Please post your sources so we may all see the light, both of an example of an SFR for rent, so we can compare the price for sale.