Home Buying in 92651>Question Details

Mr. Blue, Home Buyer in Laguna Beach, CA

Are we in a double dip - are new buyers losing money every month on their homes?

Asked by Mr. Blue, Laguna Beach, CA Fri Dec 17, 2010

According to the OC register and Corelogic data, OC home values have turned over and are diving again. If true, a new home owner would be losing value every month, in addition to the large monthly mortgage payment. Are people seeing that out in the market? How do you buyers feel about this?

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Thanks Mr. Blue for the question.

I am a Realtor in the San Francisco area. I also have a degree in economics. Our market is probably similar to yours. I can tell you that pending sales are down quite a bit from ealier this year. This is a very good indication that future sales prices are will trend downward in the future.

Part of this down trend is due to the ending of the Homebuyer Tax Credit. And part of it is due to the cyclical nature of home sales. Prices normally go down a little at the beginning of the winter.

You ask how buyers feel about this. Well I am a buyer like you. I sold my home in 2007 because it just didn't make sense to own a primary residence anymore. I am still renting and feel pretty secure in the fact that home price are not going to shoot up anytime soon.

In fact, believe it or not, home values are still in the bubble in some areas. In some of the higher end areas homes are still selling at 2005 values.

But in the lower end areas there can be some good deals. I suggest to my clients that in this market you have the time to find a home that you love. So don't jump into anything.

2011 could not only bring lower prices but much better selection for many areas.

Things to remember:

1) We are still in the final stages of the biggest housing bubble in history. Home price values in the aggregate are still above the peak bubble price reached in the 1990 housing bubble according to the Case-Shiller index.

2) We are in the most unsound economy of our country's history as our government is desperately spending trillions of dollars in an attempt to control the free market to keep home prices in the bubble. This can't go on forever.

3) Our Banks are insolvent, many households are insolvent and our government has much more debt than it can possibly pay back. If the government stopped borrowing money we would go into severe deflation. Which means there is almost no chance of true asset inflation in the near future.

4) As interest rates go up in the future it will be a huge headwind on home prices.

I really can't think of any reason to rush into a home now. Yes prices are down but they are far above historical trend. This attests to the magnitude of the bubble.

So as a buyer I am keeping my eye out for a good deal and definately for a home that I love.
1 vote Thank Flag Link Fri Dec 17, 2010
This question simply cannot be answered from a "county-wide" perspective. Better to analyze the micro-trends from city to city or even better from neighborhood to neighborhood. Many areas are actually improving in a fairly robust fashion.
2 votes Thank Flag Link Mon Feb 14, 2011
Buyers are nervous. Prices are down 9% in OC from last summer after getting a phony bump from the Obama tax credits. Once the Fed stopped giving away tax money to home-buyers the market went into the tank. Low interest rates are keeping things afloat for now.

Flippers can't get rid of their inventory and are lowering their prices, often taking losses on homes bought at the trustee sale. REO's are sitting longer and the banks are dropping their prices too. These two factors plus all the short sales leave equity seller hanging hoping for a recovery in the spring.

Other than interest rates there are few reasons for buyer to get off the fence. Sure there are some good deals out there but it's not like prices will rise for another two years.
Web Reference: http://www.wehelpubuy.com
0 votes Thank Flag Link Mon Feb 14, 2011
According to Mr. Blue - the self-designated doom & gloom bubble blogger of Laguna Beach:

"OC home values have turned over and are diving again"

Actually, nothing is further from the truth. The median price - for Orange County, Ca - is actually 10% higher - at least - than it was 24 months ago.

The only thing "DIVING" in Orange County is the checking account balances of perennial tenants like Mr. Blue.

Keep kissing that rent money "Bye-bye, Bluebird", every month.
Web Reference: http://BobPhillips.net
0 votes Thank Flag Link Wed Feb 9, 2011
Values are very specific to location and property type. A single family with an ocean view is a commodity which has not seen new construction for the past 20 + months. No new product with inventory stable. Yes more foreclosures are on the way inland and with condos. Waiting to time the perfect bottom may not be the best use of your money. Buy conservatively - don't streach into the maximum possible and educate yourself on your future needs and LOCATION location location
0 votes Thank Flag Link Wed Feb 9, 2011
Mr. Blue
There is a huge looming inventory that needs to be cleared out before we see any stabilization in the real estate market. 14% of the 54 million first liens in our country are delinquent or in default. As soon as we get "less" help from the Government, we will see the market find it's bottom and start to recover. Until then, all the numbers you see are artificial. You can stay tuned to inventory numbers for Laguna Beach http://www.ochometalk.com/laguna-beach-statistics/ .
There are many optimistic buyers in the market right now. Even with a potential downside in the future, interest rates are great and prices are very affordable. Investors can get positive cash flow with little down, and homebuyers can find a home with a mortgage that is less expensive then renting.
Web Reference: http://www.ochometalk.com
0 votes Thank Flag Link Fri Dec 17, 2010
Mr. Blue,

Guess what the sky is falling! I would say if you bought in 2006 you are upside down but not now. There are great buys in Laguna Beach right now. You can get an ocean view property for less than a million? Everything is at a 40 -50% discount. How can you beat that? By the way if you are financing rates are creeping up so don't wait too long. A lot of folks have priced themselves out by thinking the rates were going lower.
0 votes Thank Flag Link Fri Dec 17, 2010
If you are in OC, did you read what Donald Bren is doing. So far he hasn't done much wrong. He's buying big time and started building new homes again in Irvine. He's optimistic about the future of OC Real Estate.

Within the past 6 weeks borrowers have lost from 10 to 15% of their buying power, due to the increase in mortgage rates. Also, guidelines are continuing to become more stringent. What a borrower could qualify for today, they may not qualify for in the future.

There are areas in OC where values have gone up and 23 cities where they have gone down. I believe the largest decrease in value was around 3% for the past 12 months.

I think this is a case-by-case decision. All buyers do not think the same.

Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Fri Dec 17, 2010
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