- This topic has 24 replies, 15 voices, and was last updated 17 years, 2 months ago by Anonymous.
October 1, 2006 at 3:41 PM #7652powaysellerParticipant
Every time I see a Sold sign, I just cringe, for pity for the poor buyer. Don’t they know they can get that same house for 30% – 50% less in 5 – 7 years? Even waiting until next summer could yield a 10% discount. Well, maybe trying to save $70K is just a “coupon clipping” mentality.
But reading OCRenter’s blog today, where he reminded us that the flippers have left San Diego, leads me to one simple conclusion: Sales are down because the flippers have left, and first time home buyers are priced out.
The masses still want to buy! They have not realized this price drop is just the tip of the iceberg, and there will be no spring rebound. People are not yet fearful of falling prices, because they still don’t understand that we are in a rapidly deflating bubble.
By and large, people are still out buying homes like they always did. The flippers are gone, the first time buyers are having a harder time qualifying (because the interest rates are higher) and that his having a ripple effect up the chain, but everybody else is still out shopping for homes.
How long will it take for the general public to understand that home prices will fall for many years? Once they do, will they stop buying?
So that’s my thought: people are still out there buying like they always did, because they have no clue this price drop is the tip of the iceberg. They think this is a temporary dip, and prices will resume their climb this spring.October 1, 2006 at 3:58 PM #36953rseiserParticipant
So that just disproves David Leerah’s thesis that we have reached the bottom. There will always be people wanting to buy until we have reached the bottom. Then nobody will want to buy, and that’s why prices will be low. NOBODY will want to buy, because there will be all kinds of horror stories and all kinds of fears, interest rates might be high, people will think prices will go lower, and nobody will be in the mood for buying. Except me, I will be buying. I won’t be in the mood either, I guarantee you that. I am not in the mood of buying anything now either. But I will hold my nose and buy, because one has to put one’s money somewhere, and if it happens that mortgage/rent is 0.9, I will buy, knowing that it is probably a good deal.October 1, 2006 at 3:58 PM #36954poorgradstudentParticipant
Nice point. By and large people do tend to be blissfully unaware of larger economic trends. An agent tells them it’s a “buyer’s market”, they find they can suddenly afford the home that was out of reach 6 months ago, and they pull the trigger.
For some people having a home now is more important than getting the perfect price. It’s not a purely rational decision, but a lot of choices in life aren’t. I think some people buyng now will regret it. But if they’re looking at buying a home to live in for the next 20-30 years, and financing with a regular fixed rate mortgage, I think they’ll be ok.October 1, 2006 at 4:07 PM #36958powaysellerParticipant
poorgradstudent, they’ll probably not be okay. First, is their job recession proof? Anyone in retail, sales, manufacturing, construction, entertainment, travel, is at jeopardy of losing their job or taking a pay cut. What if they get a promotion in 5 years and want to move to San Francisco, but their mortgage is $750K and their home is worth only $400K? They’ll be married to that house for decades. Nobody who buys know can assume they’ll be okay, even if they have a 30 year fixed. And what about the nagging feeling that your neighbor paid half of what you paid for your house? How much will you enjoy your house in 5 years knowing you owe $200K – $800K more than it is worth?
rseiser, when it is the bottom, I think some of us on this board won’t want to buy either. There will be real fear. The masses will not be buying. Only investors and contrarians and independent thinkers like people on this board will want to buy, because they will use logic and data, and not be driven by emotion. But the economy will be bad for many years, and even government and military jobs will be cut, so perhaps some of us won’t even have a good enough job at that time, to buy. Maybe lending will be so tight, we need 10% or more to put down. So the bottom might be a difficult time even for those of us who are expecting it.October 1, 2006 at 4:12 PM #36960rseiserParticipant
Yes, you are right Poway. That’s why we have to change this website then into “Southern California Housing Phobia News and Analysis”, and remind ourselves to buy instead of renting, haha.October 1, 2006 at 7:17 PM #36973CAwiremanParticipant
Neighbors in our rental complex just bought a place in San Marcos for about $760K. My wife mentioned to them that they might want to wait a while (which is a big step for her, since she too longs for one). But, they had new home (or used home) fever and they bought.
On one hand the husband is pretty successful in the medical field. So, if his likely high-paying job is steady, then they’ll probably be able to make the payments.
Its just that 5 years from now, if they decide they want to move to different part of town, they could be stuck in an overpriced home that isn’t worth what’s owed on it. Claustraphobic. (sp?)October 1, 2006 at 7:38 PM #36975L_Thek_onomicsParticipant
Most of the buyers are not first time buyers, but people who are “moving up”. They sell an overpriced condo or house, then buy a bigger and more expensive real estate. Typically they have good credit, the fairly low mortgage rates make the move affordable, also the market conditions make no difference, they sell and buy on the same market.
L ThekOctober 1, 2006 at 8:16 PM #36980mixxalotParticipant
Yeah I see a lot of lucky bastards who got in on low priced southern California real estate 10 years ago when it was cheap. They now own expensive estates in Malibu and Rancho Santa Fe. My boss is one of these guys. When he tells me to buy, I cringe and feel like telling him “Gee, why would I want to spend 700k on some crappy place and then have it lose 200k in value 5 years from now? Will you give me a 200k loan to cover the loss in real estate value if I buy this hovel today?”
That and I work in the computer IT field and layoffs, downsizing and outsourcing of jobs to India and China happen constantly. No job is secure anymore and I cannot afford a 6k monthly mortgage if I lose my job tomorrow. Yes, taxes suck but I only pay 550 a month to rent a room near work and do tax strategies on investments until the real estate market corrects itself in 5 years.October 2, 2006 at 10:15 AM #37012DaCounselorParticipant
“But the economy will be bad for many years”
This type of crystal ball fear-mongering is indicative of many of posts on this board that are far over the top in touting the doomsday scenario. “They’ll probably not be okay”….is another good one. Wow.
I’m in the camp that believes housing prices are coming down 20-30%, but this over the top “the economy will be bad for years” and “they’ll probably not be okay” stuff is a bit much.October 2, 2006 at 10:34 AM #37016(former)FormerSanDieganParticipant
Someone living in Southern California would have to be living in a cave to not hear all the negative reports regarding the housing slowdown. I don’t buy the “masses have no clue” statement.October 2, 2006 at 5:12 PM #37059Pasadena BrokerParticipant
People aren’t as savy as the ones on this board…
but then again, how savy are most people on this board? I’ve read comments from ranging from hostile to subdued regarding the housing market.
Sad to say this, but for most of you on this board, prices will have to come down, what, 40%, before you’ll grace the real estate market with your money?
Keep waiting…I’m sure that one special deal on that house that no one is in the market for is waiting for you, because, after all, you’re the smart one with the plan and of course, no one is behind you waiting for the same thing with the same idea. We’re all going to get rich or into a home when the big boom hits and the foreclosure market opens up and we’ll all have our pick of whatever house is out there….
get real.October 2, 2006 at 7:32 PM #37074dksolomonParticipant
Prices have not fallen enough here in south OC. Too many folks still buying the 1m+ homes. The smaller ones are sitting longer – I have seen some reduced 40 – 60k, but that’s about it, I guess there are some real deals, but I feel we (the medium home buying public) will not see any real big drops unitl mid -next year.
Of course I am interested in purchasing a forecloser – however the one’s I see have all the equity sucked out and been left for the bank, and they (teh bank) still believe the market is going to rise again and will not take discounted offers.
Kinda upsetting, but I am cool to sit in my rental and wait, and wait till it is the right time for me.
SO I pay a fee more tax dollars this year, better that than to be stuck so upside down, you cannot even see the top.
Perhaps I am wrong, time will tell.
dksOctober 2, 2006 at 7:47 PM #37076AnonymousGuest
First, recognize that people will buy at all times and all prices. In the last downturn, people still bought all the way down, maybe just not quite as many.
Second, let’s face it we don’t KNOW prices will be that much lower in 3-5 years. I thought prices were nutty at the end of 2004 and that’s when I sold (October 2004), I was truely convinced they would crash and burn badly in ’05. I was wrong, a full two years later now prices in my old area are about the same as they were when I sold. I have noticed activity has decreased and places sit for a much longer time, but they have still be moving at fairly high prices.October 2, 2006 at 7:48 PM #37077DanielParticipant
Pasadena Broker said…
“Sad to say this, but for most of you on this board, prices will have to come down, what, 40%, before you’ll grace the real estate market with your money?”
For some, perhaps, for most, I’m not so sure. There are vocal people here convinced that they’ll pick up stuff for a song “when the big crash comes”. But there are lots of others (me included) who just simply think that it’s wiser to wait than to rush in. I would very much like to buy next year at 30% off (highly unlikely), but I can settle for buying 5 years down the road at roughly the same price as today. In the meantime I rent a house that is no different in size, shape, or form from the one I would buy. So I risk missing out on the potential upside over the next 5 years, right? Well, it’s a calculated risk I’m willing to take.October 2, 2006 at 8:55 PM #37087AnonymousGuest
New lending guideline: lenders must qualify buyers using the highest rate of an IO or ARM loan.
When the monthly payment goes up, price goes down.
Flippers trying to get out will be stuck, even if there are other suckers, they can’t get a loan.
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