[kev374]

that’s quite a reduction. OC prices are shifting slowly but surely. I’m sure San Diego is going to lead the way in terms of declines, OC is going to be next.

[kev374]

I think the situation in Boston is far worse than in SoCal right now but SoCal will follow shortly. Things are going to get real REAL ugly. People refusing to believe it chant the same rubbish..that the job market is so strong. First off, incomes from these jobs can’t pay for homes even with a 50% decline in prices so why does that matter at all, secondly layoffs have already started first at Ameriquest, then Washington Mutual and now 2500 cuts at Countrywide.

The last 5 yrs was a deck of cards and it will come crashing down. “The gains of the last 5 yrs will be erased” as Peter Schiff would say 😀

[kev374]

there is plenty of land here in South Orange County. Drive through Sand Canyon in Irvine and you’ll see nothing but empty land adjacent to upcoming construction. Every street corner I drive through has some sort of condo construction project going on. The oversupply is just ridiculous! All these ridiculously priced condos will not have any buyers at all!

[kev374]

idiots, it’s the classic bubble mentality…IT IS NEVER GOING TO GO DOWN…NEVER! People will find all sorts of meaningless justifications for what they want to believe.

[kev374]

Rents are absolutely skyrocketing. My lease is up next month and I got a notice of a 10% increase. All people I know who are renters have also got notices of similar increases.

But compared to buying renting is still slightly cheaper right now. I rent my 1bd 680sqft for $1400/mo in South Orange County (Mission Viejo). 1 bd condos are going for around $300k over here. HOA+Prop. taxes would be $560/mo. Mortgage with 20% down/30yr fixed would be another $1440/mo. Tax advantages and downpayment interest opportunity cost cancels out. So it would cost roughly $1960/mo. to own. vs $1400/mo. to rent a similar place.

At the 1 bd pricepoint a purchase may be worth entertaining if you can get a deal 10% below asking, which should be feasible in todays market, but this disparity between renting and buying gets bigger as you go to 2 and 3 bedroom homes.

[kev374]

The thinking of people is just wierd I tell you…sometimes the stupidity of some people just boggles my mind. Why is it perfectly sensible in their minds for prices to have appreciated 300% in the last 5 years but when you talk about a decline of 50% they label it as “impossible”.

It is only common sense that if the appreciation has been totally unprecedented then it is fully possible and in my mind LIKELY that the downturn will also be equally unprecedented and shocking.

[kev374]

Homeowners today are totally clueless about market cycles and how they work. They think that just because they take their homes off the market it is somehow going to “protect” the value from declining, that is just being very naive!!

You see there are always going to be sellers who will NEED to sell, and those sellers will have to either cut prices or foreclose..simple as that. These actual transactions will of course set the values of homes. Then there are those that bought a few years ago and have the luxury of lowering their asking prices and settle for a bit lower profits.

Whether it is a first time buyer or an existing homeowner looking to upgrade, the demand for housing is just gone..and of course it would because it was never legitimate to begin with, it was speculative and artificial.

With tigtening lending standards and the realization that the market is in a downcycle first time buyer demand is nonexistant.

As for existing homebuyers, they cannot upgrade unless they get the asking price on their current home which is highly unlikely in this market.

It’s all a question of demand vs supply. Demand has virtually disappeared, so the only possible scenario is prices aligning to a level which creates demand based on economic fundamentals like income and affordability.

This is not rocket science folks… actual prices are down 6%, *LIST* prices are down more like 10-15%, I’ve seen $600k properties with as much as a $100,000 price reduction, that’s a 16% reduction right there to start! Not to mention foreclosures are up 140% in Orange County.

Due to the quick nature of the downturn so far I’m predicting a minimum 20% drop for SoCal by mid next year, with more gradual declines over the next few years. That is my guestimate 🙂

[kev374]

vrudny, you’re right about the 6 yr cycle, however this time is a bit different. The up cycle started in 1997 and peaked around 2002-03 or so after which we should’ve seen prices starting to retreat. Unfortunately the boom was extended by an additional 3 yrs (2003-2006) by introduction of artificial demand caused by exotic loans. I feel that this part of the appreciation (around 30% or so) is pure fluff and will just drop like a rock in the next 2 yrs. as loans reset. I’m very confident that in 2 yrs (2008) we will see much lower prices.

[kev374]

It will come in about 3 yrs, at least in my opinion. The belief that real estate is forever unaffordable is absolutely ridiculous!!! Asset prices are only controlled by demand and supply. The demand for current inventory levels is just not there.

The recent inflation in Real Estate asset values has been due to artificial demand caused by speculative buying and the introduction of exotic loans. In the next couple of years all this demand is going to be converted into supply in terms of foreclosures and speculators trying to sell.

Speculators who are unable to sell will try to rent but that will result in rents going down and that will in turn cause an even bigger deficit for the speculators, a classic deflationary cycle that will lead them to foreclosure as well.

The massive rise in inventory alone will send Real Estate prices to spiral downward to HELL! My school of thought is that 30% decline is “in the bag” and I would hardly be shocked if there was a 50-60% decline in real terms (inflation adjusted) in the next 5 years.

Remember that there are also other catalysts like the loss of construction and other Real Estate related jobs which has been the majority of job growth here in Southern California.

So far the downturn has been much much bigger and faster than all the “experts” have predicted. Each month these experts are going back and “revising” their estimates which is a total joke! Why can’t they just come out and speak the truth? Well, prediction of doom is always unpopular of course and they don’t want to be the ones that publish it!

[kev374]

sdrealtor, yes you’re right many have stated that Zillow is quite inaccurate…however, the point I wanted to make is that this guy held the property for a year and most likely he is going to take a loss on it! So much for the belief that real estate in Orange County never goes down.

We’re also assuming here that this guy is going to get his asking price…in this market? FAT CHANCE! Not going to happen. He’ll be lucky to sell that thing for 400k before it gets foreclosed upon so I’ll bet you a silver dollar that any way you slice it this guy is going to be eating his shorts!

[kev374]

I rent a 700sqft 1bd in Lake Forest for $1320 (no utilities are included). I’m thinking this is excessive and planning to move out, do you think this rent is reasonable? The unit does have a 1 car garage.

[kev374]

Moody’s is way off. If you look at the housing tracker (www.housingtracker.net) you’ll see that the prices are already down YOY 5.5% so is it Moody’s estimate that there is going to be only a 3% correction over the next 2 years…what a load of BS! I am already seeing price reductions on the level of 10% on the MLS listings. This is on properties where the ORIGINAL LIST PRICE was already BELOW the ZEstimate and comps from May 2006 so it’s not a case of buyers asking too much and then repricing lower. I have concrete examples of people selling at below cost and losing money…check out ocfliptrack for many examples.

Here is an example of one I was just looking at: MLS# S442558

Guy wants $464k for his 3bedroom, ZEstimate is like $571k so he has already priced $100k below appraisal. he bought this property just over a year ago for $432k so any lower and he is going to get burned.

This is just the tip of the iceberg folks…the calm before the storm. This run down will be like nothing in history and will send shock waves through the economy, just like the run up set a new precedent in history.

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