Another dam RE question [Archive]

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Excessive Force

07-22-2006, 06:42 PM

doesitfloat?

07-22-2006, 06:57 PM

I think the market is going to drop (but not plunge) for the next 12 months. $800,000 homes will be available for $700,000, IMHO.
Since your home is free and clear, is it possible to add on to your existing home and make it the way you want it? That way, you won't feel the "pinch" of depreciation (as much) if it does drop. Granted, it's a mind game as value lost is the same for a financed home as well as a paid off home.
I'd wait...

FREIND OF AA AND TA

07-22-2006, 06:59 PM

You might wan't to wait a bit. I would keep your current home though. Let it drop and see how low they go but keep a close eye on rates. Timing is everything.

Excessive Force

07-22-2006, 07:03 PM

If it were possible to widen my lot I would add. Lookin for something with RV parking on the side. My current home doesnt have that, so thats outta the question....100K drop!!...thats uh.....rather SIGNIFICANT. Im willing to purchase now for a moderate drop, but if 100k is true im gonna have to think about this one.
on edit: surely some areas will drop more than others. Anyone familiar with the east highlands area? Wonder how much of a drop that area would be in for?

FREIND OF AA AND TA

07-22-2006, 07:06 PM

We have lost a lot more than a hundred grand in some areas. What is now 600 was 750 a year ago. (some areas) WOW!! It is still going down too.

LaveyJet

07-22-2006, 07:30 PM

al cole'holic

07-22-2006, 07:54 PM

Real estate pros...Is now not a really good time to buy? How much are house prices expected to drop? Will it be a small, 10-20k drop, or large enough to make me want to put a gun to my head in about a year? Im pretty RE illiterate. Need advice. TIA........EF
Im wanting to buy a home in East Highland,so cal. at about 600k. What to do!!
PS my current home is free & clear. Worth about 370-390/400k. Im loving the lack of a mortgage right now but need something WAAAY bigger.
..If you have 370-390/400k in equity you should have been in multiple homes long ago. Personally, I would rent out the current home and take a line out and buy a home you really want, fine tuned to your situation of finances and what you can afford month to month. If you can deal with a renter in your current home paying for your new home, by all means do it :)

Outnumbered

07-22-2006, 09:51 PM

Excessive Force

07-22-2006, 10:05 PM

If you like that area of the 909 I think you would have more price stabilty in Redlands that EH. You should be able to find something decent there for $600k-ish.
I also would probably keep the current home as a rental if you can swing it.
FYI, some of the latest stats show San Bern as the strongest county in SoCal as far as holding value right now. I think it has alot to do with "the bigger you are the harder you fall" theory. Meaning the higher values come down harder. San Diego was the hardest hit.
Thanks for all the info so far.....lol thats where Im currently at!! :boxed: Cant find anything newER around here(Redlands), especially with RV parking or with 3000SF for 600k. I figured the next nicest was East Highland plus you can school to Redlands from there.
Like i said im RE illiterate. If I get an equity loan, what percentage, of the home value, would I be able to get? :220v:I know its credit dependent. but whats the max. hope im making sense......EF

Outnumbered

07-22-2006, 10:24 PM

lol thats where Im currently at!! :boxed: Cant find anything newER around here(Redlands), especially with RV parking or with 3000SF for 600k. I figured the next nicest was East Highland plus you can school to Redlands from there.
Like i said im RE illiterate. If I get an equity loan, what percentage, of the home value, would I be able to get? :220v:I know its credit dependent. but whats the max. hope im making sense......EF
I was going to mention that parts of EH are in Redlands Schools, so you are one step ahead of me.
Not sure I would do an equity line as you will be about 7.5-9% right now on a variable and about 8.5-10% on a fixed rate HELOC.
I would probably do a 30yr fixed 1st cash-out mtg and take todays rates while they are still good--probably around 6.5% depending on your situation. The variable products are not much of a rate saver right now. You may want to go with a 30 year fixed interest only. Its a great loan that is I/O for the first 10 years if you want it to be. In other words, you can determine on a monthly basis your payment for any principal paid above the I/O payment for the first 10 years. After that it converts to a standard pricipal + interest loan.
You can take out up to 80% without MI and sometimes more with a combo loan. $400 x 80% = $320k

Trailer Park Casanova

07-23-2006, 03:27 AM

Gridlock here in Simi.
Everyone is stuck with contingencies on both sides of their transactions except the very few leaving the area.
111 homes slid back past the $533K threshold.
Prices will back up a bit, but in an orderly manner.
No bubble is gonna pop - at least not in So Cali.

ROZ

07-23-2006, 04:00 AM

I San Diego was the hardest hit.
Wonder where in th ecounty.. The last couple homes sold in my hood may have taken a little longer to sell, but they got what they wanted.. They were nice homes, though...
There's a couple homes that haven't moved, but they're shabby and are asking over what they're worth...

Excessive Force

07-23-2006, 11:13 AM

catman-do

07-23-2006, 12:02 PM

Excessive- If you are looking in the 600k price range I would go looking many other places before Highland San Berdo area. Once the market goes down less desirable areas such as that are going to drop the fastest and when the market goes back up they will appreciate the slowest. Also a few other things to think about are tax rates. Redlands is a fairly old city and doesnt have much building so not much in taxes, supplementals, or melo's... Get into some of the newer parts with newer homes and you might be tossing an extra 10-15k per year to help the city build parks, schools, sidewalks, etc.... Rancho has alot of homes in that price range with rv parking, same thing with southern Corona, chino and a few others.. The city would be alot nicer and you will experience better financial gains in the property. Im not a real estate agent by the way. Do work for a lender, and I do alot of real estate investing as well. DONT let some agent sell your house for 3pts on each side if you can help it. There are plenty of agents that will sell now for a 1pt fee, or 2pts if they represent the buyer as well. Its slowed down alot for them and if they still want to make money most of them will have to take a loss in wages like we are taking a loss in our property.

Excessive Force

07-23-2006, 02:22 PM

TCHB

07-23-2006, 02:31 PM

1. Buy Location and in the long run you will be ok!

Outnumbered

07-23-2006, 03:36 PM

Catmando, thanks for the tips. I never had heard that EH was an undesirable area. Perhaps your thinking of san bernardino and downtown, that is the armpit of california!!!East highlands, as far as I know, is the quasi beverly hills of the IE area. Aside from the cucamonga area of course......
No offense EF but I would not say East Highlands is the Bev Hills of the IE. But I would not call it undesirable either. Its a newer area that is nearly all tract homes with some customs and semi-customs mixed in. Most parts of Redlands would be considered a nicer area IMHO. Don't be fooled by the newer is nicer bit. It's not always the case. Redlands is more established and should hold value better. If you wan't to compare the area to BH I think the Redlands Country Club area is the closest match for that part of the 909.

Excessive Force

07-23-2006, 03:45 PM

i think i meant to say the BH of san bernardino!!lol sorry, that sure would be one hell of an inaccuracy. :cool:

Chipster27

07-23-2006, 03:57 PM

Personally, I would rent out the current home and take a line out and buy a home you really want,....If you can deal with a renter in your current home paying for your new home, by all means do it :)
I'm not a tax expert or a realtor, but I did stay at a Holiday Inn Select :)
I have a couple rentals and can give you a bit of advice on the financials of a rental. If you're going to do a line of credit (or first) on your home, do it BEFORE you declare it a rental. If your property is a rental the rate on a mortgage or HELOC will be about a point higher. The banks recognize rentals as a risk knowing that if you run in to financial dire straights you'll walk from the rental before you walk from your primary.
The other issue with a rental is that you may get hit hard on taxes if you decide to sell it and "cash out". I'm going through this right now. I'm looking at selling one of my rentals in OC to buy a "vacation rental" in Havasu. My goal was to sell one of the properties, pay off the other and pay cash for a place in Havi. However the gov't says if I sell my current place I have to take a mortgage on a new place for the same value or more. This really f***s with my plans as I wanted all my income properties paid off...
If you're going to rent your place, talk to a tax guy to understand the financial liabilities. There is also a rule that if you have lived in the property for 3 of the last 5 years (or something like that) you don't have to do a 1031 exchange (re-investing in another rental).
Anyway, that's what I know! Good luck.

THOR

07-23-2006, 04:22 PM

I can honestly say that the prices around me in HB havent dropped at all. They have climbed about 5%, but havent dropped at all.

AirtimeLavey

07-24-2006, 10:27 AM

The IE is still growing, and as someone mentioned before, is forecast to continue to appreciate. You just can't make broad sweeping statements about the market, as it's going to affect different areas differently - location, location, etc... The question is, how long do you plan on staying in that house? Most cycles are about 5 years. Forecasts for the IE are still to appreciate, even if it goes to a more NORMAL single digit pace. The movement in SoCal is to the East, which will help hold the values as someone else already said. The other thing to consider is interest rates.
I am a realtor, just so you know (you might consider my opinion biased, or not). I would say if your looking for a primary residence, I wouldn't sit back and wait for something magic to happen. It's a good time to buy, as sellers are beginning to realize the sky is no longer the limit, and they are more motivated to negotiate. Sure you MIGHT see a dip, but it's always a gamble, and in the long run, nothing beats owning. A rise in interest rates may kill whatever price reduction you're hoping for anyway. The best thing to do is get with a good lender and realtor, and figure out what's right for you. I'm not sure throwing away money on rent, while you're waiting for the planets to align is the right thing. Unless you're a speculator, and think you can time the market, which most can't. At some point you will see gains and losses, I don't care who you are.
As for commissions, the opposite is true of what someone said earlier. It's now much harder to sell a home at the price you want, so you will see the good agents charging more. The 1 and 2 percenters are like the Walmart/flea market type agents, that will take your listing and wish you luck. They were born out of a crazy market when things were so hot, you didn't hardly need to do anything to get an offer on a home. There's a lot more to that issue than I won't go into here. But you definitely can find them out there. They just might not be out there tomorrow. Forecasts are for about 300,000 agents (nationally) to leave the business over the next 18 months. The 1 and 2 percenters are turn and burn, and good luck getting a return phone call, or someone with strong negotiating skills. I mean, think about it, you want someone to negotiate an asset worth hundreds of thousands of dollars, and yet they're not strong enough to negotiate their own commission with you? Good luck. Unfortunately, as is evident to many who have ever dealt with agents, many don't really know what they're doing. As with any profession, it's usually the ones that are desperate for business, that under cut the industry norm. Just my .02. Good luck with whatever you decide. I just know homeownership radically changes your financial situation, just don't get crazy with the loan. Good luck. :D

Excessive Force

07-24-2006, 02:50 PM

Thanks for all the great input!!I knew i could count on you guys!! :rollside: :rollside: I guess my main worry about getting into this newer home was buying a 600k house only for it to drop 100k(extreme) over x amount of time. By reading here I gather that that may be extreme speculation and that I would be ok to buy. Like I said im not very RE savvvy. I need to explore other options like renting out the current home im in if financially possible.......Thanks.................EF

AirtimeLavey

07-24-2006, 03:18 PM

I hate long posts, but thought this was interesting, considering all the talk lately. This is from yesterday's LA Times. Most of the hard numbers reflect this, whereas there are many pundits who like to stir the pot with conjecture, as that's their job. Bottomline, it's not a sure thing either way. :cool:
Hold off on that panic attack
The market's just returning to normal, experts say. Good news for buyers, but not that bad for sellers either.
By Diane Wedner, Times Staff Writer
July 23, 2006
Although it may appear to some that the sky is falling, Chicken Little can relax for now. As Southern California's real estate boom fades and a more normal market returns, buyers and sellers can take some comfort in what lies ahead.
Industry analysts say the tumbling prices, glut of houses and 8% to 10% interest rates that marked the recession of the early 1990s are nowhere in sight now. The area's strong, diverse economy will help prevent a market freefall similar to the one the region experienced then.
"The fundamentals today are vastly different than those of the '90s," said John Karevoll, chief analyst for DataQuick Information Systems, a La Jolla-based real estate research firm.
Karevoll says that by the end of the year, he expects Southland home prices will have risen by 6% to 7% from the median price of $460,000 in 2005.
"Even in a worst-case scenario, which is not expected, economists say homeowners will lose no more than 7% of their homes' value down the line," Karevoll said. So much for a real estate crash.
Much has been made recently of the downturn in San Diego County's real estate market, considered a harbinger for the region. Alarm bells went off when the June median home price there fell 1% and the number of sales dropped 24% from the same month a year ago a tumble experts attribute largely to conditions peculiar to that area, most pointedly the overbuilding of downtown condominiums.
That is not the case in the rest of Southern California, where in June, prices rose 7.4% from a year ago to a median of $494,000. The number of existing homes and condos sold dropped, but new-home sales, which made up 22% of the market, are showing strong gains, according to DataQuick analysis.
Taking a longer view, Los Angeles County prices rose 14.7% and sales of existing homes fell 13.8% during the first half of 2006 from the same period a year ago. In Orange County, during the same period, prices rose 10.7% and sales of existing homes remained level, while in San Diego County, prices went up 3.7% and sales dropped 12.4%.
In contrast, new-home sales in San Diego County dropped 16.9% during the first half of this year, compared with that period a year ago, while such sales, including condo conversions, soared 25.1% in L.A. County and 34.6% in Orange County.
The reason for such strong new-home sales activity is pent-up demand, a spillover from a half-decade of under-construction. Most big builders, wanting to avoid a repeat of the '90s when they were stuck with unsold homes after the recession hit now build houses only after preselling them.
"That is an intelligent business plan," said Carola Cherief, vice president of sales for Centex Homes. "We plan to continue that strategy. It's easier to slow down the sales pace this way and hold off on construction so we don't saturate the market."
With Southern California adding 200,000 to 300,000 new residents a year, the demand for homes won't slow anytime soon, economists say. And until the stock market takes off again and no one knows if or when that will happen people are expected to keep parking their investment dollars in real estate, at least for now.
So why the 13% sales decline overall? It is more a reflection of a drop from the record number of sales the region has seen in the last few years than an especially slow sales rate this year, Karevoll said. Today, the sales pace is "around the average."
Prices, meanwhile, have continued to rise. The median price of all homes in Orange County during the first half of 2006 was $624,000; in L.A. County, it was $505,000. Regionwide, however, prices in June which rose 6% from a year ago to $493,000 represent the smallest year-over-year increase since May 2000. The median is expected to continue to set records, but at a slower rate of appreciation than in June.
The move back to a "normal" market is resulting in unnecessary panic among some sellers, who are cutting prices too soon, industry observers say.
"Some sellers' expectations have shifted way out of whack," said Raphael Bostic, an economist and professor at USC's Lusk Center for Real Estate. "They think their homes should be on the market only for a week or two. But that's not the norm from a historical perspective."
At this midpoint in the real estate cycle, sellers who are testing the waters are planting for-sale signs in frontyards, fishing for top dollar, then taking their homes off the market months later when they don't get those prices. Anecdotally, about half the listings on the market fall into this category, industry analysts say.
The consequence of this activity is that it falsely inflates the inventory, keeps homes on the market longer and can skew the realty picture. On the other hand, serious sellers who price their homes right are enjoying more timely sales, agents say.
Because some homes are on the market longer, David Toyama, a Coldwell Banker broker in Eagle Rock, has seen a subtle shift in favor of buyers, who for several years struggled to purchase properties especially at the entry level and finally are getting some breaks from sellers willing to accept contingencies.
Ricardo and Eva Mendez, and their three grown children who live with them, desperately wanted to move up from their Highland Park home on a noisy, busy street, said daughter Gladys, 29. Until late last year, the family felt priced out of the market. But in November, Eva and her two daughters spotted an Eagle Rock house that had been listed for two months.
The Mendezes jumped at the chance to grab the four-bedroom "major fixer," Gladys said, for $29,000 less than the asking price of $749,000. The steep appreciation of their first home allowed them to make a hefty down payment and have money left over for renovations.
"We lucked out," Gladys said. "The timing was right."
Timing has made a difference in the mortgage market too. While buyers may be encouraged by the return to more normal home-price increases, they still face higher interest rates, said Mark Cohen, owner of Cohen Financial Group in Beverly Hills.
A year ago, a buyer with a 10-year-fixed, interest-only mortgage, for example, locked into monthly payments of about $2,448 for a $500,000 loan at 5.875%. Today, with rates at about 6.75%, that borrower would pay $2,813 per month, a 15% jump.
The psychological barrier to home buying when interest rates reach a number that discourages buyers and pushes home prices down is 7.8%, Karevoll said, but most economists do not expect rates to reach that level in the near future.
With interest rates still in "reasonable" territory, buyers are flocking to areas where they smell bargains, such as San Bernardino County. In June, the median price was $367,000, up 14% from a year ago. Available homes there have increased, and some sellers are giving buyers allowances for repairs and carrying their second mortgages, said Hector Castañeda. The Century 21 Town & Country agent said he's giving buyers' agents more than half of his commission as incentive to get more traffic to listings that are about to expire.
Eagle Rock agent Toyama, who has ridden out several real estate cycles, is sanguine about the current changes.
"I love this market right now," he said. "Sellers are more reasonable, buyers are getting in the market, and the flip artists are gone. We all win."

Outnumbered

07-24-2006, 05:20 PM

The only flaw I see in the stats is that they are using June 2005 to June 2006 to calculate the % change. The flaw is that the market was still on fire in June 2005 and continued to appreciate rapidly up until about November/December. So to say that this is the current appreciation/depreciation rate, I would disagree. When the stats are run again using, say, December 2005 to December 2006, you will see some not so rosy numbers.
However, great info in that article. And I agree, the sky is not falling but it's a pretty flat market out there right now.
EF, like was mentioned above. I would not worry about buying the home you really want if you can afford it and you do not plan to sell for at least 5 years. If this is the case, go for it and buy it. If you think you will be selling in the next 2-3 years, I would stay put.

dicudmore

07-24-2006, 09:46 PM

As for commissions, the opposite is true of what someone said earlier. It's now much harder to sell a home at the price you want, so you will see the good agents charging more. The 1 and 2 percenters are like the Walmart/flea market type agents, that will take your listing and wish you luck. They were born out of a crazy market when things were so hot, you didn't hardly need to do anything to get an offer on a home. There's a lot more to that issue than I won't go into here. But you definitely can find them out there. They just might not be out there tomorrow. Forecasts are for about 300,000 agents (nationally) to leave the business over the next 18 months. The 1 and 2 percenters are turn and burn, and good luck getting a return phone call, or someone with strong negotiating skills. I mean, think about it, you want someone to negotiate an asset worth hundreds of thousands of dollars, and yet they're not strong enough to negotiate their own commission with you? Good luck. Unfortunately, as is evident to many who have ever dealt with agents, many don't really know what they're doing. As with any profession, it's usually the ones that are desperate for business, that under cut the industry norm. Just my .02. Good luck with whatever you decide. I just know homeownership radically changes your financial situation, just don't get crazy with the loan. Good luck. :D
I know nothing of the IE market since I'm in Vegas most of the time...however I certainly agree with what he said about the 1 or 2 percenters...I guess if you're the selling agent you can take that if you choose to.
As of last friday morning in Las Vegas there were 17,053 single family homes available...surprisingly there are still a lot of them that the sellers are offering less than 3% commission to the buyers agent. I'll let y'all guess how many of those under 3% homes we show what with "only" 17,000 choices :220v:

4DAY4PLAY

07-24-2006, 10:10 PM

I can honestly say that the prices around me in HB havent dropped at all. They have climbed about 5%, but havent dropped at all.
And they havent been selling either...those that need to sell will drop their price, those that are not desperate can be firm....but dont expect much movement unless their under-priced.