"Dana Point Harbor Sunset." Photo: jnocca93
If you're like the majority of homebuyers right now (we'll exclude investors), your budget is probably $600,000-$650,000 or less (or much less), and you'd like something beyond an apartment-like condo with enough space to stay put in for at least a number of years. You've got a real job so you're not going to waste time chasing short sales, and properties that are in escrow are also out of bounds for obvious reasons - we don't want to go around making backup offers.
What does the for sale landscape look like right now during the busy time of 2009? Not very welcoming. There are few properties for sale, and the ones that are for sale at reasonable prices (by today's standards) are attracting buyers. There are a below average amount of sales happening, partially becuase there are fewer properties for sale in total. Even fewer are not short sales that can actually go through. Foreclosures are "hot."
Let's take a quick tour around South OC to look at what our theoretical buyer would see. Remember, they're ready to pull the trigger right now on a house, we'll assume they can afford up to $650,000 (because they earn $162,500 and are being conservative with their financing), and they need at least 3 bedrooms and 2 baths.
First, let's start in San Clemente. For many who work in the county's job centers, it's too far south. Still, a great place to live if you can stomach the 5 freeway.
In this screen shot, there are about 20 listings that meet our criteria. Now up to Dana Point and San Juan...
There are lots of properties for sale in San Juan - particularly in the not-so-great areas, and many of those are short sales or foreclosures. Besides some WTF pricing, the majority of properties here have been on the market for some time. Maybe that pricing is crazy too, and we just didn't look closely enough...
We've heard it before that Aliso Viejo is a "strong" mini housing market. The properties for sale right now are not appealing to us - at least based on the selection available and their relative value based on asking prices. If you'd like a comparison, here's a similar view with short sales and escrow properties back in. As you can see...a lot more properties out there, just not within reach of our reasonable made-up buyer.
7 comments:
NO. And in this economy there is not many people making 200k to qualify for an overpriced home in these markets. After the market crash and RE crash Americans have lost over 8.6 Trillion in wealth so show me who has this type of money? Yes there is nothing selling much in this price range as they are all stuck upside down with Alt-A option arm loans that are all going to come due in the next 3 years coupled with a large portion who have 2nds and there is no way these people will leave until the mortgage resets they are stuck. And can you ask yourself is your job safe? Safe enough to be a knife catcher and buy and watch prices fall another 100 to 200k in overpriced south county? With financing tougher to get and Appraisals going to hell courtesy of the May 1st change in appraisals valuing which will cause more of these deals to wash out as the value will come in a lot lower than the sellers can afford. It will be a sea of short sales as no one can afford to sell any other way. And the State issuing IOU's probably for a long time and unemployment only going to get higher due to cuts in the budgets in all state and local government. Do you really think that we will see any appreciation in home prices even once it levels out in 2014 i don't see prices going up not for another 8 years or so and those gains will never match the losses we will see in the next 3 years. I guess if you where a public employee who is retired then it makes sense to buy as they are way overpaid and get free health care for life. Bottom line get rid of the Unions who have rapped the taxpayer of California and who tell the Democrats to raise taxes to keep this over bloated pig at the trough to well feed while there is over 40,000 homeless in Orange county alone. The union should be ashamed of themselves...
Very interesting snapshots. That fits with what I see on Redfin - some properties out there for sale, but still expensive compared to what they were in the 90's (relative to incomes).
Still waiting in South OC...
Anonymous, I completely agree. Not only is it a matter of income, but buyers must also have a downpayment if not utilizing an FHA loan. 15% down on $600,000? Who's got $90,000 sitting in the bank?
We would love to live in Aliso Viejo, but people are still putting their homes on the market for rediculous prices. Comparable to 2004-2005, which his comical. 2001 and older is more realistic to get inventory moving.
Great post. This question is the heart of the matter as far as I'm concerned.
I'm one of those "theoretical homebuyers" you mentioned. I've been on the sidelines since 2005 when I moved here from Europe. I've wanted to buy a single-family home, 4 beds, 2.5 bath, 2000+ sq feet, with a reasonably sized back yard given the tract home hell that is OC.
Decent, move-in homes that don't require major repairs are priced at about $600K-$1M in south OC from my observation even today. This remains way out of alignment with my own take home income ($120K+), let alone the 3x income rule or 15x rental expense rule.
My situation might be rare. I have the cash to put down 20% on such a ridiculous price. But should I? Unemployment is a possibility for me and I suspect many other higher earners who live in South OC(technology sales). I'm renting a SF home right now and making do. I enjoy no mort. interest tax write off. But I do have my mobility, which is valuable during an economic depression.
I just get this growing sense that while LA and the Inland Empire may have hit the wall at 100 mph with the housing crash, the South OC market has only reached the awareness stage, but has not even begun to adjust to the horrific reality of local incomes and new credit restrictions. Nobody is panicking here from what I've seen.
Added to this, the single family home supply situation royally sucks in South OC. We're talking 60 sf homes in Lake Forest that meet my specs other than price.
I'm shocked to see, for example, people paying $500K-$600K for P.O.S. sf home foreclosures that obviously require at least $30K to $80K in repairs (new roofs, carpeting, plumbing, landscaping, etc.)
Discretionary sellers with equity have decided to hunker down and not put their homes for sale until the "garbage" (foreclosure P.O.S. homes) gets picked up. Plus banks seem content to send their south OC foreclosures all the way to auction.
All of this serves as a sad reminder to us prospective buyers that the housing bubble simply did not "pop" in South OC. Instead it's going to deflate slowly and painfully here. The bottom will come. It is inevitable. I've decided to wait some more.
The two things that provide some hope for continued home price deflation are continued unemployment issues in southern California, including South OC, and a tidal wave of foreclosures in 2009-2010-2011 that simply cannot be stopped by the state legislature, nor the federal government.
What I would like to know is, who are the people buying $800K+ homes in Laguna Beach and Laguna Niguel? Someone still has a lot of money.
hi,
i heard that property values are just generally low in california...just curious as to how the fha loans are helping south oc out...
Boise RE who gives a flying rats ass? Why do i need this link? I don't, so take your RE ad and Idaho and crawl back under the bridge you came from troll...
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