Are you kidding, or are you just another ignorant realtor?

We “harp” on the $ value of homes because you should always buy a product at the right price. In case you don’t know the $ value is what determines the payment. And for cash buyers why spend an extra $200K today when you can wait a year.

People who just focus on payments alone or what they can “afford” are idiots. Sorry, that just a fact. You need to look at all variables and understand what you are doing not just sign the line next to payment.

That includes determining if the home is overpriced or undervalued. The last round of buyers with the ARM’s focused on payments and what they could afford to pay at that time. Then the ARM readjusted and the home value fell and now they can’t pay. If they had not bought an overpriced home by focusing on what they could “afford” at the time, they would be in much better shape today.

If they had bought a properly valued home or undervalued home, put 20% down, then if times get rough they can sell it even in a down market. And no, in 2005 almost NO homes were properly valued.

That’s why we don’t buy broken down fixer homes next to a highway for $500 sq/ft. If ever in doubt take a trip high into the mountains and look down. LA has no shortage of run down homes and fixers.

Not a problem if you can live with following scenarios
1) a few months after the close of escrow, your neighbor’s house which is similar to yours goes on for sale for $100k less than what you paid.
2) a few months after the close of escrow, you found your dream house asking for the same amount of money your paid for yours
3) a few months after the close of escrow, you attend your friend’s open house party and found out that her/his house is much nicer and he/she paid much less.
4) 3 years after the close of escrow, you found a new job and have to move to another city. You think about selling your house, but find out that your neighbor’s house is still on sale (for much less of course). You rent your house out, luckily the rent covers the mortgage and you move to another city. You can not afford to buy another house because the loan underwriting rule is so tough that you can’t get 2nd mortgage unless you have 2nd income.
5) 10 years after the close of escrow, the market finally recovers. Your house is sold and you get your down payment and principles back. You are a happy man again, but looking back you suddenly realized that you are back to where you were 10 years ago. Keep renting would be much better choice!

That’s a total decline of 28% and doesn’t seem far fetched when you consider than we’re 1/3 to 1/2 of the way through that.

>>If you have the money and are willing to pay for the asking price, what is the problem with that?<<

It is a perfect realtor talk. So are you one?

Actually, that is exactly the problem. The prices are so artificially inflated that most people can not afford their own homes, especially in many regions in CA.

Take today’s profiled property as an example. It will take household income of more than $150k and downpayment of $110k to afford. It is a small 3 beds a500 sf PUD unit.

Take away the bubbly equity and credit, I do not think you can afford much on your earned income either, at least much less than you think you can.

Thanks for the definittion.

PUD is rare in the Northwest. Most if not all condos/townhomes have shared walls and properties.

LLKING

Anecdotal evidence. Over this past weekend, a friend commented that he wants to get rid of his current home of 2500 SF and gets a smaller one. Behind this whole story is that they can’t afford the payment anymore even though it’s fixed. Both being single, they feel left out on a lot of activities due to house poor.

Ken:

Are you serious? Where have you been. It indeed is a misleading statement even for a realtor. IrvineRenter has an excellent observation:

>> The truth is, nobody is sure about which direction the market will go from here. If not for investment, for those who purchase house to live for next 10 years the the only question is, can you afford?<>Now it is a selling point that some idiot paid bubble prices in 2005? This statement is actually quite revealing of people’s perception of value in the housing market. The reality is that prices were inflated far above fundamental values by loose credit and unsustainable financing terms. The perception is that peak bubble prices were fair value and today’s discounted properties must be undervalued; therefore, if you buy now, you will be far ahead when prices quickly rebound back to fair value. In fact, there was a recent post at the OC Register where a supposed expert claimed prices are undervalued. Realtors should be pleased when I show a house with a huge loss because that means it is really undervalued.<<

http://www.irvinehousingblog.com/blog/comments/weeping/#more

I want to an open house this weekend, and the realtor had a “facts” sheet with payments. ALL payments required 20% down (about 180K) and the payments were high!

Good luck finding fools to put 20%/180K down on a home that they feel is going to fall 20-30% in a few years.

I just love the market returning to the fundamentals! In a normal market the homes might go up 4% year, so there is no rush. Even if you miss the bottom you only lose 4% by waiting a year and finding a house you truly want to buy.