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Rent is too damn high.


kuhla

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I had a church friend who just purchased a condo (1000 ft) in Foothill Ranch / Lake forest area for ~$450k so they do exist even that territory.

Regarding the eviction moratorium is even impacting home buyers like this:

https://www.businessinsider.com/california-couple-barred-from-their-own-home-by-eviction-moratorium-2021-3
 

 

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22 hours ago, Malaphax said:

To paint a slightly nicer picture, I have seen <$500,000 homes (town homes and condos mostly) that are available and look pretty good. 

 

1 hour ago, Jedi2155 said:

I had a church friend who just purchased a condo (1000 ft) in Foothill Ranch / Lake forest area for ~$450k so they do exist even that territory.

I realize it is entirely possibly that I may end up in a condo someday (because of having no other choice in OC) but I also have the strong opinion that condos are essentially glorified apartments. The roof? Not yours. The garage? Not yours. The lawn? Not yours. The fence? Not yours. The doors? Not yours. The list goes on and on and don't forget about the HOA fees.

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1 hour ago, kuhla said:

I realize it is entirely possibly that I may end up in a condo someday (because of having no other choice in OC) but I also have the strong opinion that condos are essentially glorified apartments. The roof? Not yours. The garage? Not yours. The lawn? Not yours. The fence? Not yours. The doors? Not yours. The list goes on and on and don't forget about the HOA fees.

That's exactly what they are.  In fact many condos were once apartments that have been converted. 
There are some minor benefits to this - if the roof leaks or some other major maintenance needs to be done, it's paid by the HOA and even in the worst case where the HOA can't cover it, the pain is spread among multiple owners. 

I understand the American dream of a standalone home with a white picket fence is still a kind of barometer for home ownership, and I can see the appeal.  My point was more that there are other options available, and in an "affordable" price point.  It's not like the only homes on the market in OC are $1M+

I'm not trying to be an ass, but I do think that a "starter home" is going to be a fair bit below the median home price and you will absolutely make some compromises, whether that's a townhome/condo with an HOA, or a fixer that you're going to be spending your nights/weekends on, along with additional cash for improvements.  I think anyone needs to be aware of what their budget is and adjust their expectations accordingly. 
I still think the housing market (locally, nationally, and internationally) is stupidly expensive, and that's partly due to the commodification of the market and all the issues that come with it. 

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5 hours ago, Malaphax said:

That's exactly what they are.  In fact many condos were once apartments that have been converted. 
There are some minor benefits to this - if the roof leaks or some other major maintenance needs to be done, it's paid by the HOA and even in the worst case where the HOA can't cover it, the pain is spread among multiple owners. 

I understand the American dream of a standalone home with a white picket fence is still a kind of barometer for home ownership, and I can see the appeal.  My point was more that there are other options available, and in an "affordable" price point.  It's not like the only homes on the market in OC are $1M+

I'm not trying to be an ass, but I do think that a "starter home" is going to be a fair bit below the median home price and you will absolutely make some compromises, whether that's a townhome/condo with an HOA, or a fixer that you're going to be spending your nights/weekends on, along with additional cash for improvements.  I think anyone needs to be aware of what their budget is and adjust their expectations accordingly. 
I still think the housing market (locally, nationally, and internationally) is stupidly expensive, and that's partly due to the commodification of the market and all the issues that come with it. 

For the record, I ended up spending somewhere between $100-150k in repairs for my old home. Plus a TON of DIY to keep that cost reasonable. My new place does not have much a yard, has a huge HOA fee ($270/month), and there will always be compromises.

Homeownership is far from cheap and the purchase price is literally just the entry fee in Chuck-E-Cheese because you'll be fleeced in repairs left and right. New homes aren't necessary better (I've already reported 15 issues on my home, neighbors still having plumbing issues etc.). For the record the home I got was a bargain so the build quality is kinda shit for a "luxury" home but I knew that going in. 

I don't necessarily recommend buying new as a 1st home either as I've seen plenty of new homes buyers with outsized issues that me being a seasoned homeowner, would've caught early on. 

The biggest issue with condos vs. traditional homes though was the saying "condos are the first to drop, and last to rise" in terms of appreciation. Most of a home value is not the structure itself but the land around you. The structure is ALWAYS a depreciating asset (unless its a historical home), while the land value is where it can go up or down. To min/max I always focused on the land aspect.

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  • 6 months later...

 

https://slate.com/business/2021/06/blackrock-invitation-houses-investment-firms-real-estate.html

"While normal people typically pay a mortgage interest rate between 2 percent and 4 percent these days, Invitation Homes can borrow money for far less: It’s getting billion-dollar loans at interest rates around 1.4 percent. In practice, this means that Invitation Homes can afford to tack on an extra $5,000 to $20,000 to the purchase price of every home, while getting the house at the same actual cost as a typical homeowner."

 

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I have seen online but also heard in-person so many people quietly hoping for some sort of bubble to pop so they finally afford buying a house but as it stands, and especially with stuff like what you posted happening, I just don't think it's going to happen. I only sees housing (and many other things) going up for now.

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2 hours ago, kuhla said:

I have seen online but also heard in-person so many people quietly hoping for some sort of bubble to pop so they finally afford buying a house but as it stands, and especially with stuff like what you posted happening, I just don't think it's going to happen. I only sees housing (and many other things) going up for now.

The bubble isn't likely to pop and if it does it will be a slow deflation versus the massive drop that occurred in 2008 which was a once in a generation type event I think. The current analyst predictions in 2024 to 2026 IF there is another crash.

https://www.msn.com/en-gb/money/other/house-prices-will-boom-before-crashing-in-2026-we-speak-to-the-man-who-forecast-the-last-two-slumps-but-will-his-18-year-property-cycle-be-right-again/ar-AAKAgYV

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  • 2 months later...

Anecdotally I will say that at both my last place and my current place that the rent goes up on the 1st of the year every year. If I do some quick napkin math, compared to when I first started renting years ago, my rent costs have gone up about 40%.

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On 1/3/2022 at 3:10 PM, kuhla said:

Anecdotally I will say that at both my last place and my current place that the rent goes up on the 1st of the year every year. If I do some quick napkin math, compared to when I first started renting years ago, my rent costs have gone up about 40%.

So would it be safe to assume your rent is now above two dot one k?

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  • 2 weeks later...

That is insane, it also means that if I wanted to rent out a portion of my home, I would be rolling in rental income. Way above what I was getting in my last home since I basically kept my rent constant over the 8 years.

I just looked at the cost of rent in my neighborhood, it would be $800-1500/room and I have a 4bd/4bath home.....

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  • 1 month later...

This is only slightly offtopic.  This youtube channel does a great (if slightly biased) job of talking about city planning and the huge issues with single use zoning. 
This video in particular clearly shows that simply having cities push for more mixed use zoning with walkable neighborhoods allows for dramatically better return on investment for the cities in question. 
tl;dr - suburbs are a net negative for cities, downtowns and mixed use neighborhoods are net positive.  Eliminate single family zoning or make those people pay more to fix the issue. 

 

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  • 3 months later...

https://www.kuow.org/stories/seattle-housing-market-is-going-into-hibernation-but-its-not-all-good-news
 

Quote

Angela King: A report by Redfin shows the median rent rate in Seattle increased by more than 30% in May of this year, compared to May of 2021. And the median rent in Seattle? Now more than $3,000. That is unaffordable for lots of folks. Daryl, are there any signs those prices are going to come down?

Daryl Fairweather: I think there's actually even more room for rents to grow, because as people get priced out of buying a home, they're going to be more likely to rent.

 

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If my rent jumped 30% or more in one year from where it is at now, I would start considering moving back to the house. I could still afford it but I would start looking myself in the mirror and asking if burning that much money every month is worth it.

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Rent increases can be completely arbitrary. Usually it happens with new listings rather than existing tenants. If someone moves and spot opens up, you can expect it to be at the current market price, usually from my experience small time landlords tend to keep rent prices relatively stable with good clients at the risk of losing them, but big corporate owned rentals tend to adjust as needed since they care much list about the individual unit since they have so many more units to manage.

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  • 9 months later...

California HFA announced a program called "California Dream for All" which was designed to provide a silent 20% second mortgage acting as an initial down-payment to help new homebuyers purchase their first home.  This program was announced on 3/27/23 with an initial funding of $300M.

https://www.calhfa.ca.gov/dream/index.htm

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They ran out of money on 4/7/23 (technically the money has been reserved).  

I have good and bad things to say about the program, but I have mostly positive opinions of it.  

  • The program "solves" the problem of many first time homebuyers which is the down-payment, often renters are paying rents of the same size or in excess of what their mortgage + insurance costs would be.  
  • They didn't gimp the hell out of the income requirements - Orange County has a $235,000 household income cap for the program.  
  • In theory the state will receive some "interest / income" from this program as these loans are paid back.  The loans themselves do not bear interest but do receive 20% of the increase in home value (read the website for details) which means this isn't a pure gift by the state but rather a long-term investment.  
  • This program helps buyers purchase homes somewhere near the median price, instead of being artificially limited to less expensive / "starter homes"
  • Politicians (read: property owners) will never vote for policies that decrease the value of property - this program adds to the demand side, rather than addressing the supply side - it may even provide a small backstop towards the current weakness in the housing market, which was showing declining sales prices over the last few months.  
    • As a counterpoint, if the state wanted to invest this money into building housing, there would potentially be issues surrounding where that housing would be allocated, let alone the type of housing etc.  
    • The state really hates building/owning housing, this sidesteps their traditional concerns regarding "public housing" and also sidesteps local complaints from Nimbys
  • If politicians can point to this program as a success we may see additional funding made available (maybe even more this year).  
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On 4/10/2023 at 10:52 AM, Malaphax said:

California HFA announced a program called "California Dream for All" which was designed to provide a silent 20% second mortgage acting as an initial down-payment to help new homebuyers purchase their first home.  This program was announced on 3/27/23 with an initial funding of $300M.

https://www.calhfa.ca.gov/dream/index.htm

  • If politicians can point to this program as a success we may see additional funding made available (maybe even more this year).  

If its anything EV rebates, they continuously add to the funding pool based on state politics, but will take reservations on a 1st come, next served basis etc.

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  • 2 weeks later...
On 4/10/2023 at 10:52 AM, Malaphax said:

California HFA announced a program called "California Dream for All" which was designed to provide a silent 20% second mortgage acting as an initial down-payment to help new homebuyers purchase their first home.  This program was announced on 3/27/23 with an initial funding of $300M.

https://www.calhfa.ca.gov/dream/index.htm

Small update to this, it was announced that this program was used by ~2,500 households.  Which gives you an average of $120,000 in down-payment assistance per household.  That's a little bit under the current California median home price of $791,490 as of March 2023.  It would be more in line with a $600,000 home purchase (since the program provides 20% of the purchase price as a down-payment).  

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On 4/20/2023 at 10:46 AM, Malaphax said:

Small update to this, it was announced that this program was used by ~2,500 households.  Which gives you an average of $120,000 in down-payment assistance per household.  That's a little bit under the current California median home price of $791,490 as of March 2023.  It would be more in line with a $600,000 home purchase (since the program provides 20% of the purchase price as a down-payment).  

Most of the homes a little bit east of where I live is in this price range (Fontana, Rialto, Redlands etc.)


Not sure what to think about this:
https://www.foxnews.com/us/biden-rule-redistribute-high-risk-loan-costs-homeowners-good-credit

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I'm getting some conflicting information about the article you posted.  I generally dislike using fox news as a source.  
As far as I can tell this is related to a proposed rule by the FHA regarding loan level price adjustments (LLPAs) based on debt to income ratios.  This has already been delayed to at least August and is seeing pushback for the very good reason that debt to income ratios fluctuate - if you're income varies (gig work, commissions) or your debt load changes, this ratio adjusts.  So assessing lending fees or even mortgage interest rate changes based on simple debt to income ratios isn't a great idea.  

I think this is a better and slightly less alarmist article, but honestly I don't generally get worked up about proposed rules or legislation, because often it changes or doesn't come to fruition.  

https://www.housingwire.com/articles/mortgage-industry-takes-another-stand-against-the-fhfas-dti-fee/

There's also this article with a heatmap reflecting the proposed changes.  I have to quote this section because people seem to be glossing over this fact:
"The effective penalty for having a credit score under 680 is now smaller than it was.  It still costs more to have a lower score."

https://www.mortgagenewsdaily.com/news/01192023-big-llpa-changes

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  • 3 months later...

Someone brought up foreign home ownership.  Here's some very light reading I've condensed (fuck me this turned into an essay sorry) and some recent statistics.  
tl;dr - Hard data is spotty at best and surveys and estimates vary wildly.  It's probably an issue but no one really knows how big of an issue.  

First let's start with abroad.  New Zealand banned foreign home ownership in 2018.  Canada put in place a 2 year temporary ban on foreign buyers starting in 2023, there are some minor exceptions.  Canada's real estate market is considered one of the most expensive in the world.  

But what about California?
Older article from 2018 talks about foreign purchases (harder to measure because California does not require disclosure of if the purchaser is foreign) and more explicitly tracked all cash purchases (as a proxy).  California Association of Realtors estimates foreign purchases were between 3-8% during the mid 2010's but that all cash transactions were between 23-32% for the same period.  They also estimate that foreign buyers are 70% from Asia (the suspicion/implication is majority Chinese).  California supposedly represents 40% of all Chinese home purchases far outpacing any other state.  This may also be connected to visa programs like EB-5 visas which are tied to investment objectives and lead to green cards.  

More recent numbers from National Association of Realtors (these were based on broad surveys not data sets).  

  • Nationally they estimate foreign purchases to be 1.8%
  • 42% of foreign purchases were all cash
  • 50% were vacation/rental properties (not owner occupied)
  • 13% Chinese, 11% Mexican, 10% Canadian, 7% Indian, 3% Columbian
  • 23% Florida, 12% California, 12% Texas, 4% North Carolina, 4% Arizona

There was a tangentially related bill in California that would have barred foreign purchase of farmland - this passed the legislature but was vetoed by governor Newsom back in 2022.  I don't believe any additional legislation has passed in California.  There are some other states that have tried (Florida man strikes again) and it's getting some pushback from the federal government.  I believe the feds are concerned that this is a form of discrimination (it is) based on nationality and don't want that codified into state laws.  

Totally cool opinions and analysis:
Chinese investment in real estate is absolutely occurring and they often select housing markets with strong growth appreciation (like California or Canadian cities) which can also help them gain citizenship for themselves and their children.  [That doesn't even touch the birth tourism that happens here in America.]  Economically it was also a way for wealthy Chinese to park some of their money outside of China, which is attractive for diversification (and other reasons).  
HOWEVER, all of this data is backwards looking.  China's economy isn't doing so great, and they're currently in the process of their own real estate collapse.  I suspect there will be less Chinese investment in the US over the next few years as they deal with their own economic issues.  

Mechanically, I think there are two separate issues.  Our data is shit, and I think it would be a much easier legislative lift to require all real estate purchases to collect broad information about the purchaser including: nationality, corporate/trust information (such as where they're based and if they take outside investment).  I also think there should be some additional data collected on weather these homes are owner occupied or for short-term or long-term rent.  This would probably need to be collected (and randomly audited/verified) by the county assessor when they collect property taxes - failure to comply should result in a big fat fine.  We would be able to asses just how much foreign home purchasing was going on and how much corporate homebuying was happening - both issues we should address.  

The other issue: banning ownership of assets/property based on various criteria begins to run into problems with discrimination.  As much as I would like to wave a magic wand and ban foreign & corporate ownership of individual homes - the current court system has ruled that corporations are people and discrimination based on race/ethnicity/nationality isn't allowed.  Even with the substantial anti-China sentiments we're seeing in this country, I'm not sure it would be a good idea to pass any laws that could be compared to the old/racist Chinese exclusion act.  

There are also underlying issues across these states and countries with expensive real estate - namely not enough housing is being built.  That's a whole other issue, which I feel rather strongly about but I'll save that for another time.  

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  • 3 weeks later...

That totally long ass post right above you goes over it.  California (and the US) does not track foreign buyers or corporate buyers.  At best they survey mortgage brokers and agents to get a loose approximation. 

image.png

Source: https://www.car.org/en/marketdata/data/countysalesactivity

Currently the quantity of home sales is on the decline, down 10% Y/Y and 3% M/M.  The price Y/Y and M/M are either flat or very slightly up.  It's because the people who do have money (existing home owners with high incomes) are the few that can afford anything and they're buying at the top end which drags up the median, while anyone at the lower end is priced out.  If you're wondering if these are all cash buyers, that's possibly the case, but I suspect anyone who's buying a home for $1M+ can afford the mortgage.  I doubt this is majority foreign buyers, and I especially doubt it's majority chinese buyers - the chinese real estate market is in the shitter and it's dragging their entire economy down. 

Anecdotally, I'm seeing price reductions on zillow and redfin at the lower end.  I think with the current interest rates being ~7%, new home buyers can't make the payments they could a year or so ago, which is deflating the housing market.  Inventory is very low at the lower end of the market, which despite the high mortgage rates and general unaffordability, is helping maintain a price floor. 

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