01-12-2013 10:23 AM
I've been searching for a house in this crazy market for almost 8 months, exactly since it started picking up to become really hot. Here I am still searching.
For all this time a question has been occupying my mind. I understand that there are many factors to consider in evaluating a neighboorhood in a city but in the general sense of evaluation. I've heard Irvine holds the value of the property while other Southern Orange County (like Mission Viejo, Aliso Viejo, Laguna Hills, etc) have better chance of appreciation.
Definitely what I've seen is that, since 2005 those properties have dropped much more than the equivalent ones in Irvine. Is that a basis to say they have better chance of appreciation?
That doesn't sound very reasonable to me. If Irvine in general is a good city to live, then when the market picks up even more it has better chances to pick up in Irvine than the other cities.
I appreciate any idea/advice on this one.
01-12-2013 11:28 AM
The "OC Housing News" website has detailed analyses of just these trends, for all OC cities, and for the various villages of Irvine.
For what it's worth, I think your focus is misguided. Unless you are in the business of real estate speculation -- and if you were, you'd already have your own opinion about likely trends in OC cities -- it is not wise to buy a house based on expectations of future value. You're just asking to get burned by someone better informed who takes advantage of your greed. (Keep in mind those who got wealthy from the California gold rush were, for the most part, not the prospectors, but those who sold them the pans and tools and mules that fueled their search.)
A better approach is to compare the price of property to rental parity, so that there is no chance of you locking yourself into a negative cash flow situation. Imagine yourself a landlord, renting to yourself. If you would not rent the property from someone else for at least the monthly cost to own it -- don't buy it. If you would, go ahead. The OC Housing News has tons of information on how to make that evaluation (and if you want, they'll even put you in touch with buyers' agents who will run the numbers for you on any particular property).
I personally think MV and Aliso (and RSM) have a better probability for appreciation, because they crashed to rental parity faster than Irvine, which behaves on the downside more like Asian real estate markets (for obvious reasons) -- a very slow drift down as people for whom real estate ownership is a religion are forced to accept reality seeping in. Many properties in those other cities seem well-positioned for smooth non-bubbleicious appreciation -- if and when the local employment market justifies it, which so far it does not -- based on the desire of parents with good wages (but realistic ideas about the value of owning property) to have nice places to rear children, with decent schools. LH strikes me as trickier because it has that giant Leisure World influence, and schools with a lower general reputation, so its value may depend less on local wages. Coto and expensive parts of Laguna Niguel are also trickier because they, too, depends less on the ambitions of parents in their 30s, and more about what very wealthy or funky people do. The beach communities are a mystery to me.
But I would never risk tying myself up to a half-million dollar 4:1 or 9:1 leveraged debt on the basis of this amateur speculation. I would only buy on the basis of good rental parity and a solid stable neighborhood.
01-14-2013 11:07 AM - edited 01-14-2013 11:09 AM
I hope that future appreciation is not a large factor in your decision on where to buy. My advice is to buy where you want to live, unless you are buying for investment ONLY. And then buy based on cash flow, not future appreciation. Trying to factor future appreciation into your decision is a crap shoot. Real real estate investors do not figure appreciation into their buying decision.
In direct opposition to the common wisdom, your home is NOT the largest investment you will ever make. Your home is the largest EXPENSE you will ever purchase.