Live Lake Forest

Foreclosed homes in Orange County now total 865 in the MLS.  I’m pretty sure there are more, but this is the number that has been labeled that way, and I’m not going to read the details of over 11,500 listings to find the rest of them.  They range in price from $5,000 to $3,299,000 and vary in size and condition almost as much as they vary in price!

The one available for $5,000 is a 561 square foot condo in the Laguna Woods (Leisure World) Rossmore Tower, where the dues come to $1572 per month.  This property is wrecking the market for the rest of the exclusive “Towers” sellers, where the rest of the prices range from $59,900 up to $419,900!

The most expensive at $3,299,000 is in the Covenant Hills section of Ladera Ranch and offers 5 bedrooms, 8 baths, and a 6 car garage.  The listing agent put in the agent private remarks “This home is priced to see quickly!”  I think he meant to sell quickly, but since it didn’t sell quickly at the previous short sale price of $2,995,000 I wouldn’t worry too much about racing over to see it!  The selling bank also wants the buyer to pay the 1/4% Ladera Ranch transfer fee, which would come to $8,247.50 on a full price sale.  It seems a little silly to me to talk about this fee when the costs of property taxes, dues and insurance are costing the lender over $5000 per month without even considering the cost of having almost $3 million of their money tied up in this non-performing asset! 

I just updated all the REO listings in South Orange County, so take a look and see if you can find a bargain that fits your budget!

Search all 11,500+ homes in Orange County (some aren’t even distressed!)

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Real estate values have fallen substantially over the last 2 years, and I am now hearing a lot of “Are we there at the bottom yet?”  I would very much like to announce that we are  but that is probably premature today!  I believe that before the values can stabilize or improve, we will have to over-adjust, and dip below “bottom” and then inch our way back up to a reasonable level.  As that happens, there will be opportunities to make some good, and very safe investments, especially while the prices are over-corrected!

The good news is, that in certain sectors of the market, we are getting very close.  The disconnect from reality in the last few years was really due to what the “bubble bloggers” have been saying all along:

• Incomes have not risen enough to justify the double digit appreciation that everyone got so used to seeing. 
• Limited supply of “for sale” homes does not justify paying substantially over what the property would rent for.

“Rental parity” is the expression used to describe the total monthly costs to own a home (principal + interest + taxes + insurance + HOA dues) compared to cost of renting the same property.  To be really accurate, you should also look at any tax advantages of mortgage interest & property tax deductions, so for a rule-of-thumb, let’s use 25% as the discount from that total payment number.  There is also some value that you can assign to the “pride of ownership” factor, along with the feeling that you can control your own destiny about when you will move out, as well as the freedom to decorate to your own tastes.  Those values are difficult to put a number on, and it will vary by individual. 

At the peak of the real estate bubble, we saw properties that would rent for around $2000 per month, being sold for prices over $650,000!  (The payments after 20% down payment to a $520K loan @ 6% interest would be $3117 + about $600 property taxes + $100 insurance = $3817)  At that payment, even after taking out the 25% tax advantage, you are still paying about $850 per month more than the cost to rent that same house!  You better have a lot of “pride of ownership”!  During the big price run up, it was pretty easy to justify paying that extra $850 because you knew that in a year or two, the property would be worth $100,000 more than what you paid!  And during the time of “everybody with a pulse can qualify for a no-money-down loan” it was very easy to justify over paying.  It’s not working like that anymore! 

The good news now, is that we are beginning to see the rental parity values coming back.  In the lower price ranges, using an FHA loan and a 3.5% down payment, it is now possible to find a property that will cost almost the same as the cost to rent it.  There aren’t a lot of these yet, and they aren’t in the best condition or location, but the trend is there.   Here are some examples in Lake Forest :

Rent 2 bedroom condo = $1600
Buy 2 bedroom condo for $200k and put down 3.5%, $300 HOA dues, and 1.1% taxes, the total payment should be less than $1700 month.  (There are currently 23 properties that fit this profile today.)

Rent 4 bedroom house = $2800
Buy 4 bedroom house for $450k and put down 10%, no HOA dues, insurance $100, 1.1% property taxes, the total payment should be about $2940.  (There are currently 15 properties available today!)

Many of the properties that are available today are offered as short sales, or bank-owned.  They will probably be sold “as is” and may require extra cash to make them nice. 

If you have been waiting for the market to hit bottom, it hasn’t quite happened yet, but you should be getting ready because it won’t be too much longer!

Go check the MLS and find one that you like!

Call or email me if you want some help!

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Don’t forget your First Time Buyer Bonus!
Watch out for property tax scams

There are 182 bank owned homes on the MLS in the South Orange County communities of Aliso Viejo, Laguna Hills, Laguna Niguel, Dana Point, Mission Viejo, Rancho Santa Margarita, Trabuco Canyon, Coto de Caza, Laguna Beach, Newport Coast, Corona del Mar, and Newport Beach.

There is a wide variety – ranging in price from a low of $99,900 to a high of $2,999,999.  To view them by communities, go to my “Foreclosures“ page and click on the links.  (These are live links from the MLS, so they will be automatically updated when the status changes.)

You may also view over 11,500 homes in the MLS, including short sales and “normal sales.”

Call or email me if you need any help!

Thanks for visiting!