Let's search for a home in Lake Forest, California - Part I

I'm currently renting a 4 bedroom, 2.5 bathroom home in Lake Forest, California.

The reasons I'm renting are pretty logical and obvious:

1.) 4 Bedroom, 2+ bath single family home prices in Lake Forest, CA cost approximiately $500,000 on the low end to a cool $1,000,000 on the high end.

2.) The only way for someone like me to finance such a balloon purchase is through unconventional financing mechanisims that leave me as a potential borrower at significant risk should market interest rates change even slightly. These options include ARM loans and interest only loans.

3.) A fixed rate 30 year mortgage loan would require anywhere between $3000 to $5000 per month. I make good money, but I cannot afford such an outlay each month. There are now 40 year and 50 year fixed mortgages, but still the mortgage payment per month would be prohibitive.

4.) While I understand that I am throwing out he window almost $25,000 in rent every year, and that as much as 5 to 7% of my (2 deeds of trust) hypothetical mortgage payments would be tax deductible, this still doesn't solve the problem of monthly cashflow and meeting mortgage payments with ease.

OK. So that's the situation.

But I am open to buying a home if it could fit into my monthly budget, and assuming market conditions are favorable to owning a home.

I decided to do online search today, May 9, 2007 for a 4 bedroom, 2+ bedroom, single family home between $500 and $700k on several different online services. This is what I found out:

ZipRealty.com

Total found: 35

Lowest Price Home: $609,0000

Highest Price Home: $700,000

Estimated Average Price:$654,500

Realtor.com

Total found: 36
Lowest Price Home: $549,000
Highest Price Home: $700,000

Estimated Average Price: $624,500

Redfin.com

Total found: 40

Lowest Price Home: $536,990

Highest Price Home: $700,000

Estimated Average Price: $618,495

Zillow.com

Total found: 13

Lowest Price Home: $599,000

Highest Price Home: $699,900

Estimated Average Price: $649,450

OCExecutives Multiple Listing Service (MLS)

Total found: 30
Lowest Price Home: $520,000
Highest Price Home: $699,900
Estimated Average Price: $609,950

First of all, there do not appear to be that many single family homes available for sale in Lake Forest right now that meet these requirements. It must also be said that after reviewing some of the home for sale ads, 5 to 10% of these homes aren't fit for human habitation. I mean a number of homes would require serious work. I don't consider 35 units to be an earth-shattering inventory number, nor dreadful enough news to induce home sellers to disregard convention and slash prices.

However, I do believe that the Lake Forest single family home inventory trend is going upward because I have performed this same exact search many times before and come up with matches of only 10 or 15 homes max. Inventory is definitely climbing.

Secondly, the low-side of home prices remains too high. There was one house at the low-ball $520,000, which turns out to be a shit-hole house. But even if it were immaculately clean, the affordability/risk for me as a buyer is too much to shake. While I am saying that the prices are too high, I can also report that the prices are headed downward. It was not uncommon just 3 to 6 months ago to find 4 bedroom, 2 bath homes priced at $750K, $775K and even $800k. Not so much anymore. Most are in the $600-$700K range, so there's plenty of room to go.