Raindrops Keep Fallin’ On My Head — B.J. Thomas
In today’s market conditions, there are 4 types of market participants: 1. Renters, 2. Owners who bought before 2002 and did not abuse home equity lines of credit (HELOCs.) 3. Owners who bought after 2002, and 4. Owners who abused HELOCs. Obviously, when prices drop precipitously as they have over the last year, renters are the happiest of the group. Owners who bought before 2002 and did not abuse home equity lines of credit may be bummed that their illusory wealth is disappearing, but they will go on with life much as before. They have no particular reason to be stressed. Owners that bought after 2002 will probably go underwater, and the closer the purchase was to 2006, the further underwater they will fall. Owners who abused HELOCS have put themselves in the same situation as late buyers by increasing their mortgage balances mostly through foolish consumer spending. These last two groups will experience a great deal of stress once the veneer of
denial is stripped from them by the continuing decline in prices.
Stop for a moment and contemplate how large a group of people it is that purchased after 2002 and/or abused HELOCs. Given the degree of kool aid intoxication we all witnessed during the Great Housing Bubble, it is obvious that this describes many, many homeowners. The numerous posts I have done on HELOC abuse are a testament to the scope and scale of the problem. The behavior of these people is not the exception, it is the rule. How many of you know friends or family that fall in this group? Or perhaps the question should be how many of you do not know friends or family that fall into this group? I hope they are preparing themselves financially and emotionally for what is to come. It will not be a good time.
But there’s one thing I know
The blues they send to meet me won’t defeat me
It won’t be long till happiness steps up to greet me
Today’s featured property is a high-end Irvine property rolling back below its 2004 purchase price.
Asking Price: $1,150,000
Income Requirement: $287,500
Downpayment Needed: $230,000
Monthly Equity Burn: $9,583
Purchase Price:
$1,200,000
Purchase Date: 8/27/2004
Address: 9 Raines Corner, Irvine, CA 92602
| Beds: | 5 |
| Baths: | 3 |
| Sq. Ft.: | 3,374 |
| $/Sq. Ft.: | $341 |
| Lot Size: | – |
| Property Type: | Single Family Residence |
| Style: | Mediterranean |
| Year Built: | 2002 |
| Stories: | 2 Levels |
| Area: | Northpark |
| County: | Orange |
| MLS#: | S537735 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 1 day |
 New Listing (24 hours)
|
|
Open Floor Plan*Travertine Flooring*Highly Upgraded Kitchen
W/Stainless, Granite, Euro-Cabinetry, Large Breakfast Bar/Island*Main
Floor Bedroom W/Full Bath*Family Room W/Media Niche, Gas
Fireplace*Upstairs Desk/Computer Area with Built-In Cabinets*Spacious
Master with Retreat/Dressing Area, Built-In Vanity, Master Bath Has
Seperate Sinks, Tub and Shower, Large Walk-In Closet*Large Upstairs
Laundry Room*Upgraded Backyard with Built-In BBQ & Bar Seating,
Fireplace and Water Fountain. *Resort Style Amenities with Low Tax
& HOA*Tustin Unified School District*
When did asterisks become periods? Is there something wrong with periods? Is the asterisk supposed to catch my attention in a positive way? I think it just makes realtors look stupid.
Why Is Every Word Capitalized? I suppose it is easier to read than ALL CAPS, but it is just as unnecessary.
There is an interesting subplot to this property. The current owner purchased the property from someone who paid $638,000 on 8/12/2002. In two years, that owner made $562,000. It is a good thing the greater fool came along because he was abusing his HELOC before the sale. I followed this owner to a property in Woodbury where he opened a HELOC for $100,000 shortly after buying a new house with a small downpayment. I don’t know what he did with the $562,000 he made, but it isn’t serving as equity in the new property. HELOC abuse is everywhere. There are so many people who are so screwed…
When this property was purchased in summer of 2004, the borrower put $60,000 down on a $1,200,000 purchase. In the summer of 2006, the borrower took out a HELOC for $90,000 and drained all his equity. The total debt on the property is $1,230,000. If this property sells for its asking price and a 6% commission is paid, the total loss on the property will be $149,000. The borrower will make $30,000 while the lender loses $149,000, assuming of course that the house sells for its asking price.
There has been much speculation about the apparent resiliency of the high end. If any of you have been going to Piggington.com, you have seen what has been going on in San Diego.
It hasn’t been pretty. I have forecast a 40% decline in prices here in
Irvine. The low end of San Diego’s market is almost there already. Ours
is not far behind. The low end of the market leads prices higher or
lower (see The Plankton Theory Meets Minsky.)
When prices are rising at the low end, sellers are flush with cash from
the sale of their property and use this money as downpayments on larger
homes which push those prices higher and so on through the housing
market. When prices are falling at the low end, sellers do not have
significant (or any) equity to move up to a larger property. This
depresses prices up the housing scale in the same way higher prices
boost them. The sharp decline of prices at the low end of the market
will act like an anvil weighing down all prices. Part of the greater resiliency of the high end is that subprime loans were not concentrated there. The Alt-A and Prime borrowers still used toxic financing, and their loans will blow up, but many will have greater holding power after their mortgage explodes, and they are not scheduled to explode until 2009-2011. In short, the high end
will fall, it will just take a bit longer.
Thus concludes another week at the Irvine Housing Blog. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
😉
.
Raindrops keep fallin’ on my head
And just like the guy whose feet are too big for his bed
Nothin’ seems to fit
Those raindrops are fallin’ on my head, they keep fallin’
So I just did me some talkin’ to the sun
And I said I didn’t like the way he got things done
Sleepin’ on the job
Those raindrops are fallin’ on my head, they keep fallin’
But there’s one thing I know
The blues they send to meet me won’t defeat me
It won’t be long till happiness steps up to greet me
Raindrops keep fallin’ on my head
But that doesn’t mean my eyes will soon be turnin’ red
Cryin’s not for me
‘Cause I’m never gonna stop the rain by complainin’
Because I’m free
Nothin’s worryin’ me
Raindrops Keep Fallin’ On My Head — B.J. Thoma
The high end is about to have its lunch handed to it. Get out your popcorn.
That’s not fair. They get lunch and all we get is popcorn?
Qu’ils mangent de la brioche (Let them eat cake)
Screw the popcorn, I want barbecued pork!
AZ, way to steal Neil’s line.
BTW, where is Neil?
Popcorn was 1/2 off at Costco.
I have been tracking the existing homes on the market, and it looks like supply is going down (from a high last year of over 1,000 to the mid-upper 800’s now- although it’s stayed relatively constant lately). If there are so many distressed properties/foreclosures/short sales and supply has dropped 20%— what is this indicative of?
Just curious.
Thanks for a great site.
Your question is a good one…..I am not sure if there is a good method any longer of figuring out what the inventory is. Certainly the MLS listings is a good start…then there is the foreclosures and the REO’s. So what is the total….who knows for sure.
My guess is that inventory was very high for the past year or two because of the housing musical chairs set up by flippers. When flippers left the market inventory temporarily decreased on a seasonal basis. What’s next….my guess is a slow and long increase in inventory…….
Rentals… A lot of the homes I have looked at recently disappeared from the MLS but did not show as sold. When I checked Craigslist, sure nuff, there they were, lanquishing with sky high asking rents. Even then, compared to owning the rents seemed reasonable. One place was asking $1.2 Million; rent asking $4500. Not many folks are willing to pay rent of $54000, but using the 160x thats a home value of $720000. I think for home buyers in a normal market maybe 200x is right, so that place probably would have easily sold for $900000, and theres a good chance that will be the bottom. The owner just could not accept (afford?) swallowing the $300000, so instead will bleed roughly $40000 a year. Thats about 4.5% of the $900000 value; so if prices were appreciating at significantly better than 4.5%, making it a rental might work out.
I think they will discover what a horrendous headache being a landlord is; that being a rental significantly devalues a high end home, and end up selling and taking the loss in a couple years.
Red,
Thank you for providing the “160 rule,” which is probably an old saw for most of IR’s readers but was not for me. Turns out that what I think my property is worth today (on the other coast and not in an area decimated –yet?– by Alt-As/subprimes/ARM resets) actually is the reasonable rent for the area times 160, almost to the very dollar I had thought.
Other, equally experienced readers might consider dropping some of your “cliched wisdom” into replies so novices to this subject can learn more.
Thanks again, Red, and everyone else.
Price
They went completely over the top on this place. Pushing gaudiness to an all time high.
The entire thing screams lipstick on a pig.
Why are the table chairs wearing dresses?
Why does the television look so lonely and pathetic in that giant background of a room?
Tile, tile, tile, and more tile on everything.
Million dollars – yea, sure, buddy.
Just shut up already. I’d take ugly in CA over pretty in AZ ANY day of the week.
This is a critical list that is at the beginning of the steep retracing of the rocketing rise from 2002 Aug. to 2004 Aug.
All knife catchers be warned: easy come easy go rule most likely will apply in this case. This home will go back to 2002 level in 2010 Aug. That is another $500k drop from its asking today.
I disagree with your 4 groups. HELOCs are definitely a problem but the bigger problem is ARMs.
I don’t think a 2002 or 2003 buyer will feel any pain if they bought with 20% down and took a 30 year fixed. Even if prices fall to 2002 levels, both these buyer groups will be fine. My parents bought near santa monica in 2004 and lost 15-20% on paper by 2005 but that didn’t cause any hardship. They were in a fixed product and had a down. Actually, I have friends who bought in 2004 with 20% and 30 fixed and prices in their neighborhood have already fallen below their purchase price but they aren’t stressed and I don’t think they will be even if prices fall farther.
If people bought with conservative financing and can afford their payments, they will be fine.
That is the way many people look at it right now. I can’t help thinking that if you are sitting in a house worth $250,000-$500,000 less than you paid for it, the payments are higher than they need to be (if you had waited) and there is little hope of it climbing back to breakeven any time soon, it would be very stressful. You would be trapped, unable to move because of the value of your house. I don’t see how this can be ignored other than through stress-inducing denial.
I think for those that made a responsible purchase, while they may not be happy that the housing market is dropping they most likely aren’t ‘stressed’.
Such is life, you cannot be timing the market and speculating what the future may bring when making a big decision such as puchasing a house.
If they made a responsible purchase, most likely, they had to purchase that house during that time period.
Life such as having a family etc do not wait for all the chips to fall in place.
I am in a little bit of that situation myself with my car. The gas expense hurts. I’d like to get something more fuel efficient, but my car depreciated so much in the past year because nobody wants to buy gas guzzlers like mine. I can’t afford to sell it, and I can’t afford to keep it!
“I can’t help thinking that if you are sitting in a house worth $250,000-$500,000 less than you paid for it, the payments are higher than they need to be (if you had waited) and there is little hope of it climbing back to breakeven any time soon, it would be very stressful.”
– We might call this emotional stress. It is unpleasant, but you can survive the situation if desired. Some people hardly track the news, and all they know is they are making their payment and will experience little, if any stress.
If you are in an exploding mortgage, we might call this financial stress. The situation will cause an ever increasing amount of emotional stress as the prospect of losing ones house and credit nears. There are few that will not feel stress in this situation regardless of if they follow the news or not.
Most people are clueless. Most people who are hugely underwater won’t realize it until they need or want to sell.
Then will come the big shockerooo.
I bought my Irvine Westpark house in early 2004 with conservative financing. I got this house so that I would have a nice place to call home, to raise kids in a safe city, to swim, bike, and walk at almost any time of the day. My estimated zillow has so far not decreased below purchase price yet, but it may – In this kind of market, who knows what will happen. However, my home-induced stress is nil, nada, zero. On the contrary, I’ve tremendously enjoyed Irvine-home ownership: I see safe environment, abundant greenspace, excellent school district, collee-town atmostphere Irvine offers as invaluable dividents I receive every day. I’m not a speculator: I do not see primary home as an investment and therefore having no need to sell it to make some extra money nor being bothered by short-term pricing fluctuation.
Kudos to IHB. It helps me get to know other angles of a city I call home. 🙂
Happiness = Swimming+working+taking nap+working+teaching kids.
They should not ignore the fact that now they have little room for error and they will be living under this for an unknown period of time, as long as prices recover from an historicly unprecedented bubble.
If the the recession becomes severe and there are wide spread job losses, for people that are under water and are forced to sell, because they ran out of their savings, they will need to bring a check to the closing table or have their credit history affected.
I’m with you rkp. People who spent less than 2.5x their incomes using a fixed rate mortgage will be fine. Sure, they’ll be a little stressed about the value of their home. Will it be any more stress than parents worried about paying for college? Is it any more stressful than watching your retirment accounts lose 10%+ this year?
I don’t know. There are plenty of things in life to get worked-up over…
If I knew my neighbor’s monthly payment was 500.00 less than mine, I’d be a little stressed.
It doesn’t matter.
Let’s say you were certain that your neighbor, who got in at a much lower price point, had a mortgage $500 less (both fixed for 30). If you spent 2.5x your income, but s/he spent 5x, you’ll have a much better cash position every month. Are you still stressed about it?
“People who spent less than 2.5x their incomes using a fixed rate mortgage will be fine.”
This probably applies to less than 5% of the buyers since 2002. The aggregate DTI ratio in Irvine topped 62% at the peak. The only people who did this bought much less house than they could have rented and much less house than they could have purchased after prices fell.
“Stupid is what stupid does.” ;P
But, if you spent more than 3x your income in anything other than a fixed rate mortgage, you were asking for stress. So congratulations, you got it.
Is this the figure for full doc loans only? Most loans taken out in Irvine since 2002 were no ratio/no doc, no DTI is calculated.
The ratio is an aggregate that a median income person would have to utilize to purchase a median sales price home. As you noted, very few people used this kind of financing.
Geesh, I really dont think you see the full impact of whats happening…
Try telling that bs to my coworker, who bought in 2005, with 20 % down. He’s blown past the stressed phase, to a point where he’s PISSED OFF !!!!!!
Imagine housing countining DOWN, AND the DOW going back to 7500. Just imagine how many MORE people are gonna be PISSED OFF!
“Imagine housing countining DOWN, AND the DOW going back to 7500. Just imagine how many MORE people are gonna be PISSED OFF! ”
Yeah, buh bye housing, buh bye 401k.
Now its gonna be far worse this time, than ever before.
Got gold ?
Tell us more on what your co-worker is doing. How is s/he behaving feeling?
I have a friend in a similar situation — can make the payments, is worried about the economy and the stability of her job, is pissed that the house is underwater, and it is stressing her big-time. Her response: she just listed her house, hoping a miracle buyer will take her out and pay off the remaining debt so she can sleep better at night.
The contrarian in me wonders if this is a sign of the bottom, when people who don’t have to sell put their places on the market because they just don’t want to own a house right now.
There is a difference when your 401k goes down. You didn’t take out a loan to make the initial deposits in the 401k. You don’t get foreclosed on if the value goes down.
“There is a difference when your 401k goes down. You didn’t take out a loan to make the initial deposits in the 401k. You don’t get foreclosed on if the value goes down. ”
That may be true, but when the value of your house is crashing down, and at the same time, your 401k is down over 20% this year alone, one must feel like a real loser.
Gawd, this country is going DOWN faster than flies on shit.
Protect yourself, because no one else can, or will.
FWIW, Countrywide owns 3 Raines. I don’t know if it’s listed yet, but if it is, that will put some more pressure on this house.
Irvine Renter:
Just to be sure – when you tabulate the loss the bank will suffer, you’re not taking into account the money paid to them each month as mortgage payment, right? To be fair, even though the HELOC abuser is walking away with that cash and not making good on their promise to pay… they aren’t just leaving the house as collateral, there were carrying costs on the home that they paid each month, right?
I am not taking into account any payments or lack thereof because this information is not readily available. In reality, the lenders are losing significantly more than I am stating because they have lost income from payments they do not receive, plus they will incur other charges and fees not reflected here. In short, it is even worse for the lenders than I am showing. Also, since many of the borrowers who go through a short sale or foreclosure do not have a housing payment for several months, the short-term benefit to them is even greater.
I’d like to hear someone knowledgeable comment on the likely effects of the $300bil bailout moving through the halls of government and straight out of the wallets of taxpayers.
No dissertation necessary, just the net in your opinion. Personally I think monkeying with contracts has to raise risk premiums on borrowing in the future, making it harder to obtain loans, prolonging the crash, etc. etc..
The “monkey-ing with contracts” part is voluntary. Lenders are free today to write-down principal and refi borrowers rather than foreclosure. Under this bill, lenders can do the same, but the loan goes on FHA/taxpayers books thereby improving the banks’ balance sheets.
What it does is allow the lenders to transfer 85% of the debt to the taxpayers and reduce amount the homeowner by 15%.
In other words, the homeowner will take the 15% reduction debt, THEN try to short sale it or walk away. In my opinion it will increase the velocity of the downward slide in prices. From my understanding, if the the homeowner sells the house later, for more than what they owe, they have to pay that money back that was reduced off their mortage by the financial insitution.
Just another way for the government to save the backs and keep the homeowner in debtors prison…
The other thing I’m wondering is what kind of taxes does a HELOC abuser have to pay on his gains?? It’s not considered capital gains right? But does he have to pay income tax on it? Certainly hope so. I think they should be taxed up the whah-zoo on heloc dollars.
At the time the loan is granted, there is no tax — it is a loan not income. At the time of foreclosure, they are supposed to pay taxes on the forgiven debt, but most will claim insolvency and avoid taxation (if they report it at all.) Basically, there are not consequences other than to their credit report.
There’s the luxury resort illusion that I’ve referenced! The outside softscape of trees and plants is appropriate for the climate here. They are low water/low maintenance varieties. There’s no high maintenance tropical plants that require loads of water.
The resort part can be seen in the outside dining areas, the massive built in bbq and the lovely hardscapes that surround the “water features”. That’s what I’m talkin’bout. That fountain is going to require a LOT of maintenance and it will lose water daily when the weather heats up (ask anyone with a pool about evaporation around here). ALL of the stuff outside and inside requires cleaning, cleaning supplies, maintenance, repair/replacement and TIME devoted for those activities.
IF you were set on Staycations (vacationing only at home) this might be a “deal” because the high monthly costs could be justified. You’d still have to be your own resort chef, your own resort maid, your own resort pool boy etc…but I am sure that would be a labor of love for some. 😉
However, if you are planning on actually visiting a luxury resort outside of your own domicile, you’re going to pay the vacation premium as well as the staycation premium that you’ve left behind for a couple of weeks.
My contention is that MOST people cannot afford two luxury resort lifestyles.
And I wonder just how much you can actually enjoy that outdoor dining area when you feel like barfing with stress at all the bills and spiraling debt that is piling up week after week.
“Jeeves! Two luxury hot dogs, please! And make them spesssssssssssssssshial!”
“At your service! Two luxury resort dogs on the grill!”
I don’t get it, I don’t see what you see.
Outside has very little grass that can be mowed weekly or every other week. An outside yard service will only set you back maybe $100/month. The palms only need to be trimmed twice/yr and that fountain needs to be cleaned out maybe once/month and topped-off every several days.
As for the inside, just mop the tile. I know many people who live in homes like this and maintenance is not so burdensome as you make it out to be.
Luxury resort dogs – too too funny.
“Luxury resort dogs – too too funny.”
David, Glad I could pay you back a little for all the humor you’ve been providing. I look forward to your posts. 😉
alan,
GRASS would have been so cheap to put in. This place is way beyond lawn.
The resort/luxury expense is already baked in – look at that custom outdoor fireplace, the custom concrete work, the water feature, the built in BBQ and related crafted dining area. Ever price that sh!t? It’s crazy.
That stuff cost the owners up and above what they purchased the house for and that is the debt load that they are paying each month. It has the look and feel of a true resort. It’s a little corner out of “lives of the rich and famous”
Ever put in a mature Palm? Hundreds of dollars, but softscape is by far the least of expenses in a yard like this one.
LOL… a little mopping will do… you crack me up. This ain’t a double wide.
A housekeeper for this place will cost a minimum of 1500,00 per monthe. Overall maintenance costs wikk be another grand. That is if your like me and you require everything to look as good or better than the day it was built or bought!
You can expect to pay $200.00 for housecleaning per week if you have connections to a good Lupita.
Cleaning services would probably run $225.00+
If the home is not heavily used, you can get by on once every other week. But dusting, mopping and general cleaning have to happen if you are going to keep the resort look. Who wants to look at dust and grime in a million dollar home? Even homes that are not occupied for two weeks b/c of real luxury resort vaction time, accumulate dust during that short period of time, even when the home is locked up.
Hey, is alan the resident bull? Just curious.
People that purchase million plus homes such as this do not expect to do their own housekeeping. Cleaning ladies, gardeners and nannies are required.
In looking at the tiered Case Shiller data, I was struck by a persistent effect. In those bubble cities where low, medium, and high priced homes were all below the $417k conforming limit, the %price drops from peak are pretty similar. Phoenix, Tampa, Miami, and Las Vegas all have drops between 24% and 30% for all tiers (low, mid, and high). It’s as if they were the same metro area. Chicago and Atlanta also have very similar drops in price from peak across the tiers. This occurs even where the price rises from 2000 to peak were somewhat different for different price ranges, like Miami.
However, if you look at cities where a significant portion of homes were above the conforming limit, low end houses dropped more. The highest price market, San Francisco, had the largest spread: the low end has dropped 40.9% and the high end has dropped 10.7%. In Los Angeles, the low end has dropped 33.7%, and the high end 19.5%. Similar story for San Diego.
So, what’s going on? I suspect that it has to do with the types of loans being sold. It does not appear to have much to do with whether particular homeowners were more or less wealthy than others in their city. We already know that one of the reasons for the difference between CS numbers and OFHEO is that OFHEO didn’t include nonagency loans. Places with high portions of Fannie Mae and Freddie Mac loans didn’t see as bad a bubble as others. Fannie Mae and Freddie Mac didn’t change their underwriting standards as much as the rest of the world.
SF, LA, and SD had far higher price to income ratios than the other bubble cities. All had median home prices which peaked out at more than 9x median income. It is no coincidence that a very disproportionate amount of CA high end properties used pay option arms. About 60% of these were in CA. See http://www.doctorhousingbubble.com/stage-two-of-the-mortgage-collapse-500-billion-in-pay-option-arms-meet-the-piper-in-2008-with-60-percent-being-in-california/
Those loans typically have teaser rates, negative amortization, and a 3-5 year reset where payments become 2-3 times the teaser payment. People with those loans from 2003 or earlier might be able to pay off the balance if they sell. 2004 or later highly unlikely. The 2005 to 2007 loans will be deeply underwater, and disproportionately they will be coastal CA high end homes.
The reason the high end hasnt dropped as much on a percentage basis is becuase they are selling a lot less homes.
I toured some homes this weekend and still cant believe some of the WTF pricing going on out there. Next time im going to ask the realtor if the price includes a producing oil well.
Yes, there are fewer high end homes selling in coastal CA vs the low end. And asking prices at the high end haven’t dropped nearly as much as at the low end. That situation is different from other bubble markets like Phoenix, Las Vegas, or Tampa.
The question is why? I suspect that it has to do with the pay option arms for the more expensive homes in CA. Their teaser payments last 3-5 years. In CA a lot of owners with homes over the conforming limit are watching various legislation, hoping something will either bring the market back to higher prices, or help them get out of their exploding ARM into something more affordable.
If I was in a homeowner’s position, I might do the same. They can hang out paying the minimum teaser rate and hope that something bails them out in the next 1-4 years, before their monthly payment goes way up.
I think what camsavem was saying is that there is *no market* for high end homes.
since the pricing reports use market figures (offered/buys) to determine their analysis, it is skewed/inefficient. no one knows what the high end is worth, because no one is buying them.
eventually, sellers at the high end will realize that if they *need* to sell, they will have to lower their prices. but they aren’t there yet.
at the low end, REOs are making the market. they are priced to move by the banks, so the market is made.
Exactly.
You have a few people that are transfering equity, but for the most parts they sit, and sit, and sit.
Seriously, how many people can really afford a 750K to million dollar home?
The people that paid those prices and have to sell in the next couple of years are going to lose half.
There is a condition sometimes in thinly traded stocks and bonds where there is only an offer to sell OR an offer to buy, but not both. Thus, no transactions take place at that time.
If there are no forced sales at the high end in a particular area, what you tend to get is a series of slow small drops in price by some frustrated sellers. Over time, you finally get a critical mass of REOs and short sales and an actual market with sales reappears.
Actually there are $750K plus properties up here (Silicon Valley) sold every day. They aren’t necessarily high-end, either, you would not believe the crap houses here that cost even a mil.
The equivalent of Irvine would be Cupertino or Palo Alto up here. Right now you can’t get a house in Palo Alto at all for under a mil, and it’s tiny and old on 5250 sf. The better northern zip has houses starting at $1.6 mil. I’m not making any of these numbers up. People still have jobs and stock options up here. When the software jobs go away, then the correction will hit hard.
The lower-end zip codes here have already corrected more than 30%. But the higher end is still holding on, for the most part. It’s just that less and less of the county is part of the “high end.”
I think we’re lagging you OC guys by a year or two, but this party can’t go on forever.
You guys are “paying a price” for having a local economy soundly built on technology.
Although our local economy does have a tech component, we also have (or, I should say “had”) a huge fluff industry tied to the REIC (real estate industrial complex).
Since the REIC was the succeeding bubble after tech, we took on an aura that resembled the Silicon Valley during its boom years. However, there are two huge differences. First, after the tech burst, people could move to other locations because there was no housing bubble to BK them should they want to move. Second, the tech boom attracted sharp minds to the region, as the nature of the industry requires it.
The REIC industry made a lot of people with much less education suddenly rich. They invested their money in Hummers and over-priced houses. The consequence is a lot of people who are stuck in their homes and can’t start another good-paying job at a tech firm.
So, prices will plummet here first, along with our economy. Really, we will be re-visiting the sentiments of the mid-90’s when people were looking at Disneyland and remarking that although they generate a lot of revenue, they don’t have too many high-paying jobs. What to do? Two succeeding bubbles (thanks to Greenspan) allowed everyone to forget for a while that a region’s standard of living really does depend on a well-educated workforce supporting an industry that produces tangible results (which can be exported for profit) in improving living conditions.
So true. And with “green” tech shaping up as the next bubble combined with the collapse of the investment banking industry due to the end of the securitization biz model, SV will likely be the pre-eminent job center in the US. I hope we’re only a year or two behind.
Outlying upscale areas like Danville are gettign hammered right now. You can buy in Blackhawk CC (one of Money Magazine’s 30 richest ZIPs in the US) for $1M. But LG/Saratoga/Palo Alto/Los Altos/Cupertino still see demand exceeding supply.
BJ Thomas looks like The Night Stalker in that album photo.
LOL! B.J. is one tall awkward looking guy.
This song reminds me of my early childhood.
Surprised he didn’t slip from that water on stage.
http://florence.en.craigslist.it/vac/725787925.html
just plain fun
Am i the only one that thinks that woman is a little on the scary side?
And that pose is her “signature” stance? weird…
A couple of properties are now under the status of “backup offer accepted”
48 Rutherford Irvine after a 20K price increase
54 Rising Sun Irvine
Are there really some foolish knife catchers out there? even over the asking price?
Or is there some gimmick by the listing agents?
Wow, this market is amazing.
Don’t know if this was posted the other day.
Freefall: California median home prices down 35% in May
California’s housing market continued its historic decline in May, as a flood of foreclosed homes for sale drove down the median price paid for a single-family home by a stunning 35% from year-earlier levels, the California Assn. of Realtors reported today.
The median price paid for a single-family home in the state dropped by almost $210,000, from $594,530 in May 2007 to $384,840 in May 2008, the association reported. That drop represents a decline of $3,800 per week, or $549 per day, and is the highest ever measured by the association. The price decline appeared to be accelerating from April to May, as median prices dropped by 4.7% in that period.
“The statewide median price declined 35.3% to $384,840 in May, a record for year-to-year percentage decreases in the median, reflecting the effect of large numbers of short sales and foreclosures in the market,” said association Vice President and Chief Economist Leslie Appleton-Young. “With the statewide median in the $585,000- to $595,000-range through August of last year, we expect the market to continue to experience large year-to-year adjustments through the summer, even if the median price holds steady over the next few months.”
There was a glimmer of hope in the report: the number of homes sold in the state rose 18% from year-ago levels, marking the second straight month of year-over-year gains after 30 straight months of decline. The Realtors’ group attributed the pickup in sales to a flood of cheaper houses — many previously foreclosed on — that has dramatically changed the state’s real estate market. Additionaly, inventory of for-sale homes has decreased when expressed in terms of how long it would take to sell off all the inventory: “C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in May 2008 was 8.4 months, compared with 10.7 months (revised) for the same period a year ago,” the association reported.
In case anyone is interested, I made a spreadsheet for using NPV to determine whether buying a house makes sense (I used a lot of the maintenance/insurance numbers from IHB’s post on the subject). I talk about it a little more over here: http://morganla.wordpress.com/2008/06/27/rent-v-buy-excel-sheet/
Let me know if anyone finds it useful.
http://www.redfin.com/CA/Irvine/22-Honey-Locust-92606/home/7201191
Ouch.
I wonder how the happy homeowner faithfully paying his monthly mortgage bill will feel about the coming government bailout.
Say you are making a large monthly payment on a mortgage that is larger than the worth of you house. You don’t like it, but you pay up mainly because you can & it’s the right thing to do.
Along comes the massive government bailout pumping billions into the collapsing banking and mortgage business. This now enables those financial institutions to go to distressed homeowners and offer to cut their mortgages – the principal – to more a managible level.
How will all those responsible homeowners feel?
Screwed?
The bailout isn’t much different than the one for Katrina, etc. If one person acts irresponsibly (overborrows, doesn’t get flood insurance in a flood zone, etc.) and the inevitable event happens than they usually pay the entire penalty. If you get a large # of people who act irresponsibly (especially during an election year) then Uncle Sam (the taxpayers) bails them out.
As a responsible homebuyer (no HELOC, 30% down, fixed rate 30 yr. mortgage, affordable monthly payment, etc.) I’m not happy about the bailout but I expect nothing less from Congress. The banks will get bailed out and my prediction is that most of the homeowners will end up defaulting in 2-3 years rather than in 6 to 9 months. When your ARM resets and you can’t afford the new payment, will it make a huge difference if its reduced by 10 or 15%? Probably not in most cases. But now you can stick it to the federal gov’t instead of Countrywide, CitiMortgage, etc.