Clueless — Sevendust
Sometimes I come across a property where the circumstances around the speculative purchase lead to one of two possible conclusions: fraud or cluelessness. I am giving the benefit of the doubt to call this one clueless. This property was purchased in April of 2007. The news of the subprime implosion were on the front page. News of weakness in the housing market was everywhere as sales volumes were already declining and prices were dropping in many markets. And, of course, outlets like the IHB were screaming from the rooftops that prices were going to crash. It was in this environment that our flipper purchased today’s featured property.
The purchase allowed the previous owner who purchased in 2004 to sell at a small profit. It is the kind of circumstances that also has potential for fraud, particularly since the property went into foreclosure in just over a year after its purchase.
But was it really clueless? The flipper didn’t have any money in the transaction. This was a 100% financing deal, so Affiliated Funding provided the money, and the loan was packaged and sold in the secondary market. Some faceless investor is eating the loss. If prices had rebounded, this flipper would have made money. If it went down (which it did in a big way) then only their credit score was at risk. In those circumstances perhaps those of us who did not participate were the clueless ones…
What really caught my attention with this property was the discount. The asking price is 34% off its 2007 purchase price. That is a substantial drop. Perhaps they are hoping for multiple bids over asking. Perhaps there are enough knife catchers out there that they will succeed. In the comments recently, we were reminded about all the bullish commenters in the early days of the bubble blogs who were certain that if prices dropped 10% that investors would swoop in and buy up the entire inventory. This one is 34% off. Where are they now?
Asking Price: $499,000
Income Requirement: $124,750
Downpayment Needed: $99,800
Monthly Equity Burn: $4,158
Purchase Price: $756,000
Purchase Date: 4/17/2007
Address: 33 Visalia, Irvine, CA 92602
| Beds: | 3 |
| Baths: | 3 |
| Sq. Ft.: | 1,821 |
| $/Sq. Ft.: | $274 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Contemporary/Modern |
| Year Built: | 2000 |
| Stories: | 3+ Levels |
| Floor: | 1 |
| View: | Park or Green Belt |
| Area: | Northpark |
| County: | Orange |
| MLS#: | P655808 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 4 days |
Does that picture and description scream, “I don’t give a crap?”
If this property sells for its asking price, and if a 6% commission is paid, the total loss will be $286,940. Think about these losses magnified by the total number of REOs in California and the rest of the country. No wonder our financial system is in such distress.
.
Scared to look ahead
Instead I fold my arms waiting
The train’s arriving with the goodies I’m entitled to
All this time I never felt I got what I deserved
Oh what a shame (why me why me)
I never take a thing for granted
I’ll never be a hypocrite
(what would you know)
Fly, watch you’re falling sunset
I can’t remember when I ever heard you say
Thank you for everything you gave I’m so grateful
(hang on) to your fallen sunset
Don’t you see I’m talking can’t you wait until I’m done
Hold on a second here’s another one you haven’t heard
You think you’re owed the world well look at me
I’m owed it too (you’re feeling sorry for yourself once again)
I never take a thing for granted
I’ll never be a hypocrite
(can’t stand to hear you)
Always taking things for granted
you’re such a hypocrite
(what would you know)
Fly, watch you’re falling sunset
I can’t remember when I ever heard you say
Thank you for everything you gave I’m so grateful
(fly) watch you’re falling sunset
Clueless — Sevendust
One picture of the exterior – nice strong attempt to sell this place!
Good point. Please note that there have been many listings with only 1-2 exterior photos. I wonder why?
3% increase compounded from 2000 purchase yields $387K which is a good benchmark for any one who may be interested.
There are only 1 or 2 photos because the owner/agent realize the futility of short-selling a property in this market with 2 or more lien holders.
There is zero chance this house will sell for the listing price from the owner. Maybe the first will have better luck after the foreclosure.
Chuck Ponzi
Um…I wouldn’t bet on that. Have you checked out 604 Larkridge? 1 photo (and worse that this one) with 1 liner and it’s now in “backup offers accepted” status.
Zero chance is too extreme…I would say .001% chance đ
Is Irvine some sort of penal colony for architects?
That sh*t is funny, I don’t care who you are.
Why yes! Yes it is! I’ve lived there for 20+ years and the only variation on the “stucco box” theme is the faux Mediterranean theme. You know, the pink house with tile roof thing.
I will never be able to drive through Irvine again without that phrase coming to mind. Congratulations.
Where Oh Where Have Those Little Bulls Gone
Oh Where Or Where Could They Be…….
Remember just maybe six months ago how many permabulls there were left on Lansner’s blog?
At least the SH!Theads don’t bother me at work anymore.
Now I can go a whole day, maybe even a week without someone talking about housing prices staying up or being “strong”.
Jeebus, it’s a paradise.
Chuck Ponzi
With the bailout of AIG – one of the principal insurers of mortgages â home prices are set to skyrocket. 80/20 loans will come back with a vengeance and anyone who doesnât currently own a home will NEVER be able to afford a home again. Itâs morning in America for homeowners and slavery to the fools who toil away producing things instead of selling houses to each other. I pity all you bitter renters.
It’s still a half a million bucks for an ugly condo. Try again!
Look at all that curb appeal!
Sometimes I wonder how today’s architecture will stand over time in Irvine if this is what they built 8 years ago. Ick…
At the risk of drawing the ire of some of the far flung posters who have probably never been inside of Northpark, this is horrific marketing for what is actually a nice community of paired homes. For whatever reason they chose to post one picture of the back garage entrance. The front of these homes are actually quite attractive, and as with everything in Northpark are highly landscaped and very attractive. This particular one appears to be directly behind Hicks Canyon Elementary, another big plus.
No way it ever dips below $300k as suggested (less than its 2000 selling price), and I have a hard time seeing $390k. As far as today, unless it is totally trashed inside, easily goes for the low $5’s.
Thanks for that – indeed from the bird’s eye view it does at least have the possibility to look better from the front. Odd that they would use just one photo, choose the worst angle, and no interior shots at all. Trying to prove cluelessness over fraud?
I can’t comment on it’s current value or where it may end up in 2 years or so, but there is clearly no real effort to sell. It would be very interesting to learn the inside story on houses and listings like this.
Indeed CK, CMV in the $500’s on this unit. The last few closes I have seen on low list NP and NP Square units have gone for over list, some considerably.
With shorts, you never know if the list price means anything. Probably not a real price, just a tool to attract offers. $499K, $399K, $199K, the list means nothing if they won’t sell it for that…
Just when you though all of the bulls had gone to sleep for the winter, here we have the usual pumping from CK. Maybe you did not read it in the paper, beneath the headlines of all the other financial carnage, but the SoCal median price dropped 34% since last year.
More on that MDA Dataquick press release…
Rewind: SoCal home prices down 34%, back to ’03 levels
Breaking: Median Southern California home prices continued their free fall in August, falling another $18,000, to $330,000 — a 34% decline from year-ago levels. The median price of homes sold in the region has now rolled back to November 2003 levels, wiping out much of the gains achieved in the historic housing bubble.
The level of home sales across the region was generally higher than year-ago readings, as foreclosed houses at fire sale prices lured buyers into the market, DataQuick reported. Across the region, sales rose 9% from year-ago levels, including a 44% surge in Riverside County, the region’s foreclosure capital. Sales in Los Angeles County, however, continued to lag, running 7.7% below last year’s depressed levels.
“The median price of homes sold in the region has now rolled back to November 2003 levels, wiping out much of the gains achieved in the historic housing bubble.”
Notice the subtle implication that the housing crash is over and that the bubble started in 2003. I call BS on both points.
And don’t forget that the bubble actually began early in CA, starting back in the mid to late 90’s.
The prices still have a ways to go.
And I’m a bull why, LC? Because I suggest that this home will sell for 34% off its last sale price? But no, you say — I’m a bull because SoCal prices are down by….34%? Sounds like a reasonable guess to me. It does not make one a bull to state a fact of what a home will sell for today. If I were a bull I would say this place will be worth $600k by October 2009. In reality, I think it will be closer to $450k by October 2009.
BTW, LC — Can you send us some more data on the housing market in Hemet, and maybe let us know how is correlates to Irvine? I’ve been worried about it lately — but have not seen a recent update from you.
CK –
When a housing gambler in Irvine HELOC’s his home to buy a spec-house in AZ and drives up prices in that state then I am assuming that you see absolutely no correlation. Those out of state babies should just keep quiet and stay off your blog, huh!
You assume employment remains at the same level as now.
Unlike nearly everyone I know in California, I know what 15% unemployment *feels* like.
Mark my words: prices will stabilize down around $140/sf.
Those from outside of Irvine just don’t understand. We paint the entire bland side of it white. We then sit in our lawn chairs, wheel out the beer, make popcorn and show home movies and vacation slides on the side of our condos. It’s a neighborly thing. The challenging thing is getting it all done before the HOA Police arrive and slap us with a $125 fine for violating the “no fun” rules of the association.
Those silly non-Irvinites….
Ha ha good one…
My dream is to do that when I move to Turtle Rock and shake that place up…
Us Irvinites know how to have some fun…
The realtard missed out on a great opportunity to promote the health benefits of tromping up and down the stairs of this 3 story condo.
Crazy.
I think today’s music should be the theme song for this whole mess.
Excellent Starter in Gate guarded community.
http://www.crackthecode.us/images/highlysought2.jpg
So the new definition of a starter home is a meager half million dollar condo.
Those of you earning less than 124K a year will have to stay in your cardboard boxes. Places like today’s condo are reserved for Irvine’s elite money makers.
In reality, a place like this should be selling for around 200K, but of course the sacred land folks will freak with horse lauighter at the thought of such truely affordable housing in Irvine. If you want to throw your IOU’s away on this then have at it!
I doubt we will see $200K, but George8’s estimate of $387K could easily happen.
Units like this will see 300K no doubt. In case no one has noticed the finacial/banking sector is swirling down the crapper. Unemployment is skyrocketing and the California economy as a whole is shattered. Asset deflation combined with a desperate need to raise capital will see these really ugly units sold off for a pitance by next spring. SoCal has thousands and thousands of these units owned/will be owned by banks compounding the deflation cycle. A price undershoot is inevitable.
Only a soothsayer could call the price at the bottom, but I think you’re assessment of the fundamentals is spot on. The perfect storm is brewing for massive ‘real’ deflation of RE asset prices. Inflation won’t even save it short term.
I think the premium for so cal living gets a major haircut in the wake of our loss of ‘lone economic superpower’ status. The vast extra sums of (monopoly) money that people were willing to pay to live here becomes an unsustainable luxury if the American standard of living is forced into ‘junk’ status by our inability to adequately service our debt obligations.
And the weather in SoCal sucks a**. No rain, no water.
I love the surf in a mighty way, but there is something very reassuring about 40 acres of bottom land in East Tennessee.
Hey! Don’t be coming to MY state and start to bid up prices here!
I have my eyes on 50 acres of wooded land in nowheresville for 75K – no kidding!
Volunteer born and bred buddy.
I’ll be buying into the southern Plateau,
once all the Floridians get foreclosed on.
Subdividing the Cumberland Plateau is a
crime against humanity.
The banking system won’t disappear. It will shrink. Banks and mortgage firms in many ways were similar to home buyers. Banking was inhabited by a number of people who thought real estate prices would always go up. Not mean or dishonest, but rather stupid, and they caused a lot of damage.
Another group was the “grab money now” contingent. That included most of the independent mortgage brokers, and a lot of people in the securitization food chain.
Just like with homes, there were some financial institutions that knew what they were doing, were conservative, and have cash. Those institutions will be able to buy companies and assets at fire sale prices. They have at least two challenges. 1. Other firms and regulators pressuring them to buy troubled assets and companies. For some firms, zero is too much to pay. While it is technically possible for a collection of mortgages to be worth less than zero, it’s pretty rare. 2. Thinking “now is the time to get into mortgages (or auto leasing) in a big way”. Just say no. If you already have a mortgage operation, keep the underwriting guidelines tight and keep very little of the risk. Either that, or charge high rates and fees with tight underwriting and high downpayments.
By about 2011, the financial sector will be at least 1/3 smaller in terms of employees. Overall profit in the sector will drop by more than half. However, the few healthy firms will be making about as much as they did in 2007.
The prediction (Lehman, GS) for So Cal is 50% off peak at bottom. That would put this place at $350-375K assuming the 2004 price was a valid peak and not some fraudulent transaction.
MalibuRenter,
I always appreciate your insightful analysis. This mess still has a long way to go before it is resolved and a new, stable system takes its place.
I still wonder about Bank of America’s strategy. First Countrywide (even if walled off somehow from the mortgage losses and lawsuits, they still paid good money for something that still had farther to slide down the chute), now Merrill. Barkley’s waited 2 whole days and could pick up the profitable and well-running bits of Lehman that they wanted, without having to touch the smelly parts or pay for firings and contract terminations, while BofA paid a 70% premium over the last weekend’s price.
I guess the companies that start buying carefully selected parts of AIG now will have a better chance of happiness too.
I say it’s quid pro quo for the housing bailout bill.
Bank of America is taking the AIG route: buy everything in sight to make itself too big to fail. That way, the government will HAVE to save BoA too.
We need some good photoshops or posters of “too big to fail”. Sadly i don’t have that set of talents :long:
Let me add this (perhaps many will think I’m crazy) but I do believe BofA made a good move on Merrill Lynch. Why? Because they needed something to go against Citigroup (Smith Barney) and the last one standing (or 2) will result after this entire credit mess is behind us.
Did BofA overpaid? Perhaps. It’s like buying this house at $350k. Some will say CRAZY while others will say it’s an ok price. However, there’s a possibility that this house will hit $500k in year 2050….since in 2050 inflation will finally catch up to this type of price right? Maybe sooner, maybe not. If you think I’m crazy in this paragraph, try think back when Irvine became a city in 1971 and say to yourself that there is no freaking way a single house of 1700 sq ft that cost $200k in Woodbridge is considered reasonably priced in 2008 when you can practically buy one for just $15k.
But bottom line is that we still haven’t seen the bottom yet IMO. Citi and BofA are the 2 that I believe will be the last 2 standing. I may be wrong but I don’t believe there is currently a nation where financial institutions are nationalized unless the nation is either 1) a commie, 2) a dictator run enterprise. I don’t foresee USA nationalizing the entire financial institution….but hey, I may be wrong.
No way man ! This place is worth at least 500k… Don’t you know its holy land?! đ
I don’t know why the only picture is of the garage. Shouldn’t they have taken one from the front so it could appear to be a McMansion?
AZ:
You’re always good for a laugh.
200k? Be realistic.
OK, let’s try it this way: what is the household income of a target buyer for this home? Hmmm?
Remember, there are a ton of rental properties, quite a few multi-family units, etc.
I’d say 90k total household income for this place.
That puts the value at around $350-$375k.
$200k? Sure – perhaps in Anaheim, Garden Grove, or in the IE all day long. Why? Because the household income for those areas is lower.
You are assuming that Irvine’s median income is going to stay hopped up even with the loss of many financial/real estate jobs. Will be interesting to see what the median income is post-recession. If it drops low enough then your rents will drop and so will your house prices.
It may seem laughable to you right now. We’ll see.
I hope they do drop (for the sake of the country as CA has screwed the pooch and it has infected other states including Arizona)
My assumption of $90k household income assumes depression in local wages. In a 2-earner household, that’s $45k each. You clearly have no understanding of the Irvine area; many households have more than 2 earners living on the property.
$90k is conservative.
If Irvine gets to a $50k household income for a buyer of this home, that means surrounding areas are at $30k and $40k household income.
We’re talking minimum wage homebuyers.
Again, not realistic, even if we hit great-depression. Sorry.
You think Irvine is the only place in the country with 2 wage earners? Sorry, that alone is not going to prop up your house prices.
One other point – median income does not set minimum price of your houses. It indicates the median price. Today’s condo is not a “median house”. It is clearly a starter home. First time buyers having to put up 20% to buy this place at 500K are not going to have 120K down payment.
What is a realistic down payment for a family income of 90K? Suppose they can save 10K a year for 5 years makes about 50K. 50K is 20% 250K. That puts your starter homes in the 200K to 250K range.
Those are the facts. Sorry.
FHA dude. Starters get FHA help. That’s 3.5% down.
Incomes, my friend, incomes. What do you think the household income of a buyer household of this home should be?
Seriously?
And you have to remember that many folks in Irvine choose to rent because (I know you wouldn’t know this considering you’re a few hundred miles away yet glued to this blog like a pig on a sow’s teet) The Irvine Company has a bazillion REALLY GOOD apts here. That skews the income demographics dramatically.
Ah, I see. So you think FHA is going to save the day and keep the market propped up.
If you plan on going that route, I hope you plan on living in your condo for more than 10 years before you plan on “moving up”. Almost all of your payment money will be going to pay for interest on the bigger loan and when you try to move up you will be very disappointed at your relatively small down payment left over. Might have been better off renting for those 5 years and saving your cash.
So you think FHA is going to save the day and keep the market propped up.
No, it’s just a reality that FHA provides lending to starter homes at 3.5% down payment.
You still aren’t answering the question – what household income level is the target buyer for the home? Third time I have asked, still the sound of crickets on an answer.
I’m bearish. Very bearish. Renting and bearish. Stockpiling cash like it’s going out of style. But you need to know entry points, and right now, you’re simply talking out of your Arizonan a$$. You have completely ignored FHA, fundamentals of affordability, and the pricing hierarchy of the many different areas in So Cal.
Despite huge corrections, Scottsdale is still more pricey than greater Phoenix, right?
Can just anyone get FHA help?
I’m thinking it only applies to purchases within certain (depressed) areas and/or people with smaller incomes.
If the government indiscriminately give loans based on just 3.5% downpayment to everyone, then this would work to keep home values inflated.
I must be missing something.
There is no income ceiling for FHA, but there is a ceiling on values in that the home can’t be over the conforming limit, which varies by area.
There are credit qualifications, though:
1. No credit lates in the last 12months
2. 3.5% down
3. No BK 13 in the last 12mos, no BK 7 in the last 24 months, no foreclosure in the last 36mos
4. No outstanding judgments (other than medical)
No, I am not anything close to a realtard or mtg hustler, so pls verify…
I don’t share your FHA enthusiasm. They will “get you in” for a lesser down payment, but ultimately you end up with more debt and pay more interest to a bank in the long run. FHA is not a housing affordability Elixir.
Also, if all first time buyers are forced into a “social program” such as FHA to be able to afford a house then it seems to me that it is a symptom of a much larger problem that is unaffordable housing. No?
It’s not enthusiasm, it’s just reality. You can’t wish it away, it’s a factor in pricing and is a means to assist in downpayments – mainly, IMO, because the taxes are so damn high, it’s tough to put away 20%.
You still haven’t answered my question on the target buyer household income.
It’s all about affordability.
The target income for this home is not median income as this is not a median house. It is also a condo which brings down its value (compared to similar sized house).
If your median family income in Irvine is 85K then I would put this in the category of young single/couple with income 50K to 65K range. This is easily possible with 1 person owner or only 1 person working.
Median income in Irvine is skewed by the abundance of apartments.
The folks that live in the apts tend to bring down the median income level.
Unlikely.
heh – median income in Santa Monica is $61,423. Hell, it’s $87k in Beverly Hills! (look it up) Therefore houses in Irvine should be more expensive, right?
Well, not so fast — there are abundant rentals in Santa Monica. In fact, renting is a damn good deal there. And Beverly Hills just has demographics that are weighted heavily in one direction, ie, the numbers go WAY UP over 87k.
But condos are still over $700k in SM.
Point is, there’s more to the story than median income. Hard to know the story when you’re in dustville, though, slinging photoshops on the Irvine Housing Blog all day.
You’re getting too hung up on median income. Median income is useful as a rough metric for determining home prices, but it’s just that – a rough metric. Yes, people need to be able to pay their mortgage, but as the number of people entering the market is equal to the number of people selling and they find an equilibrium price, there’s no magic % of median income that needs to go towards housing.
Completely agree.
Here’s a good one:
The median income for Chino Hills is higher than Beverly Hills.
Need I say more?
“Starter home” is a pretty subjective term. For instance, on my Temecula street an REO listing was touted as a starter home by the out of touch listing agent. I was flabbergasted – what’s the median income here in Temecula and how could a 3 year old, 2800 sq. ft. home on a 10,000+ lot at $365,000 be considered a starter home? My idea of a starter is a little, older 2/2 or 3/2 that needs work.
For another silly description, check out http://www.burbed.com and see today’s “starter or retirement home”!
One thing a starter home is NOT is half a million bucks.
In those circumstances perhaps those of us who did not participate were the clueless ones…
I don’t feel clueless. I am now sitting on a huge down payment in the bank and a credit score in the 800s. I am hoping to buy in the next year or two a house that will be good for living and investment.
I one thing I wish I had done is sell an investment property. But these cycles are very hard to predict in the moment…
Wow, i can’t believe someone paid $756k for this. Not even a driveway to wash your car!
if prices dropped 10% that investors would swoop in and buy up the entire inventory
I’m pretty sure that there were plenty of investors who would have grabbed it up, but then realized that their exotic borrowing options were gone and folded like a house of cards.
BTW IrvineRenter,
That property on Walnut that I helped you profile was grabbed by a Knifecatcher, but he only bidded $3.5k over asking.
Correction it went for $5k over, but still a small bit over the asking price.
Thanks for the update. I can’t find the post. Do you remember the address? I can post the link.
5228 Walnut Irvine 92604
There it is:
https://www.irvinehousingblog.com/blog/comments/there-goes-the-neighborhood/
I am unimpressed with the search function of this blogging software.
If this sold within $5K of asking, it probably isn’t too far from rental parity. That is assuming someone would be willing to live in this place just to break even on rent since the prospects for appreciation are pretty grim.
OMG, People you have not been listening to what is going on in the WORLD! Stockmarkets are plummeting, credit crisis, mass jobs lost, need I go on? The masses are losing their jobs, thus no income. How in the He** can people buy anything when they don’t have income? Prices will reduce to affordabiity. All previous formulas to calculate prices have gone out the window, I don’t care where the house is located. Oh and the two bulls that support higher prices, ah, guess what, they are probably realtards, starving realtards.
“Prices will reduce to affordabiity. ”
Bingo.
Do you recommend one take themselves 6 feet deep by gun or hanging, beinformed?
With all this happening, I’m surpised that I just got my annual raise letter from the Big 4 Accounting firm I work for. 8% base increase plus a 10% incentive comp bonus. I better cash that check before they read your post and change their mind and ask me for a pay cut. I’m also surprised our Western area is bringing on 500 campus recruits in October.
Things are not all rosy, but don’t jump out the window just yet. I guess I’m a bull by your definition, but I think we’ll all figure out a way to get out of this alive — and some of us might even make some money along the way…
But then again, I don’t buy the line about “our best days are behind us” that one of those political parties likes to throw around to scare up votes.
BTW, AZDavid — 21 of those campus hires are for Phoenix. We’ve got a budget for another 7 campus hires in Phoenix for our January hiring class if you want to try to get in on that action. We recruit at ASU, where I believe you attend. đ
Thank you for the offer, CK. If things get really bad then maybe I will let you know.
I guess it depends on which side of the window you are looking out of.
I am in manufacturing and my business is off 70% from 07. I am down an equal percent in the stock market. My expenses to run my business are skyrocketing and there is no indication that I am alone.
This will trickle down to every sector. The only saving grace is that manufacturing has been shrinking for about 8 years so it should recover first.
Good luck to anyone in the service or construction industry, you will be feeling what I have been feeling since 2001.
The carnage I have witnessed first-hand in the real estate field has been amazing/saddening. Most employers in the design fields including planning, engineering, architecture, landscape architecture, and related consultants have already laid off 50% of their staff. The builders have laid off 70% or more of their staff. Several developers have gone out of business while others have done well (it depends on how much property they were left holding when prices crashed). There is about to be another huge wave of layoffs in the commercial construction and development fields. This is worse than the early 90s according to those who were in the business then. The worst part is that there is no light at the end of the tunnel yet.
What irony?
It’s been a slow death waiting for commercial prices to drop.
Now that itâs finally happening.
Banks arenât extending credit.
I agree, but so far it has been short lived. The contraction has only been for a little over a year. No one cared about manufacturing when it was farmed out to Mexico and China. I bet all the paper pushers now wished we had stayed a manufacturing powerhouse instead of brokers/servicers.
It will be at least a decade before finance and construction start to expand again, then is no more free money to be had and no business left to hire people and fill up the empty office space.
I just reread my post, I sound like kind of a gloating dick, that’s not how I meant it to come across. I was trying to make a point that while there is certainly some real pain as this unwinds in the financal services and RE industries, not all sectors are feeling pain.
Although there was a lot of arm flapping about McCain and Bloomberg’s comments yesterday about the fundamentals — there is some truth to it. At the end of the day, I don’t think its doomsday. As a matter of fact, the entire economy and all of us will probably be better for the correction. Nobody should be looking for the razor blades just yet.
And if it gets so bad, just go BKY — it will probably be the in thing in the The OC! I can already hear the talk in the VIP at Sutra about 2015: “My Chap 13 is discharged next month, I’m throwing a credit card party”
Weâre talking about the commercial RE climate.
The credit tightening in capital markets has made doing deals far more difficult.
Not sure what youâre talking about or referring to CK.
Manufacturing is f***ed.
Who would possibly want to build
anything in California with the labor
laws, tax load and zoning?
Frankly, I think we’re looking at a 75%
haircut on a large number of these places.
Sure, the current round is going to be
picked up by knife catchers on two-salary
financing with their hard earned cash
down. Then one gets laid off… for a
couple of years.
I live in California, I love it, but I
didn’t grow up here. What I have experienced
here is the most amazing hubris concerning
property of anywhere I have ever lived.
And that includes Austin Texas. Had to bail
from Austin in ’86, when Neil and the boys
f***ed it all up. Couldn’t happen here,
not in Texas everyone said.
It’s not only conceivable, but probable
in a lot of bubble areas, including big
parts of the Bay Area, that prices are
going to fall 75%. $1000/ft for a 2 br
shack in the East Bay hills is not supportable.
$500 isn’t supportable. Not even $250
is supportable. These homes are going to
end up in the affordability range for a
single wage earner sometime in the next
5 years. I bet the same thing will
happen in Irvine as well.
Of course, I have been hearing for 12 months
I am out of touch, having liquidated to cash
in October 2007… so be it.
I think that a lot of the problem for the housing market, though, is that a lot of the pain is being felt in the sectors that account for much of the OC’s job base.
As camsavem notes, manufacturing is getting slaughtered, but that’s not as huge a component of the local economy as it once was.
However, real estate related professions made up a large part of California’s job growth in the last 8 years (I’ve herad 50% of all jobs created in CA since 2000, but I can’t verify that). That’s construction, design, real estate, financing, etc. Those sectors are getting HAMMERED. And, from what I know, a lot of jobs in the OC were real estate related. Now, many of the OC jobs tied to real estate employed people who can parlay their skills into other professions. But, those folks will still be in trouble, at least temporarily.
Do the data bear my theory out? Not entirely, but somewhat. While OC is posting a 5.7% unemployment rate, it’s driven by the cities lower on the economic totem pole–Anaheim, Garden Grove, La Habra, Santa Ana. Irvine is doing well at 4.2%…but in 2006, that number was 2.5%.
So, even if you approach the question on a relative basis, Irvine in 2008 would seem to be ripe to have a correction (which, of course, it has had). I’m not saying that some folks aren’t doing well; but I think that, on average, higher unemployment, job insecurity in some of these higher paying jobs, and A LOT of people’s down payment funds giving up 10% of their value in 3 days leads me to think that we still have a long way before most sellers find most buyers.
This one’s for you, Beinformed:
http://www.marketwatch.com/news/story/how-bad-its-actually-pretty/story.aspx?guid={1B147F0F-2256-4CB4-A1BA-9136F4112570}&dist=TNMostRead
“The asking price is 34% off its 2007 purchase price.”
This is what the RE industry terms “soft landing”!
I’m somewhat enjoying the crumbling of Wall Street and the deflation of the stock market.
To me this is marking the beginning of the truimph of the prudent over the profligate. The prudents have been knock’d about the mazzard by the profligates for quite some time thanks to Wall Street. However, the past few days have signalled that this about to change, hopefully for good, as it should.
I don’t like seeing friends losing jobs. However, if the new financial system cultivates prudence, then everyone will benefit in the long run.
All I have heard for the last 10 years is “If you’re so smart, why aren’t you rich?”
So, yeah, I’m still not rich, but I am solvent. Always have been. And I have good cash flow. Always have had.
Frankly, the last few days have been a disaster. Gold is up $100 an ounce over last week. That’s not real good.
We need some good photoshops or posters of âtoo big to failâ.
http://www.crackthecode.us/images/TooBigToFail.jpg
That’s what I call inspiration! :coolgrin: