Living on the Edge — Aerosmith
There’s somethin’ wrong with the world today
The light bulb’s gettin’ dim
There’s meltdown in the sky
Fringe markets are those regions where properties are less desirable due to proximity to large employment centers. These markets develop as people are priced-out of the more desirable markets closer to work. Eventually, employment centers also migrate to these fringe market areas, and development pushes even further into the wilds.
When Irvine was first developed, it was a fringe market. The primary employment centers were in the LA basin, and those who bought in Irvine commuted to these far-away employment centers. As Orange County continued to develop, it became a strong employment center of its own.
There are still fringe markets even in Orange County. San Clemente and Rancho Santa Margarita are examples. There is limited employment in these sub-markets, and people commute to employment centers.
Fringe markets have characteristically volatile house prices. People only live in fringe markets because they are priced-out of more desirable areas, so when prices drop in the better areas, people leave fringe markets, and prices really plummet.
{book}
Proximity to employment is not the only defining characteristic of a fringe market. Even within primary markets like Irvine, we have fringe neighborhoods that experience greater price volatility because they are undesirable for other reasons. One such neighborhood in Irvine is Columbus Grove.
Columbus Grove was developed at the peak of the housing bubble, and it was overpriced from the beginning. The continuing activity of the builders coupled with the ubiquitous toxic financing has resulted in many home sales of the must-sell variety. This created a nasty downward spiral in prices.
Columbus Grove also suffers from its proximity to powerlines, underground toxic waste, a nearby cement factory, and other elements which make it less desirable. The combination of inflated prices, huge numbers of must-sell homes, and low desirability has caused prices to absolutely crater.
Every single homeowner there has a property worth less than the paid for it, and the vast majority are hopelessly underwater on their mortgages.
Tell me what you think about your sit-u-a-tion
Complication – aggravation
Is getting to you
Actually, conditions like these make for ideal places for vultures to be active. When we do reach the bottom, the best deals will be in neighborhoods like this one. Unfortunately for the flipper who owns today’s featured property, we are not at the bottom.
If chicken little tells you that the sky is fallin’
Even if it wasn’t would you still come crawlin’
Back again?
I bet you would my friend
Again & again & again & again & again
Asking Price: $699,000
Income Requirement: $174,750
Downpayment Needed: $139,800
Monthly Equity Burn: $5,825
Original Purchase Price: $800,000
Original Purchase Date: 11/28/2006
Flip Purchase Price: $479,774
Flip Purchase Date: 10/30/2008
Address: 78 Fringe Tree, Irvine, CA 92606
| Beds: | 4 |
| Baths: | 3 |
| Sq. Ft.: | 2,685 |
| $/Sq. Ft.: | $260 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Other |
| Year Built: | 2006 |
| Stories: | 3+ |
| Floor: | 2 |
| View: | Park or Green Belt |
| Area: | Columbus Grove |
| County: | Orange |
| MLS#: | P665053 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 31 days |
Exquisite Kensington Court Luxury Townhome. Built in 2006. 2-Car
Attached Direct Access Garage. Private Front Fenced Patio. Home
Features 3 Bedrooms and 2 Full Bathrooms on Third Level, Includinga 30′
x 21′ Master Bedroom with Huge Walk In Closet, Large Master Bathroom
with Roman Tub, Separate Shower and Dual Vanities. Main Floor has
Bedroom and 1.75 Bathrooms. Separate Family Room on 2nd Floor with
Beautiful Wood Floors. Washer & Dryer Hook Ups are on Bedroom
Level. Ceramic Tile Floors in Kitchen, Dining Room and Living Room.
Living Room also has Alot of Windows and a Cozy Fireplace. Upgraded
Gourmet Kitchen with Stainless Steel Appliances, Stainless Sink,
Granite Countertops and Island. Association Amenities Include Pools,
Spa, Park with Tot Lot, Outdoor BBQ and Lounge Area. This is Truly a
Remarkable Area with Lots of Amenities.
Notice how much more detailed and cared about the description is when people think they are going to make money on the deal.
What Is With Title Case?
This is Truly a
Remarkable Area. Yes, the price drops have been truly remarkable here…
If this property sells for its asking price, and if a 6% commission is paid, the flipper stands to make $177,286. It certainly looks like there is some room to negotiate…
What is interesting about this property is the impact it is having on the neighbors. Imagine you were a buyer in this neighborhood in 2006. Then you see an REO go for 40% less than you paid 2 years ago. It must be very disheartening.
But wait! the new owner is asking a more reasonable market price. Perhaps you didn’t lose $320,000 after all, perhaps you are only down $100,000. Can you see how this little property has taken the neighborhood from despair to delight? Oh, but there is more…
What is it Worth?
Those high HOA fees are a killer
P.S. I notified the forum of my writing of this post yesterday. I received the following email:
“I see that you are planning to try to attack me personally again, by means of showing a distressed sale in my neighborhood. I would expect nothing less of you. I really don’t know where you get off, with your bottomless pit of arrogance and general spitefulness. You explained to me privately two years ago that it is your “persona” who is the one being so obnoxious, and that you personally don’t have any/all answers. I never revealed that conversation, even though I could have, and respected you enough to let it be. I never once attacked you after that, despite any accusations of the same. I am happy that it gives you so much pleasure to see me hurt financially. Congratulations, you have got your fondest wish. Both my husband and I, and everyone else we (and you) know (both homeowners and not) are suffering. You clearly have your opinions on the cause, as do I, but only you are allowed the freedom to express them, apparently.”
No, I will allow you to express your opinion too…
“It is too late for me to participate in any general forums, due to the unending belligerence I have had to suffer through, and any comments on 78 Fringe Tree will bring nothing but personal attacks, as is your intention. For every person you feel you have helped, I feel you have harmed another…I genuinely do. I think you have convinced yourself that everyone who owns a home has intentionally harmed you, and I find that (thinking) a fate worse than being wiped-out. Come what may, I will carry on with my life. I am proud beyond measure with who I am and what I stand for. I am only interested in lifting others up.“
I know I feel very uplifted…
As for the statement, “I never once attacked you after that,” how about this little gem, “I don’t think Irvine Renter is really capable of an honest discussion.
In fact, I firmly believe he exhibits some of the characteristics of a
sociopath. This issue has certainly brought out the vilest aspects in
all of us. That may be the saddest part of all.” Or perhaps this one, “This is no first-time homebuyer crying out for fairness. This is a
self-serving greedy bastard, who doesn’t care how much damage happens
to others, or the economy in general. What they care about is lining
their own pockets, period.”
Do you feel the love?
Due to our policy at the Irvine Housing Blog, I will not share the name or email address of the correspondent.
The astute observations should be interesting today…
{book}
There’s somethin’ wrong with the world today
I don’t know what it is
Something’s wrong with our eyes
We’re seeing things in a different way
And God knows it ain’t His
It sure ain’t no surprise
We’re livin’ on the edge
We’re livin’ on the edge
We’re livin’ on the edge
We’re livin’ on the edge
There’s somethin’ wrong with the world today
The light bulb’s gettin’ dim
There’s meltdown in the sky
If you can judge a wise man
By the color of his skin
Then mister you’re a better man that I
We’re livin’ on the edge
You can’t help yourself from fallin’
Livin’ on the edge
You can’t help yourself at all
Livin’ on the edge
You can’t stop yourself from fallin’
Livin’ on the edge
Tell me what you think about your sit-u-a-tion
Complication – aggravation
Is getting to you
If chicken little tells you that the sky is fallin’
Even if it wasn’t would you still come crawlin’
Back again?
I bet you would my friend
Again & again & again & again & again
Living on the Edge — Aerosmith
One can assume the email correspondent lives in the neighborhood and is personally affected. Back East things are not much better for those who bought after 2004. They are seeing all they worked and borrowed for go up in smoke.
Obviously they are scared about their own situation but you live in that area so you are going to write and use examples about the area you live in. It doesn’t seem that the email understands the premiss of the blog or the parameters of the property choices.
Bub I know you are scared but to take your fear out on IR by making this seem (to you) like a personal vendetta is just weak. If you don’t like what he is saying don’t visit.
I have ‘lurked’ here for two years, but never posted. I wanted today to express my appreciation for the site, and believe that it saved me $200,000 to $300,000, as I was about to buy in 2006. Thankfully I did not. I will wait it out another year in a rental, save my money, and go into a purchase with 30% down, or more, on a home I plan to stay in forever.
Another greater fool Truthiness could have taken advantage of… you are an evil man Irvine Renter.
I think you are exactly the type of person the angry writer had in mind. If it wasn’t for IrvineRenter, you could have been the suffering owner instead.
Glad you did your research. Welcome to the board.
I also have IR to thank for not making a purchase toward the end of ’06. I was about to purchase a two bedroom condo right next to the 5 frwy on Monroe. It was going to be $500k. Now I’m looking at SFHs for the same price.
I don’t just have IR to thank for the $$$$$$ but now I’ll be able to get a house instead of sharing walls with my neighbors, and being sure to keep the windows and doors closed so I don’t have to smell them smoking on their porch.
I was just about suckered in toward the end of 2006, I’m so glad I found this site. Thanks IR! 🙂
A Sociopath? I think she needs to look up the meaning of the word. Its funny, because during the bubble she probably saw herself as being wealthier than she was, bragging to one and all about how much her house was “worth” and now that the truth is unleashed she is bitter.
How many of you sat and listened year after year hearing other adults openly brag about how much they could sell their house for?
I can’t feel the love, but I can taste the schadenfreude and it tastes GOOD!
I bought a used refrigerator from a soon to be vacating homeowner in Columbus Grove a month ago. The owner was about to “walk away” from his house. I got the opinion he wasn’t the first or the last to do so.
I wasn’t aware of your spat IR but I knew you were not well liked by those who consider it their right to expect exhorbitant value in their house. But someone has to declare the emperor has no clothes and it may as well be you.
My “walk away” neighbor took all of the appliances with him (fridge, range/oven, microwave, etc.).
So, naturally, when it sells for 30% less that its purchase price, I’ll go ahead and rationalize that “but for the missing applicances, it would’ve sold for much more.” Great coping mechanism, no? 🙂
Reminds me of the realtors trying to rationalize why a very similar house down the street with a better view sold for $600k less than they were asking. “It was a foreclosure, and a fixer”. OK, there might be some difference due to it being a fixer. As I pointed out to the realtor, I could bulldoze the other house, spend $300 per square foot building a brand new home the same size, and still come out cheaper than the home she was trying to sell me.
That $600k difference keeps shrinking. Now down to $300k, and still not selling.
Ha ha. You can’t make a proper housing bust omelet without breaking a few eggs. I guess your correspondent is a very bitter broken egg. Too bad for her.
I can feel the love. I’m lovin’ the housing bust.
I’ll bet the correspondent hasn’t broken yet, but is feeling the pressure and the heat.
Once people have let their homes go to foreclosure, or done their short sale, if the rest of their life is in order they are very relieved. Especially for short sales, a lot of those people can pay for a nice rental, or even a cheaper house.
Could be a blessing in disguise I suppose. Anyone out there have a story about a foreclosure or short sale that changed their life for the beter?
better*
I thought Truthiness and her friends had conservative traditional financing. Wow, we are just finding out new things about this asset bubble every day. This is surprising, unexpected, and absolutely shocking.
I have no idea what kind of financing Truthiness used. I have never looked up her data.
So it could have been an income bubble as well…….. I am flabbergasted.
schadenfreude rush!! Sometimes I feel guilty but then I think of all of those “investors”/realtors during the boom telling me that I’m going to be priced out forever.
“I think of all of those “investors”/realtors during the boom”
I don’t think the term investor is the correct word for these people. Investors use their own money. These people used bubble financing, “OPM” to acquire the properties and then extracted further equity with HELOCs or made only partial interest payments on their “exotic loan”. When the bubble collapsed, they wine and give the property back to the bank. These people never owned anything. They were not investors.
What the hell were people thinking? I hate to see people suffer, but too many people were only focused on the monthly payment. No one had any plan for when the option ARM reset.
I have NO sympathy for those who bought $500,000
homes with $80K incomes and are now crying that they can’t afford their mortgage. You could blame the realtors and mortgage brokers all you want for pushing creative mortgage products, but ultimately it’s the buyers responsibility to determine what he can afford.
“ultimately it’s the buyers responsibility to determine what he can afford.”
That may be true, but it seems to me that it is really the lender’s responsibility to figure out what the borrower can afford. They are the ones at risk if the borrower defaults. If a lender burdens a borrower with too much debt, and the borrower defaults, both parties get hurt. The lender loses money, and the borrower has damaged credit. Lenders are supposed to be the adults in the relationship. I think they abdicated their responsibility, and now we all have to pay for their irresponsibility.
I hear you, ipo. I’m waiting, waiting, waiting for prices to fall in my neighborhood of choice so that I can buy and be done with renting. I check your spreadsheet regularly. Houses are selling and prices have barely budged.
Apologizing for my ignorance – but what spreadsheet are you referring to?
Thanks.
You can find it here http://www.ipoplaya.com
And mortgage rates falling so low isn’t going to help either… Jumbo conforming 30-years loans are at 5.25 today with no points. Conformings are in the 4’s. Those must be incenting some buyers to pull the trigger.
If the economic/employment picture wasn’t so poor right now, I know that it would be hard for me ignore a 5% 30-year loan on $500K. That’s like $1312 per month after-tax in interest cost if you are already itemizing and sure helps put a property closer to rental parity.
You’re better off waiting until interest rates go up to buy. Let high interest rates push prices down and buy when prices are depressed. You can always refinance your mortgage when rates go down (since you’re not buying at the top of the bubble).
Those must be incenting some buyers to pull the trigger.
Not really. Refi’s are going through the roof but purchase applications are still going down.
http://www.ritholtz.com/blog/2008/12/fed’s-rate-moves-fail-to-spur-home-buying/
Unfortunately, the lender’s have managed to socialize their losses onto our backs. The banks did abdicate their responsibility, but they didn’t care, they were selling their loans off as CDOs.
I guess the lenders are somewhat responsible, but unfortunately they exist to make money just like any other business. As long as they can offload responsibility to someone else, they do not care what the consequences are. As long as those mortgages could be packaged up and sold off to investors, they had little consequence. I’m not saying this is right by any means, but that’s the way it worked.
Car dealers don’t look out for the buyer’s best interest – if the guy making $10 an hour wants to buy an Infiniti G37 and there’s a lender willing to loan the money, the Inifiniti salesman isn’t going to stop the deal to take care of the buyer.
She is directing her anger to the wrong target and feels offended, insulted when nobody is practically doing that to her.
what the heck is a 0.75 bathroom? I mean c’mon, what got a bidet in there? does that count 0.25 of a bathroom.
y’no what? don’t answer. i don’t need to fill up my brain with that piece of information.
A shower and a toilet. It needs a tub to be a full bath.
Could I trade the tub for a bidet?
I am somewhat new around here. Who is Truthiness? (FWIW – 0.75 of a bath is a toilet, sink and shower stall w/o a tub.)
I’m terribly sorry you receive such abuse and personal attacks, IR. Human nature can be notoriously unkind to truth tellers. I commend you for never using this blog as a venue to attack others. You have consistently kept the discussions “above the belt” and focused on numbers only.
Thank you for providing this valuable service.
The only thing that he does that whiffs a bit of “attack” is assuming that the owners of a profiled property used their HELOC(s) for buying toys rather than for emergency expenses of some type (e.g. health problems, to get a small business through hard times, loaning to a family member who’s in trouble, etc.), and then chastises them on that basis.
Given all the data he’s digested in the course of writing for this blog, I can buy his premise that most HELOC drainers were not using the funds for responsible or necessary reasons, but I don’t like the idea of just *assuming* that a given homeowner was in that larger group and then spraying them with vitriol.
Sadly, IR, I’m not surprised that you got this letter, because this individual somehow figures that your reporting on bad news is somehow creating it. Take it as encouragement that you’re doing the right thing: in this case, not only does the empress have no clothes, but I think someone swiped a few of her tattoos, too.
I am sure that there will one day be a question on the SAT tests………..
Son of sam, charles manson…………
a) george washington
b) ghandi
c) Irvine renter
You have profiled properties in Northpark that are now worth much less than they were. I live in Northpark and, unfortunately, had to buy at the peak. My property is very much underwater.
Never once have I considered the possibility that you were attacking me personally. Even if I had to sell my property right now and take a huge loss, I don’t believe for a moment that you did anything to affect that situation.
Your profiles seem to be educated guesses and your attacks on perceived flippers doesn’t come across as personal. There may be back stories that I don’t know about and I am sure, given the size of your blog, that there is a temptation to profile people that may have bad personal relationships with you. If this is the case and you have singled out certain people, that is between you and them.
Raise your hand if you are a self-serving greedy bastard. IPO raises his hand…
I do miss truthi. She is definitely entertaining in the car-accident-can’t-avert-your-eyes kind of way.
Thanks for a good trip down memory lane IR. The post of mine that truthi referenced was spot on in a couple of ways. In Dec 2007 I said my place was worth $600K and I sold it for that amount seven months later. I am today, as a renter, spending way more than I was as an owner on housing. Since home prices haven’t moved down that much (my old place would probably sell for $575K today) over the past year, I am just spending more each month and don’t as yet have a potential payback on a cheaper future mortgage due to price declines.
Boy, I sure wish the $100-150K I thought my old place would fall would become reality. Only a fraction of that has come to pass over the last twelve months.
Hey IPOP,
What you are forgetting, or should I say witholding, is that most amateur speculators out there were praying that the $600,000 house in 2007 would be worth at least $700,000 or more in late 2008. But alas, our house would sell for $575,000 today, only a 25,000 dollar loss. This $25,000 represents a whole lot more than you are implying, hence the carnage we are seeing. You are sounding more like truthi everyday.
Boy do we live in a society full whining fools. Does anybody take responsibility for their actions? In the end, I guess ignorance wasn’t bliss after all for her. Instead, it reared it’s ugly head and now she needs someone to blame.
I wonder what kid of response she would have given if you informed her that she never “owned” her home in the first place. Or inform her that her house is not an asset.
This is going to be a really ugly wake up call for most Americans.
Her email reminds me of what I am hearing from soo many — that 2008 was an awful year and they can’t wait for it to be over.
Yesterday I had it with this talk — after my wife repeated it from a friend of ours. I said I disagree. 2008 was a great year. It was the second year of my turning around my career after 2 tough years between 05 and 06 when I had to hear endless people chastise me for not buying a house and see others around me appear to get rich while I was struggling to get clients and pay bills. But not once did I complain or whine about my situation — I fixed it myself.
And 08 brought a change I wanted in the white house (I know on an OC blog this may not be a mutual feeling), and 08 brought us the start of the housing fix — a return to long term stability where fundamentals once again rule the day and people who deserve and can afford to buy a home get to do so at a reasonable price.
Now by no means am I rejoicing in people loosing jobs, going broke or even loosing a house — but as I did in 05 and 06 my advice is to take control and stop complaining. So to this writer — either suck it up and pay your mortgage and realize that a primary home should not be viewed as an investment but as a consumable (just like your car) or take your medicine, sell or let your home be foreclosed, and move on in a better and more responsible direction.
But do note this — not once did I blame others for my problems — not even my x business partner — after all it was I who kept working with him and chose not to split ways for 2 bad years. So please Ms. email writer — stop blaming those of us who brought intellectual discourse into the issue of what is now universally seen as an irresponsible period of lending and buying homes people cannot afford.
“…realize that a primary home should not be viewed as an investment but as a consumable (just like your car)…”
I use this argument with friends when they try to give me a good-natured hard time for my home losing 20% of its peak value (to date). Everyone who has made a comment has purchased a new luxury car in the past couple years. So, they’re very willing to purchase a $50k+ car knowing it will depreciate 30%+ immediately and continue to lose value indefinitely, but, somehow buying a home (within your means) and losing 20% in two years is shocking?
Oh, and two of these friends have babies due shortly. So of course, I now respond to those comments about my house with a little comment about how expensive their blessed child will cost to raise just to 18.
Have you asked them how their stock market investments are doing?
When you look at it really closely, a given price decline in real estate is usually worse, because of leverage. You can lose much more than your initial investment. Still, people who have lost 30%+ on their stock market investments shouldn’t play holier than thou to those who have lost money in real estate.
Disclosure: I own no stocks and my portfolio will have a gain in 2008. Got out of my last stocks in August, had been mostly out for a year prior. However, I will be putting my money where my mouth is and buying when fundamentals look right. That’s Dow around 7000.
Yes, I use the equities retort too! Although, it’s not so funny with one of my friends. She had the foresight and good timing and sold an Irvine condo in 2005 pocketing a $200k gain and has since rented. However, she placed that gain and other cash in “boring” mutual funds and is currently down 40%.
She should be directing her anger at those who drove prices up to bubble levels.
You know, people like herself. D’oh!
(Those alligator tears nauseate me. I’m sure she was going to dedicate all her “home equity” profits to charity, right? You know, like the displaced in Darfur or the victims of domestic violence? And I’m sure she was saddened that so many people were “priced out”, I’m sure she felt terrible about these people.)
There’s nothing like a bit of reality to piss some people off…
A lot of people have been living in a dream world for a long time. It’s going to be the most painful for these people over the next few years.
“They are the ones at risk if the borrower defaults.”
Not to be a cynic, but I think that the lenders not only wanted to shear the sheep, but skin them afterward. Take their money in monthly payments and if/when they can’t continue to pay, take the asset. The only thing that I don’t think they thought of was that the asset would lose value.
That doesn’t really make sense. If the asset was worth more than the debt, the homedebtor would be able to refinance it or take out a HELOC. That’s why foreclosures were so low during the bubble.
Has anyone else notice rent has been dropping fast in Irvine? That mean current renters and future renters will be less inclined to dough out for the opportunity to own that bottomless money pit we call “home”. BTW, they are building apartment homes at a furious rate in Irvine – should be good for bigger drops in rent in the near future.
I just checked rental 4 bedroom SFRs last night and there is nothing cheaper comparable to what I termed up on back in June. I don’t any evidence of great softness there…
I imagine on smaller units, rents are probably falling, just like prices are falling more quickly on smaller less-desirable properties in Irvine in terms of sales.
I agree Ipoplaya. I had to work to get a good deal on my house. Many nicer detached houses were being rented quickly which I assumed the owner was getting close to asking prices.
When we left our IAC (Rancho Tierra) apartments, the manager said they were not having much difficulty with prices yet, mainly because of ex-homeowners moving in.
I was chastised on the blog for paying $2260 for a nice detached 3/2 house in Northwood which used to get $2500. For now I’m happy knowing ownership costs would be well over $1000 higher.
Where to find the rental prices for condo and SFH in Irvine. Asking price verses actually rented prices?
There feeling sorry for those who lost real money, paper money, and those who lost the house but pocket large amount of cash (HELOC or refinance money). I see the extreme high house price to incomes as a form of slavery — working endlessly to met the monthly payments or the govt., bank or others will take the house way.
Couple of points re: your rent vs. own on that property IR. The special assessments are too high. MRs on that property are $5K per year, not $7K. Homeowners insurance would be more like $50 per month vs. $145.
That being said, the place is probably still $1200 above owner-occupied rental parity, i.e. horribly overpriced. Probably should be listed for $600K and they would find a crazy buyer to pony up something in the high $500K range. Those MRs and HOA are a killer…
earthquake insurance itself could run $50 a month –
never mind homeowners that actually covers your belongings.
IR..you greedy bastard! Thanks for all your hard work and great entertainment. Rock on!
Homebuyers thought buying in Irvine is a guarantee of price retention. This is obviously a costly lesson for many and for those unfortunately purchased in the Columbus Villages. Not only do the villages faced with negative environmental impact the communities were not properly branded. Most Irvine residents are brand conscientious and status driven as a result a community with a tarnished image and inferiority it will take a long time in its recovery or remain in its comatose state. A village must have the proper layering of designed topology and syntax like a car must have properly functioning mechanism. Without them such in the case of Columbus home prices will not only plummet but must hit bottom to make them attractive for home buyers or investors.
Homebuyers in Irvine is the most discriminate in the entire country and even some Irvine villages not properly branded are facing financial turmoil as in the case of Northwood II. Its location is no different form Woodbury but its fate is doomed. One must choose a community very carefully for price retention. This recession
Is no doubt an important casestudy in identifying the best price insulated villages and its direct correlation to the confidence of the homeowners believing in the brand.
Don’t quite get your “branding” point…
Excellent drivel! You’re pretty talented at skewering realtor and economist babble.
At least, I hope that’s what you’re doing.
Don’t worry, bkshopr. The Asians will save these homes prices.
Hey, good to see you in the comments section, bkshopr — haven’t noticed you here in a while.
Can you give an example of what you mean when you say certain villages are suffering because of branding?
As to DeathToSinan’s comment, though in yesterday’s comment section I spent a lot of time defending the plausibility (and non-racist nature) of your theories about the price-retention-supporting nature of various Asian cultural traits at work in Irvine, since in your comment above you’re chastising those who were expecting Irvine price retention, I’m curious whether you’ve changed your mind as to how much effect these cultural traits will have on prices here.
Regarding the resiliency of some areas of Irvine (as illustrated in IPOPs data) I have always thought the Irvine housing fundamentals would be somewhat different from the rest of Orange County.
Irvine has established a true comparative advantage with public schools relative to the rest of Orange County. The willingness of people to pay a higher down payment and put a greater percentage of income towards their house are impacted by this comparative advantage. The Asian community most certainly feeds this comparative advantage from the education side and the down payment side.
Personally I would rather live in a nicer area of Orange County and pay the exorbitant fees of sending my kids to private school. When you make this economic comparison the Irvine Housing premium starts to make more sense.
I fully expect the Irvine Housing market to decline further, but I think there will always be a premium in Irvine relative to more vanilla areas with mediocre to poor schools. This is part of the reason for the Irvine Housing Blog’s popularity. I’m not trying to take anything away from Irvine Renters eloquent blog post and pensive analysis, which also add to the popularity of this blog. However I doubt Mission Viejo Renter posting on the Mission Viejo Housing Blog would have ever gained this level of notoriety. Coincidentally the precipitous decline in housing prices in vanilla areas like Mission Viejo are likely related to that…
Mav – you took the words right out of my mouth. No one else seems to see the irony. A blog dedicated to a premium area, filled with hundreds of posters (and even more lurkers) carping about why prices havent fallen much in said premium area.
The fact of the matter is, the premium area will not fall as much so long as people care about it and want to live there. Quite simply, there are too many people interested in it, and not enough homes to meet that demand.
The day people quit caring about nice areas in irvine is the day they plummet. Until then, unsatisfyingly slow and mild price declines shall be the order of the day…
You are correct Yep. A “premium area” is subjective. Just because Irvine “had” that rep in the bubble years doesn’t mean it will in the future.
I wonder how “premium” Irvine will be if unemployment gets higher?
I agree that it is difficult to define what that “premium” will be especially in a deflationary environment. However, people with a culture of frugal living, prudent savings, and community, are set up extremely well to prosper during a deflationary period. The antithesis of the generic prodigiously spending OC culture. Perhaps the premium could grow even as home prices plummet in a deflationary environment?
Bkshopr have you ever tried to monetize this premium? I would like to see your analysis if you have.
BTW, I have always been a huge fan of Truthiness, and I am proficient in deciphering her writing… I believe she has jumped into the discussion as the Yep character. Truthiness, if I am wrong, your insight on this matter would be appreciated specific to Columbus Grove.
Monetizing the premium is easy. Look at rents compared to other cities.
idrnkurmlkshk with regards to the premium Irvine will have if unemployment gets higher, it should be about the same. Unfortunately for us, unemployment hits both buyers and sellers. (Unlike say Alt A resets which hits just sellers). So, as the sellers lose their jobs, prices come down. Unfortunately, statictically just as many of us have lost or jobs too, meaning the place is still as relatively unaffordable as it was before.
If an area is “premium”, it probably also was premium in 2000, when prices were much lower.
The premium areas I follow closely, Calabasas and Malibu, both had prices which held up longer than others nearby. Now, both are plunging. The list prices have trickled slowly down, but the actual sale prices have dropped quickly. The rate of sales has really dropped. In November, there was a 10 year supply of homes (350 homes and condos for sale, 3 sales closed).
Promising. Thanks for pointing that out.
Hey hey… watch the “Asian Community” reference.
You may get photoshopped into infamy.
It’s all about the “Legend of the FCB*”!
*To find out more about FCBs… please visit the IHB forums.
I can’t believe you guys do get it. The central idea that IR and other bubble bloggers have been talking about the last 3 years is that home prices are overvalued comapared to rents and incomes. Home prices in Irvine are “too” high compared to rents and incomes… in Irvine. The fact that Irvine has high desirability and commands higher prices is 1) not in dispute and 2) not relevant to the discussion. Seriously, it’s important that you get this because if you don’t, then you are clueless as to what this whole housing bubble was about.
I can’t believe you don’t get my point. I am not challenging macro housing fundamentals of Orange County or California or the United States.
I am challenging you to think about other factors when analyzing a small area. Factors like the size of down payments and how education is valued. I am not saying prices won’t continue to drop. Please since you appear to know a lot more than me, explain why the drop in Irvine is slower than the drop in an area like Mission Viejo. Is the income disparity that great?, exactly what is impacting this? Maybe I am just asking you a quesiton that you already know the answer to… and you simply do not want to admit it to yourself.
I believe I did understand your point. You think that Irvine home prices have fallen less, and will fall less, than other cities because of it’s high desirability. And yes, I disagree with this. I never said you were challenging that prices would continue to drop – don’t put words in my mouth.
To answer your questions, I think Irvine has fallen less so far for two reasons. First the dynamics of how home prices are catalyzed to move down during a housing bust result in fringe areas being affected faster, as IR has explained numerous times far better than I ever could. And second less desirable areas became more overvalued to begin with and have further to fall.
Yes, Irvine commands higher rents and prices than Mission Viejo, for all the reasons you mentioned. But I’m sorry, saying that one city is going to fall less than another because it is more desirable is a totally dumb argument. What matters is which city is more overvalued compared to it’s own fundamentals.
What is funny is that there is very little disparity between rents and incomes in Mission Viejo vs. Irvine. Sorry to try to make you think a little. That’s all I was really trying to do.
(A prior commenter probably has said this already, but:)
It’s neither “personal” nor an “attack” for IR to post his routine, “look how this property has fallen / is still overpriced / etc.” commentaries. If there is a criticism — an “attack”? — it’s directed at the overvaluing of the property by the would-be seller.
There’s nothing “personal.” Personal would be pointing out that the seller is fat, too. (Or her accusing you of being dishonest. That’s personal.)
Sure, she lives there and stands to lose a boatload of money, so it affects her personalLY, but that doesn’t make IR’s posts “personal.”
IR,
Ignorance+(10xDenial)= Undivided Arrogance
People are getting past the Ignorance but they are barely digging through the Denial.
Irvine is a strange beast as I am realizing while renting here. It is a very yuppie town in most ways. The yuppie mentality is responsible for most of the denial here in Irvine. If it were not for the crashing economy and declining credit limits, people would continue to live on borrowed money and pretend that they are rich. After renting here for a while, I am unsure if I would want to own here based on the extreme ‘Socal pathology’ or whether I would be able to afford to own here even while there are much better deals in the fringe cities.
Regards,
PH
IrvineRenter,
I was going to make some snarky comment about the ridiculous asking price of today’s featured property, but then remembered that I almost bought a 1/1 in Columbus Grove in 2006 for $468,000. This blog, and the fact that the ground is toxic, helped to bring me to my senses. Keep up the good work.
-DT
This was a story run on NPR this morning and I was astounded by the details. A heart wrenching for sure but just how does one qualify for a $500K no down loan with $22K income EARLIER THIS YEAR! The audio isn’t available as 10:30AM PST but may be later today.
http://www.npr.org/templates/story/story.php?storyId=98450421
The Wazadally family will likely be foreclosed on early next month. With just $22,000 dollars in annual income, bankers gave the Wazadallys a $550,000 home loan earlier this year. WNYC reporter Cindy Rodriguez has the story of this downwardly mobile family figuring out where to go after foreclosure.
Meanwhile, Secretary of Housing and Urban Development Steve Preston tells Madeleine Brand that the government-backed Hope for Homeowners program has failed. The program was hatched as way to keep struggling homeowners from foreclosing but red tape has blocked many people in need.
The program was hatched as a way to keep people who could pay from electively defaulting. That’s one of the objectives of many modification programs. Keep homeowners in their houses by having them watch for the next bailout.
That also keeps the number of foreclosures and short sales on the market down.
I don’t know whether the description of the failure of the program due to “red tape” is correct or not, but we shouldn’t expect these types of programs to help everybody.
For example, the family making $22,000/year shouldn’t be living in a $550,000 home. Period.
As a practical matter, it’s unlikely they’d be able to amortize that home over 30 years even if they were paying zero interest.
As an equitable matter, the idea that my tax dollars should be going to provide a person who makes 1/10 as much as I do (and likely doesn’t pay a penny in federal income taxes) with a nicer home than I can afford makes me blind with rage.
I also don’t particularly understand all the hand-wringing about people like this being foreclosed on. They didn’t pay any money to get into the home, they aren’t able to afford the home, why shouldn’t they be forced to find something that’s in their price range? I don’t get it.
I frankly have no idea WTF these bankers are thinking approving these kinds of loans (unless it was a liar loan in which the income was mistated), but that has nothing to do with the points I raise above.
The bankers were thinking that they got paid for making loans, not making good loans.
To aggravate things further, some mortgage brokers and a few banks provided incentives to get borrowers into loans which were worse deals and more expensive for the borrowers.
If you did these kinds of things selling securities, your license would be revoked. In real estate these things were well-known, and many unethical practices were legal in many states.
The loan reps were thinking that they got paid for making loans, not making good loans…
BECAUSE THEY WERE!!!!
Due to perverse incentives built into the system people who qualified for better lower-risk loans (like fixed-rate loans) were deliberately steered to the ARM’s they’re currently worrying about.
There was an assumption that those you were paying to get you the best loan actually had a fiduciary duty to act on your behalf rather than just consider you another contributor to the trough.
Yup, I think MalibuRenter is aware of that, despite his wording.
On a related note, on NPR’s “The Story” on Tuesday there was a good interview with a former employee of Wells Fargo’s mortgage customer service call center, where he talked about how Wells Fargo would penalize (up to and including firing) employees that didn’t meet certain quotas on selling HELOCs to customers who called in with unrelated questions about their mortgages, regardless of whether the customer needed/wanted them or not.
http://thestory.org/archive/the_story_667_Lobstering_Man.mp3/view
Wow. I am almost speechless. Almost. I ABSOLUTELY DO NOT feel sorry for people who were stupid enough to purchase ridiculously overpriced homes. You are not a “better person” because you speak out against this writer of this blog. I, along with many others, appreciate a fellow voice of reason. Go home (if you still have one) and look in the mirror if you want to see a “sociopath.” Then, shut up.
Why are the HOA’s so high in this village? It’s seems rather high for a newer community.
So if I understand correctly, with Mello Roos and HOA’s it adds about $1k month? That sucks.
I live across the street in Westpark and I can hear the cement plant and waste facility cranking away at odd hours…can’t imagine what it would be like to be living right next to them.
You go Irvine Renter
you have saved me thousands.
I am definitely not suffering
Wow.
Looks like the Natives are restless in Columbus Grove. Saddly reality bites hard. And its only going to get worse. IR keep up the good work.
I went with a friend to pick up a car at the Tow Yard a few hundred yards from this property over
on Construction. When the wind blows the wrong way it must really stink in this neighborhood.
The waste recycling plant is very close.
I smell it driving on the way home down Warner.
You will smell it driving on Jamboree just north of Barranca.
A neighbor and his son did a science project on the amount of particulates generated from that cement plant. It was not good! In fact the particles traveled as far as the 5 freeway when the wind comes in strongly from the ocean.
Damn you IR, you sociopath. You single handedly caused real estate to drop, and it’s only because you hate me. Quit being such a self-serving greedy bastard.
I have the same feeling about Irvine as does PurpleHaze. My husband went to college here and loved it, so we came to rent while he followed his business opportunity (no, not in the mortgage biz). We hoped to save money and buy a place in Irvine, but that goal is changing with the faltering economy. And I’m none too sad about it, as I haven’t gotten over the “Truman Show” aspect of Irvine. I also lived in a planned community growing up, but the yuppie factor in Irvine really turns things up a notch. I don’t talk too much about it with my husband, as I’m hoping to completely move out of the OC…
And for the poor lady who is upset with IR – puh-leeze. She should be writing in capitulation: “IrvineRenter got a hold of a property in Columbus Grove (haha…or my house)to profile!! He was right about home prices. Confound him! How do I get him to focus on Woodbury again?!?!?! I need a kkknnniiifffeeeccaaatttccchhhhherrrrrrrrr!”
I was brought up to believe homeownership was something to aspire to…but I turned down several crazy loans for a crappy property because I COULD NOT AFFORD IT!! So lady, I’m sorry you’re suffering, but get your panties out of the knots they’re in and face the grim reaper. A good majority of us are struggling now, homeowner or not, and striking out against IR for doing his research and sharing it seems more than a bit misguided.
Hell, I’m glad he’s making money on this…hip,hip,hooray for the American way.
HATE THE GAME, NOT THE PLAYA. You probably would have agreed with something like that back in 2006…
Will the real TurtleRidgeRenter please stand up? Hey, you’re using my nom de plume. I’m not mad though, because we are neighbors! It just might get confusing around here with two of us, is all.
See you at the jacuzzi, TurtleRidgeRenter2!
AAAaaagh!!!
You missed your big chance!!!
The song to use would have been “Lunatic Fringe”-
I thought the realtors description should not be mocked but commended for its apparent eveidence of effort.
Look ladies noone here makes a nickel on any of you or your suffering. That’s just a damned slander.
I have 7 people in a 1500 sq. ft. house. Maybe you deserve a less intense population density ‘cuz you’re a better person than me.
Or maybe you overbought and share a wee smidgen of responsibility for your own plight.
If the truth causes you pain don’t blame the messenger.
IR has NEVER delighted in the sufferings of the undeserving but he does have the integrity to say that when people like to front like they’re rich and pullout huge sums from their home equities and then walk away holding huge cash and assets and want to be viewed as innocent vistims it’s JUST NOT RIGHT.
He’s providing an INCREDIBLY GENEROUS public service and for that he deserves commendation and gratitude not harshness from those who don’t like the sound of the truth.
Want your own voice to be heard? Start your OWN blog!!!
The dns Irvine Whiners’ Blog is still available…
I’ve a question for those of you who are considering buying now. Esp now that mortgage rates are so low , it seems very attractive when compared to renting.
If you buy this house at rental parity and let say you live in the house for 10 years.
if we assume lowest ever rates now, will it be reasonable to assume higher rates in 10 years and then what will happen to the price of the home.
Home prices aren’t especially sensitive to interest rates. It’s a moderate correlation.
In the short run, what tends to happen is prices stay the same when rates rise, but fewer people buy. If nothing else changes (inflation, unemployment, wage growth), prices would slowly drift down.
On the other hand, refinancing is very sensitive to interest rates. That’s why mortgage brokers get so excited about a half point drop.
One of the other subtleties about interest rates is that it should be the real rate of interest which matters. However, very few people do real rate of interest calculations. If we are currently in deflation, a 5.5% loan could have a real rate of interest of 8%. If you kept that 5.5% loan for many years, it might be a better deal later when inflation returns.
Lunatic Fringe was made popular by Red Rider-
…or Vision Quest.
[edited],
The shoe is finally on the other foot…how does it feel? Us renters were the pariahs during the housing boom. Many of us figured fundamentals were completely out of whack. Our views are now justified as the house of cards has collapsed.
You should take your frustrations out on all the enablers of this mess. Greedy banks, mortgage brokers, real estate agents, irresponsible home owners, etc. This is classic Darwinism…only the strong will survive.
Good luck out there, we’re all going to need it.
I bet this property has nice summer breezes from the cement plant next door and the host of recycling and industrial plants across the river *cough* sewer drainage *cough* in Construction Circle.
What a joke.
IR, keep your head up, at least you haven’t had a shoe (or two) thrown at you yet.
I don’t know what pain I caused..maybe the pain on the face of realtor when I told him/her that I thought the used house they were selling was priced too high. Or the loan swindler when I turned down that tasty suicide loan that he/she would’ve made a bundle on. Time and time again, all we have been saying is…give fundamentals a chance. All to together now! All we are saying…
What’s the best way to find out housing price histories for some distant market — I’m considering several different locales and would like to have an idea “if I move to location X, is the housing market inflated?”
I would like to get the data to generate figures like IrvineRenter creates — median price, median price per square foot, and volume as a function of time. Ideally, I would get it for free.
I’ve looked at a couple of websites, but the transaction histories are worthless — incomplete (only a handful of recorded transactions) and shoddy (price, but no sqft data). None of the data I found reached back further than six months ago.
Clearly I’m looking in the wrong places. Where do people on this blog get their data from?
“Clearly I’m looking in the wrong places. Where do people on this blog get their data from?”
Well, I do not know about others, but I find it convenient to just make stuff up. That way my data fits my conclusions.
Those who bought in the aptly-named Columbus Villages are surely by now indeed discovering a new world-
Speaking of aptly named, every time I see “VOC” on Villages of Columbus posters at The District, I chuckle as I read it to stand for “Volatile Organic Compounds”. :cheese:
Didn’t the VOC’s namesake Columbus Tustin die bankrupt after he couldn’t attract enough would be homeowners to buy any lots?
“I am proud beyond measure with who I am and what I stand for. I am only interested in lifting others up.“
Pride comes just before the fall.
“People only live in fringe markets because they are priced-out of more desirable areas, so when prices drop in the better areas, people leave fringe markets, and prices really plummet.”
I don’t think I have ever found anything to complain about here at IHB – but this statement, and claiming that the entire city of San Clemente is “fringe” because only people who are priced out of other markets live here, is laughable.
Perhaps if you are referring to SC’s overpriced stucco tract boxes lined up, Irvine-style?
Certainly there are CRAPPY areas in SC just as there are in other towns. Yes, it’s far from Irvine, Newport, etc. – guess what? Not everybody works in Irvine or Newport. Not everybody wants to live there, either. For a multitude of reasons.
Having owned homes in San Clemente off & on for the last 20 years, I can say without a doubt that your statement about this area being “fringe” is a complete generalization. There are micromarkets in this town that rival some of the nicest neighborhoods in Newport and Laguna, only with a hell of a lot better SURF – which is another micromarket in and of itself. You would be surprised at the number of high falutin’ execs that will plop down 3 to 4 million in cash to purchase a home here that is close to a good break. In addition, there are other reasons for living here that have nothing to do with being “under priced” relative to say, Corona del Mar, where I have also lived – or Laguna, where I have also had a home.
Please remember that everyone has a different opinion of the “best” places in this county. I for one wouldn’t live in Irvine, Newport or CDM is I was paid to. San Clemente is just fine by me, for my own reasons. Having said that, there are areas in San Clemente that are hideous.
PS: I cashed out at the peak and now rent.
Yeah, I found “People only live in fringe markets because they are priced-out of more desirable areas” hyperbolic as well. Not everyone wants to be close as possible to the hustle and bustle. This is no different from the choice of urban vs. suburban.
Also, the opening sentence of this post doesn’t make sense — “Fringe markets are […] less desirable due to proximity to large employment centers” should read “less desirable due to lack of proximity to large employment centers”.
Everyone rises up to defend their home turf…
Look at the prices across Orange County. There is a general decrease from north to south because the employment centers are in the north. Proximity to employment centers will always be a primary driver of real estate value. There are always cities and neighborhoods that are exceptions to this general trend for other reasons, but commuting time always impact real estate value.
Personally, I like San Clemente. If I wasn’t so focused on Irvine, San Clemente would be a place I would like to live. However, it is what it is, and San Clemente is a fringe market distal from employment centers.
Sure, but that doesn’t really get to his point. Your assertion was that…
“People only live in fringe markets because they are priced-out of more desirable areas, so when prices drop in the better areas, people leave fringe markets, and prices really plummet.”
Whether you think the statement is true or not depends on the modifier you impute in front of “people”. If you read the sentence as “many” or “most” people only live in fringe markets… it’s probably true. If you read it as “all” people only live in fringe markets…it’s probably not. Fringe is reading it as “all”, my guess is you meant it as “most” (hence the employment centers comment).
Autolykos & Bitter Renter – exactly.
IR, you posted: “People only live in fringe markets because they are priced-out of more desirable areas”.
IR, while I understand that proximity to employment centers has an impact on values, it isn’t as cut & dried as your original post suggests. By your reasoning, then, Santa Ana housing values should be higher than Laguna. Or Costa Mesa higher than Coto de Caza. After all, SA and CM are just a few miles from the employment centers that you reference – and Laguna and Coto are more like, say, Egypt, in their distance from those centers. I would argue that prior to 2000, proximity was in fact a huge force in housing values – as there was limited office and industrial space in the “fringier” areas. This is simply no longer the case. It ahs some impact, but not as much as you suggest.
Further, if proximity was the major reason behind value, then the condo crap built on Jamboree (sorry – don’t know what it’s called, but drove by it recently – aghast at the hideousness) near the Marriot would be going for $3500/sq. ft.
And yeah – I will rise to defend my home turf when the argument doesn’t hold water. Not that I care, being a non-bubble buyer and having profited off of people’s real estate stupidity. San Clemente’s beautiful, but I really don’t care if housing values tank here. I have some rentals that cash-flow in SC bought well before the bubble, but no primary to lose sleep over. Again repeating myself – there are definitely sub-par areas in SC (and other far-flung places) that would support your argument. But, then it would still support the fact that your argument is a generalization. 🙂
If oil hyperinflates in a few years to $250/barrel – I’ll agree with you.
One last thing: great job on the blog. I have been a faithful reader since January 2008.
In the end I suggest that Ms. bitter and feeling persecuted and her peers should lose the ‘tude and get out their readin’ spectamacles and see if they can learn a better way from this point on. Because this ‘lil epoch is FAR FAR from over… there’s still a LOT of opportunities to choose well or ill before any of us can really relax about housing I think- better to be better prepared and there are no better places I can think of to begin that process than here-
I do feel bad for some people who really are unable to access the information the need to make informed decisions – like the story on NPR was very sad to me – some people can’t even use a computer – how can they even get real information when our tv media is so biased.
However, there were many, many people that bought during this housing bubble that had been warned by friends/family, etc. – only to completely dismiss their ideas – those people I do not feel sorry for.
If you can’t even handle reading, listening to or thinking through something that contradicts your current choices or ideas then you will never come out on top.
This whole housing situation is like a garage sale where people are asking $20 for something that you can buy on ebay for $5 – and when you make an offer they look at you like you are offending them by not being willing to give them exactly what they want.
We have totally forgotten that something is only worth as much as someone will pay for it – and there is no reason to be angry at someone else for choosing what they will pay. If it is worth more than that to you personally then don’t sell it.
IR – so sorry about the verbal abuse you take – you don’t deserve it.