39 thoughts on “Open Thread 1-17-2009”

1. Priced_Out_IT_Guy January 17, 2009 at 5:09 pm

   Its amazing how all of these properties tripled or quadrupled in a handful of years only to fall back to where they started. Did minimum wage increase four fold in these neighborhoods to support home values?

   I think we should give a blue ribbon award to the ALESSANDRO property realtor for taking the most crooked photo I’ve seen to date. The shack ‘er I mean house looks like it was built on a hillside without bothering to level the foundation….Just imagine how easy it would be to roll out of bed in the morning! Straight onto the floor! *Ouch* Where did that damn protruding nail come from???
2. Laura Louzader January 17, 2009 at 5:33 pm

   “anywhere but California”

   Well, the bubble affected most major cities, and the only diff is that the unwinding is coming to us later,and places are a little stickier on the downside.

   But it’s happening… I am seeing more and more really steep reductions in Chicagoland prices, and more places rolling back to 2003, 2002, and even 2001 prices. Every building all the way down the lakefront, excepting the co-operatives where a board vets new buyers, has at least one unit in foreclosure, and entire new condo developments are being foreclosed on as units do not sell and construction loans expire. The South Loop with its 50 story badly-built hirise condo developments, is a bloodbath of the same sort Miami is.

   Meanwhile, a new wave of bad loans is being written under the auspices of the FHA, so we can expect yet another wave of defaults and foreclosures in another 2 or 3 years.

   And the Case-Schiller index indicates that we are nowhere near the bottom. What happens in CA happens next to the rest of the country, so the rest of us aren’t far behind.

   By the way, Circuit City liquidation sales begin today. This is, what, the 2nd Big Box retail chain to liquidate? The retail contraction is going to be catastrophic. Wait till the unwinding of commercial credit gains traction, for it will make the mortgage debacle look minor compared.

   We have a lot of pain in front of us.
   1. Colin January 18, 2009 at 1:05 am

      FYI – The Circuit City “sales” this morning were anything but. I visited Fashion Island last week and decided to take a spin by this morning to see what kind of deals I could get.

      TV’s that were selling for $2,000 last week are “on sale” now for $2,300. I know the standard operating procedure for a liquidation company is to jack up prices before slashing them by 50-75%, but this seemed excessive. Buyer beware.
      1. Chris January 19, 2009 at 5:28 am

         Nothing unusual about that. Businesses will jack up prices and then give you the 50% to 70% off on already jacked-up prices.

         It’s the same as RE. Jack up the price way above the average price/sqft on initial listing and then bring it down and say “l@@k here….owner motivated….offers are rushing in so quickly we don’t even have time to filter them out….so please submit NOW@!@!”.
   2. scott January 18, 2009 at 6:11 pm

      One thing I noticed on Citigroup’s break up announcement is that in their ‘good bank/bad bank’ they put their private label credit in the bad bank with stuff like the sludge g’teed by the government. That shows how they think of that business.

      Those private label programs aren’t Visa/Mastercard but stand alone for retailers like Circuit City and Sears. I was in Sears recently to buy a new washer/dryer and they had a no interest offer, which is no brainer to take (had the cash and will pay off before the zero interest expires). It doesn’t take a genius to figure out that if I have a Visa and a Sears card and can only afford to pay one, that I will pay the Visa, so I can shop anywhere, instead of the Sears, meaning I can’t then shop at Sears. So, will make it harder for Sears to sell washing machines as credit dries up.

      Also, note that alot of the big retailers make alot of money on their own credit card businesses rather than selling stuff. For example Target has a large credit card business and Dillard’s lost money in 2007 and was only profitable because of fees paid to it by GE Capital on the Dillard’s credit card program.
3. Eric January 17, 2009 at 8:18 pm

   My wife and I were fresh out of college in 2005, looking at some of those condos in Santa Ana…They were $289,000 or so at the time. I found myself wondering how two college educated people with great jobs (I work in software) could only barely afford a dump in Santa Ana.

   We said screw California and moved to Austin Texas. Bought a new home for 200k and have seen steady appreciation (to 242k) while California has plummeted. Smartest decision we ever made. We’re living in a hip college town with a fantastic cost of living and we’ve been thriving in Austin’s high tech atmosphere.

   Good riddance Orange County…
   1. Orcian January 17, 2009 at 10:59 pm

      Austin is beautiful. You made a great choice.
      1. No_Such_Reality January 19, 2009 at 7:44 am

         Psst, don’t tell Graph about the wine country in the hill country 30 minutes away…
         1. tonyE January 21, 2009 at 1:46 am

            Hill country in Austin? Come on… I’ve been to Austin ( north of Austin ) twice and I have seen bigger hills in Costa Mesa… not to mention the fact that on the freeway overpasses you are higher than anything for 200 miles around…. ;-D
   2. Monty Montana January 19, 2009 at 7:59 pm

      Yes. Everywhere else is better, especially wherever you chose to flee. But home prices here are dropping, Escalades are cheap, and we’re living by the sea drinking Pisco Sours while you spend Saturdays nights listening to another Stevie Ray Vaughn tribute act in some chili shack in downtown Austere.
4. Perspective January 17, 2009 at 8:45 pm

   I can understand realtors’ rage against IR. We all like to attribute our financial success (income to most people) to our unique effort and intelligence. It’s not fun to think that any of it could be the result of chance or luck, or even fortunate timing. Life had to have been so great for realtors earlier this decade!

   Where else could a high school degree and passing a simple multiple choice exam result in six-plus figure incomes for so many? That’s gone now, and many realtors don’t want to let it go. I wouldn’t either, and I wouldn’t appreciate truth-tellers out there educating people about residential property valuation.

   Realtors should take some comfort in the fact that their polar opposites are also hurting. Ivy League grads were making tons of money earlier this decade too in investment banking. They’ll also have to lower their expectations and take those “plain ‘ole” six figure jobs now; just like realtors will have to take those $10 per hour service-sector jobs.
   1. IrvineRenter January 17, 2009 at 9:38 pm

      I had a friend from High School visit me this week. He quipped to me that I am pretty brutal on realtors. I am. I should probably examine why they annoy me so much and see if I can let go of some of it. When I think of all the interactions that served to fill my Reservoir of Schadenfreude, my interactions with bad realtors and the stories other people tell of their tactics have served to irritate me the most.
   2. IrvineRealtor January 17, 2009 at 10:55 pm

      Misdirected anger causes people to lose sight of the real objective.

      A site like this gives insight to sellers and buyers alike, and getting the real information out helps everyone. From the right perspective, this should be a positive to anyone involved.

      The blog helps sellers to set realistic prices, and comes as information from an uninterested neutral third party. Likewise, buyers can help educate themselves and understand exactly what their true costs of ownership are, saving more valuable time and improving communication. In either case, it is a benefit to the realtor.

      Even more importantly, in a downturn that we are experiencing, culling the weak from the herd is necessary and valuable in its own right. The lesson is not lost here.

      You cannot stop the waves, but you can learn to surf.

      -IR2
      1. tlc8386 January 18, 2009 at 12:24 am

         “You cannot stop the waves, but you can learn to surf.”

         So few will try and reinvent themselves they will continue on with the weather has a premium, the view if you tilt your head out the window to the left you may see the ocean, prices will go up mantra, and this is the OC.

         The brainwashing won’t stop no matter how you inform people only a few really get it.

         But I appreciate an honest real person!!! 🙂
      2. TurtleRidgeRenter January 18, 2009 at 9:33 am

         IrvineRealtor, you’re the first realtor I’ve encountered say something so savvy. You actually understand that it’s a business. And when times are tough, you have to hire the best people and innovate your way out of it.

         When my husband and I finally get tired of renting at IAC, you’d be the realtor I’d want to pay a commission to.
         1. Boston2theBay January 19, 2009 at 1:32 am

            last time I checked buyers don’t pay a commission
            1. freedomCM January 19, 2009 at 4:04 am

               Where do you think the money to pay the commission comes from if not the buyer?

               It is true that the seller negotiates the commission level, but the buyer pays the cash that goes to the real estate sales person.
            2. Fermi Pyle January 19, 2009 at 10:14 am

               Ignoring word games, the listing realtor works for the seller. The seller usually has a long term friendship and business relationship with the realtor. The seller negotiates the amount of money the lister gets. The seller has the most leverage in deciding if the sale goes through. Any buyer who thinks the listing realtor works for them is … words fail me.
               If the buyer gets their own realtor to represent their side of the transaction, then there might, repeat might, actually have someone working for the buyer. A clever seller can increase the commission paid to the “buyers” realtor, creating a conflict of interest. Then sometimes the buyer’s realtor will change sides and promote that property to his buyer because his commission would be bigger.
5. Walter January 17, 2009 at 8:54 pm

   2521 W Sunflower Ave #R2 Santa Ana, CA 92704: $279,000 in 2004, asking $128,000 today.

   This is not a bad area. Right down the street from South Coast. I own a rental not far from here and I have few problems.

   It is not Irvine though. The schools and safety do not compare and you need to do your best to avoid 10 people moving in. There are quite a few young professionals that live in this area. Most without kids because of the schools.
6. lagunalover January 17, 2009 at 11:05 pm

   With all the money potentially coming into the system, it may cause inflation that encompasses housing. When inflation arrives is anyone’s guess, but it’s a possibility due to unwise monetary policy.
   1. zoiks January 18, 2009 at 5:11 am

      “With all the money potentially coming into the system, it may cause inflation that encompasses housing…”

      This is *really* unlikely for the next several years at prices anywhere near where they are today. If the Fed manages to promote inflation, it will be a jobless inflation with goods prices skyrocketing. People simply don’t and won’t have the income to support these high real estate prices.

      There’s nothing to promote the idea that incomes will rise any time soon, and there’s every reason to expect taxes will go up in the near (state), medium, and long (federal) term.

      The thing you have to understand is real estate is wildly overvalued in *value* terms (for example, relative to everything else, labor, etc.), not just dollar terms. To preserve any semblance of current nominal prices, you would have to utterly devalue the dollar so much that most people won’t be able to afford other things, such as clothing, food, transportation. How much do you think health care will cost if that happens?

      Many people here seem to think we don’t have much more housing devaluation left. I believe we have plenty. 50% drops from current prices will be common, even in Irvine. Currently, Americans’ labor is a bubble itself, and the reservoir of credit being extended to us by foreigners will not last indefinitely. Imagine, if you will, that the federal and state budgets were *forced* to be balanced, today. It would be an unmitigated economic disaster.

      I’m neither a Pollyanna nor Chicken Little. But I see very dark clouds on the horizon. (BTW, trying to debate valuations with a Realtwhore(TM) is like trying to explain to a stone why it should float on the water and not sink. Realtwhores(TM) are worthless for logical exchanges, or pretty much anything else.)
      1. irvinesinglemom January 18, 2009 at 6:50 am

         Except for IR2. 😉
         1. zoiks January 18, 2009 at 1:00 pm

            I don’t personally know IR2, but I’ll say that’s a bit like claiming you know the one mafioso who isn’t such a bad guy. OK, well, he’s still a member of a criminal organization!

            Consider:
            – The National Association of Realtwhores(TM) is a national lobby which manipulates our legislative processes to their ends (through campaign kickbacks and other means).
            – The NAR is an illegal monopoly that has used its lobbying influence in the affairs of many states to maintain that monopoly status.
            – The NAR collects dues for the purpose of funding their illegal monopoly and marketing real estate to the general public as a good investment even in times when it’s the worst investment. Household financial health be damned, they have a commission to earn! Despite their ridiculously high commission, they will never *ever* give you a guarantee that you are making a good decision.

            Don’t you find it odd that only the NAR can market certain instruments as investments to people, but do not have to register as investment advisers and are not, in general, required to fulfill their fiduciary responsibilities? They will always always *always* tell you that a house is a good investment, no matter what.

            Many of the recent bailout bills were sponsored by the NAR. And you can bet that they will sponsor many more. When you buy or sell a house through a Realtwhore(TM) you are helping fund and perpetuate their influence in our government. Are they representing “the People”? Hell no. Many thousands of voters called, faxed, and emailed their representatives expressing their disdain for yet another bailout. But in the end, special interests won out, thanks in part to the NAR.

            The NAR had an ad campaign a few years ago that repeated the idea that sellers would get 16% more money from their sale if they used a Realtwhore(TM) vs. doing it themselves. So, either
            1) Realtwhore(TM)-assisted sales are overpriced by 16%, or
            2) the NAR are liars.

            Which is it?

            The only honest Realtwhore(TM) I’ve ever known quit the business several years ago. He became disgusted with the profession, and chose of his own free will to become a productive member of society. (Actually I know another one, but he only uses his Realtwhore(TM) status to save himself money on his investments, not to “represent” clients. Frankly, he thinks Realtwhores(TM) are crooks, too.)
      2. tlc8386 January 18, 2009 at 8:22 am

         I totally agree with you—we have a long way to go in deflation nation!!
      3. lagunalover January 18, 2009 at 10:49 pm

         Zoiks, I’m not a Realtwhore(TM). I’m hoping prices go down, too.
         1. zoiks January 19, 2009 at 5:27 am

            Sorry, that part was directed at IR, or at least the Realtwhores(TM) with whom he debates.
   2. mav January 18, 2009 at 8:06 pm

      anyone who thinks that you can just print money and create inflation doesn’t really understand how money is utilized.

      supply and demand for credit are the key to inflation or deflation, printing piles of money that can not be used productively is a symptom of deflation.
      1. zoiks January 19, 2009 at 5:25 am

         Well, Zimbabwe prints money and this has created giant heaping piles of inflation.

         And, as Mish says, if this was a valid strategy then Zimbabwe should be a shining example of a successful society. Instead, their unemployment rate is something like 80% and their economy is utterly destroyed. After a cumulative devaluation of their currency by something approaching 10^20.
         1. mav January 19, 2009 at 6:32 am

            if the US went Zimbabwe you would not even worry about inflation, you would be preparing for nuclear winter if you were still alive.
            1. zoiks January 19, 2009 at 9:45 am

               OK, well I was responding to this part you wrote:

               “anyone who thinks that you can just print money and create inflation doesn’t really understand how money is utilized.”
            2. mav January 19, 2009 at 6:36 pm

               you can’t just print it, you need to also dispense it (typically via lending, other methods lead to chaos)… and when you do dispense the money that is printed you need to use it productively for long term value, otherwise you are headed back to deflation. The US Dollar is a global fiat currency, much the way gold is a global fiat commodity. Right now the value of gold is more likely to decline than the US Dollar, despite how many dollars are printed.
7. NoWowway January 18, 2009 at 1:54 am

   That cranky realtordude just reminded me…..

   There should be some kind of professional proof-reading service for realtors. Habitual, sloppy writing does not scream “professionalism!” worth 6% commissions on homes.
8. Major Schadenfreude January 18, 2009 at 2:18 am

   “A well price or home will sell twice as fast.”

   LOL! Love it!
   1. TurtleRidgeRenter January 18, 2009 at 9:47 am

      I have no idea what the cranky realtor guy was trying to say in his email to IrvineRenter. I think the gist of it was that you can’t offer a home for sale at a higher price than the rest of the neighborhood? If so, then I’m not sure what he was so mad about, regarding this blog.

      Wells cost a lot to drill, so maybe he was saying that a home with a well sells twice as fast. This is true in the rural midwest. But I believe all homes in Irvine get municipal water.
9. asianinvasian January 18, 2009 at 9:42 am

   I thought this was “Irvine” housing blog.
10. alan January 18, 2009 at 10:55 am

    IR…

    Can you find any apartment buildings for sale not owned by the Irvine Co to profile…

    The reason I ask is that I’m up in San Francisco, (where prices are still about 2x fundamental value) and one posting on the real estate office is for an apartment building with a ‘projected’ annual rental income of $110k offered for $2.2 mil, an astounding 21x rent. Since investment buildings should sell for 10x rent, I can’t understand how a highly informed real estate agent would list it for twice it’s investment value.

    Find anything like that in Irvine?
    1. IrvineRenter January 19, 2009 at 8:51 am

       Cap rates on apartments have fallen to as low as 6%. That translates to a GRM of around 180. Buyers at those prices are insane, and I predict most of these properties will end in foreclosure. Unfortunately, I don’t have any specific properties of this kind to profile. Occasionally properties like this come across my desk at work. I will keep my eyes open.
11. wheresthebeef January 18, 2009 at 9:48 pm

    The hate mail from the realtard is pretty funny. Back in the day, realtors actually performed a service. They had client lists of potential buyers and would be knowledgeable about specific locations, areas, tracts, school systems, etc.

    Fast forward to the bubble and the allure of easy money attracted high school drop outs to jump into the realtard arena. As long as you could put a “For Sale” sign in the front yard, print a pretty sales brochure and sit at the open house…those were the only requirements. Houses sold themselves and these realtards were making fat commmision checks.

    I for one am happy that most of the part time realtards will have to get a job back in the real world. With the internet, almost all info only previously only available to realtors is now accesible to everybody. I see the 3% commision a thing of the past…maybe 1% in the future
12. Ryan January 19, 2009 at 7:08 pm

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