Prices rose in March in Orange County for the first time in nearly two years. Don’t worry, it won’t last. This is not the bottom, although several of our prominent local bottom-callers may come out and say so.
Asking Price: $1,279,900
Address: 57 Eaglecreek, Irvine, CA 92618
{book2}
The Song Remains The Same — Led Zeppelin
California sunlight, sweet calcutta rain
Honolulu starbright–the song remains the same.
Here we go!
In most price declines there are false rallies. Prices become oversold and look inexpensive relative to previous pricing. These bear rallies often bring new money into the market as buyers do not want to miss the bottom, so they buy and drive prices higher. This can go on for a while, but eventually bear rallies fizzle out because prices are inflated and not supported by fundamentals, so prices fall back to where they started from.
I originally added the annotations to the chart below in early 2007 for the post, What is Past Is Prologue. We did have a spring rally in 2007, but we skipped the second year rally entirely in 2008.
The price rally, if you want to call it that, is a mere uptick in the Orange County median from $375,00 to $380,000 from January to February. With all the artificial props to the housing market being engineered in Washington, it would not surprise me to see a spring rally, but given the state of our economy, it seems more likely that prices will continue to plummet.
What makes a price rally in these circumstances so seductive is the residual kool aid intoxication among market participants. How much of a rally would it take before people start to worry about being priced out forever? How much do prices need to go up before greed starts buying to capture appreciation? Of course, without loose-money financing to propel prices higher, the rally will go nowhere, but not before it sucks in a new round of knife catchers.
Bear rallies bring out another phenomenon: overhead supply. When prices drop, people who may want to sell do not because they cannot get the price they want. This pool of would-be sellers do not appear in the inventory statistics, but they are out there. Once prices start to rise, these sellers come out of hiding and list their properties for sale. Most will list their properties at a breakeven price hoping to get out without a loss. Of course, the cummulative impact of all these new sellers in the market is the death of the rally.
Today’s featured property is a WTF listing in Oak Creek. Apparently it has gone up in value since late 2005. It is listed at a price that provides a little negotiating room to get out at breakeven. It might not be a bad strategy if it were not about $350,000 overpriced in today’s market.
Asking Price: $1,279,900
Income Requirement: $319,975
Downpayment Needed: $255,980
Monthly Equity Burn: $10,665
Purchase Price: $1,160,000
Purchase Date: 10/28/2005
Address: 57 Eaglecreek, Irvine, CA 92618
| Beds: | 5 |
| Baths: | 3 |
| Sq. Ft.: | 3,150 |
| $/Sq. Ft.: | $406 |
| Lot Size: | 5,800
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Mediterranean |
| Year Built: | 1999 |
| Stories: | 2 |
| View: | Park or Green Belt |
| Area: | Oak Creek |
| County: | Orange |
| MLS#: | S564030 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 46 days |
STUNNING EXECUTIVE HOME ON PRIME INSIDE LOCATION IN THE PRESITGIOUS
GATED COMMUNITY OF OAK CREEK…5 SPACIOUS BEDS..3 FULL BATHS..(ONE BED
& BATH DOWN)(DOWN BEDROOM IS OPEN AS A PLAY ROOM BUT AN EASILY BE
CONVERTED BACK TO A BEDROOM).. LG FML LIVING & DINING RM..GOURMET
KITCHEN W/STAINLESS APPLIANCES, GRANITE COUNTERS, CENTER ISLAND &
EAT IN BREAKFAST NOOK..HUGE FAMILY RM W/FIREPLACE..DOWNSTAIRS BEDROOM
IS OPEN AS A PLAY/TOY ROOM..INDOOR LAUNDRY ROOM…SOUGHTAFTER BONUS
ROOM & OFFICE AREA UPSTAIRS..EXTENSIVE STONE TILE FLOORS
DOWNSTAIRS…VAULTED CEILINGS…A/C..DESIGNER PAINT & LIGHT
FIXTURES..THIS HOME IS IMMACULATE SUNNY & BRIGHT…MODEL
PERFECT…SHOW YOUR FUSSIEST BUYERS AGENTS PLEASE CALL 2 HOURS BEFORE
SHOWING FOR APPOINTMENT. DO NOT SHOW WITH OUT APPOINTMENT…NO SHOWINGS
FROM FRIDAY 5 P.M. TO SUNDAY 9.30 A.M ABSOLUTELY NO SHOWINGS ON
SATURDAYS.
PRESITGIOUS?
ALL CAPS.
This property was purchased on 10/28/2005 for $1,160,000. The owner used a $870,000 first mortgage and a $290,000 downpayment. If this property sells for its asking price, and if a 6% commission is paid, the owner stands to make $43,106. Perhaps he left himself some negotiating room to get out at break even.
I get a kick out of the Cyberhomes estimate of $612,702. Perhaps Cyberhomes does not appreciate the special qualities of this property.
{book3}
I had a dream
Oh, yeah
Crazy dream, uh-huh.
Anything I wanted to know
Any place I needed to go
Hear my song
Yeah…people dont you listen now? sing along!
Oh, you dont know what youre missing now.
Any little song that you know
Everything thats small has to grow.
And it has to grow!
Push push, yeah!
California sunlight, sweet calcutta rain
Honolulu starbright–the song remains the same.
Here we go!
Honolulu now…
Sing out hare hare, dance the hoochie koo.
City lights are oh so bright, as we go sliding
Sliding
Sliding through.
Oh!
The Song Remains The Same — Led Zeppelin
The weekend post generated many comments and plenty of controversy. If you have an opinion on the subject go to that thread to express it. Do not pollute this thread with those comments as I will delete them.
I can understand people’s concerns, and I can take negative comments, but there is a limit to what I will put up with.
The comments were an interesting study in mob mentality (I deleted many of the worst of them). It is amazing the things people will say anonymously if they feel the collective approval of the mob. In all the posts we have done on properties, we have never used names or made it personal. Many people on that thread did make it personal. Their conduct was shameful. Many said they would never come back. I hope they keep to their word.
This experience has been a cause of reflection for me. In life you tend to attract people to you that think and behave the way you do. I would like to think the comments were provided by good people who succumbed to the lynch mob; however, if these comments are a reflection of who these people really are, and if that is a reflection of who I am, then I perhaps the IHB really does need to change. As Shakespeare said, “The fault, dear Brutus, lies not in our stars, but in ourselves…”
I want to thank all of those who left positive comments and offered their support. It is for you that I keep writing. BTW, some people do support our efforts.
There’s absolutely nothing special about this house–maybe it’s worth $900K at the most. The yard is small, and it’s like every other tract house (just a little bigger). Unless they drop the price substantially, it’s going to sit on the market for a long time.
Thanks IR for your work–always enjoy your posts.
Don’t forget about seasonality. Since kids start school in the fall, prices often go up in the summer, and down in the winter. You can see a little seasonality in the graph.
Prices are not up. What we’re seeing is more homes selling in the conforming (subsidized) loan limit range. People can call it a bear market rally if they want.
The home mentioned in IR’s post, virtually has ZERO chance at the currant asking price. What’s left of the securititized mortgage market, ain’t gonna loan some average Joe $1,000,000 to buy an average house in Irvine California. That’s over.
“Prices are not up. What we’re seeing is more homes selling in the conforming (subsidized) loan limit range. People can call it a bear market rally if they want.”
That is probably why the median ticked up slightly. Once the mix changes and we start seeing a few more mid- to high-end homes starting to sell, the median will move higher. I wish Case-Shiller had a finer-grained reporting. I doubt any spring rally will register there.
The homes that are currently priced just outside the reach of a buyer obtaining a conforming (subsidized) mortgage, now have a greater incentive to drop the asking price. This is especially common if the agreed seller is a lending institution. This cycle will continue until incomes, prices and nonconforming mortgages meet at a central, sustainable, point.
Perhaps you are looking for this http://www.economy.com/home/products/case-shiller-indices.asp
“In addition to the forecast dataset, clients receive the comprehensive historical database. The database includes:
Exclusive Case-Shiller Indexes for approximately 110 metro areas.
Case-Shiller Indexes for 353 counties.
Case-Shiller Indexes for 3,750 zip codes.”
Very cool. I did not realize that data was available. Thank you.
IR, are you ignoring the case-shiller data that ipo has collected for Irvine, and that I have collected for Costa Mesa?
What doess the data you have collected show? Is this uptick registering using the Case-Shiller data locally?
I calculate a large uptick in prices for Irvine in March…
I’m seeing homes selling over all price ranges, not just within the conforming loan limit of $625k (which should be going up to $729k shortly?)
Mid-priced Irvine homes within the $650-750k range in nice areas are selling rather fast. And many folks are putting substantial amounts down as well.
slight uptick in february. march data not complete yet
https://www.irvinehousingblog.com/forums/viewthread/3539/P36/
Thanks much for keeping track of and posting that data, freedomCM. Note, though, that the above link doesn’t work for me — I get a page with no posts on it. I guess the links to pages further into a thread depend on your setting for how many posts to display on each page, which is unfortunate.
For me, page 2 is https://www.irvinehousingblog.com/forums/viewthread/3539/P25/. In any case, regardless of their settings, people can get there by going to https://www.irvinehousingblog.com/forums/viewthread/3539/ and then clicking on the page 2 link.
Today, this house is worth more than $900K.
They don’t need to drop the price substantially, just to $1.19M or maybe $1.15M, and take the $1.075M or so someone offers them…
The problem with this house is with the following eight words on its Redfin page:
“No similar recent past sales could be found.”
These million dollar plus houses simply aren’t selling in this market. Now, Redfin found three other houses listed in the area that were simplier, but no sales either.
In fact, if you go to the Redfin page of cheapest of those three (47 Chadwick, listed at $799,000), it gives you three different comps for that house, all between $780k and $850k-and no similar sales either. Then if you click on the cheapest comp for that house (45 Commonwealth at $780k), you get 4 listings but, again, no sales.
So, then click on the cheapest of those comps (4 Fallbrook, at $625k), and you FINALLY get some sold comps-although all but one date back to October and November. That one is 21 Winterbranch, sold for $720k on Jan 28th-and that was only $60k more than it sold for in Dec 03.
I’ve found that sometimes square footage resets to zero after a sale and therefore Redfin does not include it in Recent Past Sales. I’ve had to cross-reference many sales back to their original listing in my personal database in order to get more accurate priors. Not sure if that’s the case here, just a quirk I’ve noticed…
Good to know — thanks for reporting that. Have you notified Redfin? I’ve found them to be very helpful when reporting technical issues with their site.
I’m not sure if it’s a Redfin thing or the way the realtor sets the listing up on the MLS. My guess is that it’s an MLS thing.
Redfin never answered a question I had a while back so I’m not inclined to bother asking any more questions.
And first post out of the gate gets it right. I don’t see what makes this place a million-dollar home. I’ve seen houses shown on IHB that were not only larger, but more appealing in layout, design, and decoration.
This wouldn’t look out of place at Tapestry in La Habra.
You may not see it, but someone else probably will.
Someone just paid $850K for a 2200sf 4-bedroom a few blocks away from this house, in a much worse location. If that is indicative of market, this house should definitely sell for $1M+.
Without the bubbly financing, $1.3 million seems so impossible to afford…..How many and who do have $319k yearly income and want to buy this?
Plus 215k in cash sitting in the bank for down payment.
This listing at its current asking will receive not even a serious call let alone showing because by now everybody knows it is just waste of time.
The bear rally bringing out new sellers thing is SO True. I cross-posted it to my local housing blog (novabubblefallout.blogspot.com). In DC there’s a real spring rally, as prices in the bottom tier are near rental parity, and wow is it bringing the 2004 buyers out of the woodwork listing at precisely “break-even” with the 6% commision. Since two of these were homes that I really liked, it was especially comforting to have you bring up this exact point today. Patience is difficult even in that last gasp rally before the overshoot.
“I get a kick out of the Cyberhomes estimate of $612,702…”
Cyberhomes doesn’t seem too far off… most homes are selling in the low-mid $200/sq ft range, which (from what I’ve been told by those in the construction biz) is still more than ‘replacement cost’.
Also, I find the ending Realtor remarks interesting: Absolutely no showings on Friday evening or all day Saturday. I’m thinking this might be for religious reasons… I can’t imagine wanting to otherwise stifle the weekend lookie-loos.
Yes, when I saw the Cyberhomes estimate I thought it was a reasonable estimate for what this home will be worth at the bottom. If you run the GRM calculation backward (612,000 / 160), this place would need to rent for $3,825 to justify that estimate. A 5 bedroom, 3000 SF home on a corner lot next to an elementary school should be able to find a renter in that price range. One could argue a home this nice might command a premium over rental parity, but that might bring the value to $650,000 not $1,279,000.
Modguy this has nothing to do with religion. This is typical realtard speak to let all know that they have such a crush of buyers beating their door down for viewings they just have to limit the time. This house is so special, prices are rising and buyers just want to get in immediately. Please call 2 weeks in advance to make sure I can schedule you in. Otherwise the house will be gone. Already I have 5 offers for my client. Everyone wants to live in this neighborhood. This location, ( where the 405 is loud and clear) does not last long on the market.
Make sure to bring a good faith check for no less than $25k IF you want to see this house, or put your name on a list. I will do my best to get your offer to the front of the line.
It’s simple English, don’t you understand?
LOL… I love it
$200 per square foot?! If you are talking about Irvine, that is ridiculous.
The last relevant comp in Oak Creek is probably 31 Highfield Glen, which closed on 3/20/09, for $384 per square foot. THREE HUNDRED AND EIGHTY FOUR DOLLARS PER SQUARE FOOT. It was a 2200sf SFR.
Heck, an attached condo on Geranium in OC went for $322 per square foot last week…
I find it amazing that folks think these tract homes are worth anywhere near this much. On our street, there is a similar property that is about 200k over-priced, imo. It just sits and sits.
For what it’s worth, I did read some of those negative comments this weekend and was very disappointed in my “fellow” bloggers. You have been successful and my only guess is that they were motivated by jealousy. Ignore them and keep up the good work.
This cannot be good for the bull rally –
http://www.mydesert.com/article/20090405/BUSINESS04/90405003/-1/rss
Experts brace for new wave of foreclosures
Desert Sun wire service • April 5, 2009
A new crushing wave of foreclosures is expected to wash through Riverside County’s fast-growing suburbs, a second housing bubble that is about to pop, it was reported today.
“We have unsustainable debt taken out during the housing bubble and it hasn’t popped yet,” Chris Sorenson, a Temecula-based mortgage and real estate expert, told one local newspaper.
The corridor between Perris and Rancho California, and the nearby Moreno Valley area, are poised for a second wave of homeowners to walk away from upside-down condos and houses, the experts said.
Now, purchasers with good credit records who bought more house than they can afford are finding their “Alt-A” and “Option-Adjustable Rate Mortgage” loans are resetting. Although interest rates are low now, homeowners are finding themselves severely upside-down, and faced with the option of buying a new mortgage for a balance that may be 50 percent more than the house is worth.
About 337,000 houses in Riverside County were purchased from 2004 to 2007, before prices began to dive. Almost all of them now are worth less than their owners paid for them.
The coming wave of foreclosures is a “big problem,” Mason Gaffney, an economics professor at UC Riverside, told the North County Times. “More banks are going to show up with negative equity.”
Nationally, a banking and mortgage system already choking on hundreds of thousands of foreclosures soon will be forced to take in more, the North County Times reported.
Figures compiled by the group show that some 700,000 homes across the country stand in what’s called a “shadow inventory,” dwellings that have been taken back by banks but not yet given to an agent.
“When you have an adjustable rate and lose your job … we will have a lot more foreclosures and people leaving the state to find jobs,” Norris said.
I believe this is the original article that this was based on:
http://www.nctimes.com/articles/2009/04/04/news/californian/riverside/zccf7c59392d71c558825758d0068e5fd.txt
Don’t be misled by any bottom-calling or minor changes in the median, which is far less representative of the market than the Case-Schiller series. Or by any uptick in sales numbers. Regardless of the market, there will always be some level of buyers, but the number who can afford properties like this is small, and getting smaller.
There will be plenty of inventory coming onto the market at distressed prices during the next few years. We’ve had a lull in foreclosures as banks were overloaded, homebuyers attempted workouts, and their were various types of moratoria, formal and informal.
But the HELOC abusers and toxic loans are still out there, especially the option arms, and even the most generous government programs or even bankruptcy cramdowns (and they will eventually pass) won’t support housing prices for people without the incomes to justify the payments on conventional loans.
What’s the deal with the showings restrictions? If these people really wanted to sell they would make their home available at all times. But with their WTF pricing, I doubt many people will want to see this place anyway.
The household that owns the place is most likely a Orthodox Jewish Family that still observes the Sabbath (no working from sundown Friday to sundown Saturday)
I’ll bet you are right. That makes a lot of sense.
Here’s some interesting data from Redfin’s page on that ZIP code (92618):
Median List Price: $1,150K
Median Sold Price: $542K
Quite a difference, eh?
http://www.redfin.com/zipcode/92618
Hi IR..I don’t read your open threads on the weekends. I did read what you said above about the negativity. If it was from people whose homes you have featured, I think I can understand if they are pissed at you. Think about it..you list their address and their history of buying and HELOCs. You tear them down over what they’ve done financially.Even if they have made stupid mistakes I don’t think you should be critizing them publicly. I always think I sure hope my family never ends up as a story in the Register because those commenters will blame you for anything. I imagine there are other blogs like yours. I’m fiscally responsible so if we ever sell I can’t see you tearing us apart. But, anyway it’s your blog and you run it. But, maybe think a little more about the families you are critizing and what if someone put your information out here in cyberworld. Sue.
I don’t know about that Sue. It’s not the people being criticized, it’s their actions. And I think IR’s account of the history behind houses is very factual, with little judgment. In fact, the final judgment in most cases is, that the homeowner did a great job of monetizing their asset.
“You tear them down over what they’ve done financially.Even if they have made stupid mistakes I don’t think you should be critizing them publicly.”
“Oops! I accidentally opened up a huge HELOC on my house and spent it all on a pleasant lifestyle, even though I haven’t paid down any of the principles on my loans. And now I’m walking away from this mess I accidentally created so that the tax payers can clean it up.”
If I had the time and bullet proof skin, especially on my back side, I would start up a web site and publish the names of these people who mortgaged my country’s future for their present pleasure.
Major..you are extemely mature, aren’t you? Sorry, but as a seven year stage III cancer survivor you can’t upset me with your ridicule. Have a lovely day.
I hate cancer as much as anyone and you are great for surviving. I wear a yellow bracelet everyday.
However, you must admit that the majority of people who abused the system were doing it to support a lifestyle – not to protect their life.
Another way to view it is that these people have drained away government (our tax dollars) resources to people who could really have used the financial aid like yourself. Also, future government sponsored programs aimed at learning more about cancer will have much less money because it won’t be there as a result of the majority of HELOC abusers – hence my anger.
Well said. Think about all the good things that we could have done with that money. Sadly, this is (or hopefully was) an America that cares little about producing useful things for society. Instead, it is all a get rich quick scheme. Pathetic.
The really sad part is I can understand it. Corporate America abuses its workers and we are all looking for a way out. But, the only real way out is to make work worth it with strong labor protections and equitable pay. Then we can finally get things done instead playing hot potato with the next fad.
I’m cautiously optimistic this is the way we are now heading.
This is very typical Bear Market Rally…
I like the term, ” Dead Cat Bounce”
Here in Jacksonville Fla area, the Association Of Realtors love to mention how sales have increased. They fail to mention that 50% plus closings are now Short Sales and Foreclosures over the last 3 months… way up from 08 figures of 22% on average.
Based on the last 3 months of closings, we have apprx 29 months of inventory of condos.. guess what I sell for a living? YES, new condos..
Our Builder has decided that NEW has a premium that the potential buyer should instinctively recognize.. Yeh right.. Foreclosures prices ARE the market NOW…
Oh, a question.. My neighbor hasn’t made a mortgage payment in 8 months now, and not one letter from the mortgage company.. Is this a common accurance ? banks overwelmed?
You know that “voluntary foreclosure moratorium” that some banks promoted? Guess your neighbor qualifies.
There is also a good chance that their mortgage servicer has gone out of business and someone else hasn’t taken over the files. There will be a small number of homes and condos for which no one ever collects money or forecloses. The typical reason will be that both the lender and the servicer went out of business. In CA, if you wait long enough (many decades), the mortgage expires without obligation. If LawyerLiz is around today, she is from Florida, and might be able to provide some insight.
Fascinating stuff. Thank you for those tidbits, Malibu.
New definately has a gross premium over old. People recognize that old has higher repair cost and has been partially amortized.
I notice lots of MHU near Spectrum. Will they be condo’s or apartments? Why build with a lowering price market and excess inventory?
I wonder what makes this a bear rally?
A bear rally is a brief period of upward price movement during a sustained period of declining prices–at least that is the definition. I identified some of the reasons in the post, and Lee in Irvine identified another reason in his comment above. Bear rallies are seductive because many people incorrectly believe it marks a turning point in the direction in prices and that the rally will be sustained.
How is that different from the other times when you called it a “dead cat bounce”?
It isn’t. They are both the same thing.
Then why did you decide to call it the “first bear rally” instead of a “another dead cat bounce”?
I just find the timing of the first bear rally interesting after the announcement of your new business venture.
Would you like me to change the title?
I didn’t say to change it, I was just trying to get clarification and stating my opinion.
Sue, I think your observation might be what Irvine Renter is realizing as he expressed “This experience has been a cause of reflection for me. In life you tend to attract people to you that think and behave the way you do. I would like to think the comments were provided by good people who succumbed to the lynch mob; however, if these comments are a reflection of who these people really are, and if that is a reflection of who I am, then I perhaps the IHB really does need to change. As Shakespeare said, “The fault, dear Brutus, lies not in our stars, but in ourselves…””
So I went out this weekend looking at some houses in Laguna of course way over priced sellers are just not willing to list their homes with reality pricing in mind. So you see a lot of price dropping as times goes by some are under water. Why I look over in Laguna is mainly because my kids are grown and I keep on thinking I am done with the burbs. But I still like my space and the pool. I am one of those torn buyers who is in mid life crisis. Would love to find people in my catagory, but Laguna is really a tourist town.
Anyway today I hear all about the FBI and fraud cases which I have kept up with because this is one area that keeps me so angry. As soon as subprime lenders lost their business they opened up remodifactions type advice charging customers and then taking their money doing nothing for them.
I think most of us who would love to buy see the entire market as the biggest piece of fraud and we just are sick about it and our hatred and fear were fed by this group. Mine was way before I found all of you.
And for me it’s just not housing since I am a stock investor so it effects the way I trade. The fall out for stocks have been massive as you all know.
So that is my angle we all have an angle I think if we all realize this we won’t be so mad that Larry and group are trying to find theirs.
As for this house like all the others the koolaid keeps flowing–:( along with the fraud—
This article is not about Irvine, but I think it is relevant to the topic today and generally. Along with this possible bear market rally, doubts that prices will recover (in a few years, or in a generation) are also starting to come out.
“What If Housing Never Bounces Back?”
http://www.thebigmoney.com/articles/money-trail/2009/04/03/what-if-housing-never-bounces-back
Since you mention CyberHomes I was curious how accurate sites such as CyberHomes and Zillow are?
Are they a good guide when looking at listings?
No, they are not very accurate at all, particularly in today’s volatile market. Usually, they are too high.
Ok, so anyone with a 5 bedroom house has kids- but the realtors should have made them clean up the clutter and extraneous plastic “kid stuff” that is all over this house. And what a horrible tiny yard for children. Love the water staining along the base of the stucco in the exterior shots. Doesn’t look like anyone put any effort into even making this house seem attractive.
There is no price rally at all, the price is still falling, even faster than before. The OC median price up from $370K to $380K is because the high end house’s prices dropped significantly recently and it attracts a lot of potential buyers. So the prices up basically is because more high end house was sold.
BTW, just wait 2 more years, this will be a $700K house.
http://investorvillage.com/smbd.asp?mb=4245&mn=408489&pt=msg&mid=7007097
article on housing too big to post
Property, in general, is a horrible investment, except maybe in the extreme long term (that is, let’s say the cost to rent a house out is exactly equal to the monthly payments plus taxes and all other expenses-after thirty years, the monthly payments go away, creating a sizable profit) or some unique circumstances, where one gets a deal on something rentable. Buying a property to rent it out usually is a loser of an investment (and flips will fail when prices are falling, stable, or rising slowly, due to transaction costs).
However, as an alternative to renting, it can make financial sense, especially in this market, with a combination of low house prices, high tax incentives (including the extra eight grand), low interest rates, plus the “in thirty years no more mortgage payments” bit. Plus, there are non-financial advantages to buying over renting (more control over what you can do with the property, no landlord, more privacy).
Pricing here in the OC is still extremely high vs. the income levels we talked about this last week if the average home buyer is making 90k how in the world did houses here even get to one million?
Speculators, flippers entered this market for fast money. Builders just kept giving it to them and many flocked. Mello roos, HOA’s got extrememly over priced and greedy. Many people here could never rent the property they are living in.
This totally threw off the balance in housing. The only ones who can really rent are those who bought prior to the run up–those owners holding homes with low tax little to no mortgage. But even those folks are losing equity value.
I’ve been a landlord twice with homes I could not sell in the past in Fla. and it’s not a easy task and I lost both times. You need a cheap housing market with secure job market to be able to make money renting.
My opinion and what I do is invest in stocks but that is not meant for all–finding good companies that can sustain their dividend and financial profits is difficult as well.
Making money is getting harder every day-cash is making very little now 1% for some MM funds and .20% in very liquid trading funds.
We all have felt a great loss of income!!
Pricing vs. income levels strikes me as irrelevant-assuming rental parity, you would still need to make as much to rent the same property as to own it (excluding down payment). A rent vs. buy question has to be on two equal properties to be an effective comparison. If you can’t afford to buy property A, you probably can’t afford to rent it, either.
Basically, there are a series of questions one needs to ask:
The first one is, how long am I going to remain in the same place? If your time period is short (under five years) buying probably doesn’t make any sense, except in rare circumstances (take some of the tax, loan, and other incentives from buying a house to live in, and then turn it into a rental property after living there for a few years), because there are transaction costs each time you buy and sell, which can be high (6% commisions, inspections, taxes, fees, etc.).
The second one is, is my financial situation stable? If there’s even a moderate chance of one losing their job or otherwise making less income, now is not the time to buy.
Then, the third question is, all things being equal, with all costs factored in, does it cost less to own the same property as to rent it? In some circumstances (although possibly not in Irvine), the answer to this is, yes. Even if it not, but is close, the non-financial advantages to owning may be enough to push this question over the top.
http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=3&ref=patrick.net&oref=slogin
this is very interesting you can plug in the numbers of rent vs. owning—
IMHO, during the housing market collapse, the low-end drops first and then the medium and then the high-end and then starts the next round. So the average prices may go up when the high-end is more affordable or price is more attractive compares to other groups. Probably there is never a rally at all. Especially, this time the price is straight up, so it will be straight down.
http://www.pbs.org/moyers/journal/04032009/watch.html
boy fraud coming out big today
Thanks for the link. I like how strongly William Black states all the problems and what we ought to be doing differently (and how much of the latter is just common sense). If only the Obama administration would take this message to heart.
It seems to me that the high end is falling faster than the middle. Look at all the new (last 30 days) listings in 92603 and compare that to the rest of Irvine. It looks to me that those folks who thought that they had lots of $ really don’t and are now “realizing” it. This should really squeeze the middle.
(1) Gourmet Kitchen? WTF? Someone should tell the realtards that a gourment kitchen MUST have:
(a) A big ass gas range top. Six burners minimum. 15K BTU minimum. Think Viking/Thermador minimum.
(a1) Big custom hood with motors that can keep the house from smelling like the tempura fish you just deep fried.
(b) Twin ovens. Convection electric.
(c) At least two LARGE and separate sinks.
(d) Custom cabinets with a large pantry and at least two well designed work triangles, one for cooking and one for dish washing.
(e) Lots of well lit counter spaces.
(f) A LARGE refrigerator… mininum a built in 48″ job.
The kitchen in this featured home lacks of all those attributes. It’s loaded with mid line features, Home Depot cabinets and just too much stainless steel. Note the range hood cum microwave oven over a single drop in 30 inch range. That’s not gourmet… you can not bring two gallons of water to boil in less than 10 minutes with that….
(2) Price wise… OK look. My home is custom re-built, in TR. About 2700 sq feet, 5be/3ba, about the same size lot. Our kitchen is fully custom, cost around 80K to build (new construction bump out). We didn’t go cheap on the hardware anywhere.
We just closed our refi with an assessed value of $990K, a price which I think is high but still in line for the going price of the last few homes our size that have sold in the last four months.
Now, do you think this house will ever sell for $1.2M? I think that if the owners are selling because of financial issues then this house will go into foreclosure late summer. The best this house should go for is $620K or so ($200 per sq foot).
Thanks for those details, Tony — I always wondered what that super-overused term is really meant to apply to.
OK so no showings from Friday Pm to Sunday…isn’t that when MOST people are off work and would WANT to view a property!! Love the plastic kid crap flooring…nothing like over indulging one’s kids,right. OIY, they need the help of DESIGN TO SELL on HGTV as that P.O.S. will never sell.
It says don’t show until after 9:30 AM Sunday, so late Sunday morning and all Sunday afternoon would be available. Basically, no Friday night or Saturday all day. Fairly restrictive but not insane (blocking off the entire weekend would be insane).
As for all the kiddie krap, I imagine most people in the market for a five bedroom house have at least a couple of kids, so that probably actually helps sell it.
Does anybody care that the freeway noise is defeaning in Oak Creek? Particularly on the Alton side!
It is unimaginable to me that someone would be willing to pay SEVEN figures for tract home ~ 650 meters from a major freeway. According to the article linked here, there is significant damage to childrens’ lungs caused by living within 500m of a freeway. I have to think that the potential negative impact is non-trivial at 650m
http://www.nlm.nih.gov/medlineplus/podcast/transcript030907.html
The freeway noise isn’t too bad from this location, but you can still hear a quiet droning in the background.
Crazy that someone would pay $1M, but they are out there.
IR, can you explain the Piggington graph above? So, I guess what you’re trying to say is that during the last boom in ’89 prices (SD) dropped approx. 18% through ’95-’96 and there were a few dead cat bounces that you’re trying to compare to today?
I’m wondering if comparing to the last go-round is always correct? OC median prices this time around have dropped around 30-40% YOY so I would think that most of the damage has been done. Also, even though the economy is bad, the last time around the SoCal economy wasn’t as diversified as it is today, so when when the defense industry contracted SoCal was hit especially hard and it took many years to recover. This time around I think the credit crunch hit hard and fast thus the big drops initially rather than over a longer period of time.
P.S. Good luck with your new business venture. Don’t listen to the playa hatas! That’s street talk for player haters 🙂
Take care,
Kurt
That last go-round may not be correct, but it is the only basis we have to go on for now. The percentage declines are certainly much larger. The chart is useful because it shows that even in price declines there are certain periods when prices do rise. We have already broken with the pattern as there was no bear rally last year.
You guys should check out the Catherine Austin Fitts speech:
http://www.askbutwhy.com/2009/03/catherine-austin-fitts-fraud-and.html
Don’t have an hour and 24 minutes to spare, unfortunately, and when watching the beginning there was a lot of stuff that was over my head (apparently she was speaking to an International Reciprocal Trade Association audience), but seemed like there was some important info there for those with the time and background to understand it all.
This house is 300k tops in Texas. So, is there oil underneath it to make it worth 1 million more?
Yeah, I know, it’s Orange County, but it’s a freaking tract home! Since when owning a tract home make you a millionaire (no matter where you own it)?
I like how strongly William Black states all the problems and what we ought to be doing differently (and how much of the latter is just common sense). If only the Obama administration would take this message to heart.
Mr. Black is criticizing the public for not standing up to morals, ethics, and common sense. You have to look in people to make change happen, not the politicians. Obama is a useless puppet.
Mr. Black was confounded as to why all of this unethical behavior and conflict of interest was taking place without resistencem from the people. Previous generations would not have allowed this to happen or let it get so perverse. There’s something different about this batch of generations.
It isn’t just the hidden reserve of wannabe sellers that will keep prices low. There is also a huge inventory of bank-owned foreclosures that haven’t been brought to market (or so I’ve heard — who has the real stats?)
On top of that, there are a lot of homes that should have been foreclosed on that haven’t been yet, as the “owners” haven’t made payments for multiple months.
I still think the banks are afraid to admit just how bad things really are, or else they still hope that the homes will be worth more sometime down the road.
Temporary and artificially low rates and low down FHA loans will END at some point leaving the market to fend for itself again. When that happens is all about the true fundamentals and we know what happened when the market was left to self correct.
Gov assistance and modifications may help but it looks like after some time many default anyway and happening now.
Servicers faced with the foreclosure moratoria are back to issuing NOD’s and NOT’s at record levels, high end this time and the Gov. programs won’t touch them.
Before the Gov. stepped in with a massive bailout that my kids will be paying for and when rates hovered around 6% (still pretty low) the market was In a fee fall, I wonder what will happen when they go back up to 6, 7, 8 and the Gov retracts their gifts. Another leg down?
Expect a roller coaster ride for a while and hope the drop we just experienced was the big one.
http://www.fieldcheckgroup.com/2009/04/07/4-7-ca-foreclosures-about-to-soar/
http://www.fieldcheckgroup.com/2009/03/31/2009-upper-end-housing-market-outlook/
Thanks for the links — the “CA Foreclosures About to Soar” article certainly instills confidence that there’s significantly more dropping for prices to do.