Many prognosticators are already calling the bottom. Most are market cheerleaders who will again be wrong. The deep price reductions we are seeing today suggests the bottom may be even lower than I originally predicted.
Asking Price: $429,900
Address: 8 Satinwood Way, Irvine, CA 92612
{book2}
Don’t Do Me No Favours — James Hunter
Y’know I fell on hard times
Bad luck fell on me
Pay day fell on Friday
And that’s a distant memory
When I predicted where the bottom will occur in Predictions for the Irvine Housing Market, I was not factoring in the impact of a severe economic recession, rampant job losses and astronomical foreclosure numbers. I did mention these factors in the post How Bad Could Bad Get? but I have been reluctant to embrace an even more bearish outlook on prices largely due to the extreme kool aid intoxication present in the market. The technical factors certainly point to a much deeper trough, but the psychological factors are still working to buoy prices. It is difficult to predict where the equilibrium between these competing forces will occur. Right now, I am hedging to the downside.
When I first suggested prices might drop 40% back in early 2007, people
thought I was crazy. Here we are a little over 2 years later, and we
are already seeing prices reflecting the percentage declines I foresaw. That tells me one thing; we should overshoot my predictions to the downside. We should not be seeing prices this low at this stage in the decline. The fact that we are does not bode well for future pricing.
As a refresher, I predicted median prices would fall from a price point near $700,000 to near $400,000 over a 5 year period.
Today’s featured property was $700,000 in 2005, and it is asking $429,900 today. That is a 38% price reduction. This property made the entire journey I outlined above, but it dropped that far in 2 years rather than 5.
The predictions I made were for the median rather than for individual properties. It is possible for the prices of individual properties to drop more than 40% while the median does not. One of the weaknesses of using the median is that it only reflects what is being spent in the market; it does not tell what was obtained for the money spent.
It is difficult to say what this property is worth due to the downward pressure on rents, but I would estimate this is quickly approaching rental parity. Assuming $2,500 a month rent, rental parity would be around $400,000. We have seen many low-end apartments condos at or below rental parity, but this is one of the first near-median properties (3/2 with 1,700 SF) we have seen to date.
It isn’t very likely that the market will bottom sooner than anticipated. There are too many homeowners with too much debt that have to be purged from the system. It is far more likely that we will reach a lower bottom than I originally estimated because if REOs are going this low now, how low will prices need to get to clear out the tsunami that is coming? We have already seen REOs from $45/SF to $100/SF all over Riverside County; that is what subprime did. Wait until the Alt-As and Option ARMs do their damage here. How low will it go here in Irvine? You tell me.
Asking Price: $429,900
Income Requirement: $107,475
Downpayment Needed: $85,980
Monthly Equity Burn: $3,582
Purchase Price: $700,000
Purchase Date: 8/10/2005
Address: 8 Satinwood Way, Irvine, CA 92612
| Beds: | 3 |
| Baths: | 3 |
| Sq. Ft.: | 1,749 |
| $/Sq. Ft.: | $246 |
| Lot Size: | 2,560
Sq. Ft. |
| Property Type: | Condominium |
| Style: | Contemporary |
| Year Built: | 1966 |
| Stories: | 2 |
| Floor: | 1 |
| Area: | University Park |
| County: | Orange |
| MLS#: | S570675 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 1 day |
 New Listing (24 hours)
|
|
park. Home has spacious yard with a green belt on the other side of the
fence. Hardwood floors throughout the First Floor. Balcony of the
Master Bedroom..
This was a simple transaction. In 8/10/2005, the owner paid $700,000 using a $560,000 first mortgage, a $140,000 second, and a $0 downpayment. Just when you thought we had seen all the 100% financing deals purged from the system, you realize, there are still more out there. The lender only bid $461,588 at the auction, and they got the property anyway. They have listed it for $429,900, probably in hopes of a bidding war.
If this property sells for its asking price, and if a 6% commission is paid, the total loss to the lender will be $295,894. This property is listed for 38% off its peak purchase price.
{book3}
Y’know I fell on hard times
Bad luck fell on me
Pay day fell on Friday
And that’s a distant memory
But don’t do me no favours
Just you let me live and learn
Don’t you do me no favours
That I can’t do in return
So don’t do me no favours
Just you let me live and learn
Don’t you do me no favours
That I can’t do in return
Don’t Do Me No Favours — James Hunter
BTW, I will not be near a computer today, so I will not be participating in the comments. Sorry.
I have always said that IR is a bleary eyed optimist.
Looking at Craigs List, I’d say you’re optimistic about rental parity. A more realistic estimate of intermediate rents might be in the $2100 range.
You can find a 1500 sq ft freestanding 3br 2 ba home for $2150 today, and smaller 3br condos in the $1850-2000 range.
If you’re devoting a third of your income to rent, 2500 means you need a gross income of $7500 a month for rent, or $90,000 a year.
Irvine Renter, a cockeyed optimist! 🙂
I spent the last several weeks looking for a rental much like this one in Irvine. I think $2500 is reasonable for this property based on all the properties I toured. For a property this size at $2150 you are going to be right next to a major road, a freeway, or the train tracks, or the place will have the original 1970s interior with no remodeling at all.
Thanks, Vendacious.
In quick blog comments, it’s not easy to elaborate a full chain of logic. My comment reflected rents in the “intermediate term”, which in my mind goes out about five years. I’m projecting a decrease in incomes and a market that brings down rents.
Current prices show lower cost options, and if you can’t afford the higher cost, the lower prices keep moving the market down.
Is it just my imagination, or has IR gotten more optimistic in his rental parity calculations ever since he became a broker?
This place isn’t renting for $2500/mo, not by a long shot, and not 150 yards from the 405.
.
http://www.crackthecode.us/images/8SatinwoodWayChartCall.jpg
You have to love the warriors over at Zillow for doing their part to carry the water for the bubble enthusiasts and keep prices inflated.
If you look at the sales history on this place, you see that they do not include the most recent sales price in their “ZEstimate”.
Zestimate: $526,500 LOL!
Sale History
09/25/2008: $461,588 *
08/10/2005: $700,000
05/24/2004: $649,000
* Transaction not included in Zestimate.
Transaction Not Included in Zestimate
This transaction was not used in computing the Zestimate for this house due to anomalies we detected with this transaction. These anomalies can include unusual document or transaction types, sales between possibly related parties, unusually high or low transaction prices, or other data irregularities that might indicate the transaction is not a full-value, arms-length transaction.
Yup, we here at Zillow feel that 460K is way too low so we are not going to count it because we know that once you give a bunch of easy credit to some schmuck, he will pay 526K.
Nice model!
That was the foreclosure, and therefore is for a fairly random dollar figure, which could be higher or lower than market. It’s not a real sale. The easy way to tell that this is the case is because it’s not in an even thousand dollars. Sales for random amounts like $461,588 (as opposed to $461,000) are almost always not real sales, but are what the bank was owed and what it “paid itself” after the foreclosure auction failed to bring in a bid higher than that figure. Zillow is correct to exclude that from their estimate. (That doesn’t mean their estimate is correct, however…)
Zillow is correct to exclude that from their estimate.
Why? If the house were worth more than $461,588 then someone would have jumped on it.
Zillow is making the assumption that a monthly payment buyer with access to credit will spend more than a cash buyer so they are throwing out the cash purchase so as to not interfere with the credit assumptions that the model is making.
Suppose that a cash buyer paid 700K for it on the courthouse steps. Well then Zillow would have been more than happy to include it in the sales history and factor it into the estimate. But because the sale was “abnormally low”, it is excluded? Why? Who does this exclusion benefit? Certainly not home buyers…
I don’t think you can have it both ways.
That’s not why it was excluded. It was excluded because it wasn’t a normal sale.
Let’s go back to the statement again:
“These anomalies can include unusual document or transaction types, sales between possibly related parties, unusually high or low transaction prices, or other data irregularities that might indicate the transaction is not a full-value, arms-length transaction.”
The document and transaction types were unusual, and it was sold between related parties (the bank bought it from itself, basically). That’s why it was excluded, not due to the price being too low.
That’s not why it was excluded. It was excluded because it wasn’t a normal sale.
I know what you are saying – because the bank bought it from itself so it wasn’t a “normal” person buying from someone else type of transaction, etc.
The sale type may have been “unusual”, but there is no reason why a cash buyer could not have walked in with a check and purchased the house for higher than the bank’s token bid.
The fact that nobody did must say something about the current value.
I don’t think that this can be completely ignored when assessing the real value which is why I say that their model is being overly liberal with their assumptions here by not factoring it at all.
You are attempting to reason with a door. Do not bother.
If their comp model was working properly, it would see that previous sales in the neighborhood had pushed prices down.
I personally find that Zillow’s data is usually wrong, usually on the high side. But I understand why they don’t include foreclosures in their model, because they aren’t real sales.
The reo sales are included, but not the foreclosure sale.
I think that’s correct. Otherwise, you end up with values which are too high. At most foreclosure auctions, the minimum bid is the outstanding loan + interest, penalties, and fees.
Not so, Malibu. I was just looking at properties that went back to the bank today on the OC courthouse steps. Saw at least one where the opening bid was half the outstanding loan balance.
I wonder if Zilliow is inventing twisted “mark to market” accounting rule of their own. I wonder if Zillow is under sponsors’ pressure to help create artificially higher price perception?
Wouldn’t you think that the cash purchase reflects the true value of the property and therefore err on the conservative side? At least take it into some kind of consideration in your estimate. To just throw it out and completely ignore the big white elephant sitting on the living room couch is extremely suspicious.
This method that they are using seems similar to the current bailout plan where the banks are buying their own garbage from themselves at artificially inflated “market value” while the true value is ignored and assumed “abnormally low”.
Hm, a “balcony of the master bedroom..” ?
This typo is brought to you by the letter f.
That’s funny..I read that as “baloney of the master bedroom”
IR..sorry if this is a dumb question. What happens to the previous onwer who bought it at $700,000 without a down payment? Is he now bankrupt, did he actually lose any money or is it all the bank? Thanks.
I doubt it. Most of them simply walked away with dents on credit score.
Nope – California non-recourse purchase money debt rule. They can walk away and neither the first nor the second can touch them.
This one still has a LONG way to go as rents are dropping. My tenant just informed me that her hubby lost his job and they need a $300 break on their rent. I told them OK. What the hell can I do? It’s a bloodbath out there, and nobody is a “Class A” tenant unless you work for the government…..
Even government employees aren’t safe anymore. Thousands and thousands of layoffs coming in schools and local government in Orange County over the next two years, even with the massive bailout from the stimulus package.
I can’t think of a single family I know where someone in the family hasn’t taken a cut in income, and house prices and rents are based on multiple family incomes.
“Thousands and thousands of layoffs coming in schools and local government in Orange County over the next two years”
Maybe it’s a signal that the state & local budgets grew too fast. Hm? And to think, some people actually call this “progress”.
This state is run by one ideology, serving the unions as its main constituency. More “progress”. LoL
Having dealt with CA state government and studied it in detail, the main ideology in Sacramento is partisanship.
We have a wicked combination of “safe seats” where most seats are perpetually republican, or perpetually democratic, and term limits. The term limits mean that legislators don’t get to see full economic cycles. The safe seats mean that you don’t get real debate between candidates.
The open primary proposals will help.
Whatever Abel!
Thousands and thousands of pink slips are going out, but that doesn’t usually mean layoffs. The government worker unions are too powerful. They’re just bluffing.
The 700K buyer takes a lump on his credit and hands the bag over to the bank which hands the bag over to the government which pays the 700K from taxes collected from you, me, and the next 2,3,4,5,… generations of Americans.
Pretty good deal, huh?
Sue, there aren’t dumb questions. Only dumb actions, like not reading loan docs.
A house with a lot size of 2,560 Sq. Ft. does not have a “spacious yard”. Sheesh.
I looked at this house Sunday. There was an open house from 12:30 to 2:00. I got there at 12:35; there were already about 10 people in or outside of the house. It is in fairly good shape, compared to what else I’ve seen in the immediate area. Given those two things, and the number of people there, I felt that it will sell quickly.
That being said, what really struck me is that for the first time I think prices are going to go lower than I originally thought. Houses in this neighborhood have stayed above the $500,000 mark for a long time. I thought they would never get below that. But this spring, even though sales have been really brisk, the list prices have finally broken the $500,000 barrier. I don’t know what their final sales prices have been because they’re all still in escrow, so maybe they sold for above $500,000, but I doubt it. The fact that this listed at $430,000, in good repair, several blocks from the freeway, to me is significant Now, we’ll see if there was a bidding war, which I figured is what the bank is looking for, and what it closes at.
Amusing (to me) anecdote:
Friday April 3, I saw an ad on craigslist for a house in Thousand Oaks for $425,000 “OPEN HOUSE TODAY, 4/3, FROM 3ish to 6ish”
We took a look. The house has been totally renovated and was pretty nice, but still probably overpriced. The realtor said the house wasn’t officially on the market yet. (Why have an open house on Friday afternoon?) He said it would be listed on Monday. There was no for sale sign in front.
Monday, April 6 on craigslist: $429900 / 3br – Only 2 Days to Get Your Offer In on this Exceptional Property! This home has yet to hit the market and has multiple offers, get your offer in now!!!
Sunday, April 12. We drove by the house and the For Sale sign was (still) up. I wonder what happened to their 2 day deadline? I wonder what happened to the multiple offers? I wonder why the price went up $4,900 in 3 days.
I run into the BS about multiple offers regularly. If the house has been on the market for any time at all, it is usually anywhere from wishful thinking to just plain made up by the realtor.
My only defense of realtors comes from the high number of offers that are dropping out of escrow due to bank underwriting standards which keep changing. People who thought they have confirmed ability to borrow find the bank has changed its mind.
Sometimes the bank’s appraisal is vastly lower than the negotiated price. THAT is a reason realtors will almost never give you for falling out of escrow. Imagine them saying “It’s listed for $750,000, and we had an accepted offer for $700,000. However, the bank appraised it for $575,000.”
How often do you think this happens?
Recently, pretty often. A lot of homes have been falling out of escrow, and this is a prime reason. Maybe Ipoplaya or IrvineRealtor are around and can comment.
Here is an example from a realtor near me.
“Appraisals. Yes, they are still very tight.
Some buyer clients of mine opened escrow on a Burbank house two weeks ago. I received a call from the assigned appraiser this week. She suggested saving my clients the cost of the appraisal by cancelling it, because her preliminary work indicated the house would not appraise for the sales price.
The appraiser told me that the comparable sales indicated the house should sell for $25,000 to $30,000 less than the agreed-upon purchase price. She also informed me that all comparable sales have to be less than 90 days old, and no farther away than one mile from the subject property. This applies to both FHA and conventional loans. And, if the loan amount is over $417,000, there will be a second appraisal, from a different appraiser, prior to closing. She also had obtained a copy of the physical inspection report, and knew that the upgrades to the property would not make up for its physical issues.
Okay, the buyers and I knew the appraisal might be an issue. And we hoped that if that was the case, the sellers would come to their senses and negotiate a lower price with us. They didn’t. And our escrow has cancelled.” http://sfvrealestate.blogspot.com/2009/04/appraisals-yes-they-are-still-very.html
Good to know that the banks are choosing to protect themselves from themselves now.
I saw that move “I Love you, Man” and yes it was a chick flick. Anyway the real estate agents friend acted like a he was going to buy the house to pressure potential buyers. Just reminded me of that.
Yeah, the agent said that it would go really fast. And for the first time, I thought to myself, well, it probably will….but that’s not going to keep prices from going down further. It’s early in the game. I’m not biting.
knife catchers—fyi
My projections in 2006 were 42-43% off peak, if the bottom came without a recession, and 55% with a recession.
Now however, I factor in a worse recession, and a much larger percentage of home sales as foreclosures and reos. This was the place where I missed the boat the most. I had underestimated the number of foreclosures due to cashout refis and helocs. That raises the number of homes for sale, because the payments are higher than otherwise for similar homes purchased 1999 and prior. It also means a much higher portion of those homes will be on the market as reos or short sales, which tend to sell for 20-30% less than similar nondistressed homes.
I’m assuming interest rates in the 5-6.5% range for my forecasts. Here are my bottom range calls for LA/OC Case Shiller:
Low end, currently under $309k, 73-78% off peak, 2010-11 bottom.
Mid tier, currently $309-470k, 68-74% off peak 2011 bottom. The mid tier will all be well within conforming limits ($417k).
High end, currently over $470k, I am segmenting this into two pieces. Currently $1.5 million or less, 62-69% off peak, if jumbo conforming limits at ~$730k are extended through 2010. 2011-12 bottom.
Over $1.5 million, 68-75% off, and this will be the tier that bottoms last, 2012-13. This will be the fate of Malibu, Laguna, and high end Irvine.
Multimillion dollar beach homes selling for under a million in 2012? You bet. Not all of them, but you will be able to buy something on Malibu Road in Malibu, or Gaviota Street in Laguna, for under a million. You might get something small and old under $600k.
Oh, and one more prediction. You will see a new perk for higher level managers: a free house. In many cities, there will be big incentives to try to get employees to move there. With the large number of REOs and vacancies, they will be given incentives to move to places like Detroit, Victorville, Riverside, Anaheim, Oceanside, and Palm Springs. Some of those vacant homes in good repair will be so cheap, firms will give them away as hiring bonuses.
You heard it here first. 2010’s news a year ahead of time on the IHB.
That’s an interesting thought-banks giving REOs to new hires as a hiring bonus. Makes sense. I’ve seen a variant of this-one of Chrysler’s recent employee buyout plans included a voucher only good on a new Chrysler vehicle. If you inventory that isn’t selling, giving it to your employees in one form or another as a bonus makes sense.
Question; how would taxes work out for the “free house” bonus? For example, aren’t tax rules different for homes as a investment, and homes as your primary residence? But now that the REO house is a bonus, that’s another factor to consider.
Argh! It so confusing. But this idea of a “free house bonus” is definitely thought provoking!
For the recipient, I think the house would be valued at market at the time of receipt. In a really down market, that might be $25k for a small house in good condition somewhere like Victorville or Palm Springs.
There is a program in Illinois which has some of the elements I expect to become more widespread, http://www.housingactionil.org/training-technical/pages1-20/index04.html
The biggest difference is I expect home prices to be low enough in some areas that downpayment assistance is big enough to buy the whole house. States and municipalities in the IL program were also encouraging employees to live closer to work.
How much for The Colony?
I’m guessing around $2 mil at the bottom for a smaller older place in the Colony. There will still probably be a decent number of $5 million transactions there.
LOL—I highly doubt this–when we moved here the so called big company believed in the bubble prices. They figured we would not stay because we refused to buy into the bubble land—
Companies used to have corporate housing I have read most of them have sold off.
They will pay for moving, selling and closing prices a good deal still—but buy your house–
only at UCI—-LOL where the tax payer buys it for the school—-
Meredith Whitney and US national housing trends
http://www.cnbc.com/id/30073339
Among the other points Whitney made in the interview:
Peak to trough levels for home prices will be over 50 percent
Well we keep going back to rental parity and to me it really seems more about income.
What can people truly afford. People were borrowing 8 to 10 times income on a home. So Cal was one of the least affordable markets in the country.
Subprime was centered right here in Irvine so those high paying jogs are gone. I have a relative that worked at Countrywide many of the people that she worked with are now back to their previous low paying jobs. From a six figrue income to an hourly wage.
I have a relative in construction as well. People getting laid off and the amount of competition for every job as driven down profits. These guys are taking a hair cut on yearly income as well.
Throw in Interior designers, furinture stores, BBQ places etc.
Then subtract the cash out equity from that and who now can afford to buy these homes.
When people at the median income can afford a decent to nice home we will reach bottom.
Factor in comparative values. Comparing a 3 bed 2 bath in Santa Ana or Riverside that sold for 500-600k of course a 3 bed two bath in Irvine should be sold at 800 to 900k.
When that spred become a house in Santa Ana or Riverside for 200k-300k now that 800k to 900k seems a little out of whack.
I think when a person making the median income can buy a decent home at a good value then we will be a the bottom. That revolves around income.
“it really seems more about income.”
I’d say that it is really more a problem of cultural values and how we collectively define affordable.
You have plenty of Californians spending up to 50% of their income on rent who believe that the arrangement is affordable to them because they can make the payment.
“I have a relative that worked at Countrywide many of the people that she worked with are now back to their previous low paying jobs. ”
This is why I am expecting to see a median income decline for Irvine. They may apply some inflation-voodoo to the numbers, but the purchasing power of the average worker is going to decline regardless of how the con-men in the government cook the books.
“I think when a person making the median income can buy a decent home at a good value then we will be a the bottom.”
Exactly. And if you assume that the latest inflation adjusted income data is correct and the median income is in the 100K range then that puts the median house price at 400K. And then ask yourself why this condo is being listed at 429K when it is not even a median house – just an apartment.
All true statements about percieved “value” and “affordability”, but I would like to add one more angle to the equation which cant be qauntified by fact.
“Real Estate” has not yet become a dirty word in peoples minds yet. There are still ads on the radio and TV, sitll shows about fixing up your house, what kind of house to buy etc.
For the most part people turned to Real Estate as in investment because they got burned in the stock market, on tech stocks and other investements over the years. They understood real estate as something tangible, something that had actual value and could make money off of it just buy buying it.
All the affordablity products made it easy to get intoxicated off the kool-aid and start “living the dream”. So many Donald Trumps in the making….
That being said…..most everyone is going to get burned and they are taking the entire economy with them, this will not be a pleasant time for anyone.
When real estate and all the players in the industry are mentioned in the same breath as Enron, Worldcom, AIG, Global Crossing etc., then you will now we have reached the bottom.
We are not there yet, people still believe the good times are just around the corner if you can hang on just a little bit longer……
I wouldnt hold my breath.
The difference now is that the Donald Trumps in the making can’t go to Countrywide, Quickloan funding, Acoustic Home loans, New Century etc to get their 100% financing with no income verification.
When these people start applying for a mortgage to buy that 600k home they have been waiting for and realize the bank will only loan them 315k reality will set in.
Not to mention the spread in monthly payments from a Jumbo to a non Jumbo because of the difference in interest rates.
417k is going to look mighty good to a lot of people.
Excellent Point!!!!
AZDavePhx,
Rents were pushed up by large influx of rents — new transplants, selling house to become rents, losing house but still with a job. The rents have been coming down in the last year. Large number of vacancy in apt. Why stay if you have no job? Schools are excellent in many other lower COL states, i.e., Texas, with wages only 10 to 15% lower than urban CA.
How have they gone back to their lower paying job? What were their higher and lower paying jobs?
From retail to Mortgage industry to retail again.
Retail paying about $15 per hour.
And those 15 bucks surely go a lot farther in TX.
“And if you assume that the latest inflation adjusted income data is correct”
Actually, you should assume the opposite, because the source of the data for incomes is lagging the actuality, and we have an economy that’s spiraling downwards. Orange County has lost tens of thousands of jobs in the finance/real estate industry, while the people remaining in the existing jobs have seen their incomes plummet.
It looks like there’s a fairly decent data set on income coming from the Census Bureau’s American Community Survey, but it’s definitely lagging, probably by a year or more.
And Mortgage Equity Withdrawal was a phantom extra household income that was never reported in these surveys, and that’s gone forever.
Although the government has definitely “cooked the books” on many data sets, including CPI and employment statistics, I haven’t seen any evidence that the census was compromised.
But yes, it’s all about the income, and the income is dropping in every sector. Although I frequently decry people who try to substitute anecdotes for data, when the data lags, right now, the sum of the anecdotes may be better than the data.
When you read the fine print on these, you can see that they are applying some inflation magic to the income numbers and not factoring in economic conditions (like a bubble).
http://www.crackthecode.us/images/MedFamIncomeIrvine.jpg
http://www.crackthecode.us/images/MedianIncomeCompare.jpg
Thanks for the info. That gave me the ability to google the info I was looking for earlier.
Drilling down, it doesn’t look like they are applying any “inflationary” factors for the Community Survey, but instead they are collecting information every month about income from the last twelve months. So a year’s worth of data would include older data, and all of that data would be predicated on past income, rather than current income. With the time added in to compile the report, this info is definitely lagging the current economy, which means it was still going up when the economy had already started contracting, and is now not reflecting the Great Recession.
Housing prices, purchase and rental, hinges on income, and income is dropping.
Anybody care to predict what the portion of sales which are REOs or short sales will peak at? I’m guessing 85% for LA/OC. I’m also guessing it won’t go below 50% of sales until 2012.
I was at a conference a couple of years ago where the Riverside County Assessor spoke. He was pretty clear and honest about his concerns when prices fall. He also said that the County almost never sold an intact single family home at a tax auction, because someone would buy it for more than the property tax bill just before the auction, or the owner would finally find some money.
I’ve run the math. If you didn’t pay property taxes when the property was valuable, it might not be worth it to pay them when prices have dropped about 90%. There will be a few of those. There are already a decent number of 80-85% off prices in Riverside and San Bernardino.
Irvine rents are very high compared to SF bay area (less SF and Palo Alto). I don’t know how they typical renter pays that much. Some co-worker’s lease is at $4500 at the high of rentals 1.5 years ago. I don’t think the Quail Hill rents are get that much now (said to be $3000 for a comparable now). Thus the rental parity value will be going down. IC reduced current lease renewal by about ~<10% or new ones with one month free rent ~8% on new ones.
As for negative credit rating for defaulting, two cases that I know, one nothing down with no HELCO, only 70 points dropped on rating (in one, from 800 to 730) and no purchase of house for 2-3 years (so they moved back into their original house and had 6 months of free "rent" in a new house). Score good enough to buy new car on credit. The very little nothing down and down withdrawn by a HELOC) did a short sale bring a little cash to the closing. The latter seems to have come out slightly worse than the full walk away. Only in America.
Flat-out not true. There is no way you pull a default and walk away and take a 70 point hit on your credit. MINIMUM hit will be 200 points for a foreclosure, meaning that if you had a glorious rating of 800 prior to your default you are now at 600 and can’t buy anything.
You lose 70 points for missing two credit card payments.
If the only penalty was 70 points and you couldn’t buy a house for two years I would join the millions of others in the foreclosure process and simply save a couple grand a month rent-free, wait for the market to bottom in two years, and then put 20% down on my next house and build my credit back up in, oh I don’t know, six months or so?
I stand by my original prediction in 2005. -78% in real vs. nominal dollars. And I was including a depression, massive foreclosures, default on credit default swap payments, big bank insolvency, etc.
Anybody knows how the Bakersfield housing market is doing? Is it comparable to Riverside/Sanbernadino areas here or is it doing better?
Thanks.
I understand Bako is the second worst market in CA, behind only Stockton/Modesto.
IR,
I was hoping someone could help explain something for me.. My Big Builder VP says we won’t have to worry about Alt-A and adjustable loans because the re-set rates are much lower. Homeowners will just be able to refi lower to save themselves.
Is this true? or are they STILL expecting me to drink MORE Kool-Aid ?
Also, the “hidden” Foreclosure inventories will further depress home prices…
Read this post.
https://www.irvinehousingblog.com/blog/comments/the-anatomy-of-a-credit-bubble/
Rates as low as 1% as a teaser.
One cannot refi unless they have sufficient equity in the home (or cash to make up the difference). So a large portion of the market that purchased during the height of the bubble is effectively shut out of the refi market. Now these same homeowners may be able to ride the floating rate for a while considering the low rates, but they are faced with a great deal of uncertainty.
Also, the interest rate reset is only part of the problem. It is the recast to a fully amortized mortgage payment that is the real killer.
The ARM Problem
There is no way this property rents for $2500 a month in today’s market.
No possible way.
Friends of mine who rent in Irvine say there rent has been reduced a few hundred bucks recently. They are in different complexes.
I love the car in the driveway… Makes it very obvious that there is, well, uh, no driveway. Without the in the picture one might think there is enough room for a small vehicle. But thanks to the Realtard’s wonderful staging abilities the question does not even need to be asked.
This old piece of crap should not sell for more than 300k.
It’s the biggest BUST in your lifetime dude.
An irrational selling PLUS terrible economic conditions PLUS horrible long term fundamentals PLUS crummy inventory built for a cheap oil economy.
This market isn’t going to follow a mathematical model.
BUBBLES over-inflated and BUSTS over-deflate.
Spock will fail. Kirk will win. It’s an emotion, fear.
ere is enough room for a small vehicle. But thanks to the Realtard’s wonderful staging abilities the question does not even need to be asked?????????