As unemployment keeps rising so will foreclosures; in fact, foreclosures will not peak until well after unemployment does.
Irvine Home Address … 35 POTOMAC Irvine, CA 92620
Resale Home Price …… $599,999
{book1} 
I been laid off from work
My rent is due
My kids all need
Brand new shoes
So I went to the bank
To see what they could do
They said son – looks like bad luck
Got-a hold on you
Money’s Too Tight to Mention — Simply Red
A recent Bloomberg article, U.S. Foreclosures to Reach Record 3.9 Million in 2009, “We are a long way from a recovery,” John Quigley,
economics professor at the University of California, Berkeley,
said in an interview. “You can’t start to see improvement in
the housing market until after unemployment peaks.” The UCLA Anderson Forecast Orange County, believes foreclosures can decline in the face of rising unemployment. I don’t know why. As I noted:
The recession in the early 90s was caused by a slowdown in housing
and real estate just like this one. That recession also saw slowdowns
in defense contracting and other industries that made problems even
worse. The recession ended in 1992, but the effect lingered as people
had to be retrained to work in other fields, so unemployment did not
peak until 1993. The delay between the end of the recession and the
peak in unemployment is well documented.
There were many reasons for the foreclosure crisis of the mid 90s,
and we have all of those problems back with more force. The
foreclosures caused by unemployment do not occur on the day a borrower
loses their job. The delay caused by draining all sources of savings,
maxing out credit lines and utilizing legal maneuvers can slow the
process for two or three years — as we have seen with properties
profiled here daily; therefore, it is reasonable to assume foreclosures
will peak two or three years after a major unemployment crisis. In
fact, I would argue it is unreasonable to assume that foreclosures have
peaked for this cycle — as the UCLA Anderson Forecast does —
considering unemployment has not peaked, and the newly unemployed will
cause defaults.
Last time around house prices bottomed as foreclosures peaked. It is
unclear if either one caused the other. For example, if house prices
bottomed simply because prices were affordable and supply was low, then
foreclosures may peak not because borrowers are not distressed, but
because distressed borrowers can sell into the resale market rather
than go through foreclosure. Remember, foreclosures are not a sign of
distress as much as they are a sign of distress that cannot be masked
by selling in the open market.
You can buy a house if you plan to be there for a long time and you recognize prices will probably go lower. If you are buying a house because you think prices have bottomed, and you better hurry because you might be priced out, you will be upset and disappointed.
Irvine Home Address … 35 POTOMAC Irvine, CA 92620
Resale Home Price … $599,999
Income Requirement ……. $124,377
Downpayment Needed … $120,000
20% Down Conventional
Home Purchase Price … $540,000
Home Purchase Date …. 3/15/2004
Net Gain (Loss) ………. $23,999
Percent Change ………. 11.1%
Annual Appreciation … 1.8%
Mortgage Interest Rate ………. 5.01%
Monthly Mortgage Payment … $2,580
Monthly Cash Outlays ………… $3,240
Monthly Cost of Ownership … $2,580
Property Details for 35 POTOMAC Irvine, CA 92620 
Beds 3
Baths 1 full 2 part baths
Size 1,424 sq ft
($421 / sq ft)
Lot Size 3,500 sq ft
Year Built 1985
Days on Market 4
Listing Updated 12/9/2009
MLS Number S598384
Property Type Single Family, Residential
Community Northwood
Tract Gl
Highly upgraded two story home with nicely landscaped wrap around yard, attached 2 car garage; hardwood floors,totally remodeled kitchen with granite counters, added counter space; new cabinets; custom window coverings;large master bedroom with ceiling fan; dual sinks in master bath; two closets. This home is gorgeous!! Must see!
Exclamation points and the venerable “Must see.” Typical realtorese.
I do like the photograph of the front of the house. The rich blue sky, the fall colors and the interesting shadows make it a nice photo. I don’t know if it helps sell this house as the front yard looks unkempt, but it is a cool photo.
When the current owners bought this place back in 2004, they must have felt they had reason to celebrate. They paid $540,000 on 3/15/2005, but after waiting 60 days, they managed to get an appraisal for $594,000, and opened a HELOC bringing their debt to that amount. It is possible they simply went through the motions to get the credit line as there are no further refinances after 2004.
Housing Won’t Collapse in 2010, says Radar Logic
The US housing market could be in for some serious trouble in 2010, but predictions of a second collapse are “exaggerated,” according to a report from Radar Logic, a real estate data and analytics company.
Housing values could significantly recover in the spring of 2010 as low prices attract a blend of owner-occupiers and investors. Heated bidding pushes up prices at foreclosure auctions, and the supply of new and existing homes is declining, according to the report.
Radar Logic’s 25-MSA RPX Composite, which measures housing prices, dropped 0.7% in October – the smallest decline since 2005 for that time period. It also remains 30% below its peak.
The threat to the budding growth is the shadow inventory of foreclosures. According to the report, delinquencies have reached their highest peak in decades and the most bearish observers believe the inventory will flood the market once the government programs end, boosting supply and decreasing home prices.
But Radar Logic analysts side with those like Rick Sharga of RealtyTrac in saying that banks will slowly burn through the shadow inventory, releasing them gradually onto the market.
“Thanks to federal bailout money and a general improvement in their financial health, banks have been relieved of the urgent need to liquidate their assets. As a result, lenders and government entities like Fannie Mae and the FDIC have been able to curtail sales to raise prices and avoid recording losses on properties,” according to the report.
If the government and the banks can effectively solve the puzzle of mitigating foreclosures, Radar Logic says that home values could even go up in 2010. Of course, before calling an end to the recession, everyone will keep an eye on unemployment. Many believe the rates will peak in the next two or three quarters and decline. Once that happens, according to the report, housing demand with strengthen even more.
“While we are not out of the woods yet, our view is that housing is showing signs of stability, markets are showing signs of rational behavior and everyone is starting to understand the fundamental problems that brought us here,” according to the report. “As such, we think the bears are overdoing it.”
Doesn’t this article read as fodder for denial rather than hard news?
Nothing more than a waffling opinion. And the banks aren’t the biggest problem as this quote from an article yesterday in the NY Times states:
These companies, the American International Group, Fannie Mae, Freddie Mac and GMAC, are not only unable to repay the government, they are in need of continuing infusions that make them look increasingly like long-term wards of the state.
And the total risk they pose to the taxpayer far exceeds that of the big banks.
The link: http://www.nytimes.com/2009/12/17/business/17wards.html?hp
My question: Aren’t banks responsible for paying property taxes, HOA, etc on everything they are holding?
How can these Charlatans make the argument that banks have no incentive to unload their foreclosed properties? These assets are depreciating in value and draining from the banks bottom line as far as I can see. Seems like a pretty good incentive to get rid of it ASAP. Wouldn’t banks rather earn dividends and fees from mortgage originations than stockpile depcriating assets? I WONDER.
The employees, CEOs etc at those banks don’t personally eat the losses. In fact, they stay employed and draw salary and bonuses.
The people eating the losses are the taxpayers (via many magic Fed instruments, MBS purchases, Fannie/Freddie/FHA etc etc).
Exploiting some govt loophole for some small personal gain while taking advantage of taxpayers …. that’s just business in Washington as usual.
Depreciating and negative cash flow asset. Hell of a business model. I’d love to be in on one of these meetings, “Bob, if we wait for that market rebound NAR was calling in the WSJ, we should be just fine.”
That’s why I say – why not just dump the entire shadow inventory onto the market at WTF prices and wait for the buyers to give in and pay?
If the banks have cornered the market on housing then they are in a great tactical position to set prices as high as they want.
They are guaranteed by law of average to get a handful of fools who will sign loans for any amount that some mortgage hustler can engineer a monthly payment for.
I asked the same question earlier. No answers in this blog so did a little research. It looks like banks can simply defer property taxes which become a lien – along with other liens that the eventual buyer will be responsible (for unless a given lien(s) is wiped out as a legal consequence). As far as I can see, the bank isn’t required to do anything. I believe that is why a few communities have passed and/or stringently enforced existing property maintenance codes to keep the neighborhood from deteriorating.
A little attorney research is more productive than a blogger’s second-hand knowledge.
It is my understanding that it takes 5 years of tax delinquency before you can begin a foreclosure process on tax liens in California (its 10 years in some other states). Since the banks have 5 years before they have to do anything, they do nothing. It is better for them to defer the losses rather than pour more money down a rathole while they own it.
This is one of the reasons California tax revenues are going to be way down over the next 5 years. In fact, if any regulatory body starts pressuring banks, it will be the property tax collectors demanding money.
The reason for the long delay on tax lien foreclosure is so that normal families are not foreclosed on. Banks enjoy the same protections, so they go along. Since municipalities cannot afford to live without a big percentage of their revenue tied up in bank owned properties that are not paying, I would not be surprised to see legislation that strips this protection from banks and compels them to pay property taxes when due or face huge penalties.
“A little attorney research is more productive than a blogger’s second-hand knowledge.
It is my understanding that it takes 5 years of tax delinquency before you can begin a foreclosure process on tax liens in California…”
Is this attorney research definitely stating that California is 5 years? or is it second hand knowledge? 🙂
Any opinion expressed here is the second-hand ramblings of a blogger….
Actually, first hand!
“I would not be surprised to see legislation that strips this protection from banks and compels them to pay property taxes when due or face huge penalties.”
IR,
How hard would it be for you to organized a letter writing campaign to encourage our legislators to do this?
Getting this into law may be a big help in pushing the rat through the snake.
Unless you want to stay clear of political activities.
I second the motion. Cities are hurting badly from the drops in tax revenue; I had no idea until reading this that banks were not paying property taxes on foreclosures. I’m sure most people, if they were aware of this, would support making the banks pay.
I suspect the legislature is going to be compelled to look here for revenue to make up for next year’s shortfall. I don’t know how much grass roots effort will be required once the municipalities go to Sacramento looking for money.
There are banks that ARE paying the property taxes. The trick is to get in touch with the right people up the chain that understand the foreclosure process. We usually contact the legal dept of the banks, they tend to ‘understand’ and act upon what needs to take place.
if a house has a CFD tax, there’s an accelerated foreclosure convenant that requires an issuer of the CFD bond (i.e. city, school district, water district, etc)to commence foreclosure action if in the event of any delinquency in the payment of the special tax (within a certain threshold i.e. aggregate amount of $3,000 on an individual parcel delinquency) within a window of determination (usually 45 days). Exception: any foreclosure proceedings could be stayed by the commencement of bankruptcy proceedings by or against the owner of the delinquent property. So, most banks when contacted are paying the taxes because even if the house value has dropped, it is still worth MUCH more than the special tax delinquency/lien.
Thanks for providing your insight.
This would seem to put a timeclock on houses in new developments with CFDs, as it may take a year or two for the outstanding CFD bill to go over $3000.
IR, you are correct. But in Woodbury (and some recent developed higher priced homes elsewhere w/a cfd), some homes have annual CFD taxes that starts at $4,000. The amount of threshold varies from each CFD and the info can be found in the bond docs/official stmt (public document).
IR, by the way…wanted to let you know that I recently used IHB’s services to lease a home to move into right after the new year. I’m very happy with the service provided by Shevy and his partner George Ross. He negotiated a $100/mo discount off of the offer price as well as making the move a smooth transition while i’m out of town during xmas by coordinating w/the cleaning crew, pool fence installation (for the safety of my young children), checking to ensure everything is in working order and such..so when i get back, the mover just have to transfer my belongings to the new place.
Great! We are glad to be of service.
“I would not be surprised to see legislation that strips this protection from banks and compels them to pay property taxes when due or face huge penalties.”
That would be an interesting showdown indeed: California vs. the Banks.
AZ,
I’m not so sure banks have the incentive to unload these properties… With Mark-to-Market replaced with Mark-to-Fantasy, the Home’s actual value is ignored… or so it seems..
I have a neighbor who works for Chase in the Foreclosure dept.. they are so busy they can’t even get to most of the deliquent homeowners.. it’s an actual bottleneck in the process…
She currently works hourly (60 hrs a week). they were going to make her full time but decided not to add to the full time workforce… save $$$ I guess…
Why don’t banks hire some more people to pick up the pace? This just shows the feet dragging is real.
I used to work in a bank where the mortgage department was next to us. They were not hiring rocket scientists. However, there are a lot of rules they need to learn. One of the things which causes difficulty in low end finance and accounting related jobs is the background check.
” If you are buying a house because you think prices have bottomed …”
What if you are buying a house to hedge a bet because you think inflation may raise to 15%?
When inflation hits 15% put every cent you can into 30 year US Govt bonds. Two very nice things will happen:
1. At 15% return your money will double in 5 years if you reinvest it at 15%. If you don’t you’re still getting a 15% return/yr without risk – virtually unheard of.
2. In addition, as interest rates fall the principal value of the bond will increase proportionately to the fall in rates. How much? Glad you asked:
Eg: you bought the bond for $1000 and it yields 15% ($150/yr); Interest rates drop to 5%, your bond would now be worth $3000.
That opportunity only happened once in my lifetime: 1982. Unfortunately I didn’t have the money or the smarts to take advantage of it.
It does not matter what You use: bonds, stocks or real estate. Market timing is always controversial strategy.
Unfortunatly, there is fundamental problem. US goverment is spending money like crazy.
“House passes $290 billion boost to debt limit”
http://money.cnn.com/2009/12/16/news/economy/debt_ceiling_increase_house_vote/index.htm
They have option to walk away from debt just like underwater borrowers from Option ARM. Imagine what may happen if You buy goverment bonds.
It may be good time to borrow money and bad time to lend money.
O.K. U S Govt declares that it will no longer pay interest on any of its bills, notes and bonds commencing immediately. And you think the great depression and last year’s financial crisis were bad? I can’t begin to imagine the immediate fallout nationally and internationally.
“And you think the great depression and last year’s financial crisis were bad?”
It was really bad year for those working people who lost income.
There are survivors in every crisis. Stock market changes are good opportunities for me. So I’m pretty happy about 2008.
US default is doomsday scenario for syfy channel. Nobody wants it to happen.
More likely we may see failure of stimulus plan and very painful devaluation of US dollar.
Nice house, nice neighborhood, great upgrades, IMO excellent price. I’m a long time Irvine resident and that price is very good. Ok, bring it on David 😉
🙂 i saw this house 2 months back. It is tastefully done, kitchen is a nice example of how to get the most in a small space… my main problem is that the house is small, 1400sqft. The original plan had 2 bdrms and a study. The study is made to look like a bedroom. The bedrooms are ok for smaller kids but constricting if you have teenagers.
I see this trend in Irvine… Many listings are showing up where the study is decorated as a bedroom. This results in two benefits, the house can be listed at a higher price and the owners do the same in zillow to feel good about the value of the home.
The average Joe(add an asian last name..sorry but its true most of the time) looks at the listing and says that it has 3 or 4 bedrooms at a nice price and falls for it.
i forgot to add that this house was listed around 630 or 640 when i saw it…pricing it just below 600 is good way of getting more traffic.
Actually, the home is selling for $60,000 more than it did in 2004, so no, it’s not such a great price.
We’re living in an economy (outside of govt frivolous spending) that’s about where it was during y2k.<--That's an undeniable fact! Once interest rates go up, and they will, it'll peel another layer off our bullshit real estate market.
Why wait for David – This house is 1400 sq. ft. The bedrooms are miniature and I am sure once you get in there you would realize it. The owners appear to have optimized the space but add a little post staging life clutter and this place would shrink even more. Sue, this house is $600,000! Just because Irvine has lulled so many into believing this is not only acceptable, but even a “steal”, further exemplifies how crazy this has gotten.
Happy Holidays everyone. Enjo the important things, friends and family.
Sue In Irvine –
To make the statement that it’s an excellent price is very subjective.
It definitely does not look like an excellent price to me because the money that I am bringing to the closing table is from my own toil and savings. Not from the musical chairs credit bubble that enables people to buy at these prices.
So from my perspective, buying this house on my income would entitle me to 30 years of being house poor and living in constant fear of jobloss.
If you think that this is such a fantastic price and if you have any children around age 25 then you should tell them to go get a mortgage. I am guessing this is not the case though.
You think this is a great price so long as it is not your family member taking out the unpayable mortgage debt to transfer wealth to your generational cohorts.
Hi David…maybe we can just wait and see how fast this house sells and what it goes for.I wonder if someone (IR)can let us know what happens with this house. Many of the houses (condos) featured here have sold quickly.
How fast a house sells has nothing to do with whether the price the buyer pays is good. Houses sell like hot cakes back in 2005/2006 so to use your logic the prices back then must have been great.
I am sure some poor knife catcher will snatch this one up in no time flat. Kool aid toxicity of RE in OC still reeks everywhere you look. But the only difference between a buyer today and a buyer in 2006 is that they can no longer gamble with other people’s money (100% financing). They have to either dip into their own hard earned savings or use the profits made from the bubble sales. Unless they get their hands on the new subprime FHA loan.
From Barry Ritholtz Big Picture Blog:
—————————————-
Why Obama’s Poll Numbers Are Plummetting
The political buzz today is all about the President’s falling approval ratings. He has now fallen faster than President Bush did (prior to 09/11).
The simple solution for the White House: Stop jerking around with Financial Reform. When there is high unemployment, people don’t want to see bailed out bankers making a killing. Fix what was wrong with the system, what led us down the path to disaster.
As noted in these pages back in September, the brain trust around Obama made a terrible tactical error by tackling Health Care before they fixed Wall Street. (See: Tactical Error: Health Care vs Finance Regulatory Reform). The record low approval ratings during his presidency reflect that.
Unless Obama wants to lose one or both Houses in 2010, he best shake things up.
My advice?
Put Paul Volcker in charge of Financial Reform.
IT WILL SAVE YOUR PRESIDENCY.
’nuff said . . .
——————————————–
BINGO!
Sadly I don’t think Obama has any real interest in fixing our financial system. His decision to use Wall Street insiders and the architects of the existing system for most of his key policies in the past year revealed his true belief. This article by Matt Taibbi in RollingStone actually makes a quite compelling case, IMO.
http://www.rollingstone.com/politics/story/31234647/obamas_big_sellout/
Obama might decide to “sacrifice” Geithner to appease some of the critics but I don’t think he will ever sever his umbilical cord to Wall Street. Unlike healthcare reform, which he at least made a genuine effort to make something happen (and he actually believes in it), this so called financial reform will be lip service at best, or make things even worse, as Taibbi suggests.
Paul Volcker serves only as window dressing for Obama administration. Obama never has the conviction that there is something fundamentally wrong with the current financial system. Some patch work to keep this charade going has been his intention from day one, and still is.
This issue is not a “left/right, conservative/liberal, republican/democrat” thing. This is an issue that crosses all politics. Proof is some of the most liberal and most conservative Senators want Bernanke’s nomination rejected. I hope they throw his ass out!!!
Obama has surrounded himself with the same perma-idiots that Bush and Clinton had. No difference what so ever!
Unless he throws Geithner, Summers and Bernanke out (I don’t think he will), he will lose big in 3 years, and his political party will lose all their power next year. That’s guaranteed.
He better stop everything else he’s currently, and focas on these GD banks.
I voted for Obama and had actually hoped for a more substantive reform. The let down is not all that surprising, given the cozy tie between Democratic Party and Wall Street going way back to Clinton era. Democrats will get their rear ends spanked next year in the mid-term election. As someone has keenly observed – what separates Democrats from Republicans these days is their willingness to spread some crumbs to the masses after they (like their Republican counterparts) banquet-feed the financial fat cats. They should probably rename themselves the “spread the crumbs” party. Hey, crumbs are still better than nothing, right?
So Obama and Democrats in both Houses are betting on the masses being grateful and content with the crumbs while fat cats become exponentially fatter thru their endless clandestine schemes. Are they going to get away with it – we will soon find out next year.
He may even throw out Geithner – but so what. Another Wall Streeter will step in and all we have is business as usual.
He has lived up to every expectation I had. However, he has actually turned out to be more of a Wall Street crony than I had originally thought.
I was on here criticizing the election as a big Kumbaya production and remember one not-astute observer pulling out his race card to paint me as some kind of KKK lover for using the word ‘Kumbaya’ in the same sentence as the name of a black man.
My biggest problem with his policies were the massive spending sprees he wanted to go on while our country was broke as well as his support for bank bailouts. Based upon what we know now, he appears to be much more of a Wall Street business partner than I had originally thought.
I knew that once all of the Kumbaya singing was over, people were going to look at his policies and realize he is just as useless as Bush was.
And look where we are today. All those people who were high fiving and chanting “Yes we can” are just chumps.
And now the Republicans are getting ready to come in and promise fiscal responsibility. Lies and more lies.
Nothing will ever change until people vote independent and stop this dumbass Democrat/Republican Superbowl Sunday nonsense.
This from The Mess That Greenspan Made Blog:
——————————————–
As expected, Federal Reserve Chairman Ben Bernanke sailed through the Senate Banking Committee phase of his re-confirmation process by a vote of 16-7, thus sending the matter to the full Senate for a final vote sometime in January.
Voting against re-confirmation were Democrat Jeff Merkley (OR) along with six of the ten Republicans on the committee – Richard Shelby (AL), Jim Bunning (KY), Kay Bailey Hutchison (TX), Mike Crapo (ID), David Vitter (LA), and Jim Demint (SC).
————————————————-
1 Democrat voted against Bernanke in a committee vote today. LoL Are these people stupid? And a majority of Republicans voted against Bernanke?!? WTF is going on here? Did the world just shift 180 degrees?!?
None of them have me fooled. 😆
Spurning Obama, McCain and Cantwell propose resurrecting Glass-Steagall to break up Wall Street
http://www.newsweek.com/id/226938
Oh don’t worry, they will leave enough loop holes for their business partners to slip through (They always do).
http://www.crackthecode.us/images/government_solutions_inc.jpg
These images you create are great, AZDavidPhx.
$421 per sqaure feet is out of line for this house. The second bedroom that is pictured (must be the study) is tiny – it looks like it belongs in a prison somewhere. 1424 x 300 gives you $427,000 so this should seel for around $450,000 which means someone will overpay and get it for around $500,000.
Sue –
I have no doubt that this house is going to sell at this price or around it. It is just not going to be sold to someone like me.
That’s why I said that your calling the price ‘excellent’ is highly subjective.
Let’s start with the basic premise that banks create all of their loan money out of thin air and really do not loan money at all.
Borrower A somewhere will have a bank conjure into existence 200K which he will use to buy a house from owner B.
Owner B pays his balance and now has say 100K left over from selling to A.
B now goes to a bank and asks them to conjure into existence 400K so he can buy a 500K house from owner C.
Owner C pays his mortgage and now has say 400K left over from selling to B.
C now goes to a bank and asks them to conjure into existence 200K so he can buy a house from Sue In Irvine for 600K.
This is exactly how real estate works. Notice how none of this money being slushed around has anything to do with income?
If you follow the stinky trail backwards, it all leads to more and more debt on the first time buyer. Hence, all of these phoney affordability programs aimed at ripping off the next generation.
You should be ashamed of yourself for saying this is an excellent price and endorsing this transfer of wealth from young to old. It’s outrageous.
Wow David, you think I’m so powerful that someone will buy a house because I think it’s priced well?
I’m just an ordinary person making a comment on a blog. Remember when you left a few months ago? I think I may leave now since you are attacking me.
Sue –
Being schooled does not constitute an attack. You are the one who called me out; I was perfectly willing to ignore your comment but you seemed to want my opinion. WTF?
It was in fun. Didn’t you see my wink?
You weren’t being attacked.
OK, maybe I mis-understood then. I thought I was being taken to task for always low-balling Irvine’s wonderfulness.
To put this in perspective.
Here is an example of how time taken to sell a house is not a proof that it sold for the right price. I saw the listing initially around Sept and it already sold by Nov and that too for more than its asking price.
7 Tradition Pl
Irvine, CA 92602
Last Sale: $625,000 on 11/05/2009
I looked at this house and it was listed at 599k its 1500 sq ft house, it had a large back yard though. I thought 479k would be right price for this house and put an offer but never got a call back from the realtor.
I later found out that some dude thought its worth 625k. So a house is worth how much a buyer is willing to pay for it and so far there are people who are willing to pay 400+/sq ft in irvine.
Its good for irvine home owners and sellers. But I believe, buyers market will return to irvine also like the rest of the country, its only a matter of time.
irvine2008 –
I think you have to take it even further than that. Since we will generally agree that most purchases of real estate involve debt pledges magically created into cold hard cash by banker hocus pocus.
What someone is willing to pay is really the limit to the amount of money a bank will conjure into existence on the buyer’s behalf. This is the crucial disconnect between income and prices. If a bank will conjure up 10X some Joe Shmo’s income with a few keystrokes – what does he care? Not his money.
That’s why I say we need more like 50% down payments in order to keep people cognizant of the amounts of money they are non-chalantly tossing around. Of course big finance will never allow this, plus government likes keeping its peasants busy with makework and porn so they don’t have too much free time to go out and protest and get in the way of things.
Why people are unable to make the connection between slavery and a 30 year mortgage is beyond me.
I agree completely, nice house and nice neighborhood. Unfortunately that price is only ‘good’ if you have a sizable downpayment and sufficient monthly cashflow. I earn well over the Irvine median, yet a $3250 monthly expenditure is just out of the question for me. This is a very nice house well suited for a slightly-better-off-than-most family, yet the price still seems too high.
Is it worth paying that premium for Irvine? Remember, Irvine wasn’t always as overpriced as it is now.
Agreed. I have no problem with the house but I am not going to play this musical chairs game and step into the double income trap.
I am not going to compete with buyers who think affordable is equivalent to how much a bank will extend on their behalf.
IR,
Great analysis on the lagging effect of unemployment on RE market. Funny how people would grab at any straws in sight – you know, that elusive recovery that’s supposed to “stabilize” the housing market in OC. If history is any indication, as you illustrated using 90’s market data, the current downturn should have many more years to go. While we did experience a real economic recovery by 93, the current “recovery” is dubious and questionable, and could collapse any moment if gov’t/Fed pulls the stimulants. Even if this “recovery” were real, the overhang of high unemployment will almost guarantee a minimum of another 5 years of price decline ahead of us.
Interesting graphic – mouse over California
Debtor’s Dilemma: Pay the Mortgage or Walk Away
http://online.wsj.com/article/SB126100260600594531.html#articleTabs=interactive
LOL, I was reading this same article from WSJ. It seems many more mortgage holders are wavering to strategic default.
Luxury-Home Owners in U.S. Use ‘Short Sales’ as Defaults Rise
http://www.bloomberg.com/apps/news?pid=20603037&sid=aQED_96QBBkk
Since there are no forums anymore I’m submitting my post here. What do people think of the new home collection in woodbury and woodbury east. I signed up 2 days after the registration opened up. Already I’m like >200 on the list for the 2 communities one is allowed to choose.
Can’t believe the pent up demand for these homes. As always Irvine company is going to hit the jackpot.
There has been little construction over the last couple of years, and they have significantly lowered prices on the new stuff compared to where they left off in 2007. Lower price and unsatisfied demand should make for a good sales season for them.
I happen to be very high on the priority list, so I have an opportunity to buy. But I’m still skeptical of prices… for example $600K for a 1,877 sq ft 3bd detached condo. Do you think a sucker out there will pay $680K for that? I’m thinking I might buy one to flip.
If you are asking me to encourage you to flip, you haven’t been reading my stuff long enough….
They will push back through $300/SF, and they will still be below the resale market. That is good for them as it will continue to build positive sales momentum. They should take advantage of interest rates and get restarted while conditions favor it. Hopefully, the economy will pick up to sustain demand and the foreclosures will not bog them down.
Yeah at $325/SF it’s more than I expected (since Ivy started at $275/SF just half a year ago). When I say flip I mean an immediate flip to take advantage of current seller’s market. Maybe instead I should just buy a later phase and hope prices drop below $300/SF by the end of 2010.
Since recession is defined as 3 quarters of lower GDP and an uptick in GDP or employment would technically be the end of the recession. Another recession could follow in the next quarter or a long-term of no growth or declines with small uptick in GDP for a quarter would also be a end of a recession. The latter two situation would be very bad for housing prices and the workers.
The house looks like $100 per square foot house on a $420,000 lot. That’s over $4 million per acre.
BUY QUICKLY BEFORE YOUR PRICED OUT OF THE MARKET!!!
Realtorspeak
You know, it’s funny, I read this blog and everyone says property in Irvine is overpriced. It is. I agree 100%. You are soooo right. So are Mercedes, BMWs, Gucci hand bags, the cost per calorie of food in high place eateries vs. McDonalds, the list is endless.
So don’t buy in Irvine. Go buy a Chevy in Anaheim. Or a Hyndai in Fullerton. Or wait (and wait, and wait some more) for pricing to fall in Irvine to where you “think” it should be. Go be smart with your money, after all a car just gets you to point A to point B, and a house is just a shelter from the elements.
In the mean time there ARE people who have the money – even in a recession – to buy in Irvine. There ARE people who don’t care they pay an extra $40K or $80K or whatever for a house (or $30K for a car), or don’t care that they can save $50K if they wait six months. Or care if the value of their home drops $80K next year. You can’t take it with you when you die, so why not live where you want, when you want?
I own a BMW (it lost value the day I bought it, paid cash) and bought in Irvine recently (20% down, and I know it will probably lose value over the next two years). And….so what? I will live in a place I love, driving a car I love, living a lifestyle I love…(and I owned a 4K sq foot McMansion in Houston – if you want a cheap house go there – it sucks).
I would have a larger bank account if I bought a Hundai and commuted an hour inland, or waited a year…so am I dumber than you smart ones, or am I just enjoying life more?
Everyone has different priorities. Some would rather see $$ in the bank than have no nest-egg and drive German. Besides, BMWs are pretty damn boring to drive (in my opinion). They rank up there with Cadillac and Jaguar to me. I’ll take a Chevy Corvette ZR1 over any BMW ever made.
Interesting…pay more to ‘live life now’… the problem is that the responsible people in this country are paying the price and carrying YOUR DEAD WEIGHT. 95% of people buying these ‘over priced’ things do it with other people’s money i.e. credit. They drive well, look sharp, and reire with a little or no 401k or savings.
Have you ever just done the math?? Here is what the average person has saved in different strata of their lives in the U.S.
< 35: $6,306 35 – 44: $22,460 45 – 54: $43,797 55 – 64: $69,127 65 – 75: $56,212 75+: (sample size insufficient) This data comes from the Employee Benefit Research Institute. Check it out... Either most people in CA (specifically SoCal) plan to retire in Mexico the vast majority will not have a fraction of the monies required to pay for the basics - much less the lease on their BMW or Gucci bag. Just some basic math and statistics... B
Forgot to say…that I live in Villa Siena – a more than decent apartment complex in Irvine.
Do you realize that my simple 1 bedroom apartment costs about what the HOAs are on a 1 bedroom condo pays in HOAs at the North Korean towers!!!
Funny…rent and pay half what it costs to own b/c it’s smart! Or ‘live life now’… 🙂 It’s a joke…
JMHO.. B
The issue is that the govt, pols and banks are continuing the policy of wealth transfer from saver to borrowers. House loans with 0-4% down, then refinance to have an effective negative 20% to negative 50% down. Live high on the equity withdraw or save the money in other assets and stop paying for the house. The govt will reimburse the banks/investors or assume liability. The govt will force the taxpayers (savers) to reimburse govt,
The pseudo-borrowers, banks, govt, RE agents gamed and continue to the system. Leaving the legit borrowers 20% down and savers holding the bag in a game that they didn’t participate in.
House purchase should be with one own money — not forcing others to pay.
> the problem is that the responsible people in
> this country are paying the price and carrying
> YOUR DEAD WEIGHT
Read my post again – I paid cash for my car, put *** 20% down **** on my house in Irvine, a conventional mortgage- I could have put down more but didn’t want to tie up assets. My mortage is below 30% of my monthly disposible income and I have no other debt. Where exactly do you come off making a statement like that?
And as for renting, my new mortgate in Irvine is a whopping $900 more than I paid in an IOC 2 bedroom apartment for nearly two years while I was in “transition”. After tax write-off, equity building, etc….well, you do the math on rental parity.
whatever,
You are in the 20% down catagory — Welcome to a small club.
Sorry, that you and I will liley be left holding the bag. If you paid <5% or took out 3X your original purchase, you could have left the taxpayers hold the bag. Hope that you didn't buy at the peak or near peak.
Very nicely stated… but, there is more!
Thank God the days of retard RE brokers making $200K a year are gone but, they STILL earn more than most!
Only here could anyone think that it is ‘ok’ for those that save and earn pay for those that don’t. Government shouldn’t pick ‘winners’ and ‘loosers’ in life…
JMHO..B
I stand corrected…paying $900 more a month to ‘own’ ($8400/year) is worth it…
You better not hope that inflation is on the horizon… 🙂 B/C a 8% rate for your 30 year fixed home will likely drop the price by 30%…
Or hope for total destruction of the Earth from global climate change b/c it won’t matter then…
B
Many people on here make great points as to the potential reasons for still inflated prices in OC SFH’s… kool aid intoxicity, low interest rates, tax credtis, etc. But, I haven’t seen many explanations for WTF prices in Irvine, versus other “inland” cities in OC. I’m not a long time follower here, hence I don’t know if this has been answered, so I’ll ask it anyways.
Has anyone considered that if other cities had a great public school system and if private elementary/middle/high schools didn’t cost 3x what I spent to go to college, the prices in other cities within 15 miles of the coast might equate to those in Irvine?
Twelve years of private school at $20,000 a year is $240,000. Present value that at today’s mortgage rates and it is about $186,000. Spread that out over a 2,000 sf home and it is $93 psf.
Maybe a 1st class education in a public school is worth the delta in home prices? Maybe not… what do I know. I rent, don’t have kids, and live at the beach.
samz2009,
Inland Empire unemployment 19%+
Irvine unemployment high 7% and medium incomes are greater.
Also Irine is closer to the employment centers and schools as you mentioned. Parents will try to hold on longer than without roots. Even if that means delay tactics for 1 to 2 years (or graduation) which ever comes first.
About 5 families that I met send their kids to private school because Irvine’s Univ High is too competative.
A friend purchase two houses in the IE near and at the high with 20% down on each. She makes good money and is try to hold-on. She’s under water 30% and 40% on each house. She and husband spend 80% earned wages for debt service and get a little by renting one house out and renting rooms. Most people would of walked being so far under water but she has 20% down on each and a sense of honor.
Most had near nothing down to 5% down on the purchhase in the IE.
Perhaps this is all a flight to quality?
Except for the superrich, everyone has a ceiling for what is “reasonable” and overpriced. Taking the car example further, is a Ferrari or Lambo worth 200k+ plus higher insurance, registration, fuel, and maint costs? Maybe not to you but to enough people, yes. For luxury purchases, it’s not a cost of production, it’s a cost of exclusivity.
Perhaps Irvine is like a buying a nice Mercedes. If you can’t or aren’t willing to pay the premium then there are other options; you can live in Orange or Anaheim or a nice part of Santa Ana.
As far as prices in Irvine are concerned, there is the possibility that it won’t fall much further but will not increase as much as other areas over the next 10 years.
Interesting replies. Newbie2008, The IE and Irvine are far different than what I was thinking about comparing, such as San Juan Capistrano and Irvine, or Costa Mesa and Irvine. I don’t know what unemployment is in CM or SJC, but I’m sure it’s a far shot less than the IE. Of course the median income in these areas are less, as home values psf are far less (Eastside CM being relatively comparable and 5-10 miles closer to the coastline than Irvine).
JCie, that is an interesting analogy, but I guess I view Irvine as maybe a fully loaded Camry or Accord. A very nice auto, better than most on the road, but the Mercedes would be on the coast, unless you think the coast is a Bentley or Astin Martin. I realize, by the way, that Mercedes are all over the less expensive regions of the county, but that isn’t relevant to the car analogy. That is relevant in a discussion of HELOC’s being used to buy nice autos.
Personally, I don’t think many “super-rich” people live in Irvine, aside from Shady Canyon and maybe areas of Turtle Rock. Of course there are exceptions, but mostly it is a bunch of hard working, upper middle class folks with $100K to $200K in family income. How do these families justify the $1.2MM tract home? I know that most will think $200K a year is a super-rich family and that is fine. But a $200K a year family shouldn’t have a $900K or $1MM mortgage.
Just my $0.02.