Home sales and prices fell on a year-over-year basis in California. More shockingly, sales fell from March to April during the prime selling season.
Irvine Home Address … 76 LAKEPINES Irvine, CA 92620
Resale Home Price …… $199,900
It don't matter, he's dope
He knows that, but he's broke
He's so stagnant that he knows
When he goes back to his mobile home
Eminem — Lose Yourself
I was bearish at the top of the real estate bubble when few others were. I maintained my bearish views locally while others celebrated the false bottom of March 2009. For nearly two years thereafter, my detractors would stop by and try to educate me on my foolish ways. Some of them are still at it.
As I watched Las Vegas's housing market continue to decline while the government engineered bottom was put in place in other markets, and I became very bullish on Las Vegas, not because real estate prices will be going up there, but because the cashflow is outstanding. I am bullish for reasons independent of resale price appreciation.
The double dip is confirming what me and other housing bears were saying about the nature of markets. For as powerful as the government and federal reserve are, they are powerless against the forces of a multi-trillion dollar housing market.
There have been surprises along the way. In one of my earliest posts back in March of 2007, I predicted there would be some form of government intervention, but I didn't think we would see the federal reserve buying mortgage paper, nor did I foresee the government takeover of the GSEs. It's the surprises that make the evolving story more interesting.
Housing markets exhibit seasonality. Most housing analysts assumed we would have a spring rally of some sort with increasing sales and prices. Even the most bearish analysts have been surprised by the failed spring rally this year. The lack of spring activity is a very good reason to be bearish, and with prices locally above rental parity, there is little reason to be bullish.
California home sales and prices fell in April
A weak home shopping season leaves sales in California down 6.1% and the median price down 2.4% from April 2010.
By Alejandro Lazo, Los Angeles Times — May 17, 2011 
California housing sales and prices dipped in April as a weak spring home shopping season took hold in Southern California and the Bay Area.
Typically, sales rise during the spring as many families try to move during the summer school recess. But this year, continued high unemployment and the absence of last year's federal tax credit for buyers are dampening demand.
The decline in sales is very surprising — in a bad way. The main reasons are as he describes.
Sales fell statewide to 35,202 in April, a 3.3% decrease from March and 6.1% drop from April 2010, according to real estate research firm DataQuick of San Diego.
“What's clear now is that 2011 is off to a slow start,” DataQuick President John Walsh said in a news release. “But it's a little soon to write off the rest of the year.”
Prices are falling, demand is low, unemployment is high, prices are still inflated, wages are stagnant, and government props are being removed from the market. What reason is there for optimism about pricing or volume in 2011 in California? I don't think it's too early to write off the rest of the year. If sales and prices typically fall during the fall and winter, and with the conforming limit going down this October, I see many reasons to write off the remainder of 2011.
From DataQuick News:
California April Home Sales
May 16, 2011
An estimated 35,202 new and resale houses and condos were sold statewide last month. That was down 3.3 percent from 36,417 in March, and down 6.1 percent from 37,481 for April 2010. California sales for the month of April have varied from a low of 27,625 in 1995 to a high of 71,638 in 2004, while the average is 44,359. DataQuick's statistics go back to 1988.
Current sales are 20% below average.
The median price paid for a home last month was $249,000, unchanged from March, and down 2.4 percent from $255,000 for April a year ago. The year-over-year decrease was the seventh in a row after 11 months of increases. The bottom of the current cycle was $221,000 in April 2009, while the peak was at $484,000 in early 2007.
The bear rally ended when the tax cuts expired, and prices have been falling every since.
Distressed property sales made up about 54 percent of California’s resale market last month.
Distressed sales are what push prices lower. With over half the market being distressed, and with a large shadow inventory waiting to be sold, house prices will likely go lower.
Of the existing homes sold in April, 36.6 percent were properties that had been foreclosed on during the past year. That was down from 39.1 percent in March and down from 38.1 percent in April a year ago. The all-time high was 58.5 percent in February 2009.
The amend-extend-pretend dance began in 2008, so the foreclosure pipeline peaked several months thereafter as the pipeline flow was reduced to a level that didn't crush prices.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 17.6 percent of resales last month. That was up from and estimated 17.2 percent in March but down from 17.7 percent a year earlier. Two years ago short sales made up 11.8 percent of the resale market.
Lenders made a conscious decision to resolve more properties through the short-sale process. It has been a failure as REO sales are still double short sales.
The typical mortgage payment that home buyers committed themselves to paying last month was $1,050. That was the same as in March, and down from $1,108 in April 2010. Adjusted for inflation, last month's mortgage payment was 52.7 percent below the spring 1989 peak of the prior real estate cycle. It was 61.7 percent below the current cycle's peak in June 2006.
The nearly vertical red line below in 2003 and 2004 corresponds to the influx of Option ARMs with low teaser rates which allowed borrowers to dramatically increase their mortgage balances and bid up prices. Current loan balances are 61.7% lower than the peak in 2006. It shouldn't be too surprising such an occurrence would cause prices to drop.
San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
Indicators of market distress continue to move in different directions. Foreclosure activity has declined somewhat but remains high by historical standards. Financing with multiple mortgages is low, down payment sizes are stable, cash and non-owner occupied buying has eased a bit this spring but remains relatively high, DataQuick reported.
Media calls: Andrew LePage (916)456-7157 or alepage@dqnews.com
Perhaps down payments are stable in California over the last two years, but that stability is at very low levels reflecting the dominance of FHA financing in the market.
No payments since 2008
The peak buyer of today's featured property paid $332,000 using 100% financing. Her notice of default is dated from 2008 meaning she has been squatting for at least two and a half years.
Foreclosure Record
Recording Date: 06/08/2010
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 04/03/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 12/31/2008
Document Type: Notice of Default
Irvine House Address … 76 LAKEPINES Irvine, CA 92620 
Resale House Price …… $199,900
House Purchase Price … $332,000
House Purchase Date …. 7/12/2005
Net Gain (Loss) ………. ($144,094)
Percent Change ………. -43.4%
Annual Appreciation … -8.4%
Cost of House Ownership
————————————————-
$199,900 ………. Asking Price
$6,997 ………. 3.5% Down FHA Financing
4.59% …………… Mortgage Interest Rate
$192,904 ………. 30-Year Mortgage
$42,332 ………. Income Requirement
$0,988 ………. Monthly Mortgage Payment
$173 ………. Property Tax (@1.04%)
$0 ………. Special Taxes and Levies (Mello Roos)
$42 ………. Homeowners Insurance (@ 0.25%)
$222 ………. Private Mortgage Insurance
$290 ………. Homeowners Association Fees
============================================ 
$1,714 ………. Monthly Cash Outlays
$0 ………. Tax Savings (% of Interest and Property Tax)
-$250 ………. Equity Hidden in Payment (Amortization)
$12 ………. Lost Income to Down Payment (net of taxes)
$45 ………. Maintenance and Replacement Reserves
============================================
$1,522 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$1,999 ………. Furnishing and Move In @1%
$1,999 ………. Closing Costs @1%
$1,929 ………… Interest Points @1% of Loan
$6,997 ………. Down Payment
============================================
$12,924 ………. Total Cash Costs
$23,300 ………… Emergency Cash Reserves
============================================
$36,224 ………. Total Savings Needed
Property Details for 76 LAKEPINES Irvine, CA 92620
——————————————————————————
Beds: 1
Baths: 1
Sq. Ft.: 932
$214/SF
Property Type: Residential, Single Family
Style: Two Level
View: Creek/Stream
Year Built: 1977
Community: Northwood
County: Orange
MLS#: P658271
Source: SoCalMLS
Status: Active
——————————————————————————
Nice 1 Bdrm Loft Townhome With Beautiful Water Views. Granite Counter Top in Kitchen. Stand Alone Fireplace in the Living Room; Breakfast Bar and Separate Dining Area. Assigned Carport Parking. Walk-In Master Bdroom Closet. Spacious Back Patio. Private Full-Size Washer/Dryer Hookups.
PLEASE !!! Stop using the Number FROM THE TAX CREDIT BOOM to do your comparisons, really the month to month numbers are UP!!!
The Double Dip is OVER ALREADY!!! Get used to it.
HAHAHAHA.
nice sign, realter. gotta love these listings.
That devastating double dip sure is trouble for less premium SFRs in Irvine like those in Columbus Grove. Now you can have one for only $1M. Oh the devastation never ends.
I remember when people were saying high down payments in Irvine would disappear. Can we put that myth to bed already. Look at that down payment chart for Irvine. When is the lowly average joe — median down payment going to dip below $100,000. Let’s be realistic…… Never.
PR, every prediction you’ve made on this board has turned out to be wrong – from the housing bottom in 2009 to interest rates going lower than they were last year.
Let’s be realistic, you’re never going to be right…… Never.
What a joke, I continue to be right and my asset growth based on those predictions prove it. Why don’t you ask some one who recently purchased an SFR how devastating price declines have been since spring 2009.
“my asset growth based on those predictions prove it”
To claim proof, typically requires evidence. Please share such evidence so we may all wonder at your success.
Rates continue to push lower, not only did Spring 2009 purchasers enjoy lower SFR prices, they also REFIed to 4.375%. Looks like another refi wave is coming soon as rates push even lower
The proof is in my great joy and the way the haters respond.
why would they refi at 4.375 when in spring of 09 rates were close to that… so these smart folks purchased with a tax credit and then refinanced to a lower rate for less than a half point gain…? brilliant!
Wrong again, rates were in the low 5s in spring 2009.
There are no points or fees for those who refinanced they were absorbed in the 4.375% rate. Now things look even brighter as rates push lower.
I tell you, it was excruciatlingly painful to refi into a 3.6% 15 year fixed at 20% LTV. Rates were 9% 15 years ago, some way some how I pray I survive the devastation. Hate on haters.
“Hate on haters.”
Nobody is here to hate. Most are trying to decode the truth from the endless stream of bullshit directed at them from the MSM and the NAr.
Most posters here disagree with you, and you can be an irritant when you want to be, but nobody hates you or anyone else who posts here.
No hate… 30 year fixed at the time was barely 5% and closer to 4.75% in spring 09… so we’re both in the right ballpark… my point, which was not clear, was that anyone who bought in the spring of 09 to refi made no sense… so I brought apples to an orange fight… duh on me!
PR is right. I was looking to buy in early 2009 and rates were between 5 percent and 5.5 percent.
Surely… you’re not suggesting that level of absolute price means there’s been no devastation? I remember going to Columbus Grove 5 years ago and looking at those $1M homes. They were $1.4M back then… The devastation WILL end, but by looks of things I don’t think it’s ended quite yet.
Right, but it still cost a million dollars to live in what many here believe to be a less premium Irvine SFR, less premium Irvine area. That is truly devastating.
How’s that “truly devastating” again? I don’t think building bigger homes and selling it for more (albeit at lesser per sf than before by the tune of some 30%) constitutes avoiding “the devastation”. The median per sf of that zip code has dropped to $300/sf, whereas it peaked at $450/sf in Sep ’06. So yeah, the “devastation” is real in Irvine alright.
Those SFRs with the high HOAs and high mello roos should be selling for $500-$600K but they never will thanks to the government induced inflation. Get your million dollar SFR in lowly CG.
Wow, <$200/sf for IUSD? I'm in! After all, it's 10/10 school rating and guaranteed entry into an Ivy school! Well if they're supposed to be $500-600K then I'm certainly not buying now at $1M. You heard it here first, folks!
PR is correct, low rates will spur a wave of refis
It’s already happening.
Recent numbers out from MBA back it up.
There’s been a surge in refi applications over the past four weeks coinciding with the drop in rates.
It strengthens demand among would-be buyers while helping those looking to refinance existing loans.
If it is spurring “would be buyer demand” then why are the numbers down March to April? Isn’t declining sales from the winter to spring season one of the signs of the apocalypse? I keep a close eye on CDM (mostly the Village part, not Spyglass or Irvine Terrace) and the market here is frigid. There was a run (ended today) where I thought the MLS was broken. Nothing was going under contract. I don’t have the long term statistics to know what the average per day should be for late May but my casual day to day observations tell me that the CDM market is having a Wiley Coyote moment. PR may be “correct” (if you give him a little leeway) for now but the writing is on the wall. Three to four years from now he is going to be crushed if he is staking himself out in the positions he alludes to. He’s part of the same “dumb money” that bought older CDM properties in 2008/2009, put some money into them and are trying to flip them now … there are a handful of those things on the market and they are not selling. Most have already started the price drop dance down.
MBA: Mortgage Purchase application activity decreases, Refinance activity increases
Another Mortgage Refinance Wave?
There may be an increase in refi volume, but nothing like the other real waves when rates fell more significantly.
Hey IR, or (any other prognosticators of the doom in RE),
You obviously have been very strong in your blog beliefs about the bubble and the consequences of that bubble.
Did you make any money off these “first to call the bubble” and unwavering convictions?
I know you are running your fund now but did you short the home builders and all the banksters back in 2006 or 2007?
Even with all the unforseen government intervention, you must have made bank shorting these stocks or buying puts or pulling a Paulson and buying CDS on the lousy MBS.
Curious…
Understanding that there was a housing bubble benefited me in two direct ways.
First, I avoided buying a home at a time in my life where it would have been otherwise natural to do so. So I didn’t lose a downpayment to equity decline, didn’t trash my credit by having to strategically default, and have saved an enormous amount of money by renting at a lower cost point in the meantime.
Second, I correctly guessed that the housing bubble would trigger a recession, and moved all of my investments to cash before the stock market crash of 2008. Alas, I was not smart enough or confident enough to take the further step of actually shorting stocks and making a killing that way…. but I’m pretty satisfied with the way things shook out.
Yes, and still doing so.
You’re too modest, awgee.
For those of you that don’t know, awgee sold in 2005 in Long Beach and rented because he saw the housing bubble. He bought gold with some of the profit. He is doing very well because of his foresight.
The froth that is the Irvine housing market is getting moldy, but it’s still there.
The relative stagnation of the median price whilst markets around OC are falling can be interpreted a at least two different ways.
1) High wage earners are flocking to OC, buttressing prices.
or
2) The disbelief of the bubble persists in more minds as it relates to OC.
If the median income numbers don’t support theory (1) then theory (2) must be true.
“The relative stagnation of the median price whilst markets around OC are falling can be interpreted a at least two different ways.”
As you implied, there are other ways of explaining the relative stagnation of Irvine prices compared to other places where prices have declined more. The ones I see most talked about here are:
1) There has been some underlying shift in the nature of demand within the Southern California housing market, concurrent with but not directly related to the housing bubble, that has resulted in Irvine housing being more highly valued relative to housing in other areas.
2) Affirmative effort on the part of banks and loan servicers to artificially restrict inventory has allowed prices to stay high even with much lower demand.
3) Housing bubbles take a really long time to deflate; this is just a result of the illiquid nature of the market and human psychology. Some places have attained a critical mass of “must sell” inventory that has been sufficient to catalyze price declines and allow the bubble to deflate much faster. Other places haven’t, and Irvine is just one (of many) such places.
#1 is by far the most frequently advanced argument of those who do not foresee further price declines. I don’t buy it because if this mechanism was true, it should have affected the price of rents as well as the price of owned homes. In other words, the price of rents in Irvine should have risen significantly relative to other areas of Southern California. The data I’ve seen do not bear this out.
Our esteemed host IrvineRenter seems to put the most weight on #2. I somewhat agree, but to me #3 seems like the simplest and most plausible. Overall I think we are seeing a combination of #2 and #3, mostly #3, with possibly a little of #1 sprinkled in (though I haven’t seen any solid evidence offered for it yet).
Depending on what you think the mechanisms are, it has profound implications for what you think prices are likely to do over the next few years. #1 would imply Irvine prices will continue to stagnate or rise. #2 would imply a pattern of price decline that is heavily impacted by the decisions of powerful actors such as bank executives and politicians. #3 implies a continued “slow burn” until price/rent parity with other areas of Southern California is reached.
The north part of Irvine and the newer parts of Irvine seems to have come down in price. Turtle Ridge and QH have definately gone down. Turtle Rock went down but then bounced back.
The plus side of lower house price is that more income will be free for saving and spending. Saving for investments and spending for jobs. Low interest will also help, but that if you keep the property for a long time and interest rate remain low.
The condo buyer was not all that dumb for a nothing down purchase. 2 years of free rent. She came out of the deal better than she when into it. 24 x $1500 = $36,000 tax free saving!
That’s like max’ing out on the 401k for 2 years, but even better. Almost as good as a ROTH IRA of $300000.
I like the other areas except for the crime and schools. The low crime and schools are a big selling point for Irvine. The more crime the other locations creates greater demand for Irvine housing.
I went to Stonegate Maricopa and Laguna Altura Toscana over the past few days. Findings are below, sales will be slow…..
Though they will both say they are more than pleased with sales, etc., the fact of the matter is they are not starting off like gangbusters compared to the well marketed launch of homes in Woodbury in early 2010. (Though I would love to poll new owners in Woodbury today to see if they feel they got a good deal….)
STONEGATE
– Since early April, Stonegate has sold about 12 houses in Maricopa and they were borderline pushy to sell a Plan 3 home with June delivery once they heard I did not have to sell a home….
– For a house that is nearly a million dollars, I want more than 10 feet from the back of my home to the back of my property….
– Layout of homes on inside were Decent
LAGUNA ALTURA – TOSCANA
– I felt trapped once I was inside the gate – at least 7 minutes from house to any commercial location
– I was surprised that I did not hear the highway traffic more but TOSCANA is farthest from the highway
– NOT a single lot was designated as “sold” though they were happy with sales (read foot traffic) the first 3 days….
– For 1.25 Million, I want more that 12 feet from the back of my house to the back of the lot
– $400 a square foot before landscaping and window treatments, etc. is steep though the layout is functional
– With HOA, RE taxes and Mello Roos, your monthly obligation is nearly $2000 before you even get to the mortgage……
> With HOA, RE taxes and Mello Roos, your monthly obligation is nearly $2000 before you even get to the mortgage …
Without a greater fool, I don’t see how house prices make any sense in California.
Am I really expected to work half a career to pay for a tract home? Why should I do that?
We’re seeing a self-sustaining cycle building in Irvine. I’ve mentioned the cottage homes in Woodbridge several times, and the most recent 3BR listing there is now in Backup at $495K: http://www.redfin.com/CA/Irvine/6-Silkleaf-92614/home/4691467. It’s a short sale, but it’s nicely upgraded and I couldn’t see any other problems with it that would lead to an abnormally low price compared to other model matches.
If it sells at or below list, then we’ll have 2 recent comps: $488K and $495K. That will be the death knell for this Carmel cottage floorplan, and there are HUNDREDS of this model in clusters throughout Woodbridge, and dozens, perhaps even more than a hundred, of them sold during the bubble years. Once this sale comp goes through, there will be no denying that this is the new appraisal ceiling for these properties. These 2 comps aren’t outside the loop, or too close to the freeway, or any of the other things that a creative appraiser could point to in justifying a higher appraisal for other Carmel models. I counted TWELVE of the Carmel floorplan properties ON A SINGLE BLOCK (the block shared by 6 Silkleaf) that last sold for $600K or higher and will now be more than $100K below today’s appraised value. How many of these owners do you think will continue to sit on a losing investment?
This is a race to the bottom.
-Darth
Real estate is local. Has been and always will. It’s a moot point to say the housing market will be so and so and the price will be such and such in general terms. Total waste of time. While all you need is focusing on the area that interests you and analyzing how that particular market is behaving over the years.
Generalized talk is cheap talk.
Agreed, there’s too many crappy neighborhoods out there that I would never include in my comps.
Actually, real estate price movements are non-local to a huge extent. Look at a graph of Irvine home prices over the last decade or two, then at the same graph of US home prices. You will see they match up quite nicely and display an extremely high correlation. The real estate bubble was a nation wide, if not planet wide phenomenon. Prospective buyers, even if they are focused on a specific area, are very well served to pay attention to non-local factors that might affect future prices.
Macro factors heavily influence micro factors in real estate.