Today we have the monthly update for the Orange County housing market for October 2011.
Irvine Home Address … 12 MILLBRAE Irvine, CA 92602
Resale Home Price …… $615,000
We are the nothing grating against the norm
We are the something that will not conform
No one understands what we've been given
Nevermore — Enemies of Reality
Back in March, I wrote a post titled The future of IHB news and real estate analysis. In that post, I made a commitment to accurate reporting:
I have no agenda to spin the data. Let's see what is really going on. I want to be accurate. People can make their own decisions and draw their own conclusions from accurate data. If approached without the built-in bias of a realtor, data analysis can be revealing rather than deceiving.
I will still have a dog in this hunt. I do run a business that makes money from real estate transactions. I am subject to the same biases as any other human being. I sell real estate, but I am not a realtor. The truth needs no salesman. I will present data as accurately as I can. If reality motivates you to buy or rent, the IHB can help you. I have no desire to manipulate data in order to make a quick buck. This is a part-time hobby for me, not my livelihood.
I now have accurate data which is updated each month. I have been presenting this data at our monthly IHB presentations. Now, I have created the first IHB monthly newsletter which presents this data in a format anyone can download and read at their leisure.
This is a work in progress, but I am pleased with what we have so far. Take a look for yourself and tell me what you think in the comments. Constructive criticism will be greatly appreciated. Any questions about the data or its presentation will help me improve future newsletters.
Just for giggles, let's read Lawrence Yun admitting to the housing bubble yet calling the bottom. Bullshitter…
“Moderate’ housing recovery forecast for next year
November 11th, 2011, 11:02 am by Jeff Collins 
National Association of Realtors Chief Economist Lawrence Yun forecast Friday that U.S. home prices will go up from 2% in 2012, part of a gradual improvement that will continue through 2014.
In addition, Yun told reporters at the NAR annual conference in Anaheim that he now pegs the probability of a new recession at 10% to 15% — down from his estimate six months ago of a 30% probability of renewed recession.
Although he believes the U.S. economy would “be teetering on a recession” if the Euro debt crisis expands, he said he doubts that will happen and predicted that the crisis will be contained in Italy.
“The market has been tough, but there are some developing positive signs,” Yun told a mid-day news conference at the Anaheim Convention Center. “As a result, there will be a recovery occurring next year, and it will continue in 2013 and 2014. It is not a great robust expansion. … But it is a moderate recovery.”
Yun also forecast that rents will rise for the next five years.
Specifically, Yun said:
- U.S. home prices will rise 2% to 3% next year, 3% in 2013 and 4% in 2014.
- Existing home sales will increase 4% to 5% in 2012. This year’s sales are projected to be up 1% to 4.96 million housing units.
- Rent will increase 3% in 2012 and 3.5% in 2013 and 2014.
There you have it. House prices will rise next year. Therefore, we are at the bottom. It would be laughable if were printed in the Onion. But Yun actually pretends to have credibility, and some potential buyers actually believe him. 
Yun noted that people buy a home today will see some price appreciation in future years. But the recovery will be too slow for people who bought homes at the peak of the market bubble and may not see prices back to what they paid for 10 years or more.
“It will be quite a long time for people who bought right at the peak to gain recovery,” he said.
Yun noted that distressed properties – foreclosed homes and underwater homes – now make up a third of all housing transactions in the U.S. That will remain unchanged next year, and will be only slightly better in 2013, he said.
“Distressed property sales will be with us for the next two years. The question is, will the buyers be there to sop up sales?” he said.
Also speaking Friday was Richard Peach, senior vice president at the Federal Reserve Board of New York, who was less optimistic about prospects for housing.
Citing a host of economic data from income ratios and savings rates to bond yield spreads, Peach concluded that the U.S. economy continues to operate well below its potential. He said also that the bulk of foreclosures and mortgage defaults lie ahead.
“I’m not as sanguine about the future prospects of home prices,” Peach said.
So where would you rather get your real estate market information, the IHB or the NAr?
Short-Sale and REO Workshop
Shevy Akason and Larry Roberts will host a short sale and REO workshop at 6:30 PM Wednesday, November 16, 2011, at the offices of Intercap Lending (9401 Jeronimo, Suite 200, Irvine, CA 92618).
Peak buyer got two years of squatting
The former owner of today's featured REO paid $835,000 on 3/13/2006. They used a $636,000 first mortgage, a $64,000 HELOC, and a $135,000 down payment. The down payment money is now gone. They did manage to obtain two years of squatting before the auction.
Foreclosure Record
Recording Date: 10/20/2010
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 08/13/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 05/12/2009
Document Type: Notice of Default
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This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599
sales@idealhomebrokers.com
Irvine House Address … 12 MILLBRAE Irvine, CA 92602
Resale House Price …… $615,000
Beds: 3
Baths: 2
Sq. Ft.: 1966
$313/SF
Property Type: Residential, Single Family
Style: Two Level, Spanish
Year Built: 2001
Community: Northpark
County: Orange
MLS#: S663808
Source: CRMLS
Status: Active
On Redfin: 141 days
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Beautiful, spacious and bright property within a gated community! House offers vaulted ceilings, new carpet, 3 bedrooms, and 2.5 baths! The master suite has walk in closet and jacuzzi tub. Enjoy granite kitchen counters with a breakfast bar, and a cozy fireplace in the living room! This property has so much to offer- must see! Highly desired Evergreen complex with pools, parks, clubhouse, tennis court and tot lot. Popular schools nearby.
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Proprietary IHB commentary and analysis 
Resale Home Price …… $615,000
House Purchase Price … $835,000
House Purchase Date …. 3/13/2006
Net Gain (Loss) ………. ($256,900)
Percent Change ………. -30.8%
Annual Appreciation … -5.3%
Cost of Home Ownership
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$615,000 ………. Asking Price
$123,000 ………. 20% Down Conventional
4.06% …………… Mortgage Interest Rate
$492,000 ………. 30-Year Mortgage
$133,757 ………. Income Requirement
$2,366 ………. Monthly Mortgage Payment
$533 ………. Property Tax (@1.04%)
$133 ………. Special Taxes and Levies (Mello Roos)
$128 ………. Homeowners Insurance (@ 0.25%)
$0 ………. Private Mortgage Insurance
$295 ………. Homeowners Association Fees
============================================
$3,455 ………. Monthly Cash Outlays
-$385 ………. Tax Savings (% of Interest and Property Tax)
-$701 ………. Equity Hidden in Payment (Amortization)
$175 ………. Lost Income to Down Payment (net of taxes)
$97 ………. Maintenance and Replacement Reserves
============================================
$2,641 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,150 ………. Furnishing and Move In @1%
$6,150 ………. Closing Costs @1%
$4,920 ………. Interest Points
$123,000 ………. Down Payment
============================================
$140,220 ………. Total Cash Costs
$40,400 ………… Emergency Cash Reserves
============================================
$180,620 ………. Total Savings Needed
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“The CEOs and the other top executives at Fannie and Freddie get all their pay in cash, and none of it in company stock, which is generally deemed worthless.”
“The latest cost estimate from FHFA is that the two bailouts will end up with a net cost to taxpayers of about $124 billion through 2014, though that figure could rise as high as $193 billion. Even the lower cost estimate will make it the most expensive bailout of the financial crisis — far more costly than bailing out the nation’s banks or automakers.”
Fannie, Freddie execs score $100 million payday
So those tools get $100 million, and the taxpayer gets a giant middle finger.
A commentator on NBR tonite said FHA is deliberately underestimating liabilities by $50 billion.
Not sure exactly why, since the FHA burned through $37 billion in the past 3 years and is officially undercapitalized by 8x, although politicians globally are just trying “to kick the can down the road.”
NYT: F.H.A. Audit Sees Possible Bailout Need
What’s the deal with needing a Facebook account to download things or to post comments. I am seeing this more and more.
What kind of man worth his salt actually uses Facebook? It is for kids and narcissistic (usually both) and one of the worst companies out there besides Citi and BofA.
(Yes, I know you can download the report by signing up for Scrib)
My sentiments exactly. If I were single and trolling for “love” from my old junior high, high school, and college flames, I might be on Facebook. But I’m an adult who doesn’t care what you did with your kids today, or what you had for dinner, or that your daughter’s soccer team won…
“It will be quite a long time for people who bought right at the peak to gain recovery,” he said.
Depending on where you bought, prices might not come back to peak levels in our lifetimes!
When I look at some of the houses in Las Vegas that are 70% below the peak, I can’t help but think the peak buyers will never, ever see equity again.
Housing in Vegas will eventually reach their peaks via decades of inflation. But it won’t be the same houses. 30 years from now the cheaply built bubble houses will have needed a complete overhaul or they will be slum houses.
They will never regain their peak in inflation adjusted terms.
Even with the lowest mortgage rates ever, the Orange County median price per DataQuick is trending down.
Per the OC Register J. Lansner …
“DataQuick reports that the Orange County median selling price for all residences in October was $405,000, down 7.5% vs. a year ago. It’s lowest of any month since April 2009 — and lowest since 2002 for any October. It’s also the fastest rate of decline since April 2009. The price is now $240,000 off its 2007 peak.”
“Sales ran 8% below the latest 5-year average sales pace. (Scary number: Sales run 43% below the average pace from 1988-2006!)”
It’s quite clear that the only way back to a healthy/normal real estate market, is lower prices. Local prices are eventually going to pre Y2K levels. The only thing that can prevent this is rapid inflation … not happening.
The market is very weak, particularly when you factor in the seasonal downturn. With BofA ramping up foreclosures, I don’t see much hope for a robust spring rally either. Affordability is already good, and it should continue to improve. The low prices and high affordability will get people to start buying, but it’s all a matte of how much overhead supply we have to absorb.
“Low prices”?? LMFAO, these aren’t low prices IR. And you say you don’t have an agenda to get people to buy?
Think what you want, Don. I could care less if people buy or rent. People now have a reason to buy that they didn’t have before, and it’s a reason I have been describing for five years now. The data on affordability speaks for itself. Prices are lower then they were at the peak by 30%, and they will likely go lower despite the relative affordability. There is no urgency to buy, but there is one less reason to rent than there used to be.
I don’t put too much weight on median prices, but clearly the trend is down and going down further. I follow a few pockets of HB closely and we are starting to see capitulation there. I remember two or three years ago, almost nothing was under 500K, now we are seeing plenty of places in the low 400K range. Soon we will be seeing places with a 3 handle.
I fully expect prices to drop about 5% per year for the next 2 years. Assuming rates will still be low, that might be the time to jump in when loan owners are experiencing MAX pain. Additionally, when factoring in all the distressed properties that need to work through the system, there is no hurry to buy now if you don’t have to.
Remember, the borrower always wants rates to stay low but it is the creditor who dictates rates. Look at greece and italy and how quickly the debt problem goes from “contained” to “past the point of no return”. I may be wrong, but i dont think we have 2 years of low rates left.
Higher rates are going to hurt affordability and put severe downward pressure on prices.
dataquick: southland home sales report
[quote]Home sales in those two counties(LA and OC) that had purchase loans between $625,501 and $729,750 – the band eliminated by the lower limit – dropped to 102, down 71 percent from 350 sales in September and down 71.5 percent from 358 sales a year earlier. [/quote]
71% drop.
crazy!
curious to know what effect it had on lowering the number of sales or prices, as opposed to people just finding ways to avoid taking out loans higher than $625k either thru 2nd loans or bigger down payments
“transactions in the $300,000 to $800,000 range fell 6.7 percent year-over-year and sales above $800,000 declined 22.0 percent from a year earlier (and dropped 29.4 percent from September). Viewed differently, the number of Southland deals over $500,000 fell 18.1 percent from a year ago.”
seems like it had some effect but not quite as drastic as 71% drop though. I expect a full upcoming report and analysis from IHB on this topic!
HARP2 Guidelines released today by Fannie Mae:
https://www.efanniemae.com/sf/mha/mharefi/pdf/refinancefaqs.pdf
https://www.youtube.com/user/9250307107
here is the Schiff UCI Barclay Theater Presentation IrvineRenter
We are watching the very beginning of the bursting of the treasury bubble in real-time
IR, I found your breakdown of rental parity and assumptions (earlier post and newsletter) to be very helpful in my own decisions about buying or continuing to rent. Looks like I’ll be saving a little longer than I thought, but I’ll be in a better situation if circumstances ever forced a need to rent out the place.
Perhaps a bit from Shevy on how he sees things playing out on the front line could be a nice addition to the newsletter? I always enjoy his observations.