Yesterday, we discussed walking away, and today, I want to explore the issue a little further and look at both an Irvine property owner and a Wall Street Journal columnist who are 10% underwater and thinking about walking away.
Irvine Home Address … 25 BOMBAY Irvine, CA 92620
Resale Home Price …… $699,000
{book1} 
we’re flesh and bone
together and alone
and we’re looking for a home
silver moonlight fills the sky
calling gently to the evening tide
you’re unfolding right before my eyes
and when you move
you move right through me
Underwater — Delerium
Underwater homeowners — homedebtors — as they have become derisively known on bubble blogs, each followed a different path to their destruction. I came across a Wall Street Journal article on Patrick.net, Underwater Houseowner Should Have Waited Longer To Buy, actually the title is Confessions of an Underwater Homeowner. By BRIAN R. FITZGERALD.
“One in four borrowers is underwater on a mortgage in the U.S.
Count me among them.
My family’s modest, suburban New Jersey house is now worth about
$30,000 less than our current balance. We never dreamed of walking
away, but the idea of “strategically defaulting,” is something we had
to at least consider. Many others have, too, as my colleague Mark
Whitehouse reported in Thursday’s Journal (See American Dream 2: Default, Then Rent.)
We’re not home flippers or boom-era borrowers who opted for an
exotic loan with no documentation. In buying our house, we believed we
were making a life decision.”
The author spends some time describing his house search, then he added:
“We weren’t oblivious to the fact that people were stretching to buy
homes. We were adamant about getting a fixed-rate loan–rates really had
nowhere to go but up, so why would we want an adjustable rate? (That
line of thinking turned out to be an epic fail–30-year fixed rates have
been at less than 5% for weeks lately.)”
What? This guys sees his decision to use a 30-year fixed at historic low interest rates as an epic fail? He really thinks that because the Federal Reserve is doing something it has never in history done — direct purchase of Agency debt to support mortgage interest rates — and because of this interest rates ticked down slightly, so this was an epic fail on his part? It was the most intelligent thing the guy did, and he thinks it was a mistake! If people believe fixed-rate mortgages are a mistake, then we are going to be in for decades of housing market instability.
“It came time to deal with the finances. Because we were plunking down only 7% or so on the down payment, we were faced with a steep insurance fee. I was naively insulted by this PMI-the idea that we were risky borrowers out of the box. So we opted for a “piggyback” loan, a second loan that would cover the rest of the down payment and allow us to avoid the PMI. We would pay about the same per month, and when our home’s value rose, we would refinance and combine the two loans into one. A lot of the people I turned to for advice were recent homebuying colleagues facing similar questions, or longtime owners who were doe-eyed by low interest rates. I don’t recall anyone saying “Dude, wait a few years.””
Apparently, this guy wasn’t reading the bubble blogs that were loudly proclaiming that he was an idiot, and that he should have waited a few years.
Notice the idea that you refinanced into a larger mortgage later after the house value goes up. Sounds very rational, and it works really well as long as house prices only go up. The author goes on,
“We never considered purposefully defaulting, but then again we’re not falling down a catastrophic, high six-figure equity hole. After reading Mr. White’s paper, though, we decided to run some numbers, pulling together basic info on our loan, tax bracket and rental prices for comparable homes in our area, and plugged them into this calculator at PayorGo.com. This was by no means a scientific appraisal. I had to enter how long we expected to be in our home, and I really couldn’t answer “as long as it makes financial sense.” So I said seven years. I don’t know how realistic that is — my kids will be about 12 years old then. Apparently, if my home doesn’t rise 1.94% in value over the next seven years, we should call it quits.
We wouldn’t. Although, if I were laid off and unemployed for more than a few months we might have to.”
This guy should call it quits because his house is probably not going to rise in value by 1.94% every year for the next seven years. In fact, it probably will not rise at all, and it will very likely decline more in the interim. He continues,
“The price drop sometimes feels like an apparition. On paper, my home is considered less valuable than what I am paying for it. In reality, it is the same home (warts and all) that I liked when I signed the papers.”
Part of the reason it feels like an apparition is because this guy is in denial! He doesn’t have to face the consequences of his mistake, so it doesn’t feel like one. I leave the author with the last word,
“I’m not blind to the pitfalls-if I was offered a job in another city, we wouldn’t be able to sell; we can’t get a home-equity line of credit because we already tapped it. Still, my biggest challenge week to week is operating the leafblower. And if I knew in 2006 that in 2009 I’d be able to get the same home for a 20% discount AND still get a low rate, I never would have pulled the trigger.
What I do know is that this is our first home. It is where our kids-going on 5 years old- are growing up. We love our neighbors and the school system. We put in central air. I still remember the feeling of getting those keys handed to me the first time. We have sentimental equity. Home buying wasn’t a zero-sum financial game of win or lose.
The Fitzgeralds are technically underwater, but we don’t feel like we are drowning.”
Brian R. Fitzgerald is an editor at WSJ.com. Email: Brian-R.Fitzgerald@wsj.com
Irvine Home Address … 25 BOMBAY Irvine, CA 92620
Resale Home Price … $699,000 
Income Requirement ……. $146,056
Downpayment Needed … $139,800
20% Down Conventional
Home Purchase Price … $737,500
Home Purchase Date …. 9/17/2004
Net Gain (Loss) ………. $(80,440)
Percent Change ………. -5.2%
Annual Appreciation … -1.0%
Mortgage Interest Rate ………. 5.08%
Monthly Mortgage Payment … $3,029
Monthly Cash Outlays ………… $4,130
Monthly Cost of Ownership … $3,150
Property Details for 25 BOMBAY Irvine, CA 92620
Beds 4
Baths 2 full 1 part baths
Size 2,300 sq ft
($304 / sq ft)
Lot Size n/a
Year Built 2004
Days on Market 3
Listing Updated 12/16/2009
MLS Number S599151
Property Type Condominium, Residential
Community Northwood
’tis the Season to get a Great Deal! This incredible ‘almost new’ Bella Rosa detached home offers a private, cul-de-sac location in the gated area of Northwood II. This open layout features, a downstairs bedroom and bath, a beautiful granite countered, gourmet kitchen with a center island, that opens to the spacious family room and dining area. On this same level is the indoor laundry room. The direct access garage is appointed with built-ins. Upstairs has a HUGE Master bedroom, with two walk-in closets, and a luxurious master bath with sunken tub, separate shower, and dual vanities. Two additional bedrooms, a bath, and an office niche complete the second level. The enclosed yard is an entertainer’s delight… very private and the beautiful hardscape makes for a great area to hold parties. The ammenities of this gated community includes a resort-style pool, clubhouse, picnic areas, outdoor fireplace, and more. Location is everything here…This is a must-see before it is gone!
This is a must-see before it is gone! It feels urgent to me, does it feel urgent to you?
“I’m not blind to the pitfalls-if I was offered a job in another city, we wouldn’t be able to sell; we can’t get a home-equity line of credit because we already tapped it. Still, my biggest challenge week to week is operating the leafblower. And if I knew in 2006 that in 2009 I’d be able to get the same home for a 20% discount AND still get a low rate, I never would have pulled the trigger.”
Moron.
And had he bought in 2009 he most likely would have been underwater also.
People were so drunk on the kool-aid and thought home prices would never go down…his statement verifies that. This is like any financial transaction…past performance will not guarantee future results. Ask anybody who bought tech stocks at Nasdaq 5000 how their investment turned out. This sense of entitlement is disgusting!
What pisses me off is this guy works for a newspaper that many people read to get their information – and we wonder how the delusion becomes so widespread.
Sadly, I’m not surprised in the slightest, because these sorts of stories make their rounds with every bubble. At the beginning of the decade, it was Salon.com running article after idiot article about twentysomethings making six-figure incomes at now-dead dotcoms who took off to travel to Nepal for six months after they were laid off. Naturally, the gist of the article is that they were whining about being unable to find jobs paying their old rate after they got back. Likewise, the “Wall Street Journal” is running the same sort of entitlement porn with real estate: “I bought at the top of the bubble, my house isn’t worth what I paid for it, and I’m leveraged up to my eyeballs because of that! WAAAAAAAH! That’s not fair!”
Bugger ’em both. Of course nobody told this idiot not to buy, because he’d surrounded himself with similarly entitled morons who were asking him “Haven’t you thought about buying?” every single day. More importantly, since he’s a highly successful journalist, he’d convinced himself that while everyone else might get burned, he was too smart and too special to get caught in that. Like journalists of my acquaintance who fell for similar inane scams and stunts, the focus now isn’t on his accepting that he screwed up and moving on. Instead, it’s about making as much of a kerfluffle as possible, with the hope that someone will come along and make it aaaaaaall better for him. After all, didn’t you know that real estate values should always go up?
Perhaps you should read more carefully before screaming on the rooftops.
The man explains in the article that the HELOC was tapped because of the way his loans were structured, not because he cashed some money out and spent it.
The blog is festering with indignation with the slightest dot missing from an i nowadays.
This was the piece that struck me: “Financial consultants would scream at me for how much of my net pay the loan sucks up.” What is his DTI? If you kept a moderate DTI, you’d look at a neighborhood and see that all the new buyers were making 1/2 what you were making, you’d smell something fishy. And you probably wouldn’t be happy with the house and would continue to rent. It’s only by upping your DTI that you would reach for the house this guy did.
For my section of NC, buying in 2006/7 puts you maybe 10% underwater today. In bubble areas, increasing DTI’s reflected increasing price/rent ratios. My dad would say that they aren’t making more land in FL (actually they do all the time by drying out wetlands). I replied that if housing were really more valuable, rents would go up too, and who was buying these homes? Seeing home prices divorce from rents is one of the many warning signs.
Oh Lordy.
Not only did he hit the HELOC juice, he goes ON AND ON in the comments about how he did it “for the children”
“My kids were getting older and I didn’t want to wait until I was in my late 30s or 40s. I didn’t want to sit out their childhood — getting that backyard when they were too old to care about a backyard.”
“
I definitely let my desire to capture a low interest rate, and to put my suddenly booming family in a home, make me move faster than not. I knew prices were higher than they should be, and I thought I captured a good deal.”
And of course…the most important things in life…
“Growing up, an island always seemed like a luxury. So did a refrigerator that dispensed ice. I have both and they make me happy.”
This is the kind of guy that is referred to as a “Bitch”.
Yes……… Child Worship…
The “We were being stupid for the children” excuse.
It’s never because they were excited about becoming real-estate investors (or speculators to those of us who know the difference).
We did it for the children!
I’m sure those children would have known the difference between a rented back yard and an “owned” back yard.
Whatever. Mail your keys back. Sell the house to someone worthy.
Don’t forget the “great schools”.
Dumb Parents + Great Schools = Waste of money because their kids will inherit the “stupid gene” most likely anyways.
oh that is such a good equation, especially for Irvine – made me laugh…
Wow, are you calling the Fritzerald stupid because in hindsight they bought at the wrong time?
If that’s the case, I would call everyone with any money, 401k, or otherwise in the market stupid if they didn’t pull out money in 2007, and then reinvest it in 2009.
Also, can I call all the home owners that bought before 2003 and kept their homes passed 2007 stupid because they didn’t sale at the peak. Think about home much money they “loss.”
Infact, I think that anyone that didn’t tap out their home equity loan at the peak of the bubble stupid because they left money on the table. Man, what idiots.
You’re right that it’s unreasonable to expect ordinary people to always time the markets perfectly. Not selling your stocks in 2007 doesn’t make you a stupid person. But not all wrong moves are created equal. If I give you a complex calculus problem to solve, and you get it wrong, I won’t think you are stupid. But if I ask you what 2 plus 2 is, and you tell me it’s 5… well that’s a whole other thing. Buying a home when Fritzerald did is more or less the financial decision equivalent of claiming that 2+2=5, and yes he is not the brightest bulb on the Christmas tree.
I wouldn’t call them stupid but I would call them ignorant.
The child may wonder why they’re moving every couple of years when the owners end up in foreclosure, or decide to sale.
The child may wonder why they can’t put in a pool, or get a pet, or paint their room etc.
Believe it or not, people do a lot for their kids.
Boo hoo. I’m sure the child will have severe issues from moving around, not having a pool and not being able to paint his own room.
I lived in 6 different cities growing up. My parents didn’t own their own house until I was in high school. I never once thought that was odd. Kids like to play, spend time with their friends and just enjoy being kids. They aren’t thinking about rent vs own variables and equations.
Astute Observer “F” –
These same folk passing on their stupid gene are the ones who send their kids off to college for job training.
Everyone now goes to college – the Bachelor’s degree is the new High School diploma.
These same parents who believe that an above average school will make their child less of an idiot. The school may be better at teaching Math and Science, but it can’t force the kids to learn anything if they care more about flipping real estate of becoming Ballers.
So now this same mental disease results in everyone going to college, Universities coddling and romancing students, competing for tuition money, doling out A’s to everybody who shows up to class. Students shooting up schools when they get a ‘B’ and cannot cope with not being the Prodigies their parents made them to believe.
I for one am just sick and tired of hearing people use their children as an excuse for not thinking for themselves. I understand that the family situation has its influence, but for these people to engage in financial Tom Foolery and then go cherry picking the politically correct excuses (children) and ignoring those other not so great excuses (greed) is incredibly disengenuous.
In fact, I will take it even further. If Mr. ChildWorshipper was all about the children then renting at a lower monthly payment would have left him with a lot more cash to feed and clothe the little crumbsnatchers. Isn’t that more in the child’s best interest than mommy and daddy pretending to own some real-estate?
This means renters with kids were actually doing a better job by maintaining stable finances. What a crazy statement to make.
I have read somewhere that Patriotism is the last refuge of the scoundrel. I’d say ChildWorship is most likely second to last.
same as all the pta moms shoving cupcakes down their (and my) kids throats every chance they get – “its for the kids”!!
Nothing sets me off more than that crap!
This home/neighborhood is infected with terminal cancer:
38 Bombay, Irvine? – more info »
Foreclosure: $676,000
This property is a Pre-Foreclosure.
60 Bombay, Irvine? – more info »
Foreclosure: $710,000
This property is a Pre-Foreclosure
39 Hathaway, Irvine? – more info »
Foreclosure: $650,000
This property is a Pre-Foreclosure.
85 Wonderland, Irvine? – more info »
Foreclosure: $720,700
This property is a Pre-Foreclosure.
38 Tea Gdn, Irvine? – more info »
Foreclosure: $646,500
This property is a Pre-Foreclosure.
This neighborhood, like all those built in 2004-2007, is going to get crushed.
Thanks for your informative site; perhaps if you have time you could select three neighborhoods that you believe are going to get crushed; and track them over the years; perhaps neighborhoods loaded with Alt-A and Option Arm loans; it would be informative to watch the fall in value.
I rather suspect that the homes in this neighborhood are going to stand as luxury tombs testifying to an age of lender greed and liar-loans.
If more would do the right thing – walk away from the house if they’re underwater too far – the housing crisis would go away quicker.
But that would be letting the free market work the way it should.
If big banks can walk away from bad investments, the little guy should too.
I think you guys are being too harsh. Hind sight is 20/20. Its easy to look back and point fingers and say “I told you so.” Buying a home is more than a purely financial for most people. And yes, children have a lot to do with it. There’s some stability to owning/financing a home versus renting. And better schools do make a difference. Its not the only factor in rasing a “good” child, but it does help. I for one would rather my child attend an “Irvine” school than a compton school. Not every child at the Irvine school will do better, becomer a better adult than the child at the Compton school, but I can safely say that the odds are better that the Irvine child will do better in life.
You can rent houses in the best school districts. Kids don’t care if you rent or own, and they aren’t hurt if you have to move down the street every couple years. And in places like Irvine the money you save by not buying at the wrong time can easily pay for 4 years at Stanford.
“… my home is considered less valuable than what I am paying for it …”
Fascinating. I buy stocks when they are considered less valuable than what I paying for them. Somehow it is what I do best.
😆
The tried and true approach…attack the victims. Most of these posts here make me sick. The whole country is being de-frauded by the elite rich, and you guys sit on this blog and attack people because they got victimized. Nice compassion, but WTF do you expect out of people that live in Irvine or WANT to live in Irvine?
Political correctness is rampant in Irvine, but good christian values….HARDLY. I’ve worked in Irvine for 23 years and never, ever wanted to move there. From the 45 year old moms walking their babies, to the unfriendly glares and impatient BMW’s, to the overly controlled police state….Irvine may be a political ideal for the ostrich republicans and democrats, but for people who actually want personal freedom, Irvine ranks pretty much dead last. Give it a few years and they will be teaching Chinese in schools anyhow.
Are they really victims? Many, if not all, of the bubble buyers did so using a “gambling” approach by way of adjustable rate mortgages. The reason they are being attacked now is that they are accepting that they made a mistake but are expecting to be bailed out using our tax payer dollars. I didn’t take the risks and didn’t reap any of the benefits of the bubble but yet I am expected to be understanding and considerate of their victimhood? If I stopped paying my rent would you send me a check so that I could stay in my home. I thought not. As for Irvine, all what you say may be true but it is also just as true in many parts of America. It’s in our culture to drive like aholes and when we arrive in our neighborhoods we roll into our garages and shut the door, rarely going out or meet let alone know any of our neighbors.
I love this post.
Being a mom at 45 or speaking Chinese means one doesn’t have “good Christian values?”
Merry Christmas Swiller. I’ll be doing hedonistic things this Christmas like spending the day with my 40 year old Asian wife and our baby. Should I even celebrate Christmas since I love an Asian woman and we reproduced at 40?
You sound bitter, kinda like an old scrooge.
Sounds like you would be more comfortable living in flyover country.
Was Kain victimized for killing Abel? I do not think so.
Sinners must face consequences of their sins. Most of bubble buyers were greedy, and greed is one of seven deadly sins. Salvation does exist, but they are in denial. That is the problem with bubble buyers.
Irvine is an upscale Monterey Park….and is sold that way to Asian buyers. Expect more Chinese in the future.
Nobody comes out and says, “Hell yes I was greedy. I wanted on that gravy train but I am an idiot and didn’t know how to really make money on the gravy train and I assumed the gravy train ride would last forever.”
I don’t like the overall pattern of attack people that made poor decisions, but these people are hardly “victims.” They made a poor decision in hindsight, and will have to deal with it. But they are hardly victims.
As far as learning chinese, why not? They teach spanish and french in school. What’s wrong with chinese?
Also, is there something wrong with 45y/o moms walking their babies? Is this a bad thing? Perhaps only 16y/o unwedded, dropout mothers should be able to walk their babies.
“I’m not blind to the pitfalls-if I was offered a job in another city, we wouldn’t be able to sell”
That’s too bad, since I’m sure there’s a publisher out there screaming, “Get me a Brian Fitzgerald type! I need a man who’s dull and maudlin, a man befuddled by math, as dim or dimmer than the public we serve. Pay him whatever he wants.”
I keep reading this astute observation… and laughing and laughing…
Someone please explain and reconcile the two stories in today’s LA Times. One says “More Prime Mortgages Default in 3d Quarter” and the other says “November Home Sales Soar 7.4%” Thank you.
That’s pretty easy. People that bought their house during the bubble are deeply underwater and are defaulting, leading to lower prices. People that are on the sidelines see these lower price home, and think that they’re a steal compare to peak prices and snap them up.
’tis the Season to get a Great Deal!
Love the attention grabbing intro
I think the greatest irony of this is that he is an editor at the wall street journal, so from all his knowledge gained from the journal, what did he learn? It seems he learned to gamble every last dollar. If you work at the journal and all the people you could consult with were new buyers, it seems that either he did not consult with people he works with, or the Journal is full of the same gambling addicts.
I am going to take an exception with this ‘attack the victims’ straw dog being kicked around by the bleeding heart throbs.
I ask you – who are the victims in this? Answer: Responsible Individuals.
I save money, have zero debt, rent because I made the decision that house purchasing was unaffordable. I did not participate in the mania, I did not cheer as prices went through roof.
At that same time – other individuals were making very poor decisions. They bought expensive houses using extreme leverage and no down payment (or very little). They lived house poor, relied on dual incomes, a paycheck away from disaster for years just because other lemmings were doing it.
We have a severe lack of awareness of personal responsibility in this place.
That’s right – the government and their business partners ripped us off. However, it is our duty as citizens in a Democracy to think for ourselves and question what the government is doing. It is our duty to assume that the government is not looking out for us. That’s the crux of the problem. These people living foolishly for all these years and now whining about it.
I am faithfully paying my rent each month while others squat in houses they no longer pay for.
I will send tax money to the government so they can give Joe Blow a refund on his mortgage interest.
Where is my ‘help’? Nobody is shedding a tear for me?
Responsible individuals are the real victims in all of this. Not these lemmings who went along with the program assuming Big Brother was looking out for them and let others do their thinking for them.
Government and Wall Street ripped us off because the majority that rules at the ballot box were lazy, apathetic, or willfully ignorant so long as they ‘got theirs’ and the music kept on playing for them.
“I am going to take an exception with this ‘attack the victims’ straw dog being kicked around by the bleeding heart throbs.”
I am going to agree on this one. There is no attack here. This post pointed out some errors in this guys thinking — poor thinking he put on display in the Wall Street Journal. He is asking for an evaluation of his behavior by putting it in the public realm the way he did. In fact, I would argue we are supposed to discuss this behavior to learn from it as a society. That is part of the purpose of astute observations on a blog like this one.
“I ask you – who are the victims in this? Answer: Responsible Individuals.”
You hit the nail right on the head. If someone gets himself terribly drunk, and drives around and smashed a few cars on the road before he hits a tree and totals his own car, who is the victim here? All you hear from our mainstream media or observers like Swiller is that the victim is the drunk – oh the poor guy, the evil liquor store owner sold him that bottle of 100 proof never told him this stuff would cloud his judgment, therefore it’s not his fault he did what he did.
But did anyone say anything about the true victims in this case, the people who obey the rules but still have their cars damaged by the drunk? Nope.
Responsible individuals who did not participate in the housing mania (drinking the kool aid) are like the defensive drivers who get hit by the drunk. The home debtors’ finances are ruined because of their reckless behavior. But the true victims are the financially responsible people who also take a huge hit thanks to the grand “socialization of loss” scheme our gov’t has been peddling since the very beginning of this crisis. Responsible citizens see their financial situations deteriorate as USD continues to be debased, their savings collect 0% interest, their tax $ goes to bail out those responsible for the debacle. And even their children will continue to pay the price thru higher taxes and rapidly falling standard of living for most Americans.
Part of parenthood is being the parent instead of Santa Claus. Teaching that life is not Madison Avenue instant gratification. The author is complaining of being 10% underwater and thinks of walking away from the loan or bailout. Well, he was 8% under when he got the keys (6% RE fee to sell plus 2% closing cost). Being a financial type (WSJ), the numbers have been likely crunched to see if it better to walk-away using the bailout money to live rent free for a year or two in his current house (6% interest plus 1% tax to be saved) vs paying the morgage using a low downpayment vs real renting. Real renting likely was the worse option.
But the victims and banks are expected, no demanding, that the taxpayers bail them out. It’s the old top WS plan, if we win, reward me big. If we lose, bail me out with a large retention bonus, sorry you must take the loss, better luck next year.
The author in his current situtation of not being able move to more for a better job because “he can’t sell the house.” — Truth is he can sell at a loss. He has voluntarly signed-up for indentured servitude (aka home loan on overpriced house via govt. sponsored Ponzi scheme). People love to say they want freedom, but would rather die that go against the prevailing thought.
You’re right, this guy was underwater the second the ink dried on the loan documents. From the article, he only put 7% down. If the old requirement of 20% down was used, this would be a non issue. But Ponzi scheme RE prices can only be sustained with these low/no down loans. Until this changes, we will be hearing from many more victims.
I personally don’t feel sorry for him one bit. Only being 10% down in this market is nothing. Ask anybody who bought in the IE at the peak how much they have hemorraged.
CNN has an article (Money Magazine) about a guy about to inherit $50K and he’s looking for some general investment advice:
http://money.cnn.com/2009/12/21/pf/expert/investing_windfall.moneymag/index.htm
Just read some of the comments at the bottom, and you’ll see that the unwinding of the great housing mess still has a LONG way to go. Some Joe Sixpack earning $12 an hour says “In this housing market, I think I’d put 50K down on a house that is very likely to rise in value sometime down the road.”
I think the tipping point for “socially acceptable default” is coming. Come April 15th after Christmas bills and taxes are due, people are just going to say “meh” and stop sending in their bill payments just like their neighbors are doing right now. Average Joe and Jane are getting fed up with free loaders gaming the system. Their moral strength is weakening. Once it becomes a defacto acceptable practice to not pay your bills that’s when the fun is going to start.
My .02c
Soylent Green Is People
Perhaps this is not on topic, but please note that here is just another blip from the BBC News on housing and economic recovery in the US:
http://news.bbc.co.uk/2/hi/business/8426548.stm
Regards,
Hard Numbers
Irvine Renter….I have read the comments on the blog the last few days, and just gotta ask — how is the environment around here going help you source clients in Irvine? There is quite a collection of characters who seem to be drawn to the IHB blog. Let’s say for a minute I was an “ignorant” Irvine home buyer in 2010, and I stumbled into the blog IHB uses to drive business. What would I find? A bunch of internet trolls insulting Irvine, its residents, their intellgence, their culture — in general just a bunch of angry and bitter people. And the resident realtor/broker cheering them on. Is this the type of people I am going to want to sign up to help me buy or sell a house in Irvine? Just curious your thoughts on how the hostile environment helps business? Or is it the theory of “the only bad press is no press”?
Maybe AZDavid can now post a middle finger photoshop to me now? I’m sure constructive criticism is not in his vocabulary. But “strawman” sure is.
“bunch of angry and bitter people”
It sure seems like you are the angry and bitter one here. What is the purpose of your post anyways? Just being one of those “internet trolls”?
Don’t you just hate when someone changes their blog handle just to make one post, “what”? It defeats any credibility to their post. I just wish people had the courage to say what they have to say using the name they always use. I’m sure you understand what I am saying.
Your post comes off as angry and bitter and it sure seems like you and bltserv came here to troll the blog. Say it isn’t so.. help us bitter people understand the point of your post.
This blog is a public service. These are real people making real comments. I would think that this should be an eye opener and provide information to make a better informed buyer which is the goal. I don’t see bitter and angry here. I see realistic and balanced.
How about the young buyer that wants to jump in because he wants to be optimistic (I know someone that said that). This may be the only place he can go to give him the kick in the butt he needs to wake up and see this market for what it is.
CK –
I am not bashing Irvine We are talking about foolish buyers in general today.
I have no intention of buying in Irvine, but if I were, you can bet your ass that I would trust IrvineRenter as my information source above any others.
The blog seems to be pretty successful, no? Why change formats and jump the shark? Turn it into a cheerleader forum?
AZDave…appreciate the reasoned reponse. And yes, I agree the blog is indeed successful. I’m just wondering how it works in driving business for the brokerage. Even though I don’t agree with much of the commentary here, it seems to be a good outlet for those inclined to engage in these types of discussions. My question was more along the lines that the daily discussion here would seem out of step with what potential buyers (or sellers) might be looking for. If one were a sheeple wanting to buy a house right now, I would think some of the discussion here may scare them off, no? So is that good for business? I’m open to a discussion — was not trying to troll at all, just curious.
If one was a potential client of Larry’s after reading this blog they could at least rest comfortably that Larry would do everything in his power to prevent his client from being a sheeple led to the slaughter.
I certainly don’t get that feeling from many others in the industry other than Jim The Realtor.
Its fun to listen to AZDavid say how nice it is in Arizona after 100 days of 100 degrees. And how having kids and maybe a wife is just a waste of time. Better to stay in his rented man cave and post here than waste his time having those evil children and a family. Bitter ? Ya Think ?
Came back to troll some more?
bltsrv –
You get no argument from me on the weather. Although, I have to say – there are a bunch of CA plates roaring down our freeways this winter. Teaching us zonies how to weave in and out of lanes and properly tailgate at 80 MPH. It’s quite the show watching these fast Eddies frustrate themselves.
When did I say having wife and kids was a waste of time? Oh wait – I didn’t; you are just blowing some smoke and making up fantasy talk. You know, acting out.
A rented man cave – nice. I like that. And I am the bitter one – I see how it goes, hypocrite.
No one is asking for a cheerleader, but I think people get tired of Negative Nancy/David too.
Other than the IHB’s Community Profiles, I think there should be some articles about how nice it is to live in Irvine… after all… IR does live here too.
I do write the occasional playful article about life in Irvine. Remember the post on Turtle Rock Raceway? A steady diet of those kind of posts bore people, so I can’t do them too often.
I don’t set out to be negative, but when reality is less than entirely positive, the writing will reflect that. If there was no hint of caution in what I write, I would be irresponsible.
I understand that.
My comments of negativity aren’t aimed at your writing, but rather the comments that usually follow any of your posts.
I guess it’s normal for people to be drawn to schaden more than unicorns and rainbows (what that says about society enjoying the sorrow of others is a bit disheartening to me).
But it would be nice to see you defend the city you reside in a bit more.
But maybe that’s just me… while I don’t like how high the prices are here and I know they are fundamentally exorbitant, I do believe that Irvine is worth *a* premium (just not as high as it currently is). It’s easy enough for non-Irvine people to bash it, especially those who don’t live here… but it’s not really the place to be if you’re a single-guy-with-no-kids-or-others-to-be-responisble-for (although having a great university nearby could pose a counter to that).
However, if your readers don’t appreciate hearing the other side of things… then I guess I can go back to not commenting because I don’t want to waste space on the IHB’s server.
CK –
I cannot speak for the business model, but as a future house buyer, this blog promotes transparency and enabling the buyer to make an educated decision and I respect that. None of this it’s always the greatest moment in the history of the universe to buy a house from me today right now yada yada yada.
The real estate market does need to start moving away from all the deception and conspiracy against buyers and evolve to helping buyers get fair prices.
I don’t think the comments on this blog are overly bitter. I used to checkout HousingPanic where every other word in the comments was ‘realtard’. Not nearly as bad on here.
If IHB were an IrvineHousingPanic with everyone talking about stockpiling guns and ammo, revolution, etc then I’d probably agree that’s probably not good for business.
Maybe the blog itself promote transparency but the comments tend to harbor elements that would turn people off from this blog.
As a parent, I am offended by much of the “do it for the children” hate I have seen in the comments which you are very guilty of.
But I understand you are a single guy who has no concept of what a child can bring to your life so I can’t really fault you for it.
But not everyone understands where you are coming from and I think that ends up polarizing the readers in a negative way.
As a parent, I am offended by much of the “do it for the children” hate I have seen in the comments which you are very guilty of.
Ah Ah Ah – watch it there, irvine_home_owner. Be very careful. My message of hate was aimed at people making up excuses and using the the children to excuse their poor financial decision making. When someone attempts to convince me of something and they bring out the children – I am immediately skeptical.
Note that my message of hate was not aimed at the act of loving the children. Merely using that love for the children to explain away real estate speculation. That’s the real issue. You can get all hot and bothered all you want, but let’s at least keep it in context.
As I logically pointed out – if dad were really all in it for the children then he could have saved a lot of food and clothing money by renting vs buying. That’s not what he did; what he did was buy a house because he just wanted to buy a house. He may have had many influences, greed, family, stupidity, peer pressure, etc. But note that he goes on to WSJ and opens up this huge sob story emphasizing the children.
Do you see my point? I have no problem with him loving the children. But I suspect that he was more interested in speculating on real estate – the kid doesn’t care if he lives in a rented house or not, come on.
I am not referring to just this blog entry and your comments. I have read other comments on other articles from you (and others) about Irvine and its schools in which you have also tendered your “oh it’s about the kids” rhetoric.
Without having children of your own, it is close to impossible for you to understand how your decisions in life are changed. Sometimes it does seem illogical but some parents will stretch beyond their means to buy a house in a location they want to live in because it is better for their children… and because they think they can work harder and make more money to afford it.
As to renting… although it may save you money, it has its own foibles. Being a renter for the last year has convinced me that I would rather own because I don’t like having to worry about damaging my landlord’s property or stress about whether he’s going to foreclose or if I’ll ever get my deposit back. I would like to stay put in a neighborhood and build relationships with families on my street so that my kids will have longer friendships or so I can rely on my neighbor to help me out since I actually own the house rather than be seen as some transient occupant.
There is always the other side to things and I find that under represented here. And when others try to, they get bullied out by Mr. Paint and friends.
Do you really know the motivation of the author? Maybe you are right but I am sure that there are many other people whose primary interest was for their children.
I think sometime in the future, once you have your own family, you will look back on your comments and feel they were a bit harsh. And maybe not, but having kids does make you do crazy things.
Or are you the person who has always been financially responsible and never bought anything that was motivated by emotion rather than logic and conservative money management.
Do you really know the motivation of the author?
No – I do not. That’s exactly my point. He may have had MANY MANY influences. We don’t hear about those in his article though. He steers his audience into the children where hearts and minds can easily be won.
I don’t know what to tell you on the images. Sometimes it is easier (and funnier) to draw up a quick sketch to make a point. I know that you are still mad about my Yoda picture with BK’s quotes – however, I did apologize for that one just like bullies always do.
And maybe not, but having kids does make you do crazy things.
I won’t be using it as an excuse for walking away from a mortgage – that is certain.
“I have no problem with him loving the children. But I suspect that he was more interested in speculating on real estate – the kid doesn’t care if he lives in a rented house or not, come on.”
But… one can argue that speculation on rising values in real estate is “for the children”.
Equity benefits both him AND his kids.
But… one can argue that speculation on rising values in real estate is “for the children
Exactly – my point!
irvine_home_owner, we finally agree.
Fair point on the transparency, and I agree that is the primary problem with the whole real estate business model. We may disagree a bit on the level of venom in some of the posts here…but that’s ok to disagree. That said, I’m sure the IHBrokerage would make a lot more money actually selling houses than educuating the folks. Couple that with a consistent anti-Irvine theme in the comments — and it might add up to some conflict in the core business model.
And don’t get me wrong, I wish Larry all the luck in the world. I’m really not a hater. Just that a brokerage tied to this particular blog seems to be an odd pairing. That’s all.
And I would not have said anything at all under normal circumstances — live and let live….but the comments today seemed particularly angry with hints of racism tossed in — and are left totally un-moderated. As a buyer, I’m not impressed with that.
“I’m sure the IHBrokerage would make a lot more money actually selling houses than educuating the folks.”
CK – There’s a difference between making a lot of money, and making an honest buck. IrvineRenter has consistently proven himself as a reliable source of information, with honest analysis. I am edumacated because he cuts through the real estate bull. At some point in the future, I will be looking for housing. And there will be many realtors out there that will tell me “Now is a great time to buy.”
When it is truly “a great time to buy”, I know there is one name I trust right off the bat.
IHB.
Interesting perspective. Larry educated me as well, and I owe him many thanks (and have done so in person).
But don’t kid yourself that starting the IHBrokers was some sort of philanthropic venture, and they will be satisfied if one day in 2012 they can help a reader like you navigate through the vultures. I’m quite certain they would not have gone through the trouble if they were not interested in “making a lot of money”.
And I don’t begrudge that — more power to them. My question just comes from the observation that the blog and brokerage might not complement each other. But I’ll stop asking now.
If they help me navigate through the fields of vultures to my dream home at reasonable price, then they deserve that honest buck. And if there are many future customers like me, then I hope they make lots of honest dollars. Its not philanthropy, its real value-added work. (Which costs real dollars.)
As for your observation about the blog and the business. . . yes, they do not always complement each other. That’s the effect of having good analysis. Sometimes, its not a good time to buy (for right now.)
But don’t kid yourself that starting the IHBrokers was some sort of philanthropic venture
That’s a pretty unfair statement there, CK. There is a difference between honest business and hustling. Your statement does not distinguish between the two – it reads like a false dilemma between Philanthropy and Hustling.
If it’s an honest business that seeks to level the playing field and close the information imbalance gap that currently screws buyers then I support it.
You are right, AZ. That came off harsher than I intended.
CK,
my wife and I moved to OC from San Diego 3 years ago and have decided on a particular neighborhood in Irvine where we would someday like to buy. We are interested in using a realtor familiar with this neighborhood and not spewing out the familiar “now is a great time to buy….” without backing it up with facts. I trust these guys at IHB as much or more than any other realtor out there and at least we share a common philosophy about the market. I think that IHB has the potential to score many clients like us from the blog who read it daily but don’t always pipe in. Only IR knows how many people contact Shevy or him and credit the blog.
irvine_home_owner –
Nobody is objecting to Irvine being a nice place to live. I have said on several occasions that I am sure it is a nice place to live.
What I take exception with is all the marketing hype that attempts to portray it as center of the universe. And my biggest complaint about Irvine are the ridiculous amounts of credit that banks extend to buyers with no reasonable expectation that it will all ultimately be repaid.
There is some serious ethical lending boundaries being pushed in your community.
Notice that none of the grievances are with Irvine being a nice place to live. Just with the financial shell games. I think that is reasonable.
The funny thing about your comment is I always tell everyone that Irvine is the center of the universe.
I don’t think that Irvine is the only area that pushed ethical lending boundaries… the companies that did them may have been formerly HQed here but that doesn’t mean most of the loans for residents of Irvine were done that way. And I’m sure that the buyers in Irvine are probably better qualified for their loans than other places in SoCal. If you can measure the number of defaults, it’s probably higher outside of Irvine.
If you want to get down to it, maybe the current price stickiness of Irvine should be appreciated as that means less Irvinites are taking our tax money compared to other areas.
“my biggest complaint about Irvine are the ridiculous amounts of credit that banks extend to buyers with no reasonable expectation that it will all ultimately be repaid”
Government is responsible for junk mortgages. Why do You complain about Irvine?
Oh… while you are worried about the debt Irvine is creating, it may behoove you to know that Irvine buyers are putting more into their mortgages than other cities.
The average down payment for Irvine so far is 42% (www.irvinerealtorsite.com), last year it was 38%.
What do you think those percentages are in other cities?
“What do you think those percentages are in other cities?”
Much, much smaller.
The average down payment for Irvine so far is 42% (www.irvinerealtorsite.com), last year it was 38%.
irvine_home_owner –
Where do you think these down payments are originating from when you see down payments in the range of 400K in a community that boasts a median salary of 90K to 100k?
Let’s suppose a prudent saver in this salary range could save 40K a year. At this rate, our buyer would be slaving for about 10 years just to make the down payment.
Do you really think that Irvine has an abundance of these savers? I kind of doubt it.
So where is all this money coming from to make these down payments?
Well, I suspect it is originating from equity sellers who bought in early 90’s and are in a position to “move up”.
This would not be possible without the government goosing the market with low interest rates, FHA, tax credits, etc.
So when all these gimmicks go away, Irvine is going to correct. I wouldn’t go boasting about those large down payments. All it is saying is that first time buyers “Piss Off”.
Curb the testosterone karate guy.
I wasn’t boasting… you’re the one who wants the world to go back to 50% down payments.
All I’m saying is that you’re complaining about some mythical credit crunch Irvine is placing on the banks and taxpayers when based on the statistics, people who buy in Irvine are putting more skin into the game than other cities.
And for your information (you should really look at the Excel spreadsheet), the average home price in Irvine is $660k, median is $560k so that median salary comparison is a little better now isn’t it?
While I agree that home prices are still too high in Irvine, don’t start going all “strawman” (or is your current term “strawdog”?) on me with your suspicions of where the money is coming from to refute my opinion that Irvine buyers are not taxing the economy as much as you purport.
And about that, I’ve always joked that the large down payments are due to FCBs… foreign cash buyers. In fact, maybe if you lived here, you may see that it’s not as much of move-up buyers as you think.
And maybe that’s the issue, I find it very hard to agree with comments about Irvine real estate from someone who doesn’t live here (how many times have you been to Irvine?).
the average home price in Irvine is $660k, median is $560k so that median salary comparison is a little better now isn’t it?
It’s getting closer. Median price needs to drop down to about 400K to be more consistent with local incomes.
I find it very hard to agree with comments about Irvine real estate from someone who doesn’t live here
Why do I need to live there when I can see the foreclosure numbers for myself?
people who buy in Irvine are putting more skin into the game than other cities.
Like I said, this “skin in the game” that you mention is nothing more than paper wealth. It does not represent money that the buyer had to work for. It’s mostly money that his previous house earned. So no, I don’t agree that they have more skin in the game than other cities. Like they say.
I cannot speak for foreign cash buyers, but it sounds like a huge myth. And, even if I assume that it is true then what a horrible investment. These foreign folks are going to lose their money when these houses finally correct.
Like I said, when the government can no longer afford to keep the housing market goosed for first timers, Irvine is going to correct.
FHA is about to pop. FDIC will need a bailout by the end of next year. How long can they keep it up? We’ll see.
If You listened to Geitner today on NPR, you would believe it can be kept up forever. He was adamant that the policy makers can cope with any crisis!
Do you have proof that these downpayments are coming from move-up buyers?
Until you can produce that, your theory is just as good as my FCB one.
And you’re back to sidestepping, regardless of where this down comes from, do you really think that Irvine buyers are more or less responsible for these economic problems than those people who are buying in other cities with FHA 3.5% down loans?
With the enormous size of the losses that have been chronicled here for the last few years, I’d have to say that Irvine (and Orange County in generral) has a heaping helping of “responsibility” for the meltdown on it’s plate.
Where was New Century from again?
“And my biggest complaint about Irvine are the ridiculous amounts of credit that banks extend to buyers with no reasonable expectation that it will all ultimately be repaid.”
The loans will be repaid, just not by the borrowers but by the taxpayers plus all the free rent and taxes, i.e., free housing while not paying the mortgage and taxes.
“As a parent, I am offended by much of the “do it for the children” hate I have seen in the comments which you are very guilty of.”
I’m a parent and take offense at the excuses in the name of the children or single motherhood as sainthood.
Part of being a parent is teaching responsibility and living within one’s means. I’m sure with the typical medium income household family income of $130,000, that family can’t afford a $1,000,000 mortgage, 2 BMWer and a SUV, unless there’s lots of undeclared income, i.e., cheating on the taxes.
The bank/RE/govt industrial complex having families selling their souls to consumptionism via RE lending is absolutely wretched. Debt/financial fights are the number one on the list for divorce. So is this housing Ponzi scheme really all for the children or for vainity?
May be it’s old already to talk about Chinese in Irvine in the blog.
I am an “Asian amreican” living in Irvine. I would like to think that I’m an American but no-one says, there is a fine lookign American to me by looking at my face or the color of skin.
However, I do have to agree with some of you that there may be too many chinese with a boat load of cash ruining many of hard working citizens’ chance to buy a piece of property in Irvine (just my opinion).
Out of 6 houses in my cul de sec, 3 are chinese familiese who rarely make any eye contact for me to say hi. Garage doors get shut before they get out of the car. White and other non-chinese started doing the same thing because there are rarely people on the street. Grant that may be it’s a culture difference.
I believe any thing too much is not good and any one race or nationality in a given area can’t be good either. I am seriously buying my future home not in Irvine not just for the price but for the general dynamic change in neighborhood.
Irvine becoming a “Beverly Hills” Monterey Park is a sad but true phenomenon and I would not like to be a part of it…
Ok now just lynch me
Rather than try to address the individual comments, I will write here.
First, I don’t understand why any of you should care about my business. If I do well or ill, it has no impact on you. If you were genuinely interested in my business, you could email me personally, and I may tell you what is going on. To ask here gives me the impression the queries of interest about the business are veiled wishes for a brief moment of schadenfreude; unfortunately, the business is doing well.
I don’t wish to divert undue reader attention to my sideline, so I confine it to Saturday news updates. Do you want to know how many closings we have had? How many we have in escrow? The info is on the MLS.
Second, people come to the blog for many reasons, and what people discuss in the astute observations may have little bearing on the reason they visit the blog. The comments on the blog represent less than 2% of the readership, the “silent majority,” as Richard Nixon put it, read the blog daily without commenting. (When people make astute observations, they sometimes forget they are not in a room with 20 people, but they are on a stage with 20 people talking and several thousand are in the audience watching.) Managing the comments or the writing on the blog to conform to someone’s idea of proper real estate decorum would turn the blog into something else, and I am not going to do that come what may.
Third, I write this blog. The writing of the blog is going to be an extension of me, my insight and my creativity. People are either going to like it and be drawn to it or not. If people want a different discussion, they can have it at a different place.
Very few people make buying decisions based on what is written anywhere much less in a housing blog. People buy and sell homes mostly because life’s circumstances compel them to. People want someone they trust to help them. Some of the readers of this blog believe I have demonstrated knowledge, integrity to the Truth, and a blunt willingness to tell the truth. The people who are turned off by this leave, and the rest stay. There is very little chance of me changing who I am, what I believe or what I write to please people who don’t like me. If I publicly fail because I was true to myself, then dance in schadenfreude to Frank Sinatra’s “My Way.” I will feel no shame.
Fair enough. Thank you for your thoughts.
BTW,
What I wrote also goes for the IE for medium household income of $85,000 purchasing at $650,000 home and two new SUV and BMW all on credit. The debt load is too high and then let the arguements begining on how to spend the remaining negative $50 per month and no more equality withdrawal loans.
But remember, it was all done for the children….
But remember, it was all done for the children….
Notice the similarity with how the government talks about its peasants in pushing all this help the homeowners garbage. Sounds a lot more PC than saying “Help the bank executives”
Trying to get your way? Just say that it will help children and homeowners.
And there are the stories we don’t see… the couple who got that OptionArm knowing they would work hard and actually have their income meet the demands of their debt so that their children can have a place to call home without moving around every 1 or 2 years.
And they are able to convert to a lower rate fixed loan and their payments are even more manageable to a point that they can buy the things for their kids they hadn’t in the past few years.
It’s the holiday season… how about some mudita instead of the usual helping of schadenfreude?
The path to home ownership you describe is foolish, and I would not recommend anyone go that route. There are many people who attempted using an Option ARM or subprime loan as bridge financing expecting that prices would go up and refinancing would always be available; in case you didn’t notice, that idea failed spectacularly for an entire generation of borrowers. In fact, part of the reason I write for the blog is to dissuade people from attempting the journey through bridge financing because it can end up a pier and people feel like they are walking the plank.
You miss my point.
I wouldn’t recommend OARMs to most people either. But that doesn’t mean there are those that the OARM serviced correctly, the people who weren’t depending on the appreciation of real estate but rather had situations that traditional financing could not service. The same people who years later are still paying their mortgage, and may have actually converted to a traditional fixed rate because their financial status had stabilized.
While this blog tends to paint OARMs as the devil, I stand by my contention that it did make sense for certain *responsible* segments of the buyer pool. An AZ resident sees traditional 30-year mortgages as the end of civilization yet you would still recommend those right?
I apologize for interrupting the schadenfreude JPEG of the day with a little positivity… but this is the season of joy and giving so I was just taking a break from the foreclosure/underwater/walk-away/short sale doom and gloom.
It’s 7:20pm and I just read all the posts for the day. David..you have been busy today. I can’t remember who, but someone wanted to hear about people saying they like to live in Irvine. I do.
Here I am, we’ve lived in Irvine since 1983. Owned a condo since 1993.
Bye now, “Bones” is on. 🙂
I visited Irvine many times; I thought it was wonderful and still do think it’s a nice place.
You are fortunate to have bought “way back when” when prices were lower. Soon prices will fall to the 2003 level and then the 1993 level.
As the market collapses, there will also be the trajedy of more divorces, and unemployment as people are forced from their home.
Well, as for me, at age 59, I’m now living in Public Housing in Bellingham where I pay $192 a month for an efficiency apartment and that includes all utilities; and I don’t need air-conditioning. Fortunate me, I count my blessings every day; I do wonder when the carpet will be pulled from unde my feet and the Housing Authority no longer gets its Federal subsidy.
Did I miss something? What happened to the Forums??
Dave, You rock! your comments make the blog more interesting
I’m not angry, nor am I bitter. I’ve worked in Irvine for the past 23 years and I can tell you without a doubt, I would not buy there. However, I know I am unlike the majority of posters here. I support smaller less intrusive government, I’m against the Drug War, and I think the banksters and all the people involved with the fraud from the top down be charged with crimes and sent to JAIL.
I’m not saying there aren’t *some* people gaming the system….they suck. The majority of 1st time buyers got burned….period, and it wasn’t because most of them just wanted money. Most want something to call THEIR OWN, to invest in something that is a good (or USED to be) long term investment and good luck finding that in Irvine where you own and the government is intrusive almost beyond belief. HOA (litigation dream)nightmares. Wanna chop a tree in YOUR yard….get a permit. Want to change out the garbage disposal…permit. Etc ad nauseem.
Actually, most of you are reading these blogs so YOU can make a bet on the best time to “jump in” to the shark tank…by all means, get on in there!!!
And as far as one poster said about being scared….buddy, thank GOD there’s still a 2nd amendment, I know most the Irvine lovers out there want that right taken away as well.