You can plan on me
Please have snow and mistletoe
And presents ‘neath the tree
Christmas eve will find me
Where the love light gleams
I’ll be home for Christmas
And you’ll be in my dreams
I’ll be home this Christmas, darling
I’ll be coming home to you
And there’s nothing in the world
Gonna get in my way
I’ll be home for Christmas
You can plan on me
Please have snow
And mistletoe
And presents ‘neath the tree
Christmas eve will find me
Where the love light gleams
I’ll be home for Christmas
And you’ll be in my dreams
I’ll be home for Christmas
Till then you’ll be in my dreams
I’ll Be Home For Christmas — Elvis Presley
.
.
Asking Price: $649,000
Income Requirement: $129,800
Downpayment Needed: $162,250
Purchase Price: $651,500
Purchase Date: 12/3/2004
Address: 56 Autumn, Irvine, CA 92602
Refi First Mortgage $695,400 
Beds: 3
Baths: 3
Sq. Ft.: 1,858
$/Sq. Ft.: $349
Lot Size: –
Type: Condominium
Style: Traditional
Year Built: 2001
Stories: Two Levels
Area: West Irvine
County: Orange
MLS#: S494939
Status: Active
On Redfin: 158 days
Unsold in 90+ days
From Redfin, “Priced under Market! Beautiful home in Summerplace, West Irvine. Patio at entrance with French doors to kitchen. Dark hardwood flooring, granite kitchen counters, big center island, mocha cabinets and stainless steel appliances. Formal dinning room, fire place in living room, custom window blinds. Full bath downstairs near garage entrance. Computer niche upstairs. Separate laundry room. Master bedroom with large bathroom and walk in closet. Close to gated association pool.”
Priced under Market! That is such BS. How can something be priced under market for 158 days? It is clearly priced over market, or it would have sold by now.
They forgot to say it is empty and burning a hole in someone’s pocket.
.
.
In the spirit of yesterday’s post, this seller has already taken their profits from the deal when they refinanced early this year and brought their mortgage up to $43,900 over their purchase price. Do you think they will give this money back when the short sale happens? I am not holding my breath.
The stupidity of lenders is breathtaking. How can you do these large, cash-out refinance loans and not expect to lose money? I suppose this is now a recourse loan, so they have the ability to go after other assets, but that is assuming this seller has any — or at least some the bank can find. Cash in a mattress is hard to find, you know.
.
BTW, for those of you who do not think prices on homes in nice neighborhoods can decline 40%, I invite you to check out this property in the San Diego suburb of Chula Vista I found on Piggington.
Maybe it’s just me, but why live in West Irvine? It feeds Tustin schools, has Tustin Ranch shopping, and carries a slight premium over Tustin Ranch. It’s a lot of money for a zip code. You’re far enough from “real” Irvine to truly leverage the city services – and while you drive past dino dash, chili cook off, and tiller days signs you’re thinking “should i go?”
If you’re going to do Irvine, DO IRVINE. West Irvine seems like an afterthought.
—–
Relevant to the rate freeze discussion, this just in from Seeking Alpha, courtesy of Orangezilo:
“While it certainly will help the situation, consider a slide from Countrywide (CFC)’s Keynote Presentation at the 37th Annual Bank of America Investment Conference in September which showed the following:
Causes of Foreclosure (July 2007)
58.3% Curtailment of income
13.2% Illness/Medical
8.4% Divorce
6.1% Investment property/Unable to sell
5.5% Low regard for property ownership
3.6% Death
1.4% Payment adjustment
3.5% Other”
A concurring opinion from folks on this board. Think it will shut up Truthinss? Not a chance.
“The stupidity of lenders is breathtaking. How can you do these large, cash-out refinance loans and not expect to lose money?”
I know several people who work/worked as mortgage brokers, loan processors, etc. They processed paperwork and tried to get loans done. Some of them tried to get loans done any way they could.
It is surprising what junk mortgage brokers could get some bank somewhere to knowingly take, even without any fraud.
They tended to think like realtors, that prices wouldn’t drop substantially. In 2006 before many of the lenders had gone under, many of the people in the loan industry started worrying about their jobs and incomes. That was because new loan volume was dropping, and there weren’t as many refis either. For them to keep their style of living, they kept trying to do as many loans as the prior year.
I wouldn’t want to shut up Truthiness. The comic value cannot be overstated. She is a case study in the emotions and behaviors associated with denial and bargaining.
The payment shock has not been a big cause of foreclosures through mid 2007 because few ARMs had reset before 2007 and gone through the foreclosure process. It will be a big deal going forward.
Tanta at Calculated Risk has promised a treatise on the new program. From what is known, it appears the rate freeze only applies to subprime (FICO below 660) and only applies to those with the highest teaser rates (7%-8%). So what they are doing is locking in the highest rates on those with the worst credit histories hoping to squeeze a few more dollars out of them before they go under.
How many people in Irvine have the following characteristics:
1. Option ARM
2. Owner-occupied
3. FICO below 660
4. Teaser rate between 7% and 8%
Not too many would be my guess.
http://calculatedrisk.blogspot.com/2007/12/more-on-freeze-plan.html
BTW, for those of you who do not think prices on homes in nice neighborhoods can decline 40%, I invite you to check out this property in the San Diego suburb of Chula Vista I found on Piggington.
With all due respect, IR, I think it is a bit of a stretch to describe anything in Chula Vista as a “nice neighborhood”. Granted, Eastlake Vista is better than most areas of Chula, but this home is less than five miles from Mexico. I think the fact this home has been on the market for 78 days is a strong indication that the small number of people financially capable to purchase a 600k home right now agree with me.
Somebody thought the neighborhood was $1m nice during the bubble. In fact, a lot of people did.
I found this property interesting because if you look at the house and look at the price tag, it could just as easily been in Irvine. We are not talking about 40% off some run-down condo in Santa Ana.
IR, I think your general point is valid but I have to add that using CV as an example only points to how stupid the bubble was, not that “good neighborhoods” are also feeling the pain. Without question, some great neighborhoods are seeing declines but describing CV as a “good” anything is a stretch. Which is not to say the CV is a scary hellhole only to say that building $1M home in CV was the result of the bubble, not anything anyone reasonable would define as sensible.
Rules out Northpark and NP Square for you too tealeaf… They feed Tustin schools.
I think West Irvine is nice, although I own here so there is some bias of course. The Tustin schools deal isn’t bad because, outside of Beckman, the schools for West Irvine best most Irvine schools in terms of test scores, rep, etc. I think Beckman will get there eventually… If my wife didn’t work at IUSD, we’d look harder at bigger houses around here, although with the exception of Sheridan (intersection of Jamboree, Portorola), the SFRs in West Irvine aren’t very nice or desirable IMO.
I love having the Marketplace right down the street. It was especially nice being close to Babies R Us when our boys were newborns. It’s a quick bike ride to Lowes if I have to pick up a part for some home improvement project. City parks in West Irvine are mediocre, but Irvine Regional is right up Jamboree. For the areas of West Irvine that have HOA, the master association is well-run and does a decent job of maintaining the neighborhoods.
I think the place is finally priced close to market now. The reduction to $649K came in November. A couple of units in Summerplace have gone into escrow recently in the high $600s to low $700s. As this one is smaller, I think it is probably worth around $600K right about now.
It’s in a good location, off the main arterial roads in the area and right up the street from a city park and association pool. It’s always nice to live on a street where no one but residents would even have need to drive on… Not quite a culdy, but close.
Upgrades are simple and decent. If you don’t mind one common wall, no yard, and a rear-entry garage on an alley, this is a halfway decent place.
Shows how even stupider the prices are in Irvine.
Let’s see:
649K for an 1850sf CONDO!! in a congested urban jungle with no yard.
609K for a 3300sf detached house.
Hey everbody check out this rollback!!!
http://www.redfin.com/stingray/do/printable-listing?listing-id=1221772
Seriously IR! The house in Chula Vista could have been in Irvine. HAHHA HAHA. Have you have been to Chula Vista? Your Santa Ana comparison is, perhaps, more appropriate than you imagined.
http://en.wikipedia.org/wiki/Chula_Vista,_California
Aside from the fact that the median household income is roughly half of that in Irvine, 50% of the population is Latino, its closest neighboring city is Tijuana, it has a larger population with less than half the total sales (measure of economic activity), etc.
http://www.boe.ca.gov/news/pdf/city_1q06.pdf
Yeah, other than all that Chula Vista is a lot like Irvine.
That may be what they had on the slide, but, from the loans I have been reviewing, 88% of them have fraud in the loan file. People can talk about payment adjustment and freezing the rates, but it won’t help when the borrowers got into loans where they can’t even afford the interest only payments. Some great examples of the loans I have seen:
1) SISA loan where the borrower is represented to be a LEGAL SECRETARY earning $10,500 per month. This brilliant lender thought it would be a good investment to lend her $550,000 without verifying her income and assets. The loan went into default and I found she actually earns $4,500 per month. Freezing the rates won’t help her.
2) SISA loan where the borrower is represented to be the owner of a cleaning service earning $13,000 per month. Lenders were climbing over each other to lend the borrower $625,000. This loan went into default and it was later discovered she was a W-2 wage earner making $3,500 per month.
These are fraud for housing examples where the borrowers actually wanted to live in the properties. I haven’t even touched on the fraud for profit examples where the property values are significantly inflated.
As an attorney who has been reviewing loan files for over 7 years, I can tell you the problem is a lot worse now than what the public is being led to believe. Politicians are trying to spin it like the rate freeze is going to stop the foreclosure mess. It won’t, and I don’t feel bad about it all. Everyone involved shares in the blame; the banks, the borrowers, the MORTGAGE BROKERS.
By the way, I don’t think I have ever reviewed a broker originated loan that didn’t contain some sort of serious misrepresentation. For stated income loans, there defense is, “I just put down what the borrower told me.” Oh really? And the borrower knew exactly what the debt to income ration had to be on the loan in order for the borrower to qualify.
Sorry for the long comment, but I thought a lot of the IHB readers would like to know.
Ahh yess…. keep kidding yourselves that you can deny market fundamentals forever. This blog almost is starting to seem bullish again.
I remember the shock in ’92 when the first hose in Palos Verdes went under the million dollar level, then they went a lot lower and took years to recover before the current bubble. And you think Irvine is a better neighborhood than PV?
All indications are that this downturn will be the worst in history.
So yeah bulls!
“The stupidity of lenders is breathtaking.”
Stupidity may have played a role, but the real culprit is Moral Hazard created by the Fed’s spineless policies.
Like the borrowers on this property, the lender calculated that somebody else would pick up the tab should something go wrong.
And we all know who that “somebody else” is…
Prices aren’t stupid or intelligent janitorT. They are what they are. People will pay what they are willing to pay… Simple function of supply and demand. Housing prices in all areas are a function of market dynamics.
Many San Diegans (me being an ex) refer to Chula Vista as Chula-Juana. It’s not just about the proximinity to the border either…
Not many bulls on this site Alan. Your post doesn’t make any sense. If you think IR is a bull, you don’t read very well… Maybe you meant to post on an NAR site?!
Is this long term data, or just from July 07?
Maybe the slide lumped that $10,500 –> $4,500 income into the Curtailment category. Hey, it was curtailed on paper!
I did some research on the house on Silver Hawk in Chula Vista by going to the Zillow web site.
This house sold 12/09/2005: $1,057,000.
So since the current sales price is $609,900 this is as you said a 42% hair cut.
I may have one of the most bearish thought processes in the country but 42% assuming there was no dirt on the front end (like cash back) is very ominous.
This would be an excellent case study assuming all transactions on both ends are purely market driven.
ipoplaya,
your posts are very bullish, are you in the business of selling real estate?
My crystal ball says the market is heading SOUTH
I’m sure you guys are checking yahoo finances regularly but in case not:
http://biz.yahoo.com/ap/071207/home_foreclosure.html
Also regarding this house. A 1800+ sq at 650k$ is good (while maybe need a little more drop for 2008, to reach a 280$/sqf).
However, most of the similar houses in Irvine, especially in the 614 and 603 zip codes are still much higer.
In Westpark, there are still priced above 400$/sq.
So it means the appeal price for foreclosure is 20% less than asking price, and the asking price are not yet dropping to aligned. Especially in the zip code where there are a very small number of foreclosures.
IR,
Is there a theorical explanation than a ‘market’/asking price will follow the foreclosure price on a wide basis ?
If not, I’m afraid that the bubble won’t crash, but will only slow down smoothly, with small number of foreclures opportunities for the lucky one, and still a massive overprices (for the wallet) houses.
My favorite was the owner of a gardening company…sure, “company”. More like I mow lawns and trim trees on the weekends. SISA documentation making over 12,000/month. Lets lend him a cool half million too.
IMO, the main difference between this property and many in Irvine is that the price crash if farther along in San Diego county that it is here. They led us by a year on the way up, and they have been leading us by a year on the way down.
Perhaps a better comparable between this Eastlake Village in Chula Vista and a community in OC would be Talega. They are both outlying master-planned communities that will see greater price declines than communities like Irvine that are closer to employment centers.
No matter, this property is for sale 42% off the peak, and the huge wave of resets and foreclosures hasn’t hit yet. This community may see 60% or more off the peak before prices stop falling. Irvine might be spared and only drop 40%.
I wouldn’t say he is bullish, but he does not feel the market will drop as far as I do.
He may be right.
Yeah, no matter how you slice it, 42% is one hell of a hair cut.
Hopefully, the momentum moves north and we see some of those reductions locally, maybe not as drastic. It will be interesting to see how it plays out.
I’m not sure there is that much of a premium in West Irvine, or Irvine for that matter over Tustin Ranch. At least for the homes we have looked at, Tustin Ranch seems every bit as expensive and in many cases more desirebable than many parts of Irvine. I would love to secure one of those SFR that feed into Peters Canyon or Ladera elementary in Tustin Ranch, but most are too pricey for me. Curious about the Tustin Ranch shopping comment? Is that a negative? To me, proximity to the Marketplace would be a big plus.
This looks like a really nice place to me.
But even so – how come 250,000 is not enough (which still seems too high for a condo in general but assuming that the demand to live in this area is high)?
That 162,250 down payment “should” be enough to buy a smaller condo straight-cash.
It’s the stupid “monthly payment” numbers game.
None of these people have a clue how much money a million or even a half million dollars really is.
The mortgage hustler runs their little game to make the monthly payment “affordable” which is all these buyers cared about when offering their “bids”. Someone would have “paid” a billion dollars if some lender could come up with a “mortgage product” to make the monthly check “within reach” of the borrower in order to “get them in”.
If any of these people had to actually earn 650,000 (yes, earn, by working a job) – would they, at the end, be willing to exchange it for this property? I doubt it. Complete instant-gratification gone awry.
Pretty sad to see what a bunch of brain-dead morons we are all surrounded by.
I have noted that all the bubble blogs invariably have comments about “illegals” and such, the tone being there are filthy animals. Here, the message is Chula Vista is 50% Latino and thus has no right to be compared to Irvine (where I note that minorities are also dominating). All because Mexicans are believed to be too ignorant and brown-skinned to have Irvine-ish homes in their neighborhoods. IR’s analogy is quite good, that Chula Vista home is far better than most properties featured on this blog — and is a harbinger for the deep drops ahead for Irvine.
Alan,
I am with you…..I lived through the downdraft of 1991 and this time it is a lot worse. I see places like the one listed here in the mid $300,000 range in a few years.
By this time next year mentioning real estate in a public place will be like telling your friends you have the plague…..
…..people will get upset stomachs and start throwing up when real estate is mentioned….that will signal that we are truly starting with a down turn in prices.
As stated on this blog, most sellers are in denial at this point hoping that someone will come along that doesn’t understand what is going on in the markets.
JP,
I find your comments interesting. I do not work in the RE industry but really enjoy reading stories about what is really going on.
Even some the bearest of bears here have a sort of ‘not going to happen like that’ here in Irvine superiority complex.
Amazing…
The term “minority” has no meaning in CA. There’s no majority. If people mean, “everyone but white people,” then say “non-white.”
This is a very interesting blog!
Who honestly has 162,000 for a down payment.
The housing market truly is amazing. If you live in Atlanta Georgia, check us out on the web for amazing housing rates.
I recall the dean of UCLA law telling us proudly, at our orientation, that for the first time, UCLA’s entering class had white males in the minority. It being a very PC place, everybody applauded at the accomplishment. I imagined that at a future orientation, the dean, with teary eyes, would proclaim that the entering class had not a single white male.
Moreover, I have noted that at numerous Asian restaurants, the naturals (note that I didn’t say minorities, sorry for offending you Mark) get far more kim-chi or seafood in their soups than do I. And you thought we had it easy. I suffer from invidious discrimination!!
IR, how dare you compare Irvine to Chula Vista or any where else, dont you know Irvine is special , everyone wants to live here
actually reading the comments yesterday, sounded like some optimistic people (I wouldnt say bulls), wanting to pay 900k for some McPOS in Irvine 😆
IR–>No matter, this property is for sale 42% off the peak, and the huge wave of resets and foreclosures hasn’t hit yet. This community may see 60% or more off the peak before prices stop falling. Irvine might be spared and only drop 40%.
Makes sense.
Thank you JP. Your insight is always appreciated.
He could have just as easily used Oceanside or San Marcos. Or Carlsbad or Encinitas in a few months.
Irvine Renter –
I really think your site is tops.
How hard would it be to find the mortgage total on the Chula Vista home?
I guess I should not be that surprised as I see Sacramento homes all the time selling for 40% off – but I believe this bubble will not be linear and ultimately it will start feeding on itself – so a 40% drop today I believe becomes 70% or more at bottom of cycle.
Sorry this relationship is so one sided. Your site has been great fuel for much of my investing.
Michael
I think it is important to differentiate between top down factors that impact housing prices, from bottom up factors. Chula Vista, Irvine, Phoenix, Las Vegas, Miami, etc. all share the same financial system. This system is broken, and is impacting markets across the board.
How various regions whether the turmoil in the financial system depends largely on local issues.
Here is a nice link that my help elucidate the importance of location, assuming of course you are at all concerned with crime.
http://chulavista.areaconnect.com/crime/compare.htm?c1=Chula+Vista&s1=CA&c2=Irvine&s2=CA
I wasn’t offended. I just try to encourage people to modify their language to be more accurate, especially in a topic so loaded as race.
There isn’t an ABA (American Bar Assoc) publication or event where race isn’t made an issue. I think their sole purpose today is to decrease the proportion of white male attorneys in the profession…
I don’t know if I’d call it a “monthly payment numbers game.” At $250K, if the entire $250K were financed at 9% (possible blended rate for 100% LTV), the monthly payment on a 30-year fixed would be right around $2,000.
Now find me an comparable property in Irvine that rents for $2,000. It will likely rent for 50% more than that if there’s an attached garage. So, unless rents in Irvine decline by a third, this “condo” (quotes used to connote pejorative tone) will not likely drop to $250K.
You should take a reading class or something Alan. Appears you don’t understand the written word. If I was bullish, I’d have said prices are going up. If I was bullish, I probably wouldn’t be contributing to this blog. I would have sold my 1600sf place, that has fallen $140K in value over the past year or so, bought a bigger one long ago, and have lost even more money…
Prices have come down and they are coming down. I watch home prices very closely and also escrow activity. I have toured many homes in West Irvine, Northpark, and Northwood that have gone into escrow within the past few months so I have a good handle on market pricing in those areas. I suspect you don’t spend as much time watching the details of the market. Houses have sold and are selling. Many have rolled back to 2004 prices. Just because things are selling, which means they DO HAVE A CURRENT MARKET VALUE, doesn’t mean they aren’t going to go down. Current market value is a simple function of what buyers are willing to pay, and I can assure that there are knife catchers willing to plunk down a half-mil plus for this property. If there
In my fairly informed opinion, this particular property is probably getting offers in the low $600s and they have been unable to get the short approved at that price. Had a place in my neighborhood, up the street from this property, that lasted all of a week on the market and closed within the last month – $594K for 1622 detached sf 3/2. It was an REO that sold to the foreclosees for $750Kish at peak.
All that being said, IR is correct in that while I’m not bullish, I don’t see as large a decline as he does. I expect another 15-25% decline before we hit the bottom. I hope it is more, as the more things fall, the lower the property tax base on my future bigger property will be, but I don’t think we’ll see rollback to 2000 price levels.
That was my post mmg. And yes, I’d pay $900K for that Malibu property. You miss the fact that us would-be upgrade buyers, who are already losing equity everyday in an owned Irvine home, just need to find a property at a great discount. I want a comp killer…
If that Malibu property, which would sold for $1.2-1.3M at peak, were to somehow fall to me at $900K, I’d be extremely happy. I could sell my place for $575K and only have a $325K spread between my current place and my 30-year home. At peak, that spread was more like $500K, so I’d have “saved” myself $175K.
Now if I wait a little longer, maybe I could “save” so to speak more, but I’d rather move sooner rather than later. As long as the place is affordable long-term, and Malibu at $900K would mean a monthly pre-tax spend on housing of $3800 or so to me (less than 25% of our gross household income), I’d buy the place in a heartbeat so I could put a hoop in the driveway and teach my boys how to shoot a jumper…
The high asking prices just result in houses not selling. Those that do not feel they have to sell cling to wishing prices while the REOs keep taking out the floor. When the number of REOs in the market exceed half the total number of sales, prices fall. This will continue until the REOs are gone. Unfortunately, each decline in house prices puts more homeowners underwater and adds to the pool of REOs. This downward spiral will continue until every distressed homeowner capitulates and sells. Since there are a large number of overextended homeowners who bought at bubble prices, have adjusting ARMs, or refied themselves into trouble, this problem will only get worse. 2008 will be a bloodbath, and 2009 will not be much better.
Ipoplaya
Take your own advice, sell now, bank the cash, put your stuff in storage and rent for 2 years. That Malibu house you want will be down to 6-700K or less and your spread will be down to 200K or less.
Remember my son.. The early bird gets the worm
I think we’re going to see a Japanese style US economy for the next decade or so under the Repukes’ *bailout* plan which the Democraps are saying *not enough*.
Pathetic. Even converting real estate asset to cash will do me in. Time to switch to AUD, Euro, and, god forbid, the Rand.
I see Irvine dropping another 10-15% in asking price next year.
That house is certainly not alone in the 40% drop category. I have a friend that bought in ’05 for $850k and is not a short sale at $525k (38% drop). And it is still not selling. Especially when the house listed above is 1000 sq ft larger asking $600k.
Although I wouldn’t live there, Eastlake seems to be a very nice community with good looking homes, multiple golf courses nearby, brand new shopping and nice green spaces. But it is not easy to get into or out of. Since almost everything there has been built in the last few years, it is currently an amazing ‘canary in the coal mine’ area. The rate at which prices are being dropped there are astounding, and they still have a long ways to go. Eventually, the huge drops there will start impacting the nicer areas. 2008 will be a very interesting year.
I will indeed do that Alan if prices are still going down and still look like they have a long way to go come this summer. It would cost me $1500-2000 more a month net cashflow out to rent, factoring in tax benefits, interest income, if I sold, etc. but I reset in August from my 3.75% rate. I only spend $1500 net (after-tax including HOA, insurance, everything including $500+ going toward principal) per month on housing on my place that rents in the $2,600-2,800 range. If renting becomes less of a cash burn due to a refi, I will happily join the rental hordes.
When I first considered selling and renting, I think I calculated that it would take around 5 years to break-even on the extra rent spend vs. what I pay today if prices fell by $150K. That was too long an ROI for me at the time, especially since my calc didn’t include any tangible or intangible move costs. Prices are down $50-75K from when I did that analysis. The calc totally changes though if I have to refi into current market rates. Might make much more sense to sell and rent then…
It doesn’t take me long to find 40% declines in Santa Ana, Garden Grove or Corona. They are everywhere. A little more searching and I can pick out price declines past 50%. These declines all happened within a year and there is no end in site to the free fall. Anyone who thinks that somehow Irvine is an island on its own, and these declines mean nothing, is just plain stupid.
Welcome to the marketplace. Less desirable neighborhoods get hit first. The most desirable neighborhoods get hit last. Rest assured they still get hit.
There’s nothing wrong with the Chula Vista example.
And Irvine is 38% asian. so?
IpoPlaya
You admit that you will overpay for something as long as you can afford it and you want it soon. Would you like to buy some of my things? My surfboards maybe? They are newly re-waxed, and even though they demand a premium because they were shaped here in socal I’m sure we can work out some kind of deal you can afford.
Overpaying for a depreciating asset is financially unwise and always will be. Regardless of its use. I can understand not wanting to move around frequently, especially considering that you have boys.
You can easily take them to a park and teach them how to shoot a J, even if it isn’t quite the same as driveway ball.
I just sold out of TRanch, an SFR feeding into Ladera Elementary. There is a definite premium when you cross Jamboree to West Irvine.
My point is: why the premium? That’s what led us to TRanch in the first place.
I guess the residents of Chula Vista prefer rape and stealing cars… I never claimed it to be a nice area; it isn’t. That’s the whole reason I brought up Oceanside and San Marcos.
I was wrong about Oceanside, btw. Holy cow.
http://chulavista.areaconnect.com/crime/compare.htm?c1=Chula+Vista&s1=CA&c2=Oceanside&s2=CA
It isn’t fair to compare almost anywhere to Irvine. It seems that anywhere that touches the coast has WAY more problems with theft. Even Del Mar. The charts couldn’t find La Jolla for some reason. I guess it doesn’t really exist.
I don’t look at it like a purchase of a depreciating asset Genius. It’s more like an exchange of one depreciating asset for another. If by some chance, I can “trade up” to a bigger nicer house and have the same whole dollar depreciation at the bottom as I would have if I simply retained my current home, why not do it?! I could get the utility and benefit of the larger home in that case (man, I’d love to have a real driveway!) and theoretically be no worse off in the end.
While a nifty idea, I have found the larger SFRs are still lagging the median-sized homes in price reductions, and great deals are not there to be had. Things are selling in my neighborhood because people (and banks) are more practical about pricing there and will absorb 2004 rollbacks and 20% one-year declines. I haven’t found many newer 2600sf+ houses in Irvine on the market recently that are what I would consider “market priced”. When I find a property I kind of like, I look at comps going back to peak pricing and then check it against my own home’s value loss. I’d make an offer on something I liked if they were willing sell at a price vs. peak discounted my same decline % + another 5-10ish%. That’s what I’d consider a good deal.
I miss driveway hoops. Haven’t been able to do that for decades. To be able to put up a motion sensitive flood light and shoot around after dinner even after it gets dark… H-O-R-S-E is a great learning tool, the boys will learn to spell and shoot at the same time!
Kirk-
Chula Vista is a den of illegal thieves and blasphemers. You better be nice to them or they will come and steal the bell connected to your web site.
Come to think of it, they may steal you web site too.
Garden Grove, Corona and “Santana” are not much better. We have contained them for a number of years and believe that given support from our Deity we shall overcome them and ensure that those Towers of Babel do not spread their discord and discontent throughout the good people of Southern California.
Irvine is Holy Land and you better watch your comments or we shall excommunicate you from the faith.
Repent!
I have a theory about housing price drops which is related to the Chula Vista area.
For those who study the bubble there is a factor called “reversion to the mean”.
This basically means that if we took a very long trend line of housing prices – and after the large gains we had the first half of this decade – those gains would adventually be given back and we ultimately would drop (or revert) back to the trend line.
Well I look at reversion to the mean (RTM) as negating all the demand factors that caused this bubble (gotta buy now, houses never drop, cheap credit).
But the excess supply (like homes built in new areas) will be in addition to RTM.
This could be ugly.
There are VERY few people I know with that much in savings… even if you include their 401k. Hell, most people I know owe significantly more than they have.
I have almost that much saved up, but I’ll be damned if I’m blowing on a house. I wonder what would happen if loans just went away and people had to use cash as payment for what they buy. Eventual economic sanity?
>>Who honestly has 162,000 for a down payment.
Believe me, much more people that you seem to believe. Especially in OC. And in Irvine.
The question is more, as Genius said, is it worth investing your big saving into a downpayment for a house that you know will decline 20% over the next 2 years ?
Then you just assume you through money out of the windows. Very depressing. So eventually, it is best to invest anywhere else at least for 2 more years… (international currency or stock ;-).
It is very frustrating, as then you are forced to rent. Meaning, not your own house, cannot do any remodelling, small customization, risk of having the owner getting you out, or any of the usual drawbacks of renting.
But it is a fact for now.
Ipoplaya
I’m trying to do your math here, it’s not making too much sense. If your payments are that low ($1,500/month for everything) then you loan can’t be more than 200K. If the house you are in rents for >$2,400/month than we are talking of at least a $500K house at the peak, which means that you probably have $300K in equity at risk. $300K at 5% will give you $1,250 towards your rent. Should current trends continue, 2 years from now that $300K could be only $50K and your dreams of moving up gone with it.
You have a hard decision to make.
The attorneys for La Jolla refused to allow the data to by published.
You have to admit less rapes and murders translates into higher home prices.
“Believe me, much more people that you seem to believe. Especially in OC. And in Irvine.”
How many people have liquid net worth (savings) outside of the phantom equity in their house? I think this number is far less that you believe.
Tonye, you make a good point. I hadn’t factored in the blasphemy. So, I retract my last comment.
However, I would suggest that Costa Mesa is the true Holy Land as that is where Trinity Broadcasting Network resides. On the other hand, it is likely that God’s chosen telemessengers reside in the splendor of Turtle Ridge thus ensuring Irvine is saved from the wrath the Almighty is laying down in the land of heathens.
Actually, there are a whole hell of a lot of wealthy people in OC.
http://www.ocregister.com/ocregister/news/atoz/article_1076369.php
Asians tend to have very high savings rates.
Lol @ the attorneys comment. I really want home prices to fall there. La Jolla is the place I want to live and raise kids. Luckily I still have a little time left for that.
If it doesn’t crash I’ll buy about 10 acres on the ocean in Baja, build a bunch of houses there, name it La Jolla, and practice my delusions.
Damn you student loans!!!
I don’t dispute that. I contend that the percentage of people in Irvine with a large liquid net worth (large enough to safely afford the downpayment plus 6 months living expenses) is not very high. There are always a few wealthy people, but there are not enough of these people to sustain a housing market at volume.
Ultimately, it doesn’t matter how many there are, if there are not enough first-time buyers with cash to allow the chain of move-ups to occur, the housing market grinds to a halt; which is what we are witnessing now.
Irvine just had that murder a while back in that apartment complex by the 405 and culver. and my residence was burglarized as a welcome-to-irvine present just after move in. And the neighbor’s car was just stolen last week. But let’s just be smug and figure that those greasy Mezcans in CV are just dying to rape and kill each other in comparison. Besides that Chula Vista home was in the Eastwood neighborhood that is entirely divorced from the remainder of the town: a right-on analog for Ladera Ranch.
And I still say that Irvine’s statistics are flawed: I had police out twice after the burglary and it never made the crime reports in the OC Register.
Speaking of crime, when I saw the headlines about the Nebraska shootings today, I waited until I saw the photo of the killer to confirm what you could have guessed anyhow: white male. God Bless us, but it is usually us white males who kill for the joy of it. Happiness is a warm gun for some sickos.
I meant to say “EastLake” Check out their neighborhood, it is no different than Ladera Ranch and is a rightful analogy for what is coming to Irvine: http://www.eastlake.net
and as far as the comparison to Santa Ana: there is the Lemon Heights neighborhood there that is substantially better than many parts of Irvine. my in-laws have a hilltop home there with views better than Turtle Ridge because you view west, not east. And they are brown-skinned to boot. But last time i visited their (expensive) home, my wallet was untouched and my wife unraped.
Support for your statement: my ex’s dad, who’s Korean, made about $750k/year AFTER taxes (he owned a small engineering firm). He wore socks with holes, drove a 10 year old broken mini-van, etc. Thrify barely even begins to describe him. He didn’t have much trouble spending money on his kids, within reason. If I made that kind of cash I would have died from a Coke overdose long ago.
…still trying to figure out why I left my trust fund ex. Oh yeah, she’s fcking crazy. Tried to run me over with her car once. True story.
I hope you got the mini van in the divorce…….
A friend of mine is a lawyer who is defending a mortgage broker who is being sued by home owners who are being foreclosed. They all claim the broker was responsible for them getting into mortgages they couldn’t afford, and in almost every case, they misrepresented themselves on the application (although I’m sure the broker knew something was up…). One couple — a carpenter and his stay-at-home wife — purchased 20 properties on the same day with different lenders (one through this particular broker), stating that each one was going to be owner-occupied, and overstating his income by a factor of 10. He’s now suing this broker (and presumably the other 19) for putting him in a bad loan. Now that’s a WTF.
plus they most likely already own a house I presume so not looking for a condo.
from Capitalismworks link
“We call them Californianaires,” said Laila Pence-Marshall of Pence Wealth Management in Newport Beach. “The biggest reason is the increase in real estate and then retirement accounts. Investments are probably third.”
No wonder.
That my friend is a mixture of greed and stupidity.
Ex girlfriend. Not wife. Sorry, should have specified.
Were I actually crazy enough to marry her and we divorced I would rather have her sister than anything else. There should be some sort of legal relationship clause that allows you to swap someone for one of their siblings, free of charge.
Hi IR,
Could you shed some light on how Bush Bailout plan would impact on OC home price as well as overall economy in general including falling doller value?
I consider your views are not biased , which is very much fact based.
Thanks
Charles
IR,
Agree with your conclusion anyway.
But in terms of saving, no. There are tones of very heathly people around here. But sometimes (ok not always) these people get to be smart, and they are NOT going to put a 20% or more down payment on an asset which is expecting to decline 20% within the next 2 years. So these guys, when they rent, will just hold which will make your argument: market will continue to go dow.
And if it happens they own, they will hold their place before upgrading to bigger one.
Does anybody know why “West Irvine” is on far EAST edge of Irvine?
The bailout plan is perfect.
It makes people think the government is involved and doing something. In reality the Government did nothing more than clarify with the lenders two regulatory terms in regards to servicers modifying loans.
They didn’t put money in it.
They didn’t change the contract law.
They didn’t force the banks to freeze rates.
They didn’t get anybody’s rates frozen.
All they did was PUBLICIZE that if you are in a very narrowly defined group of soon to be distressed homeowners that it is in the banks best interest to get you hooked on a new repaying plan instead of walking away.
So in essense, the Government came up with a near perfect free market plan. They made people think they are involved and doing something to protect the people and economy when in reality they are letting the free market resolve the situation per its own established rules while making people aware they they may be able to use those rules and since the government is doing “something” has effectively blocked further meddling in the free market until after the 2008 election.
So in a nutshell. The government solution, will do absolutely nothing to change the overall nature of the southern California housing market.
And I though Casey Serin was bad…
Capitalismworks – How is that 10 year to LIBOR arbitrage working out?
check out the neighborhood picture of that San Diego home: oh, let’s just pooh-pooh it because the adjacent community is called Chula Vista: I see 3 pale-faces sitting at country club with nice homes in the distance — why, George Bush himself would feel at home:
http://www.eastlake.net/Tour/Tour/slide5.htm
It’s not on the eastern edge of Irvine, it’s on the northern. Technically, I think the area around UCI is the furthest west…
My mortgage balance is $275K and my house is selling for $600K. You got it – around $300K in equity. You forget, that 5% interest income gets taxed Alan, so it only provides $800 (probably a bit less) per month to defer the cost of rent. So I spend $3000 lets say on rent and get $800 in net interest income. $2200-2300 out of pocket if I rent and get renters insurance. My out of pocket owning is roughly a net $1K per month ignoring principal paydown so I would spend $1200-1300 more per month if I sold and rented. Do that for a year, and you have $15-16K more spent on housing.
Since I think my place is going to fall maybe $100-150K more between now and bottom, that lower mortgage I would need in the future to buy back my own home would have approximately $5K less in interest expense per year net of tax benefit. So it would take over three years (when considering present value) just to recoup the $15K one-year additional spend on renting in terms of whole dollars. If it takes two years of renting for prices to fall another $150K, the payback period gets that much longer.
It is a hard decision to make to leave one’s home of six years, uproot two young kids, and go through the hassle of selling and moving just to do it again in a year or two, for a $5K per year return that doesn’t kick in for 3+ years. If I could have convinced the wife to do this in 2006 when I tried the first time, the payback would have been so much quicker. Unfortunately my youngest was born in late 2006 and my pregnant wife didn’t want to even consider selling and moving until she had the baby and he was older. She’d do it now though…
I am not super concerned that my equity is at risk. If my house falls to $400K (another 33% or almost 50% off peak), that means the size and type of house I want should fall to $650K or so ($1M now). I have almost $200K or so set aside for a down, half earning 5.35% at Countrywide and the other half earning 5.25%, and that will only grow over time. The future whole dollar amount of mortgage I will require gets much lower as prices fall, assuming prices move down on the same percentage basis. If I bought today, pouring the $300K equity I have into a bigger home, I need a $500K mortgage. If everything falls by 33%, the future mortgage I need would only be $350K ($650K price less $200K down less $100 left in equity) so I am much better off as prices decline, even being an owner.
As a teacher, my wife has ultimate job security and locked in raises for the next 4 years for sure. My income is probably at or near its peak unfortunately…. Considering that my family income will continue to rise as prices come down, we have more and more buying power. I hope the sky really does fall and real estate is an absolute vicious bloodbath. Instead of buying a place at 5X our gross income, we will be able to buy the same place at 3X.
Reuters
House prices seen falling 30 pct
Thursday December 6, 6:41 am ET
By Julie Haviv
NEW YORK (Reuters) – Housing markets from Punta Gorda, Florida, to Stockton, California, will crash and suffer price drops of more than 30 percent before the housing crisis is over, a report from Moody’s Economy.com said on Thursday.
http://biz.yahoo.com/rb/071206/usa_economy_housing.html?.v=3
Hey hey, looks like Moody’s agrees with me. Another 15-20% to go… Maybe they were reading my blog posts? 🙂
All the online rent vs buy calculators I consult are figuring in 30% price drops in my area.
I hope they’re right.
Sense and Nonsense on the Mortgage Restructuring Plan and the Alleged Losses it Inflicts on Investors
http://www.rgemonitor.com/blog/roubini/230954
So is this the scenario whereby it is worth getting into a nothing-down type of loan? At least you have nothing on the table. Are these the type of deals that can be expected, or is the equity drop a reason for these loans? I suppose you pay extra, compared to rent, for potential upside way down the road.
Yes, back then it was the high end houses that ate it the hardest. Of course, back then, those were the houses worth above $400k. And I am sure that will happen this time, too.
Anyone that thinks that this very ordinary condo is worth anywhere close to $600k still has a kool aid hangover.
I hope they’re wrong. I’ll take 50% off k thnx.
Yes, I wasn’t trying to say that it will drop to 250K – I was just saying why would it realistically be worth more than that when you compare the average person’s income.
I don’t live there so I am not used to the market that you CA residents are but my impression is that your rent prices are inflated as well; just not nearly as much as your home prices.
According to wikipedia, your median household income is 84,270. So that might be around 5000.00 take home per month. That means you are spending 40% of your income on rent which seems high to me (especially for a condo).
You could take your $300k in equity, move to a nice suburban area in the midwest, buy a nice-sized home (with the driveway you covet) for cash, and never have a mortgage payment again. You would have ultimate financial freedom…work, don’t work, retire early, volunteer, spend time with the kids…anything you want.
It amazes me that so many CA people never even consider this option.
[insert derisive “flyover country sucks, no one wants to live there” commentary here]
Yeah, not really a choice I would make. Let’s see – move to the Cornhusker state to freeze my ass off in the winter, move thousands of miles away from our entire extended family and large number of long-term friends, just so I can be a lazy bum and surf the web all day… No thanks.
While we can afford to live here in SoCal (pay our housing expenses, save for retirement and the kids college, etc.) we will continue to do so even if we could be on easy street in some other much less desirable location.
Life is about more than how big your house it. I’d rather have 2,000 sf here and be close to family and friends vs. being thousands of miles away in a 4,000 sf igloo in the Golden friggin’ Gopher state.
My bad for not checking the blog as much as the forums. But…
It probably doesn’t help this seller, when 68 Autumn went back to the bank a month ago for $620.5k.
Q.E.D.
Or beatiful Redhawk Golf Course homes in Temecula: So amny of them are now in the 40%+ discount club:
http://www.ziprealty.com/buy_a_home/logged_in/search/my_home_detail.jsp?listing_num=I07170502&property_type=SFR&mls=mls_so_cal&cKey=32v3nv61&source=MRMLS