Hi Fellow Bubbleheads,
No, I didn’t disappear into the void, just been busy with, like, life and stuff. Been watching the housing market of course, but mostly via trolling on my fave blogs and not by doing my out and about stuff. Some of my previous out and about visits to open houses and model homes were on my lunch hour…I’m happy to report that my job, which I LOVE LOVE LOVE, has been keeping me pretty busy for the most part so this hasn’t been as feasible. ‘sokay, tho’. When you really enjoy what you do, and like your coworkers, working hard isn’t such a bad thing. (Especially when you make $120k a year!!!)
So I just had to check in to let you know that I got an email from my good friends over at Paloma at Portola Springs today. They wanted me to take an online survey, and if I was one of the first 100 respondents, I’d get a $5 Starbucks gift card.
Well, since I didn’t open up this email til after dinner (7pm), I figured there’d be no way I’d get that gift card. However, I just LOVE giving people my opinion (imagine that?) so I dove into the survey nonetheless.
They wanted to know why I hadn’t bought yet (“priced out” was my pick), how much I liked the different pictured floor plans and pictures, among other things like my annual income and number of adults and kids in my family. What I interpreted from the survey was a suspicion that they’re planning on redesigning their models based on survey feedback (…did you like the furnishings in this picture?)
Uh, guys, your models are just lovely. I told you this already! Listen to mama!
It’s the prices, stupid. Three quarters of a million dollars for a two-bedroom condo that also comes with bitingly high mello roos and HOAs? Come on! I’m too damn smart to do that to myself!
I’ll try to do another out and about really soon, I swear!
Have a great day and BE PATIENT! Springtime is going to bring us a FASCINATING economic story to watch and talk about.
Update 12/01/06: I forgot to mention that I, in fact, was awarded one of the 100 Starbucks gift cards! I was surprised; but then, maybe not so surprised given the crash we are experiencing.
“What I interpreted from the survey was a suspicion that they’re planning on redesigning their models based on survey feedback”
Rearranging the deck chairs on the Titanic!
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They can rearrange the chairs all they want, ask all the questions they want, this boom is going down!!!!!
These types of surveys are the latest marketing ploy to try and get new buyers. The idea is that more people will respond to a “survey” than the average piece of spam email.
I am sure that offering a cup of coffee makes a huge difference to all the people that are ready to purchase a $750,000 home(townhouse). How about selling the house for $749,995 and skipping the coffee.
I want to move back to Cali, but I dont think the prices are going to go to where I am comfortable, and I dont think I’d be paid enough to be able to buy. BTW Lets say by some miracle I land a $250,000 a year job. Great, then run and buy a million dollar apartment. Now 6 months later, I lose my job. What happens then.
My criteria is to be able to manage 6 months on unemployment income only.
Anyway great blog and great insight.
Cool.
Cow_tipping.
Speaking of tipping, the new starts on construction are way down. As much as we hate to admit it, now is the best time in the last two years to buy a new home. Is it the best time there ever will be? I don’t know but there are some great choices and terms available today. As the supply is slowly shrinking, I imangine the choices and incentives will too. The builders have experienced an over supply and under demand based on price resistance. Prices have adjusted downward much faster in this market cycle than in other times. Buyers seem to be comming back into the market. There could be a tipping point in the future as it will take time for the builders to ramp production back up once they feel secure enough to move forward on mothballed or scrapped ventures. I am closing on a property this month because I know for a fact I am getting it at about 15% under what I would have paid at the top of the market. I was ale to select form a great assortmentof properties and not settle for my third choice in a lottery.
Rocky,
I hope for your sake all the bloggers are wrong and you are right. Buying at 15% off the peak may not seem like a bargain if the bottom is 40% off the peak.
If you are correct, the builders will have difficulty ramping up production because they are moving in the other direction. I have a friend who was just laid off in the KB Home architecture division. They have shrunk their staff significantly and have no plans to rehire anytime soon. Since all KB Home housing product nationwide goes through their architecture division, it is apparent that KB Home is not anticipating any increase in demand for housing any time soon. If they were caught off guard by a surprise surge in sales, it would be very difficult for them to meet the demand.
It is dillusional to think that the housing market is going to revive in the next 3 – 5 years. At this point the only people buying houses are the young and nieve(sorry rocky). We are the beginning of a long slide in home prices. As the availability of 110 % loans diminishes, the number of forclosures increases, and the mass population realizes that 15-20% annual housing appreciation is gone, there will be substantial downward pressure on housing prices. I don’t think anyone can predict how far down and long the correction will be….my opinion is that we will see houses at $235 – $250 per sq foot in the next two years.
I watch the Irvine market and a year ago there were no townhouses available below $410 per sq foot. Now there are dozens of properties in the $350 – $370 sq foot range. The next real measure of the prices will occur next march when the spring selling season begins……and the invenotry starts going up. Last year all the newly listed homes were put on the market at 10% above the previous years prices…..my bet is that next year the houses will be listed at 10% below this years prices.
Of course, if you buy a place now and hold it for 10 – 15 years you will most likely make a little money.
I can only say one thing for certain…..never, and I mean never trust a real estate agent. They are like heroin addicts at this point and they need sales so they can continue the upscale life style they enjoyed during the boom times.
irvinesinglemom,
What do you do for a living(if you dont mind me asking)?
Its just that rarely do I hear about people who LOVE what they do and get paid well for it too.
lucky you!
Great post as usual ISM! I’ve been lagging these last couple of weeks. 🙁
Rocky, as long as you aren’t doing a suicide loan AND you are more than comfortable with your full P+I payment + HOA + property taxes and mello roos AND you don’t plan on flipping or selling within the next few years, I wouldn’t worry.
Everyone is in a different situation (growing family, promotion, lottery, whatever) and for some it just may make sense to buy. It’s impossible to predict the future and although I’d love to buy at the bottom and sell at the top, VERY FEW people are LUCKY (yes I believe it is more luck than skill) enough to do this.
Although I’m still bearish on the market, I’ve got to admit I’m tempted by some of the price reductions I’ve seen. But my fear of catching a falling knife keeps me from making a move. I still think things will continue to get worse before they get better. But who knows?! 😉
Hi fellow SoCal bears. I have the real estate $$$ charts for the LAX area posted. November charts.
IMHO, for a first time buyer, to buy a new home/condo in Irvine now, is like to sign a real-life slave contract to Irvine Company.
My relative builds some high-rise buildings in different country, the cost of construction vs. total sale prices is only 1/10th, and the profit margin is about 50 percent if it can sell quickly enough.
The land cost for Irvine Company is very low, so the profit can even excess 70% and you still need to pay assoc etc. every month. the mello rose you pay all adv IC, your child might still in a convertible classroom because school is over its capacity and you also need to pay higher live costs than living in other cities.
Stillwaiting:
I wish I could tell you that I do something exotic or adventurous and that’s why I love my job so much, but that’s not the case. Instead, I work in a regular old office job in Irvine. I am a manager in a medical device company. My job involves a lot of writing and editing, which I have always enjoyed. All in all, the job is just a perfect fit for my personality and skills, and I am lucky to be surrounded by very nice, mostly highly competent people. (I have worked for several other companies and this is the best bunch of people I have ever worked with and for).
All:
I re-read my post and I realized that I left a critical piece of information out, so I’ll edit it to include the fact that I did indeed get that Starbucks gift card! Hmmm, guess there wasn’t a mad rush to fill out the survey after all. Sooooo different from a few years ago when they made you wait in line for the honor of paying way too much money on a tiny stucco box!!!
Some of the bears think 2007 will be the year of the big decline, but I think it will be 2008. Buyers like Rocky above or potential buyers like zovall above (you said you were tempted) will support the market through 2007. I think there will be enough who “buy the dip” to offer some price support or maybe even create a mini bear rally. These few remaining buyers will be the last to drink the cool aid give some false hope to sellers (and maybe bail a few out).
As long as there is a belief in the market that prices could go higher and that “buying the dip” is your last chance at home ownership, the market will not completely collapse. None of the buying activity in 2007 will change the underlying fundamentals: home ownership is still ridiculously expensive when compared to rents. The only rational justification for the price of home ownership is a belief in continued appreciation. The only possibility for appreciation is continued buying. It is a self-fueling cycle until the buyers are exhausted. We aren’t quite there yet. When all the buyers who believe in “the dip” have spent themselves (probably by the end of 2007) there will be no more lurking buyers; then the catastrophic collapse will occur.
The collapse will occur. Prices cannot remain detached from their fundamentals forever. The bottom will be found when the cost of home ownership is less than the cost of rents: and not before. My guess is that will be sometime in 2009 at prices 40% below where they are today.
Take heart bulls and “dip buyers”: I might be wrong.
I got a $5K referal offer from Taylor Woodrow Los Arborles in Portola Springs. Refer a friend who buys a house and get $5K. I only visited the development a few months ago and let them take down my name and address. Does this seem like a desperate cry for help to you?
I live in one of the Irvine companies properties in Northwood…….Solana. The other day when I got home from work there was an add on my door offering $500 for a referal that conveted to a renter. Maybe the residential rental market in Irvine is starting to weaken. I am wondering if the private rental business of unsold homes is starting to impact the normal rental business.
In my opinion, spring 2007 is when the decline will accelerate. I am planning on buying a home in late spring/summer of 2007. I realize that homes will continue to decline after my purchase, but I am looking for stability for my kids and wife, not an investment.
I am willing to spend up to $700,000 for a 1800’+ 4 bed SFH built between 1973-1984. I prefer the older homes and neighborhoods for their charm and spacious layout. I have lived in Irvine for 30 years, so I am fond of the older neighborhoods. There are already homes that fit my criteria on the market now, but they are in poor condition. I am waiting for the “perfect” home that has been loved by its previous owners. Most on the market now are ex-rentals and flips in bad shape. We are in no rush.
I will be putting $300k down and financing the rest. I realize that I could buy a mansion for cash elsewhere, but I love Irvine. Howver, I am I am keeping my eyes on southern OC cities just in case. Houses need only to come down $50k or so, and then what we want will be in our range.
BTW, have any of you been paying attention to craigslist rentals recently? Craigslist is flooded with SFH rentals. More than I have ever seen. I would guess that many are owned by people who weren’t able to sell and are going to try again next spring.
“I realize that homes will continue to decline after my purchase, but I am looking for stability for my kids and wife, not an investment.”
This is a “dip buyer” who isn’t admitting it. Why would anyone buy a home they know is going to go down in value? Because secretly this person doesn’t think prices will continue to decline.
Why not wait until prices are closer to the bottom when ownership costs are closer to rents? Real estate prices don’t form “V” bottoms. When prices bottom out there will be plenty of time to find the dream home at a reasonable price. Was there any urgency between 1995 and 1998? The same will likely be true between 2009 and 2012.
Buyers in 2007 who “buy the dip” will be underwater for several years, perhaps even a decade. How are they going to feel about that? What is it about being trapped in your home will you find appealing?
I’ll keep my freedom by renting until prices are back to a level sustainable by the fundamentals. Then, if I buy, I know I will never be underwater.
Rocky–
with that philosophy, I’ll give you a great deal..maybe 20% off of the high price for Lucent ($80). Course, that’ll still give me about $57 /share profit.
Doesn’t matter the discount if it’s so friggin ridiculously priced AND the trend is down….Remember the saying, “The trend is your friend”
And to irvinesinglemom– LOVE your site. I’ve passed it to a couple of folks @ work and the reaction was WHOA. Specially loved the bit on Ave One. My wife & I had just driven by there and noticed the “from the low $400’s” sign had magically changed to “high $300’s”. She now tells me the price sign is gone completely. May of just blown away this week, though. Extra tidbit. Apparently thos POS ave 1 units actually fall into the SANTA ANA school district. Like 4 miles to the elementary school, 5 for middle school. OUCH.
Keep up the great work.
Thanks for the compliment asuwest2 but the accolades go to zovall, who does most of the posts (and all of the f’d flipper posts!) on this site.
Yeah, I’m all about walking distance to my son’s schools. We’re talking about quality of life here.
I love it love it love it. $408/sq ft followed by $394/sq ft in Westpark (which might be in escrow now — can someone check out S466910?)
I’ve never quite understood the “I have a family therefore I must buy a home to provide stability” argument. There are tons of rentals near the best schools. When the market is finally ripe (or should I say fully decayed), there will be plenty of homes in the same neighborhood. Presto: Same school, same group of playtime friends.
Top Ramen is bad for little tykes. Grown-ups too.
Today I was in the Northwood neighborhood on Jeffrey across from the new Woodbury area (Jeffrey & Hideaway). As I drove around this new neighborhood, I could see several “for sale” signs, some in front of homes not yet completed. I saw an open house sign, so I went to see it out of curiosity. As I walked up to the house there was a paseo crossing perpendicular to the street. From that vantage point, I could see three for sale signs north up the paseo, one across the street south down the paseo, one up the street to the east, and two up the street to the west. Including the house I was about to enter, I could see 8 “for sale” signs. That is 8 houses for sale in that one small area, all of them new. I would estimate there must have been 20 or more in that neighborhood. (Go see for yourself.)
Do you think there are that many speculators? Are these new buyers already giving up on the sky-high payments? Can that many people be “testing the market”? Why else would so many people be trying to sell new homes? People keep new cars longer than that.
If that much product is being dumped on the market, and if those sellers are speculators or cash-strapped owners who need to sell, this market may start to collapse sooner than I thought.
A lot of Northwood buyers are investors, may be more than 30%. Since rent can’t cover payment, I think there will more to come.
The problem for Northwood is school – old fashion elementary and decent high school and asking prices about 10% high than other communities.
Also, except appreciation, the way buildings setup priority number, 2-3 year ago, might help this community to hold up prices well – it was based on the buyer’s finical strengths not the order of application form received. In other words it was based on amount of down payment and the incomes etc., that makes the early phases of buyers usually are rich investors.