Today was a beautiful, blue-sky kind of day, the kind of day that reminds me why I love Irvine so much. My little boy and I played for quite a while at “Bob the Builder Park” (aka, Colonel Bill Barber) as well as a small pocket park in Westpark. But first, on our way over to Bob the Builder park, I couldn’t resist making a short detour. I pulled into Columbus Grove and saw the line-up of protest signs along the main thoroughfare, Sweet Shade. I pulled up to the curb, put on my blinkers, gave my boy his Clifford Reading game on his Leapster, and chatted for a few minutes with homeowner Bob Spillar. He was sitting in a beach chair with, at the time I was there, two other men whom he identified as neighbors. I told Bob I was a blogger, writing for a blog on the local housing bubble, and Bob didn’t quite seem to get what I was referring to. (First clue, right? Too bad Bob hadn’t spent some time here, or over on
Ben’s housing bubble blog or on Rich’s site…) Bob was very eager to share his story with me. Here it is:
This is their second weekend protesting William Lyon Homes, Inc. He and 17 other buyers of Phase I Lantana homes plan on sticking it out for the foreseeable future, until Lyons makes appropriate restitution. They have clearance from the Irvine police to hold this protest; they are on public land and Lyon has no recourse to remove them. Bob said that Lyon has not tried to make them leave.
Mid-2005 Bob decided to buy one of the homes in Phase I. He closed in May 2006. He received lots of assurances from the salespeople that prices would not drop in future phases. He said that he feels “coerced, manipulated.” Bob acknowledges that he should not have signed the contract without reading it in its entirety (no kidding!), however he said the sales team promised him he didn’t have to do so. After the purchase, he and his 17 neighbors read “Addendum G” in their contracts which apparently states the standard legalese stuff about this written contract being the only legal agreement, that any verbal agreements not included in the contract would not be considered valid, etc.
So now, Lyon has dropped asking prices significantly in newer phases, and he and the neighbors are hoppin’ mad. Bob told me that he put 20% down when he purchased this home – he said that it was a requirement and you couldn’t buy the house from Lyon unless you put 20% down. (I don’t quite believe this could be true, however this is what he told me). He further told me that he took out a 100k second mortgage to pay for landscaping, etc., and that its rate is going to adjust in August and he is going to be forced to refinance in order to afford his payments. He believes that most of his neighbors also took out seconds that will be adjusting and they are all in the same boat. The whole “I put 20% down but took out a 100k second” just didn’t quite sit right with me, but I didn’t push it since my boy was itching to get going to the park!
He handed me a copy of the protest letter he and his neighbors wrote, letter to Lyons (new information: here’s the back of the petition)as well as a one-page flyer they are apparently giving to would-be new homebuyers who come to check out the models. Take a look: Experience the Lies
In their letter to Patrick McCabe, Project Manager for Lyon Homes in Newport Beach, the neighbors have this to say, “The undersigned phase I residents in the Lantana neighborhood are writing to you today to ask for your consideration to make things right…During the selling process, given the real estate market uncertainties, we had numerous conversations with the sale staff (Nancy, Jennifer, etc) about prices and we were reassured that the home purchase prices would remain stable throughout the development of our community. We believed in the community and you. We understand fluctuations and economics, but a $75,000-$200,000 price reduction? What does that say to your phase I buyers?…Given all the startup problems we endured through the first phase of development, we are asking for William Lyon to consider some type of compensation to all of us. Afterall, when we think of the sub-contractors and laborers that completed work; the quality was average at best. We trusted in you and now feel like we were misled and betrayed…”
So I asked Bob what exactly he wanted from Lyon. He stated that he does NOT want a “refund.” He wants Lyon to refinance the Phase I owners into lower-rate loans; he wants a “small stipend” and he wants free upgrades, retroactively. He said Lyon had already met with the protestors and informed them that the contracts they signed were completely legal and they had no intention of giving the homeowners anything they were asking for now.
So I thanked him and drove away, not having the heart to tell this poor, sweet guy that the carnage had just begun and his equity evaporation was just going to get worse over the coming several years. Best of luck to you and your Lantana Phase I neighbors, Bob.
As a Bob it is a bit embarassing to hear of other Bob’s who really are not the brightest bulbs on the planet. What is even worse about this guy’s complete ignorance re real estate is the fact that his protests, the letters and the complaints surely accomplish exactly what he does not want — more downward pressure on the prices of new sales. As a buyer I would definitely not want to buy into an area with this kind of sentiment by my neighbors, let alone the real possibility that these former buyers will sue the builder and create a whole lot of problems.
So from one Bob to another — next time read the contract, do your homework with the single largest investment in your life (at least do as much homework as you surely did when you bought your last TV), and learn that sometimes you just have to take your lumps and figure out a way to get out with as little damage and hastle as possible. Oh yes and since all issues like this are surely required to be disclosed to new buyers in CA, next time you may just consider Shutting Up.
Of course I guess I’d like to live in a country where people were Accountable (I don’t think it’s a lack of responsibility as much as a lack of accountability) and not always look to Daddy (government after you get out of college) to bail you out. But in America that surely won’t happen just as our obesity problem surely won’t get better. It would require accountability, intelligence and discipline.
—–
To all the Bobs and Dodds out there:
Caveat emptor – Let the buyer beware. (He buys at his own risk).
Your lawsuit doesn’t have a prayer. But I’m sure we have some attorneys in the OC (no doubt living off their own HELOC) willing to take your case (and your money…again).
This is just the beginning. These “protests” will be on the steet corners of every builder in two years. Let the carnage begin.
I would love to by and ask these guys if they would have been upset if the builder had raised the prices in the next phases? I suspect not.
Do I feel sorry for these bag holders? HELL NO!
FYI, They’re NOT victims!
I look forward to seeing the prices drop further.
Lyon homes did refund some price difference during the last down cycle in at least one of the tracks they developed.
Dammit ISM, you scooped me good! I had plans to go talk to those nice people and even take a few pictures. Instead, I spent the day playing in the local mountains. Thanks for the front-line journalism! That was a good read.
I agree with Bob… Those guys are probably making matters worse for themselves. The best thing they could hope for is for buyers to show up in droves to snap-up every available unit and try to maintain some level of sanity among the comps.
I do feel (a little) bad for the original Bob and his pals but my schadenfreude call options are “in the money” and I’ll look forward to being one of Bob’s neighbors at 40% off what he paid.
This might be the only track that one might have a realistic chance of getting it at a 40% discount from what those phase I folks paid. I can’t see a worse place in irvine.
Why should Lyons Homes care if he protests? It’s just free advertising for the price reductions. See, the new buyers are going to get a “great deal”.
IrvineSingleMom,
“Bob the Builder Park” in Irvine: any bob the builder characters in that park or it is just a regular park with play structures?
Hi oc_fliptrack, sorry to have scooped you! Actually, I owe one to SoCalHousingBubble for pointing this protest out in the Forums last weekend…I live so close by that I just couldn’t resist heading over there today to check out the action. Actually, I’m sure that if you go by there next weekend you’ll probably find someone else out there to interview and could get a different perspective. Also, I am considering heading into the Lantana sales office to see if they want to talk to me…
Hi YouPaidTooMuch,
It’s only Bob the Builder park to me and my son. We started going to it about 1.5 years ago (he was 2 years old) when he was into Bob the Builder videos…when I announced to him that it was Bill Barber park, he got all excited and said “Bob Builder park! Bob Builder park!” So it’s been Bob the Builder park to us ever since.
Even though there are no Bob characters or anything theme-parkish about it, it is definitely worth a visit. It’s a fantastic, huge, wonderful park. Has two huge playgrounds, a water play area, a slippery slidy wall of sorts (hard to describe), covered eating areas, a frog fountain, multiple softball and soccer fields, tennis courts, and on and on. It’s right next to the Irvine Civic Center, at Harvard and Barranca. Right across Barranca from Columbus Grove, as a matter of fact!
“Mid-2005 Bob decided to buy one of the homes in Phase I.”
Good timing Bob, you bought at the top of the market.
“He received lots of assurances from the salespeople…”
LOL…need I say more?
“He further told me that he took out a 100k second mortgage to pay for landscaping”
You bought at the top of the market AND you took out a toxic ARM second? Bob, your not the sharpest tool in the draw are you?
I just looked at the website for these homes and it says they are priced from the mid 800s. That is some serious coin.
Sorry Bob, but the good of the many trumps the good of the few. A boatload of foreclosed props are needed in the OC to help bring down prices to proper non-inflated levels.
one of my readers gave me this handy link to check to see if someone’s a realtor.
turns out one of the phase I owner that signed the letter, Mr. Salimi, is a realtor right here in Irvine.
“Karim Salimi is a dedicated, knowledgeable, full-time realtor with more than 14 years of successful experience in the Orange County real estate marketplace. He is able to give expert assistance to buyers and sellers all over the area, and he can give special help to those who speak Farsi”
http://www.zmls.com/DisplayAgent.asp?id=25611
here’s the link to CA’s Department of RE search site
http://www2.dre.ca.gov/PublicASP/pplinfo.asp?start=1
As a newcomer to Orange County – and someone who really loves it here:
I don’t trust any of these new developments. My gut says that one day they’ll be symbols for something bad. The architecture is beautiful – but I get the creeps whenever I visit them.
Now Woodbridge, that’s something else – but I haven’t moved into my rental there yet, so be kind.
You know what I really don’t like – Ladera Ranch. It feels so… temporary.
The sales people probably told them last year “Buy now or be priced out forever!!!!!!!!” Errr or until next year, hahaha. This is good stuff, thanks for the reports from the front lines
Wow, ocrenter, good information. Turns out, the back page of that letter has a whole bunch of other signatures. As soon as I get my coffee in me, I’ll snap a pic and add it to this post. And I’ll check out the other names that are legible, against the list of realtors.
Irvinesinglemom,
Thanks for the park information. My boys always love to go to different parks. I might take them there today and drop by the protest in front of Williams Lyons too.
I just found out the price of the flat screen TV I bought a month ago has dropped $1000. Me and some of the neighbors are heading over to Circuit City now to protest. I’ll get a picture of the flyers up later today.
Okay, I added the picture of the back of the petition to the original post. I used ocrenter’s Realtor search site to look up the names, and I can’t say for sure what I found. I found “hits” for 5 of the 15 names, however there were multiple listings under each name, the names are not uncommon for Orange County (Benjamin Chen, Angela Wang, Michael Ho, Andy Nguyen, John Gillespie), and I don’t know how to narrow down the search. To give these folks the benefit of the doubt, they may just have the same name as the brokers/realtors, and not actually be licensed themselves. I completely agree with ocrenter’s suggestion, however, for any of these neighbors who might in fact be part of the business – there is just no excuse for them to be claiming ignorance in this case. They’re supposed to be the experts!
Anybody have any ideas on how to determine with certainty the status of these folks?
ISM, so you ended up getting 1/3rd of the homeowners as Realtors.
which makes perfect sense as 1/3 of Californians are Realtors. (j/k)
but seriously, remember the posting on San Diego’s Liberty Point and the large amount of RE professionals involved in that one development. would not surprise me one bit if a majority of your 5/15 are true matches.
“Hi oc_fliptrack, sorry to have scooped you! Actually, I owe one to SoCalHousingBubble for pointing this protest out in the Forums last weekend…”
ISM- Thanks for the props!
SCHB
http://www.lennarvillages.com/neighborhoods.php?ID=4
http://www.lennar.com/findhome/community.aspx?COMID=2159&DIVID=OCHLEN
http://www.lennarvillages.com/neighborhoods.php?ID=6
http://www.lennar.com/findhome/community.aspx?COMID=685&DIVID=OCHLEN
How can we keep track of the price changes when the builder can’t? Not only on there web site but I saw the same development with two different starter price in the Pimp My Ride(OC Register) on the same day.
You know I bought some New Century stock about a year ago, maybe I should go organize a protest….. Just kidding, I’m not brain dead, but those that are get stuck. Free markets allow price flucuations. This guy was probabaly hoping to actually make some money on this and now thant he hasn’t he feels wronged. The only one who was wrong was him. Tough luck. Don’t invest if you don’t fully understand the risk. It’s rough out there, but “Welcome to America”. Personally, I love it! I’ve lost money on deals, but fortunately my gains have far exceed my losses. You made a mistake, live with it.
I got the exclusive reply from the builder!!!
Here it is:
“Dear Phase I homeowners:
You are all S.O.L.
Regards,
William Lyons Homes”
I do feel sorry for Bob since he has never heard of blogging. Doesn’t he watch CNN? That is where they get half their news stories.
I think I saw something like this in the Register’s archives from the 90s and I think it was a Lyon home project too.
Aaron – Welcome to OC. I am a native and I feel the same way about Ladera. The place just gives me the creeps and I can’t pinpoint why.
graphix – I am an OC native too. Ladera “creeps” me out too because of the location/weather couples with the excessive inflated price. It’s like 2 + 2 = 3.
I’m also an OC native and have lived in Irvine for 16 years. I know, I know, I should have bought the house we rented, but I couldn’t. I was involved in a commercial dot bomb venture that wiped me out.
Now the kids are gone, my wife went back to school and became a nurse, and our FICO’s are 740. Time to save some money for a down payment in 2009-2010, or at least take the extra cash and short Alt-A 🙂
I sit in utter amazement of the disconnect from fundamentals. I just stumbled on this blog, but have been following Ben’s and many of the others since their inception. I rarely get a chance to post, but this blog is so specific to where I live, and want to continue to live, I just had to post.
IrvineHousingBlog.com is now one of my 11 real estate startup websites 🙂
We checked out Ladera last year. It was like the Truman Show met the Stepford Wives. Every single building and every single person looked perfect. I really felt uncomfortable, it seemed so fake.
We currently rent a SFR in Oak Creek by Gelson’s (half the price of owning it) and is not even remotely that plastic.
Can someone post a picture or two of the homes so some of us out-of-towners have a frame of reference? $800,000 – I assume it’s 5,000 square feet on an acre or two. 🙂
Mark – click on the “Lantana” link in the second paragraph of the post. No inside pics available, but they have outside pics and floorplans on the website.
And oh yeah, very funny about the 5,000 square feet on an acre or two thing…
Some photos:
http://farm1.static.flickr.com/135/434432775_50f22b50df_b.jpg
http://farm1.static.flickr.com/129/434432793_d9c0bdd37b_b.jpg
http://farm1.static.flickr.com/155/434432821_2c80174152_b.jpg
http://farm1.static.flickr.com/158/434432829_eaf1385f8a_b.jpg
/bb
I once beleived that Phase I was where the bargains were, but since saw that the finals phases might be cheaper. My earlier hunch was based on speculation that losses were needed to get early construction cash that was later balanced by higher finals phase prices. But it seems that a tract that has already made sufficient profit might dump the last few units. Does anybody have the definitive suburban legend on this?
I agree with Irvine Renters comment.
Bob wouldn’t be complaining if prices went up in future phases.
Bought into the madness of real estate always going up.
No sympathy here Bob, Game Over sucker!
Poor Bob. He should have known that salespeople will do whatever it takes to sell a home and there’s no accountability for what they say. Had he done his homework he might not have been looking for a house when he was.
I was just looking at some places in Columbus grove on Saturday to see what the new developments look like (not buying anytime soon) and was laughing like crazy at the flippers who bought a phase I, upgraded it, and are still trying to make a profit. When talking to the realtors/salespeople they kept saying that I should buy soon before interest rates go up. Another person said I should buy soon since prices are down and I should catch them before they start going back up. I laughed out loud at the last comment and the salesperson immediately asked me what I did for a living. Apparently, their standard tricks only work on bubbleites and people who don’t read up on the housing market. It actually upset me because this is what they have been telling people for the last year or so and suckered many a buyer into a place for the most money that place will be worth for awhile. Oh well.
I should add that while I say “Poor Bob”, I really have no sympathy. Suckers.
Buying off the Irvine Ranch is a big risk. Lennar owns the 2 parcels of land previously owned by El Toro and Tustin Base. Lennar also negotiated other land deals with government across the country. The City of Irvine Council member Suk Kee Kang bought a Lennar home in North Park Square and Mayor Beth Krom behind the Great Park project endorce Lennar Homes as the preferred builder. Lennar really knows how to play city politic. Lennar has 2 divisions Land Aquisition and Development Division. The Development Division could take a loss such as lowering home prices on their land when Lyon decided to lower their home prices. The whole Lennar Company based in Florida can use such a loss as a tax write-off to benefit the company as a whole.
I have seen national builders such as Lennar, Lyon, Pulte, KB, K Hovanian, DR Horton, and Beaser slashed home prices across the country, Southland and especially in the Inland Empire. It is not to the best interest of these builders to protect the investments in these communities. They are not there for the long term and why should they protect the investments and long term development viability in these communities. Take for examples; Perris and Moreno Valley suffered from these builder predators. Both communitie were exploited and used. It happened in 1991 and is happening again now. Foreclosure are at 40% in these area and was featured on Nightline on channel 7.
Lowered home prices in Tustin or Ladera Ranch are happening among these builders. They have no vested interest in communities where they built homes. Their future is not solely base on the success of the neighborhood. Once the land is totally built and exploited they just move on to where ever land is plentiful and could generate a profit. Beware when buying in communities where there are no governing develpment company there for it selfish reason to protect and to operate the communities.
Beware when buying homes in comminities where there are multiple land owners. Resale home prices dropped due to new home prices dropped. Home prices is directly tied to land cost. Many builders could go back to the land baron and ask for a price rebate due to a tough economy. Due to the competition among the various land sellers in the area the landseller would allow the rebate to occur. Yes, one would find a good deal in these communities but also run a risk that the prices could drop further in the future.
On the otherhand, the homeprice on the Irvine ranch is protected so far. The Irvine Company in it monopoly position owning the entire Ranch except for the 3 parcels that were given to the government. El Toro Air, Tustin Marine during the 40’s and UC Irvine during the 60’s, would never allow rebate. The home prices are high but also nice to know that it will not drop like. It is like buying a Hermes Berkin handbag.
We learned that over the years after the development company had left the communities. The changing of the guards handed over to city and homeowner associations to enforce the operational and maintainance of a community. Erosion of community landscaping and architectural standard take place. buying in a fully developed community has less room for the comp to move up also.
New construction always create competition for selling existing homes. but also create a higher comp. Home owners need to do much more to the homes curb appeal in resale in order to compete against new model homes. Existing shopping centers need to reimage and maintain their centers to keep the tenants from going to the newer and trendier malls. This concept is vital in keeping up community pride. Another example is Pasadena’s Rose parade. The homes along Orange Grove Blvd get a new coat of paint and well manicure landscape just before the New Year. The Home and Garden tours occuring 3 times a year in Pasadena created a sence of competition for homeowners to out do each others in their beautification projects.
My observation is that home prices on the Irvine Ranch is well protected by The Irvine Company. The Company’s interest is to protect the value of the existing real estates for its future development interest. It is like buying a Louis Vitton handbag. The brand and its price is well protected. It will never be sold at a lesser price and its inventory and quality is well controlled. When the bag style or the floor plan are terminated they sort of become a collector item. Examples for homes are Mahogany in Northwood Pointe, Cambria in Northpark, Watermark in Crystal Cove and Shady Canyon Villas in Shady Canyon.
The Villages at Columbus in my mind has not delivered the quality of the Irvine Ranch. You get what you paid for. I was so impressed by the flashy graphic banners around the District fence during its construction and was hoping to see a really good designed retail and entertainment hub. The execution is cheap and it just another “detail stripped ” strip mall. In my opinion, it feels like Aliso Viejo or West Irvine. Both communities lack a frame work of well designed architectural and landscape arrival point, pedestrain trail and paths, community walls and recreational buildings. There is no romance in the Columbus design vocabulary. It is certainly not a Louis Vitton bag.
First, I feel The Irvine Company is very deep pocket and could afford to terminate existing projects that are tired and not selling well and spend money to design a completely different project on the remaining parcels. The buyers who bought apples would not be upset by the introduction of cheaper oranges.
The buyers who bought homes in earlier phases never have to deal with the same house sold at a lesser price in the future. I like the security in buying on the Ranch but I just could not live with the cookie cutter repetition. I just wish that the builder would build smaller projects. I understand that in order to get the bulk rate one has to build a lot.
I heard the California Pacific Homes will be replacing its 4-pack Decada and 6-pack Cortile since both projects have reached their price potential. This is an exellent way to keep the owners of the earlier product line very happy by not selling more of them for a lesser price.
I feel bad for the buyers who bought homes in Columbus. The return policy or the price adjustment is just not good. It is like buying from a discount outlet “as-is” where the item is not returnable. May be buying from Tiffany or Neiman may be a better investment since both store would never put their goods on sale.
How can anyone make a promise that housing prices would not drop, and how can anyone believe such a promise?
One can not guarantee the comp for the used homes. There is always a deperate neighbor who is willing to sell low that drives the comp lower. As for new housing, one has to track the pricing history of the community. Since the late 80’s new home prices never dropped in Irvine. During the last recession, price was held constant with no decrease and houses got much more clever to appeal the buyers emotion of a good life living in these homes. “Home is no longer a shelter but a resort”
The Irvine Company have never lowered home prices since Bren took over the Ranch since the mid 80’s I do not think he will do that now. He is not desperate for cash. He is the 20th wealthiest American on this continent according to Forbes. My prediction what is going to happen in Irvine will be less supply and repackaging the products.
My analysis of repackaging comparison is like a bottle of Shampoo or toothpaste that were 16 fluid onces and 12 onces respectively. The new products on the shelves are 15-1/2 onces and 11-1/2 onces now. The plastic bottle for my new shampoo looks exactly the same from the old bottle from the front width and height except for the depth ever so slightly shallower. The liquid is not quite filled to the top. As for my toothpaste the box that house the toothpaste is the same and the tube inside the box is slightly smaller. The price for both products remain the same to the consumer. The fractional onces taken out could equate to $millions profits.
Apply this to home design and you will have the answer. Use the land more efficiently by designing shorter street run and pack another few more houses into the same amount of land and keep the selling price similarly at $450-$475 per square foot. The saving could be made up in land usage.
The last recession ended the ugly 3 car garages at the front of the homes. If you see them they are pre-1995. Different garage configurations, detached garages, alley, turned in garages and courtyards are just some of the things that why some many sold their homes and moved into these new homes cross the street in the newer communities. 80% of new home buyers lived within 12 mile vicinity of Irvine. The homes with the 3-car garages across the front are like the old dinosaur computers with led lights or cell phone that weight like a brick.
One more comment. I just read his letter, and someone had better go to the sidewalk where Bob will be sitting this saturday and tell him to shred his letter. Admitting he, and others, made a “leap of faith” is not going to help his cause in a court of law, (if he decides to go down that road). Basically, he’s saying that he assumed the risk. In addition, telling people he didn’t read the contract is further proof that he assumed the risk.
He should write out the letter to show a claim for either fraud or negligent misrepresentation. However, he’s screwed. If William Lyons homes does anything to ease this pain, it’ll be because they are doing it out of the kindness of their hearts, legally they don’t have to do anything. Any oral statements made, including the contract itself, is usually merged in with the deed, and the deed’s terms will control. That’s basic property law. I believe that was the clause mentioned within this story.
Oh, one more thing… How does anyone this stupid make enough money to purchase a home?
“The Irvine Company have never lowered home prices since Bren took over the Ranch”.
I bought a 2500 sqft in West Park I on ’89 for $340K, and two year later, a bigger and better houses in West Park II only ask for $310K.
Lisa, Was it a same project ? As far as I know price was never reduced in the subsequent phases of the same project. Was it a California Pacific Homes or Standard pacific Homes project? The later homes did get bigger and better but the catch is density. Mcmansion is the term for oversized home on small lot. Read my earlier post where the land value is tied directly to the selling price. For example, 7 average sized ok designed homes on one acre is much more expensive than 9 Mcmansions with better designs on one acre when the land purchase price were the same. You paid a little more for the item at Target with spacious aisles than the same item in a cramped in Walmart. My recollection is that the later designs were using land more efficiently and produced less waste for road and unnecessary pocket parks.
Bkshopr – Lennar owns some of the outskirt parcels of land at the Tustin air base but Centex and Shea “Tustin Legacy Partners LLC.” own the inner or majority of the base. http://www.tustinlegacy.com You are very correct in that when there is a down turn they cram more homes on the land. All the builders are guilty of playing politics and I am not sure if Lennar is any worse than the others.
To anyone that thinks that the Irvine company won’t lower prices…….suckers !!!!!!
BkShopr,
Some Woodbury builders re-negotiated their land contracts with The Irvine Company in the past few months, which explains some of the recent home price cuts.
In particular, Laing got a huge price break on land for phase 3A, which is why the plan 3 dropped from $980K to $867K…
I don’t think it’s the land monopolization that creates high home values in Irvine, since Irvine homes are in competition with other communities like Tustin and Lake Forest.
However, I do agree with you in regards to the overall planning and thought that goes into the Irvine villages compared to some of the newer communities in Tustin and Ladera Ranch. Woodbridge, for instance, still seems very desirable and unique despite its age, and give me a fair degree of confidence that some of the newer Irvine villages (Woodbury, Portola, Quail Hill, etc) will also “age” well…
I’m not sure that good planning can overcome macro-level price drops in home values, but I would imagine Irvine will come out of this bubble better than some newer communities in Orange County…
-OCR
I think Bkshopr is drinking a bit of the kool-aide. He/she sounds a bit like a proud homeowner who thinks everyone else’s home values will decline, but it won’t happen to them. Irvine homes certainly won’t decline as much on a percentage basis as houses in Victorville, but they will decline significantly. Prices dropped about 15%-20% in Irvine in the 90’s, and that bubble wasn’t near as bad as this one.
The Irvine Company needs to make money like any other company. If they can’t sell and land our houses at current price levels they will cut their prices. Think about the logic of saying they won’t do this: why wouldn’t the Irvine Company just hold out for $1,000,000 per home? If they don’t need the cash, why sell any at all. Why not hold out for $10,000,000 per home? The Irvine Company has a payroll and overhead, and they must sell enough property to cover their expenses just like any builder/developer. They may hold out a little longer than some others, but they can only hold back the tide so long.
I actually drove down to the development on Sunday to see how many protesters would be willing to give up watching March Madness on their flatscreens and stand around all day. Sure enough, all of the signs were there stuck into the grass outside of the rec center, but not a single protester in sight.
Someone stated that these building just don’t seem like homes to them. I actually experienced the same reaction looking at these properties. The developers have gotten very good at emulating the basic styles of home architecture, but in a mass produced stucco way.
I actually studied for my Real Estate brokers licence just because I wanted to learn as much as I could about it with the interest in investment. This was around the time (2 years ago) that I started to see how overpriced the properties were, since there was NO WAY I could make an income statement work for a rental. When I got licensed I then pursued a certification in Appraisal, since I found that the most interesting.
I think what is happening with the architecture of these new developments can be seen in the Generally Accepted Appraisal Standards. Really no weight whatsoever is given to architecture whatsoever, since it can’t be quantified. The entire equation is based upon ZIP Code (location), square footage, # baths, # bedrooms, and of course comps…. but the comps are only really justified upon those lines. Yards are now shrunk to maximize the covered living space. Basically they use the appraisal rules as the ONLY guide in designing these properties. Hiring an architect is basically a waste of resources. And thus the McMansion was born.
It would appear that if you want Cape Cod, or Monterrey, or Gothic, or Colonial… Irvine Company will build them for you… no problem. In Stucco of course.
I’m OC born and raised and have been in the real estate/land development industries for over 25 years. I am humored at the double-standard people apply to homebuilders and developers. How is it that builders are considered greedy, but the consumers who buy their homes aren’t stuck with the same label? Why is it that someone who buys a home, lives in it for a year or two with little or no additional investment in the home, can turn around and try to sell for an exorbitant price and it is socially acceptable? It’s not only acceptable, we actually brag about it! Even worse are the investors, both professional and amateur, who have artificially increased demand, thereby inflating prices and pricing out consumers who are actually just looking for a place to live and raise families. If this same mercenary approach by individuals were applied to other basic requirements of life (i.e. food, water, medicine), people would be gathering crosses and nails to crucify them.
I was an active Realtor for 15 years. If you really want to see what greedy looks like, just go look in a mirror. In the world of greed, homebuilding companies are mere amateurs compared to most of us individuals. The vast majority of the people who I have represented or dealt with do not want to leave so much as a penny on the table; they push-push-push for every last cent. Despite claims to the contrary, homebuilders have a vested interest in price increases in subsequent phases. Why? Because it takes a long time to build a home and they want to keep their customers happy so they don’t cancel in this prolonged period of time. The deposit on a home under construction typically doesn’t go “hard” until the buyer chooses to have the builder upgrade or alter the construction somehow or the home is completed, so that is a long time to keep a customer happy and eager to complete the purchase. Buyer’s remorse can easily lead to the cancellation of a sale without the illusion (real or created) of increased equity during the construction period. But sometimes, conditions change and builders have to adjust to these changes.
If homebuilders are so greedy, why don’t we all go out and build our own homes? Just go out and buy a lot and either build it ourselves or hire a contractor to do it for us? Because it isn’t easy and it takes a long time to do. In addition to the logistics of the actual construction, requirements by governmental agencies have grown to monumental standards. And since we would each only be building one house, it would be extremely expensive on all fronts. The concept of economy of scale runs through just about every facet of business, including home construction.
If the average person could fathom the amount of money that is spent upfront in the development of property or the construction of structures, they would be blown away. People and companies in this industry gamble enormous amounts of money. Until the creation of assessment districts and community facilities districts, profit often wasn’t generated until the tale end of a development, which could be many years from the beginning of the outflow of cash by the developers. I was taught in a variety of business classes that risk and reward are typically tied together–the greater the risk, the greater the potential reward. Why else would you invest your resources of time and money?
Will prices go down? Probably. With so many of the local homebuilders being publicly traded companies, their stockholders (yes, that is you and me) require a return on our investment and don’t want them to gamble with their money. Do the builders want to reduce prices? Of course not. But anyone in business has to use the appropriate business strategy for current and anticipated future conditions. With the exodus of investors from real estate (anyone notice the rise in the stock market when the housing market softened?), pressure on pricing has been reduced and/or eliminated. In some cases, pricing that shot up based upon this artificial demand may fall back to a more supportable level. The frenzy of the market is over, at least for now. Anyone remember beanie babies? People fell all over themselves to pay ridiculous prices for stitched cloth and beans. When McDonalds offered them in kids’ meals, people were buying the meal and tossing it in the trash, but treasuring their “investment” that completed their collection. I never bought a beanie baby, but my kids got some as gifts. Do you know what we do with these treasures now? They make great toys for our dog. Housing prices may correct, but won’t collapse to this level because there is an intrinsic value in housing–shelter! Some people actually buy a house to live in it.
Whether Bob and his friends were misled by the salespeople, I can’t say because I wasn’t present. Actually live in your house for a period of time, Bob, and you will be fine. Over time, it is very difficult to lose money in real estate. In the short term, it happens from time to time, but is far from the norm. People got caught up in the frenzy, just as they did in 1998/1999, and were willing to sell their souls for the chance to buy a home. People signed up for incredibly risky financing vehicles in order to qualify to purchase. Were there some predatory lenders out there? Certainly, just as there were a huge number of people willing to do whatever it took to buy. One interesting fall out of the softening market will be foreclosures and the ramifications of the foreclosures. Yes, they will further soften pricing in individual neighborhoods,affecting many of us who never got caught up in the whole frenzy. But, many of those people who lied about their incomes to qualify for stated income loans may find themselves being prosecuted for fraud; on federally insured loans, this is a federal offense.
Sorry, Bob and buddies, but you gambled and lost. You irresponsibly added to your gamble with the $100,000 second to landscape your palace. If you weren’t planning on sharing your future gains with William Lyon Homes (bad form by the blogger when she can’t get the name of the builder right–it is Lyon, not Lyons), how can you cry foul when they chose to adust their business plan to address current economic and market conditions? This is how private enterprise works. Although it is a publicly traded company, their objective is to maximize returns for their investors. You are an adult, responsible for your own actions. Don’t expect someone else to bail you out. We don’t live in a socialistic society, at least not yet.
“(bad form by the blogger when she can’t get the name of the builder right–it is Lyon, not Lyons)”
yet:
“profit often wasn’t generated until the tale end of a development”.
It’s “tail.”
Sit right back and I’ll tell a *tale* about the time I stepped on the cat’s *tail*.
Spellcops suck.
Long Time in RE – I honestly hope that you come back and post more. Most in RE do not have the experience that you have and it seems that you get it more than most. You may have to take some flack from time to time but your contributions could add value to the blog. I would like to see a level headed opinion from someone in RE. You make a very good point in how much it cost to develop and build a home. Why do you think so many contractors who build a few spec homes here and there end up failing?
Just FYI Bill Lyon bought back his company from shareholders. So now it is a private company.
oc_fliptrack aka Sergeant Spellcop – You missed the missing J in adjust. Of course I had to look up sergeant so I really could never be a spelling cop.
Long Time in RE
I have been following this blog for some time and have never felt compelled to comment until now. You bring a very refreshing perspective to these otherwise one-sided discussions.
Hee hee. I would “adust” that business plan, too.
Hi Everyone,
I am also a real estate agent with over 20 years of experience in OC. I hope you would be kind enough to allow me to be in on this forum. I have been reading this blog for about a month and can sense that real estate agents are not exactly “well-received creatures”, and I can not really blame you, that is just fine with me. I can offers you limited “insider” information in exchange for just being a blogger in this forum! I would like to stay anonymous so please do not try to guess who I am.
“…He said that he feels coerced, manipulated…”
I’m willing to bet that if you put Bob in a car dealership, he wouldn’t have allowed the sales manager to push him around. But he thinks he was exploited or intimidated by sales ladies into buying an $800k home with 20% down, then ran off to get another $100k loan for landscaping?
*shakes head*
Anyways, what’s done is done. If he’s hoping for some kind of refund, best of luck to him. If I were the builder, I wouldn’t want to set a precedent where I have to offer price protection and refunds to all my customers.
Long Time in RE,
Good post. Hope to hear more from you.
nirvinerealtor,
We don’t mind realtors, we just mind the trolls who come here to pump the market with mindless BS. More bullish opinions are welcome as they will stimulate thought and debate, assuming those opinions are well thought out.
It is good to have others from within the industry post their insights. Any of you who have read my previous posts know that I am pretty bearish, and I lay out the bearish argument in some detail. I appreciate a well argued position, particularly if I disagree with it. I think other readers of this blog feel the same.
Welcome.
IrvineRenter,
Thank you, you are very kind. I do feel most of the bloggers on this forum are bearish, and that’s very normal. I actually do not want to have a position because the market changes so quickly; Moreover, the type of buyers and sellers whom I work with come from all part of the world (locally, nationally, and internationally). As a matter-of fact, a Million Dollar 1,800 sq. ft. SFS in Irvine is considered both “very cheap” and “very expensive” at the same time.
As you know, real estate agents are legally liable to any information or opinions they provide to their clients. I like this post because none of you is my client; therefore, I can freely be a blogger who happens to be a real estate agent.
Since I have great access to real estate database, I might be able to provide helpful data trends.
Sincerely.
Long Time in RE:
Thanks for the correction on William Lyon. My bad. I’ll fix the original post.
ISM
Okay, okay, I just have to say one thing in my defense. I am usually a very detail-oriented person and I like to think that my writing skills are better than the norm. I’m gonna blame our friend Bob on this one. Take another look at the protest letter in my post; Bob and his neighbors misspelled their homebuilder’s name! So I just went with their spelling subconsciously.
One more ding against poor Bob’s credibility.
ISM
“I would like to stay anonymous so please do not try to guess who I am.”
““““““““““““““““`
Ladies and Gentlemen….please welcome….
Greg Swan-dive!!!!!
He is Ok, Susan researched him.
lol at all you irvine detached-condo dwellers in your overpriced little cookie cutter-communist-block-housing-homes. I could never live in those cramped little communities that all look the same and have stupid little names like wood-something, something-rach, whatever-hill)hahah…I find it amusing watching you nit-pick at each other over whether or not this little community or that little community will drop in price, keep it up. Your entire zip code is an ugly hit-and-run development with no character!
Comedy!
Actually out here in Palm Desert we had a builder’s representatives (senior community) swear to the buyers in phase 1 that prices wouldn’t drop. When they lowered the prices in phase 2 and 3 (this was during 2004) the owners in phase 1 filed a lawsuit against the builder and won.
They are in their final phase and can not according to the terms of the judgment sell for less than a certain dollar amount, if they do they have to refund the difference to all the buyers in all the phases.
I will admit I didn’t think they had a snowballs chance in hell of winning but they hired a lawyer who did some pretty slick investigations and had several of the sales staff on tape stating that the builder had no intentions of lowering prices.
Generally the four corners of the contract rule applies, if it’s not contained in the four corners (written) of the contract it’s not enforceable.
Too bad they already started their protest. The should have consulted a real estate attorney first.
Hm, the question that I have is did the buyers think the sale agent is the agent for both builder and buyers?
This actually happened to me also. A year ago, I signed up for Phase 1 from a different builder in another city. The condo was selling for 450k. The salesperson assured me the price would more likely to go up and not down. And I will admit, the reason I bought on a Phase 1 was in the hope of a price increase. It was a gamble and I knew it.
At any rate, a month after signing the purchase contract, I looked in the newspaper and was shocked to see that the builder lowered the price by 100k!! Of course, I was very upset. But knowing that the contract have already been signed, I essentially was at the mercy of the builder. With this in mind, it was senseless to take the same route that Bob and his neighbors did. Why raise hell when you have signed the contract. Legally, you’re not going to win. I actually went back to the sales office and politely asked to re-negotiate. It took a week for the sales rep. to get back to me with the answer from higher ups. But guess what? The builder did in fact lowered the price by 100k!!!