I last pounded realtors back in January in Urgency Versus Reality: realtors Win, Buyers Lose. It's a subject entertaining to revisit. Today, the New York Times takes a shot.

Warning! This post has a graphic with an objectionable four-letter word… and perhaps another seven-letter word….

Irvine Home Address … 35 MORNING Vw Irvine, CA 92603

Resale Home Price …… $1,275,000

{book1}

Oh I should have seen the signs

Now we're falling back in time

So far from where we started

So far from what we wanted

And I'm trying to right this wrong

So I need you to be strong

So far from where we started

So far from what we wanted

State of Shock — Money Honey

As the housing bubble deflates, I am struck by how far we are from where we started, and rather than try to regain our sanity, we blow air into the bubble, we foster moral hazard, and we embrace any get-rich-quick scheme available. There is no concern for the collective good any longer. Or are we only concerned with homeowners. If so, then everyone should own a home; thus it must be a great time to buy, right?

Great Time to Buy (Famous Last Words)

“IT’S a great time to buy a home.”

Real estate agents were saying that in 2001, as home prices were rising. They also said it when home prices peaked in 2005 — in fact, David Lereah, former chief economist of the National Association of Realtors, published a book that year titled “Are You Missing the Real Estate Boom?”

And many real estate agents said it was time to buy as prices began to drop — and continued to say it over the past several years as prices fell by an average of 33 percent in America’s 20 largest cities.

Mr. Lereah would acknowledge that he had gotten it wrong. But from the perspective of many real estate agents, it is always a good time to buy.

I suppose I should be content trashing David Lereah in the Wall Street Journal, but since his name popped up in this article, I couldn't resist.

“What they are really saying is that it is a good time to be involved in a transaction that generates a commission,” says Barry Ritholtz, C.E.O. and director of equity research at FusionIQ, a quantitative research firm. He’s also author of “The Big Picture,” an irreverent blog on markets.

Barry is the man! [pictured right]

Glenn Kelman, chief executive of Redfin, is not.

“I can’t prove to you that housing prices have definitely bottomed out,” Mr. Kelman says. “I can say with a fair degree of certainty that the cost of money will go higher.” [I agree]

OF course, if rates go up, home prices tend to dampen. Borrowing $300,000 at 5 percent costs you $1,610 a month. If rates rise to 6 percent, that’s $188 a month more, or $67,680 over 30 years. Would the price of a $375,000 house fall because of a half-point rate hike? Now you are back to guessing about home prices. Don’t go there. Maintain your focus.

WTF? Don't go there? Don't think about future house prices? I thought I was going to be able to praise Redfin's guy, but then he spouted nonsense like a realtor, so I will try not to focus on that.

“People are frequently buying for the wrong reasons,” says Frank LLosa, a real estate agent working in northern Virginia. In most cases, he says, they think that they are getting an income tax break or that their home is an investment.

He points out that a buyer of a $300,000 home would have to see the house appreciate $18,000 just to cover the commission and closing costs. Then figure in the predictable costs of maintenance, the opportunity costs of the mortgage down payment and the amount one could have saved by renting a similar place more cheaply.

Mr. LLosa thinks that many people — including him — would be better off renting. People ought to buy a house for what he calls “warm and fuzzy feelings,” but they shouldn’t try to predict home prices. Nor should real estate agents, who aren’t much wiser.

“I don’t think real estate professionals should be in the business of telling people when it is a great time to buy,” he said.

I like this guy. Might he be a Realtor with a capital R? "An alternative perspective on Real Estate… the truth." Wow! This is promising. Check out some of these posts: Go FSBO! Save $20,000! Agent Tells All!; Agent Rebates. Free Money or Expensive Savings?

A good time to buy?

Bulls celebrate massive government intervention as a good thing, as if we are rescued from a temporary downturn and prices are set to head to the moon. Personally, I think that is crazy, particularly locally and closer to the coast, but I am just an opinionated blogger.

What do you think? Do you believe this is a good time to buy?

Irvine Home Address … 35 MORNING Vw Irvine, CA 92603

Resale Home Price … $1,275,000

Home Purchase Price … $695,000

Home Purchase Date …. 8/28/2001

Net Gain (Loss) ………. $503,500

Percent Change ………. 83.5%

Annual Appreciation … 7.0%

Cost of Ownership

————————————————-

$1,275,000 ………. Asking Price

$255,000 ………. 20% Down Conventional

5.00% …………… Mortgage Interest Rate

$1,020,000 ………. 30-Year Mortgage

$264,001 ………. Income Requirement

$5,476 ………. Monthly Mortgage Payment

$1105 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$106 ………. Homeowners Insurance

$376 ………. Homeowners Association Fees

============================================

$7,063 ………. Monthly Cash Outlays

-$1476 ………. Tax Savings (% of Interest and Property Tax)

-$1226 ………. Equity Hidden in Payment

$496 ………. Lost Income to Down Payment (net of taxes)

$159 ………. Maintenance and Replacement Reserves

============================================

$5,016 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$12,750 ………. Furnishing and Move In @1%

$12,750 ………. Closing Costs @1%

$10,200 ………… Interest Points @1% of Loan

$255,000 ………. Down Payment

============================================

$290,700 ………. Total Cash Costs

$76,800 ………… Emergency Cash Reserves

============================================

$367,500 ………. Total Savings Needed

Property Details for 35 MORNING Vw Irvine, CA 92603

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3 Beds

2 full 1 part baths Baths

2,415 sq ft Home size

($528 / sq ft)

5,000 sq ft Lot Size

Year Built 1979

3 Days on Market

MLS Number S608552

Single Family, Residential Property Type

Turtle Rock Community

Tract Rp

——————————————————————————

35 Morning View is the home that you have been waiting for.Sit and look out at spectacular views of Shady Canyon,Strawberry Farms Golf Club,the lake/reservoir, mountains and city lights.This secluded home is located at the end of a cul da sac with a large landscaped island. As you enter the courtyard,with bubbling fountain,through the Dutch Entry doors you are in the homes entry and formal dining room,with vaulted ceilings and wood floors. A few steps up and you are in the formal living room with it marble fireplace,handcrafted mantle and panoramic,sit down view.The master bedroom is on this level with a walk in closet,built-ins,French Doors to the deck and views,views, views.Downstairs is a family room with another fireplace,built-ins,a door to the large patio and more views. There are also two bedrooms and a full bath downstairs.The kitchen is on the main level and is light and bright with an oversized skylight,built in refrigerator and an eating area. Don't miss this fantastic home.

Did the agent forget to mention THIS IS A DUPLEX!!! $1,275,000 for a duplex that needs an updated kitchen. Hmmm… No bubble here.

Nice view…

I am not sure if these owners deserve a B for mortgage management. They refinanced their mortgage in 2003 with a lower balance and lower interest rate, so it appears they may have even accelerated their payoff which would earn an A, but there is no way to be certain. There are two HELOCs that appear later which would earn them a C, but there is no other evidence that they took out the money.

I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.

Have a great weekend,

Irvine Renter

The precarious balance of supply and demand in our local housing market is sustained at low sales volumes by low inventories. Is the new inventory coming to market upsetting that balance?

Irvine Home Address … 29 CHARITY St Irvine, CA 92612

Resale Home Price …… $1,449,000

{book1}

The walls start breathing

I give the final blow.

When darkness turns to light,

It ends tonight.

The All-American Rejects — It Ends Tonight

The array of government market supports are tentatively scheduled to be removed from the market. Unfortunately, the tax credit for houseowners is not helping sales, and many are worried about what will happen to the housing market when tax credits expire? People have good reason to worry because the housing market is still dependent upon government support to maintaining our inflated current prices.

realtors blather on about pent up demand, but in reality, there is very little demand because (1) many people were pulled forward during the bubble and (2) many who were not pulled forward during the bubble are either unemployed or underemployed and thereby not contributing to demand. The end result is low sales volumes that will persist until either prices are much lower or the economy recovers and those not foreclosed upon or bankrupted during the bubble start buying houses.

Pending Sales of Existing Houses Decline

March 4 (Bloomberg) — Fewer Americans than expected signed contracts to purchase previously owned homes in January, indicating the extension of a tax credit is doing little to lure buyers.

The index of purchase agreements, or pending home sales, dropped 7.6 percent after a revised 0.8 percent increase in December, the National Association of Realtors announced in Washington. Other reports today showed factory orders increased and first-time jobless claims declined.

The drop in contract signings adds to evidence the housing market at the center of the worst recession since the 1930s is struggling to rebound after reports last week showed unexpected declines in purchases of new and existing homes. The market may get another blow this month when the Federal Reserve ends planned purchases of mortgage-backed securities.

“When you take away all the support from the housing market, the underlying demand for housing is a lot weaker than we thought,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We clearly pushed some demand forward, and there wasn’t that much demand to pull forward anyway. The housing recovery is going to be very, very slow.”

Mr. Vitner's analysis is right on; what little demand was left over has either been pulled forward during the bubble or it has since been pulled forward with the glut of government supports. Any decline in sales during the first half of the year fails to match the historic pattern and causes concern among the rational.

February Sales

“The abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February,” Lawrence Yun, the group’s chief economist, said in a statement. “We will see weak near-term sales followed by a likely surge of existing-home sales in April, May and June.”

The Realtors’ report showed declines in January pending sales in all four regions, led by a 13 percent slump in the West. Contract signings fell 8.9 percent in the Midwest, 8.7 percent in the Northeast and 2.1 percent in the South.

Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later. The pending sales data go back to January 2001, and the group began publishing the index in March 2005.

Reports last week showed the housing market may be faltering. Sales of previously owned homes unexpectedly dropped 7.2 percent in January after a record decline a month earlier, according to Realtors group’s report Feb. 26. New-home sales slumped to an all-time low, the Commerce Department said Feb. 24.

Does Lawrence Yun have any credibility with anyone? Is there even one person who believes him? Isn't he a stuffed shirt?

Credit Extended

President Barack Obama and Congress extended the first-time buyer credit in early November to cover deals signed by April 30 and closed by June 30, and expanded it to include some current homeowners.

Among other concerns for the housing outlook, the Fed said it plans to end a program later this month to purchase mortgage- backed securities, which helped contain borrowing costs.

The rate on a 30-year fixed mortgage dropped to 4.71 percent in early December, the lowest level since Freddie Mac started keeping weekly records in 1972. The rate has hovered around 5 percent since then.

Is anyone surprised that Ben Bernanke refinanced his ARM to a fixed-rate mortgage late last year? Interest rates for fixed-rate mortgages are at bottom, and anyone who has not refinanced into fixed-rate financing should do so now.

Southern California Sales Volume and Price

Dr. Housing Bubble recently wrote a post on The Housing Metrics of Southern California – Seasonal Home Sales, Inflation Adjusted Home Prices, Tens of Thousands Living Rent Free, and the Japanese Experience. The chart below comes from that post:

From the good Doctor:

This is a fascinating look at the market. Even during the boom we clearly see the seasonal pattern in sales. Each fall and winter sales drop as more people take inventory off the market. Spring and summer overall are bigger sale months because of school schedules, family commitments, and just a general acceptance that this is when more inventory enters the market. But you’ll notice in 2006 that the trend radically shifted. The crash hit and sales plummeted. An interesting phenomenon occurred where the median sale price didn’t peak until the middle of 2007 well into the monthly sale crash. So it would appear that sales would actually lead future prices.

Irvine Inventory

At the Irvine Housing Blog, we have been tracking inventory since January 2007. The chart of inventory is shown below.

If you think back to what was happening in our market, the inventory graph reveals much about the strength of our market.

In 2006, the market topped, sales volumes declined, and inventory increased.

Beginning 2007, inventories were already elevated and the market contained a dwindling qualified buyer pool and tightening credit standards; consequently, when a normal amount of spring listings hit the market, sales volumes were low, and inventories ballooned.

By 2008, many late buyers were underwater, and discretionary buyer viewed the price drop as a temporary apparition; therefore, many sellers did not bother listing their properties, and many that were listed had WTF asking prices nobody could afford. The result was a continued decline in sales volume and lower prices.

By 2009, the crisis prompted the government into providing an array of market subsidies designed to improve affordability and prevent further price declines. The same problems that existed in 2008 persisted into 2009 and became worse due to rising unemployment, strategic default, and a number of other problems.

Now in 2010, we are seeing inventory rise again, but we are still well below historic norms. Current pricing is sustained by restricted inventory and low sales volumes. If either inventory or sales volumes increase, it will adversely impact prices. Some of our recent inventory is discretionary sellers asking WTF prices that will never transact, but a significant amount of this new inventory is appearing as trustee sale flips that previously has been withheld from the market. Will the lending cartel be able to sustain prices, or with the incentive to cheat and sell while prices are still high force more inventory on the market and push prices lower?

At its current trajectory, inventory should break the 30 month trend of declining inventory very soon. In both 2008 and 2009, the seasonal inventory increase was abruptly reversed, and prices were able to remain firm. Will that happen again?

Irvine Home Address … 29 CHARITY St Irvine, CA 92612

Resale Home Price … $1,449,000

Home Purchase Price … $888,000

Home Purchase Date …. 3/25/2003

Net Gain (Loss) ………. $474,060

Percent Change ………. 63.2%

Annual Appreciation … 7.1%

Cost of Ownership

————————————————-

$1,449,000 ………. Asking Price

$289,800 ………. 20% Down Conventional

5.01% …………… Mortgage Interest Rate

$1,159,200 ………. 30-Year Mortgage

$300,371 ………. Income Requirement

$6,230 ………. Monthly Mortgage Payment

$1256 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$121 ………. Homeowners Insurance

$230 ………. Homeowners Association Fees

============================================

$7,836 ………. Monthly Cash Outlays

-$1521 ………. Tax Savings (% of Interest and Property Tax)

-$1390 ………. Equity Hidden in Payment

$565 ………. Lost Income to Down Payment (net of taxes)

$181 ………. Maintenance and Replacement Reserves

============================================

$5,672 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$14,490 ………. Furnishing and Move In @1%

$14,490 ………. Closing Costs @1%

$11,592 ………… Interest Points @1% of Loan

$289,800 ………. Down Payment

============================================

$330,372 ………. Total Cash Costs

$86,900 ………… Emergency Cash Reserves

============================================

$417,272 ………. Total Savings Needed

Property Details for 29 CHARITY St Irvine, CA 92612

——————————————————————————

4 Beds

2 full 1 part baths Baths

2,910 sq ft Home size

($498 / sq ft)

6,223 sq ft Lot Size

Year Built 1995

108 Days on Market

MLS Number S596674

Single Family, Residential Property Type

Turtle Rock Community

Tract Cw

——————————————————————————

Beautiful Plan 1: Professionally maintained gardens, decorator paint, brand new granite countertops, refinished hardwood floors and brand new never lived on designer carpet throughout. This home is truly move in ready. The yard is lined with Fuji apple tree's that bear great apples every year, Orange, tangerine and lemon tree's are also part of the back yard. If you are looking for a multiple purpose home to entertain, easy everyday living and easy to keep clean this is the one! This home is located in the best part of Concordia, best of the Irvine School system, always on the top 10 safest city list. Gated community with hill lined street and nice views. Centrally located to schools, shopping, freeways, toll Roads and minutes to the beach. Another bonus is that the association dues are low and there is no mello-roo's tax. This is a great place to raise a family and you are guaranteed University High which is a top high school. THIS IS THE ONE!!

This is chasing the market down:

At this rate, the house should reach its current resale value by 2020. Does any rational person believe this property has gone up in value about 80% since 2003?