Irvine Housing Blog

My house in the space coast had screaming orange Gator orange as a rug in the master bedroom, with not too bad dark blue wall paper.  He was a high school football coach.  Luckily, the rug had faded some since he had had it installed 16 years before we bought it.

All carpets pulled up and replaced with colors I like.  But it is fun discussing their extremely bad taste.

Aww, c’mon, the 5 is only 12 lanes there. Not noisy at all. I’m sure someone will mention a soundwall now….

Could be the loan didn’t go through, or inspection showed a rat infestation, bad wiring, asbestos, who knows. Or as you imply, it could be the bank balking at the offer.

That said, I wouldn’t make any “rash” decisions when you come back to OC, as regards to real estate. Just watch the debacle. Easy does it!

Actually I was thinking maybe a better analogy is the fishing industry. The banks lure us with shiny objects like cars and houses, and capture us with giant credit nets, so we can be sold off in bulk at a Japanese fish market. The smart ones escape before ending up as nigiri and hand rolls.

Banks are getting creamed because of bad loans (with low or no DPs) that they can’t sell or are being forced to buy back.

Banks are like a manufacturer. We, the Joe Blows of America, are the factory, the fuel, the machines, the materials, etc. Banks assemble us into big loans of various kinds (cars, jewelry, credit cards, mortgages). Once assembled into loan product clusters, the banks then attempt to sell them to their customers, much as Best Buy might try to sell you an iPod. Only their customers aren’t us, they’re the overseas banks, investors, hedge funds, pension funds, yadda yadda.

So they’re experiencing a classic recessionary inventory cycle. They’ve got too much of their product (you and me assembled into loan products) but declining demand (from funds, foreigners, etc.). This puts them into a deflationary spiral. They know their best hope is to cull their inventory (you and me and our debt), take the tax write-off, and move on. Lather, gargle, repeat (or something like that).

Hey, at least LOANS are still made in the USA!

My current home was built in 1950. My previous home was built in the 1890’s. When I mentioned these “old” homes to a European co-worker, he laughed and explained that nothing in this country counts as ‘old’ yet…

+1

our family room is blue, I think it might photograph that dark, but really it’s quite a bit lighter.  I really like it, but I’m fighting any more strong colors in our house.  I lost on the master bath too, that one would have you people in stitches.  My wife and daughter like colors.  I’m going to buy any color they want, as long as it’s eggshell.

I think they call it, what was that again…  THE FINAL FOUR!  Bowl games are for chumps.  The BCS is whacked. 

Purity is March Madness.  Win or go home, game after game, until someone can truly say they are the best.  SC had a nice little run there too, but they’ll be lucky to even get invited to the Big Dance this year…

“Golden Brown” by The Stranglers came to mind.

Weren’t the Clampetts from Tenessee too?

Mabbe he found himself some gold in dar hills while hunting. 

“Come and listen to a story about a man named Jed
A poor mountaineer, barely kept his family fed,
Then one day he was shootin at some food,
And up through the ground came a bubblin’ crude.

Oil that is, black gold, Texas tea.“

But, Mr. Moving Back.. I thought you should be moving to the 90310…

“Well the first thing you know ol’ Jed’s a millionaire,
Kinfolk said Jed move away from there
Said Californy is the place you ought to be
So they loaded up the truck and moved to Beverly.

Hills, that is.
Swimmin pools, movie stars.“

In the early 90s, places like Moreno Valley lost 50% of their value.

Yeah, I have never seen a CONDO staged like that. You have to wonder who they plan on apprealing to.

Given the current volumes, I’d venture to say your volume bounce is in the bag.

If you don’t get a meaningful and sustained increase in prices, it won’t be a datapoint meaningful of anything than some people who are forced to buy or sell for one reason or another (corporate relocation, divorce, estate sale, ect) either have to sell or cannot wait any longer.

The condos in TRidge are painted in Cardinal and Gold.  I dunno, but I think SC played a great Rose Bowl… what did UCLA do?

Once upon a time I worked in Westwood.  Driving through Westwood Village I saw this attorney looking guy driving a big SEL Benz with two bumper stickers: 

“USC”
“My maid went to UCLA”

That was awesome.  And, no, I didn’t go to USC, I actually went to a more expensive private school myself.

Exactly IR… the ‘shadow banking system’ created by all of this ‘innovation’ has been completely obliterated.  Hundreds of billions of dollars already written off on bad / ludicrous lending in housing.  What would you ask for if someone wanted to borrow $500K of your money to buy a house in the OC?  How much would you want down? 

And, BTW, the consumer spending that was fueled by the refinancing of the american home / ATM over the last few years is now drying up…people have been spending on their credit cards to keep up their payments in other areas.  Now we have rising defaults on credit cards.  This is going to get much worse before it gets better IMHO.  This is why I believe we could see year 2000 prices at the very bottom.

I moved to Utah just at the end of the real downturn there, in ‘89.  There were a ton of abandoned houses for us to chose from.  Of course, we picked up a really nice house for $95k that would go for a lot more now.  The funny thing was, there was a boom as we were leaving in ‘94, which died just as we listed our house.  We got an offer right away, which was low-ball so we didn’t take it, and we ended up taking less after dumping a few thousand in mortgage payments.  We still made over 30k.  The boss’ wife had been warning anyone that moved into the area not to buy a house, but for some reason we didn’t get that warning, which was a good thing.

There is a transition now as the amateur speculators get out of RE, and the banks figure out if they are going to stay open.  The full market dynamic isn’t defined.  Of course I never understood the RE market in Irvine, and I probably never will.  The rest of us in the U.S. will hopefully never have to deal with housing prices that are such a high percentage of our income.

“I am not convinced why banks will raise downpayment requirements to 20 percent considering the fact that banks are making the CDOs the bag holders.“

How much longer do you think bagholders will line up to be bagholders? At some point, people stop risking money when they are losing. That is why we are having a credit crunch.

I wish I was too young to remember the bust of the early 90s. I wasn’t living in California at the time, so I have no first-hand experience of California’s problems.

cal’s blue is the darker end of the scale, while ucla’s is pale.  and, of course, the gold component of ucsc is really more of the brownish yellow found on a banana slug.

Excuse me, my bad, I was looking at another properties on market. This property just got on redfin. Nevertheless, this place still needs some help.

I think what’s shocking about this property is not that the colors and general look of the place are bad, but they haven’t been improved in the 300+ days this place has been on the market (assuming the pictures are recent) Amazing.

This seller should immediately paint the interior to a neutral color, and work on the general look of this place a little.

However, I seriously doubt they’ll get an offer anywhere near this price, regardless of what cosmetic changes are made.

I was 17 years old when Peter Frampton arrived on the scene.  Every female in Wisconsin was crazy for his long, curly, blonde hair.  It was hard to decide who was hotter, Frampton or William Katt in “Carrie” (although we did not use the term “hot” then…I think we preferred “cool”, but maybe that was a Wisconsin thing).

Having now seen the video linked to today’s posting, and the goofy faces Frampton made during the special sound effects portions, I think all memories of my adolescent angst about the fact that he was not my boyfriend are no longer retrievable.

Just make it 0% and charge even more for PMI.  Start the music.  Good times are back.

I don’t recall posting a wish for 50% declines.

You are just building up a straw man so everyone can watch you knock it over.

C’mon now, don’t get me wrong;
I’m not completely against UCLA. 
During college I spent a lot of time in Westwood.
The girls were 10x more approachable and receptive than their counterparts at SC.
I felt like Tom Brady when I was at Strattons.
SC on the other hand, was more of a challenge.
The girls were hotter and I had to compete for them against Carson Palmer and Charles Schwab’s son.

Actually, UNC was recently rated #1 for quality of education for the price.  Go Heels!

I was curious to when comparison between US/CA/soCa vs rest of the world would happen.
Yes , $ is week. But when comparing RE from different countries, you need to make buying power adjustement. Right now, 1 - 1 buying power would put the euro=1.11$.
So this unit you are talking about in spain would be not 2M$ but less…

Anyway, I spent some time in France in different area (south, Bretagne, Normandie, Paris) over the holiday and looked at the RE.
It sucks as well.  Paris especially, where a 50m2 appartement downtan would have a GRM >350 ! Crazy. and not in best areas.

But waht shocked me the most were in places in Bretagne and Normandie, where average income is much lower than Paris and much much lower than in OC.  Then you can find houses at almost similar prices (ok, they are in concrete and not wood).

Maybe as usual, Europe will follow US and they’ll see a collapse someday.

I was just sharing an observation… I like your fire analogy; that’s certainly what it feels like right now.

Heck, I’m just watching the forrest fire buring the hills wondering how big it’s going to get before they put it out.

Citibank cuts dividend and lays off 20,000 people..

Fantasy????

What planet are you on…

10-20% used to be the norm with PMI required on anything less than 20%.

I don’t see why that will not be the norm again given the massive losses the financial firms are going thru now.

Don’t kid yourselves, this is bad…

I’ve seen a few programs for first time buyers (like myself) that don’t charge PMI even if you put down 10%.

I don’t think i’d be able to afford the monthly payments comfortably without putting down 20% though, so I doubt i’ll take advantage of it.  (I’m looking to get a newer place for 500 in the fall of 08!)

That’s what I think will start happening.  5-10% will be the norm downpayment requirement and PMI will just be more expensive.  Maybe Congress will expand the deductability of PMI?

You two foaming at the mouth wishing for 50% declines reminds me of watching bubble-buyers fantasizing about double-digit appreciation.

1 out of 2 isn’t bad I guess.  Both have balls of steel though as those down payments will most likely be evaporated by the end of the year.

The second buyer with the 45,500 down is paying around 2800.00 a month including HOAs assuming the loan is 30 fixed.

EEK!

That’s going to be one unhappy condohold in another year.

Yea, just make it 5% and let PMI hold the bag.

The buyer of 3 Pierre (model match) in 10/07 purchased for $450,000 with loan amount of $360,000. $90,000 down payment.

The buyer of 18 Sacramento (smaller unit) in 10/07 purchased for $450,000 with a 1st loan amount of $360,000 and a 2nd of $44,500. $45,500 down payment.

Whenever I hear about the salary differences between CA and others places - the absolute #1 justification that immediately follows is “well housing is so expensive in CA”.

Should this work both ways if housing prices were to dramatically fall in CA?

How in the world can you afford to move from TN to here?

“Unless the international investors put down strict conditions on US banks before buying debt from them, I do not see banks self correcting the requirements.“

That’s exactly what will happen.  “Fool me once, shame on you.  Fool me twice…“

Salaries are more dependent on the difficulty finding qualified workers and union contracts.  Companies will not arbirtarily cut salaries based on housing costs but if they post help wanted adds and 100 people qualified people apply, then they know they have some leaway with salaries.

IR,

I am not convinced why banks will raise downpayment requirements to 20 percent considering the fact that banks are makind the CDOs the bag holders. Unless the international investors put down strict conditions on US banks before buying debt from them, I do not see banks self correcting the requirements.

PH

And don’t overlook the velvet Elvis painting that is prominently and proudly displayed at the Helena property.

I moved to TN for work several years ago and am now being transferred back to the OC this year. I’m watching the market and this blog closely to get an understanding of what is happening back there. I am somewhat new to this and don’t udnerstand 100% of the terms used on this site. Can someone help me out here?

I understand what a short sale is. I am a regular Redfin user and receive updates from them. I see several homes go from “active” to “contingent” only to shortly thereafter go back to “active”. Why is this? Does the bank not accept the purchase price? Or does the buyer not qualify?

The hard part seems to be finding a comp for any property listed these days.  I see huge price reductions and still nothing is selling.  Part of me would like to see where the market is right now but most of me hopes we keep free falling for a while.

Regarding downturn in jobs,

Also consider that many CA companies are over-paying their employees to subsidize the cost of living since houses and rents are so expensive.

As the prices come down, is it unreasonable to think that companies are going to take note and reduce salary offers to new employees?

If salaries reduce then you would think prices would be impacted as well.

Perhaps rental prices need to come down too…

They should let it go bankrupt. Somebody will get their assets on the cheap and maybe somebody will learn something from this. I don’t like the idea of the guvment doing anything about this whole mortgage mess. Let the poor suckers pay their dues and let the market move along.

I’m wondering how many more lawsuits will be popping up by individuals and cities against CFC.

I went to UCLA.  My oldest daughter goes there now.  I could care less about their football or basketball teams.  It is one of the best colleges in the world, and for the money, it is the best.  Nothing in our home is painted blue and gold.

An $80k to $90k down payment is nigh impossible for the crowd they’re aiming for. I’m guessing they’re aiming for median folks here. My wife and I combined make close to the median household figure for Irvine, but we own our tiny single-wide outright and have no debt, and it would still take us a good three years saving a little more than 50% of our take home. I’m sure we could pump up the savings a little bit more, but that’s still qutie a bit of time. It’s scary to think how somebody is gonna save up in irvine paying those rents.

I’m not an economist, but from my reading I think the limiting factor on sales will be the availiblity of buyers and the amount of down required by lenders.  Assuming lenders go back to 20% down requirements, that means family’s have to pony up 80-100k to get into party, that will put a crimp on the buyer pool.  Add to that a regional downturn in jobs…  Layoff’s haven’t near peaked yet… 10% of OC jobs are state/local government now facing 10% cutback, another 15% realestate related (7-8% construction alone facing projected layoff’s of 20%, at least 1/2 of real estate agents will leave the field)

And you have the perfect storm for a price collapse.

Love it!

Thanks Alan… so if the fundamental equilibrium is somewhere down 30-40% as suggested by Golden Slacks and we had an overshoot of up to 20% does this mean that we might find areas down 50%+ (peak to trough)?  I’m just trying to test my understanding and get positioned appropriately.  From my perspective here, the most difficult thing for new buyer is the downpayment.  It is really difficult to SAVE $100K+ to get into ‘entry level’.

Greater than 360 days? WTF?!? Why even bother having something listed that long? That just calls for knocking a large % of the asking price right there. If the price is too high, no bites at all.

Reminds me of this property here in TN in a nearby town. Decent sized 2000+ sq ft home, looks beautiful, and also has an adjoining forested lot behind it. They’re asking waaay too much for it, $219,900 I believe. It’s been on the market for quite a while, possibly 6+ months and I don’t think I’ve seen the price budge one bit. Median household income is ~$26,500 and median family income is ~$39,600. So I’m thinking this is a WTF price for the area. But bad thing is that the little real estate sales booklets are full of properties in this price range. I just don’t get it.

How about a market board where we can all make predictions on what the final sale price will be? See who does the best (loses the least) over the year.

LOL ten.  I didn’t even go to UCLA.  I do love Bruin basketball though.  Always have.

We’ll see this weekend when Love and company put some smackdown on OJ and the boys.  Mayo represents everything that has gone wrong with hoops.  He’s about flash, street cred, endorsement deals, gettin’ paid, etc.  Now Love is a throw-back guy.  Great fundamentals.  Passes the rock.  Hits the glass.  That’s something and someone to root for…

IR was too young to have lived thru the last bust in the early 90’s.

My recollection was the overshoot was about 20% but it was really variable.  If you were in the right place at the right time you could snap up properties for a song.  I did.  I don’t know how to tell you to put yourself in the right place, it’s still too early yet in this downturn.

Or vaseline, the sales crowds up could be a precursor to a little bounce on sales volume…  We’ll know in a couple of months.

I agree.  This is a stellar time to refi.  2-3 Fed drops and probably a heck of a tightening cycle down the line. 

My ARM is due up in August, but there isn’t any way we’ll in the house for more than a couple of years.  I’ll be sad to see my 3.75% rate disappear.  I have no interest in being a landlord so a 30-year isn’t a product I’d use…

If we were sure that we weren’t buying in 2008, I’d refi into a 3/1 I/O sometime over the next couple of months.  It’s at 5.25% or so now and should dip below 5%.  As its possible we might find a property we like for a price we can afford sometime this year, I don’t want to dent the FICOs with a refi unless absolutely necessary.

Interest rates are nice and low, yeah!  I got a call from my bank mortgage lady saying they went down this week. Can now get a 15-year fixed conventional at 4.875%. Wassup. Come on baby, how low can you go!

IPOP

CFC now trading at $5.94!

How bout shorting CFC now..

Downside… Loss of difference between $5.94 and $7.15 + 0.18 x apprecation (deprecation) in BOA stock price if sale goes thru projected to be minimal.

Upside… Deal tanks after BOA does due dilagence on CFC and finds billions more in losses. CFC delare bankrupcy and stock drops to pennys. Only question, will Feds let CFC go bankrupt

Except for the location (right up against the I-5), I like the fact that these have 2 car garages and more than 2 baths for a 3 bed unit.  There’s also what appears to be a small courtyard, which may be suitable for a dog.  Tiles on the ground floor is also nice, I just wish it had a full bed/bath on the ground floor, but for these floor plans it’d be too difficult to ask.

If the unit was, say, close to UC Irvine and selling for

Given that ‘market corrections’ tend to overshoot on the downside in the same way they overshoot to the upside (fear vs. greed), where do people believe the price will eventually bottom on a $$/sq ft. basis?  It looks like we have a perfect storm looming - high energy prices, declining home values, a rapidly weakening consumer and the largest YOY increase in inflation in 26 yrs!  See the comment below from CNBC -

http://www.cnbc.com/id/22663966

“In another report, the Labor Department said wholesale prices dipped 0.1 percent in December, but were up 6.3 percent for all of 2007, the biggest annual gain in 26 years, mostly reflecting higher energy costs”.

IR how bad have we overshot in previous housing busts?

+1: great idea.

This place will not hold it’s value and will continue to fall.

You should only buy when you find a place you want to live in.

I wouldn’t want to live here.

The only reason to buy this property is to not rent and build up equity for a trade up.

Therefore, in the long run the price of this place will be highly dependent on local rental rates, the state of the economy and the number of renters willing to make a near term commitment to build up some equity.  I predict the later factors will tank, the number of similar units will rise.

Tachyon?

Tachyons?

lol tachyonaments!

(I think I’ve been outed as a closet physics geek/degenerate gambler)

I know you like your adjustable rate mortgage, but you really should consider refinancing into a 30-year fixed while the rates are this low. If for some reason you do not move in a few years, you will be really liking the lower payments. Once the FED goes through this easing cycle, interest rates will rise, and they may rise a great deal because inflation is getting pretty bad. I don’t see the FED rate topping out at 5.25% in the next cycle.

And volumes are down and prices are down.

But the showrooms are packed?

Lets recap:

Sales Volumes = DOWN
Sales Prices   = DOWN
Sales Crowds = UP

To me, that adds up to a bunch of folks sightseeing a train wreck.  I’d bet it’s 1/2 neighbors and 1/2 curious getting thier fill of schandenfreud.

This weekend, a home on Mt. Vernon in Orange had a “Bank Repo” open house.  It got a great deal of foot traffic based on the drive by survey I did.  Too bad the non repo SFR across the street is nicer and listed at $40K less. 

Both properties have been on the market for more than 360 days.

Ipop,

Can’t believe you lowered your value posting that garbage.
The Bruin fight song, what a contradiction
C’mon man, the only thing playing at UCLA games was cricket sounds.
What score, they hardly ever made it into the end zone.
Too bad, you seemed like a very knowledgeable guy, should have gone to a real school like SC
Fight On!

Is there any way to see how much they are actually putting down on these units that have sold?

If your greatest statement about yourself is the school you attended, you are not nearly mature enough to buy anything. 

Also, you probably need to get a life ‘cause you’re still living in your college days and have nothing better to say about yourself than you attended XYZ University.  And if you still remember your fight song, well…......  enough said.

What strikes me about the Montgomery and Helena properties is the strange details in the photos. 

Between the the stuffed animals, the faux fur comforter, and the blue tint (?) on the sliding glass door at Helena, and Montgomery’s crap-filled kitchen counter and random pieces of furniture strewn about, these are some pretty half-assed staging attempts (although I recently saw a posting in Long Beach with a photo of the front of the house—complete with workers cleaning the place out.  Really?  You didn’t have 30 seconds to ask them to move?).

I think staging and MLS photos can tell you a lot about the level of desperation, the confidence in ability to sell, and how overwhelmed realtors and banks are with new properties and REOs coming on to market.

Little bit further to fall on the 10-year and it will be in 2003 territory.  Conventional 30-years will see 5.25-5.50 range by then…

I am positively loving my gold and bonds right now.

Two units in the same complex have sold in the mid $400s within the past couple of months.  Neither appears to be REO based on the transaction amount.  Some people are anteing up on these in the $400s.

I agree FE.  It’s a BE if maintenance reserves are at around $150-250 per month.  I calc after tax spend on interest + prop taxes + HOA + insurance at around $1950 per month assuming 20% down.

I think it would probably rent for $2000-2200.

This place is a total starter home, right?

An 80K to 90K down payment seems tough (to me) to come up with as a first time buyer with no existing equity.

I could see someone trying to catch it for low 400K, but have a hard time seeing someone willing ante up 80K to 90K of their savings account for this place in the current market.

Who knows.  Will be interesting to see.

I’m in Spain right now on business. The same size unit is selling around 2 million us dollars. The eurodollar is kicking the $$$$ out of our money back home. Irvine is 10 nicer than Spain.

You are not alone.

I checked out a bunch of open houses this weekend for fun and there was quite a bit of traffic at all of them.  Back in the late summer, I’d be the only guy walking a house sometimes.  This past weekend, I’d be one of 3-4 interested parties in the house at the same time.

Red-green color-blind people *could* see both yellow and blue. It’s an interesting idea - colorblind people do have completely different perception of color and my color-neutral preference would be totally meaningless to them.  Strong colors work IMO in half-baths (because you’re not there much) or kitchens (because there’s not usually much wall space).

I predict it sells in the very low $400s.  Banks are starting to wise up to allowing shorts.  The foreclosure process is expensive and time consuming.  A number of banks will hold off auction if any halfway reasonable offers are coming there way on a property.

Breakeven GRM is influenced by interest rates. With the current very low interest rates, the GRM will be higher. This property is very close to, or perhaps even at, interest rent-saver.

If there weren’t a blue room, I’d just think that the owner is colorblind (red-green, I think, w/o checking) and wanted walls in a color he (most likely) could “see”.  I know people who have an all yellow kitchen (not the appliances—they aren’t crazy) for that reason.

For that Helena property:

Using the 1988 sale price and 4% annual increases, you get $335k. 

If you use 4.6% appreciation (the appreciation b/t the 1991 sale and the 2002 sale—still a not unreasonable number) from the 1988 sale price you get $375k. 

Using the 4.6% to carry forward from the 2002 sale, it’s $432k. 

So, if the last few years had been reasonably stable, the current asking price isn’t nuts.  Given that everyone is expecting further declines, $375k wouldn’t be unexpected.

Of course, I think of condos (without something special, like an ocean view) as depreciating assets rather than appreciating assets, because you don’t really own any land which is the part of a house that actually increases in value over time.  Ordinary condo purchases should always be made as rental apartment substitutions with no expectation of equity gain above inflation.

Lots of alums there - it’s *all* the UC’s. Even so, youch, too bright for me. I like rooms in overall color balance - if not in neutrals, then red/green or blue/brown. Other two-tone balances are too garish for me (yellow/purple, blue/orange). Yellow/red/blue works, so I suppose you could have a bruin theme with red furniture, but only if you mix yellow and blue in the same room. The blue room isn’t too bad but those STRONG yellow walls in a room with cathedral ceilings over a tan floor - gasp - i need air -

Was this intended as a flip? (minimum tax-avoidance residency, hmmm). Who would paint a flip such idiosyncratic colors?

I don’t know… Maybe I’m just not cool or whatever, but painting your walls blue and gold in honor of your school seems a little corny and immature.  I would expect to see this kind of stuff going on in a sorority house, but not in a home that someone dropped a half-million on.

I’m all for being proud of your Alma mater, but let’s keep it real.

If I bought my kid a condo and he/she nuked the walls like that; I’d be livid.

Not in any decent part of SoCal you didn’t.

I agree.  What a rathole!  I would rather live in a homeless shelter.
$175/month association fee?  HAHAHA!!!

Ten years ago, I say places nicer than this going for $50k.

Graphic is great.

This is what used to be an affordable home. Maybe not the best neighborhood, but certainly not Compton. It is pretty large and good for a small family. No granite anything.

The price is not a starter price. It should never have sold that high and an affordable price would be maybe high 200’s.

I agree with the comment that when prices go up, flaws are meaningless, when prices go down flaws are huge.

Starting a jingle mail pool here….I predict 6 months before this guy walks away completely and some financial entity, who knows at this point, ends up with it.

A friend of mine was in Northwood over the weekend and saw a housing auction sign.  She decided to swing by and see what was going on.  The place was jammed and there was no where to park.  There still seems to be a lot of enthusiasm fueled by dilusion out there.

Hmmm, it’s empty.  Why would anyone jump on it when they know money is being lost every day… week… month?

At least it is below 300/Sq ft.