Please join the discussion at Talk Irvine.

Home Sales Data January to June 2007

Jul 29th, 2007 by IrvineRenter 

The information presented in this post are provided by the Orange County Register and Dataquick.

Median sale price

Sales volume

ZIP

code

1st 6 mo. of ‘07

% change

from ’06

1st 6 mo. of ‘07

% change

from ’06

92602

$753,000

2.4%

167

-29.5%

92603

$888,500

-5.6%

185

-31.2%

92604

$630,000

-2.9%

137

-23.0%

92606

$650,000

-5.4%

108

24.1%

92612

$627,750

-0.7%

215

40.5%

92614

$550,000

-8.3%

131

-28.0%

92618

$568,250

7.2%

114

-9.5%

92620

$697,000

-14.8

268

-33.7%

Previous commenters have noted the "noise" from week to week makes it difficult to determine where the market is really going. Here is the data from the first half of 2007 smoothing out the noise from individual weeks.

Slice Price Vs. '06 Sales Vs. '06
House $725,000 +3.6% 1,733 -24.0%
Condo $458,750 +0.2% 663 -30.6%
New* $650,000 -23.2% 307 -27.1%

Above is different look at the market. Instead of breaking it down by zip code, this data looks for trends in various housing types, and it is for all of Orange County not just Irvine. Notice the dramatic decline in sales volume, and notice the huge drop in the median sales prices of new homes.

It is difficult to put a bullish interpretation on this data. New home prices are down, and we know the prices of new product is not reflective of the true price because the incentives being offered to buyers. So one could argue the new home sales price numbers are far worse than what is shown. It is true that many of the new home sales have been condos on Jamboree, so perhaps there is smaller product dragging down the median, but then again, this also means new higher-end homes are not selling at all (Portola Springs).

The numbers appear to be holding up for resales, but ask yourself how is this possible. If new homes are selling for 20% or more under last years prices, how could resale prices not be lower? Wouldn't a reasonable buyer go buy a new house for a significant discount over an old one? Of course they would.

The reason resale prices are not showing the decline in the median is twofold:

  1. There are few if any sales at the low end of the market. The sales that would be occurring in a healthy market that would cause the median to record a lower value are not occurring now.
  2. The people who bought new homes in 2005 and 2006 are going underwater and unwilling and unable to sell. They are being killed by the pricing of the homebuilders, but there is nothing they can do about it, so they all sit in their overpriced homes waiting for their exotic mortgages to explode.

The resale buying which is occurring right now is the last of the move-up buyers who are taking advantage of what they perceive to be a bargain in the market. The loose lending standards are still being offered to prime borrowers (for now.) These buyers are few in number because they are having difficulty finding someone to purchase their home. There are many properties falling out of escrow for this reason. It is the "plankton theory" on display.

Perhaps some of the bulls can offer another interpretation in the comments. I would like to read them.


Posted in News

Burlingame Over

Jul 26th, 2007 by IrvineRenter 

Real estate markets move like large ocean liners: once they start going a certain way, they tend to continue in that direction for extended periods of time; they are slow to change direction. The credit markets have grabbed the rudder and ordered a price decline. The boat spent the better part of a year changing direction, but now it is clearly headed toward the rocks.

Today's properties are on the same street in Northpark. One was purchased at the peak and is now offered for sale at a 10% discount. The other was purchased in 2005, and they are hoping for a breakeven sale.

Burlingame Front Burlingame Kitchen

Asking Price: $664,999IrvineRenter

Purchase Price: $712,500

Purchase Date: 5/31/2006

Address: 75 Burlingame, Irvine, CA 92602

Beds: 3
Baths: 2.5
Sq. Ft.: 1,664
$/Sq. Ft.: $400
Lot Size: -
Year Built: 2000
Stories: 2Rollback
Type: Condominium
View: Park or Green Belt, Trees/Woods
County: Orange
Neighborhood: Northpark
MLS#: S491713
Status: Active
On Redfin: 43 days

From Redfin, "Northpark beauty! Fireplace in the cozy living room, lg. upgraded entertainers kitchen, cathedral ceilings, spacious patio, rare side yard & more. Large master bedroom/bathroom w/ sep. tub & shower. New carpet, fresh paint, plantation shutters. End unit, so feels like detached for attached price! Excellent, private location with attached 2-car garage. Pools, spas, sports courts, walking/bike paths - come enjoy the best Irvine has to offer in this guard-gated, private Northpark townhouse"

I am surprised this unit wasn't listed as having "custom paint." I actually like the colors, but I could see how some might not.

.

.

If this seller gets their asking price, they will lose $87,400 after a 6% commission. This unit has been on the market for over 30 days, so it doesn't appear they are fielding multiple offers over the ask. In short, they will not get their asking price, and they will lose more money.

17 Burlingame Front 17 Burlingame inside

Asking Price: $545,000IrvineRenter

Purchase Price: $550,000

Purchase Date: 4/29/2005

Address: 17 Burlingame, Irvine, CA 92602

Beds: 2
Baths: 2.5
Sq. Ft.: 1,475
$/Sq. Ft.: $369
Lot Size: -
Year Built: 2000
Stories: 2Rollback
Type: Condominium
View: Other
County: Orange
Neighborhood: Northpark
MLS#: S495748
Status: Active
On Redfin: 17 days

From Redfin, "Model Perfect With A Large Wrap Around Yard. view Of City Lights, Priva te & Cozy. Highly Upgraded W/ hardwood Floors, Shutters, Custom Paint, ceramic Tile And More. Unique Floor Plan Offering A Full Suite Downstaris With Full Bath And Walk-in. Master Upstairs , Open Living And Dining, Cute Balcony This Is Your Buyers Dream Home. Prestigeous Guard Gated Community Of Northpark. "

.

.

If this seller gets their asking price, they will lose $37,700 after a 6% commission.

ATM Game Over

With falling home prices, I think we can safely say that for the housing ATM, the game is over.


Posted in Price Rollback

Weeping Desert Willow

Jul 25th, 2007 by IrvineRenter 

Desert Willow

Today's property is a perfect example of how negative amortization loans given to people who can not afford the payments destroy property values.

In this one section of street in the Villages of Columbus there are three properties for sale: 27, 28 and 30 Desert Willow (links on the numbers.) Two of them are adjacent and the third is directly across the street. They are all of similar size and character, and the sellers paid similar amounts for them.

However, the seller of today's featured property got behind on his payments and went into default. As a final effort to get out of this property, he put it for sale at a drastically reduced price. The neighbors can't be too pleased.

.

28 Desert Willow Front 28 Desert Willow Kitchen

Asking Price: $850,000IrvineRenter

Purchase Price: $1,286,863

Purchase Date: 5/3/2006

Address: 28 East Desert Willow, Irvine, CA 92606

1st Loan — $943,629
2nd Mtg. — $251,634
Down Pmt. -- $91,600


Beds: 5
Baths: 3
Sq. Ft.: 2,790Rollback
$/Sq. Ft.: $305
Lot Size: 7,800 sq. ft.
Year Built: 2006
Stories: 2
Type: Single Family Residence
County: Orange
MLS#: S495550
Status: Active
On Redfin: 14 days

From Redfin, "Incredible 5 Bedroom, almost new with many upgrades. To appreciate thi s home you must make an appointment to SEE IT IN PERSON. Near Schools, park and shopping. Perfect family home. Too many upgrades to list."

.

.

As you can see from the financing details, this is a short sale, and it almost certainly will not be approved by the lender. It is not uncommon in these situations for the second mortgage holder to get wiped out, but rarely will the first mortgage holder take a loss. They would rather foreclose, buy the property for the amount of the first mortgage and go through their loss mitigation procedures. It is possible they think it will cost them less this way, but I doubt it.

Just for the sake of Schadenfreude let's calculate the theoretical loss on this property: There was a closing on 5/3/2006 at which Lennar walked away with $1,286,863. If this house sells for its asking price, and a 6% commission is paid to a broker, there will be $799,000 left to pay off the various parties. That is a total loss of $487,863. First, the owner will lose $91,600, then the 2nd mortgage holder will lose $251,634, and finally the primary mortgage holder will lose $144,629.

This can't be good news for the owners at 27 Desert Willow hoping to get $1,188,000 for their house, or the owners at 30 Desert Willow hoping to get $1,279,000? Once a similar property sells for $850,000, what chance to they have of getting their wishing price?

AAA ABX

On Sunday's post on Home Sales Data thru 7-16-2007, I posted this chart with the increased insurance premium lenders are being charged to insure the most stable subprime borrowers. The reason this insurance is becoming so expensive is because of situations like this one where primary mortgage holders are getting burned, and insurers are having to pay off claims.

This is also why mortgage interest rates are going to rise. Future borrowers are going to have to pay the increased insurance costs and make up for the losses on these loans made during the bubble.

It only gets worse from here.

.

I would like to thank EvaLSeraphim for pointing out this property and helping me with some property data.


Sconset Sunset

Jul 24th, 2007 by IrvineRenter 

Windmill Sunset

Like the beautiful image of a Sconset sunset from Nantucket Island shown above, the sun is setting on the Southern California housing bubble. Peoples dreams of endless appreciation and instant riches are slowly wasting away into the silent summer sky.

Sconset Front Sconset Inside

Asking Price: $629,999IrvineRenter

Purchase Price: $780,000

Purchase Date: 5/18/2006

Address: 51 Sconset Lane, Irvine, CA 92620

Beds: 3
Baths: 2.5
Sq. Ft.: 2,000
$/Sq. Ft.: $315
Lot Size: -
Year Built: 2000Rollback
Stories: 2
Type: Single Family Residence
County: Orange
Neighborhood: Northwood
MLS#: S497195
Status: Active
On Redfin: 5 days

From Redfin, "This is a great 3 bedroom , loft and 2.5 bath Cottage Style home in No rthwood pointe. Open light floorplan w tile floors on the first level. Gormet kitchen with tile counters and custom backsplash. Check out the master bath!Private yard is perfect for entertaining. "

What is a gormet? Another realtor that gets excited about bathrooms. What would Freud say?

.

.

When I first profiled a property in this neighborhood (The English Garden) I said it is one of my favorites in Irvine. When I first discovered this little enclave, there was a house for sale on this same street for $875,000. It was about the same size but with one more bedroom. How times have changed.

SunsetThis is one of the most extreme price reductions I have seen to date. I actually admire this seller for accepting the reality of life and setting the price to a level which will sell in this market. Assuming a 6% sales commission, this seller stands to lose $187,800 in just over one year. Think about that for a moment...

I have speculated we will see prices 40% to 50% off the peak in Irvine. Here we are early in the decline, and we have a property selling for 20% off peak pricing. Does that make you believe in a more serious decline as I have speculated, or are you of the opinion this is as bad as it gets?

.

I would like to offer a special thanks to Rockysan99 for pointing out this property


Posted in Price Rollback

Burgundy or Kool Aid?

Jul 23rd, 2007 by IrvineRenter 

Kool Aid Man

We like to start off the week with an analysis post, but those posts are time consuming, and this week I was pretty busy. If you need a fix for your analysis habit, try this link to Saturday's post: The Nature of Market Reversals.

Over the last couple of weeks, I have been featuring a great many rollbacks because I wanted to give you a feel for the deterioration of the market. I have several more coming this week. However, I would like to start the week with a taste of kool aid.

Burgundy Front

Asking Price: $799,000IrvineRenter

Purchase Price: $595,000

Purchase Date: 12/17/2004

Address: 5242 Burgundy Circle, Irvine, CA 92604

Beds: 3
Baths: 2
Sq. Ft.: 1,237
$/Sq. Ft.: $646
Lot Size: 6,000 sq. ft.
Year Built: 1970
Stories: 1
Type: Single Family Residence
County: OrangeWTF
Neighborhood: The Ranch
MLS#: S492007
Status: Active
On Redfin: 37 days

Sale Price $595,000
1st Loan $476,000
2nd Mtg. $119,000

From Redfin, "Beautiful, well-maintained 3 bedroom, 2 bath family home in The Ranch with very rare private pool and spa! Located on a small cul-de-sac, it backs up to a greenbelt with no neighbors behind. This one has had it all done! Remodeled kitchen and updated bathrooms. Fresh paint, tiled flooring and mirrored wardrobe doors. Double paned windows and exterior doors throughout and a new roof. No Mello-Roos or mandatory HOA dues. Great location! Close to parks, schools, freeways and shopping."

Notice the sparing but regular use of exclamation points...

"This one has had it all done!" Sounds like the description of a Coto De Caza gold digger...

.

.

$646 per square foot in The Ranch. WTF?

I consider this in the lesser category of WTF homes as I merely laughed when I saw it. I wasn't left completely dumbfounded. It is still absolutely ridiculous, and I can't figure out what metric the seller might have used to come up with their asking price, but there probably is some rationale for it -- irrational though it may be.

Kool Aid Man

Here is my guess:

I suspect they pissed away $80,000 on improvements, took a few trips and bought a few cars on their HELOC, and the negative amortization built up. Further, they have to pay a sales commission, and they have to make a profit, so add it all up, and they need $205,000 more than they paid. I guess it is perfectly rational after all.

Isn't that the way real estate is supposed to work? Isn't every form of irresponsible financial behavior supposed to be cured by never-ending house price appreciation? I imagine they were assured it worked that way when they bought the place.

Is the insanity of this mindset apparent to you? If not, you need to stop drinking the kool aid and join us in the reality-based community.

Just in case you don't think this price is obscene, let's look at some properties in the neighborhood.

Nantes Front

Price: $775,000

15385 NANTES CIR
Irvine, CA 92604
Beds: 4
Baths: 2
Sq. Ft.: 2,125
$/Sq. Ft.: $365
Lot Size: 0.28 acres
Year Built: 1971
Stories: 1
Type: Single Family Residence
County: Orange
Neighborhood: The Ranch
MLS#: S470252
Status: Active
On Redfin: 198 days
Unsold in 90+ days
Rare one story home with four bedroom in Irvine school District. Back to Yale with orange, lemon, grape fruit trees in the yard. Perfect for retirement. Remodeled kitchen and bathrooms with granite counter tops, new electric build in range, travertine and light hardwood flooring. Two fire places with glacier glass deco in Living and family room. New roof, new slate patio, with storage shack and RV parking. No association due and low tax. Large master bath has both shower and tub. New exterior paint

Nice pictures...

.

.

This property is almost twice as large, it has another bedroom, and it costs $20,000 less. Hmmm...

It has also been on the market forever, and it is in danger of becoming a 2005 rollback. I imagine the price is at the breakeven level once a commission is figured in, and it is not selling which says the price is too high. If this property is priced too high, where does that leave our seller on Burgundy?

How about this one...

Normandie Front
Price: $699,000

15232 NORMANDIE AVE
Irvine, CA 92604
Beds: 4
Baths: 2
Sq. Ft.: 1,620
$/Sq. Ft.: $431
Lot Size: 6,511 sq. ft.
Year Built: 1971
Stories: 1
Type: Single Family Residence
County: Orange
Neighborhood: The Ranch
MLS#: S484138
Status: Active
On Redfin: 94 days
Unsold in 90+ days
Cute single story with lots of potential. Great opportunity to move in to the Ranch at this price!!Owner added square footage (all Permitted) buyer to verify. Now currently 4 Bedrooms plus a Den.

Compared to our seller on Burgundy, this home is 40% larger, has an additional bedroom, and is $100,000 cheaper. All that, and it has been on the market over 90 days without selling, so it is overpriced as well.

Perhaps I am piling on, but here is another...

Skinner Front

Price: $769,000

5232 SKINNER ST
Irvine, CA 92604
Beds: 4
Baths: 2.5
Sq. Ft.: 2,167
$/Sq. Ft.: $355
Lot Size: 6,240 sq. ft.
Year Built: 1972
Stories: 2
Type: Single Family Residence
County: Orange
Neighborhood: The Ranch
MLS#: P585401
Status: Active
On Redfin: 24 days
Beautiful home in Ranch. Mirrored family room wall, oversized backyard and giant family room. No mello roos, no association dues, low taxes. Walking distance to school, close to freeways. Must must see!!!

The exclamation points are back. Hurray!!!

This house is twice as large, has an additional bedroom, and it costs $30,000 less.

WTFIn short, our seller on Burgundy is not going to get $799,000. I would speculate they would be lucky to get $599,000 based on the comparables above and how long they have been sitting on the market.

For being completely clueless in their pricing, the sellers at 5242 Burgundy Circle win our WTF Award!


Posted in House Flips

Home Sales Data thru 7-16-2007

Jul 22nd, 2007 by IrvineRenter 

I have been kindly asked by the OC Register to stop posting the scanned image of the DataQuick information from their newspaper. So from now on, you will get the data in a non-scanned format.

Median sale price

Sales volume

ZIP

code

Prev. 4 weeks

% change

from ’06

Prev. 4 weeks

% change

from ’06

92602

$751,500

-0.4%

24

-42.9%

92603

$960,000

-4.0%

38

-34.5%

92604

$565,000

-5.8%

22

-18.5%

92606

$679,000

-11.2%

23

228.6%

92612

$634,000

-9.3%

35

52.2%

92614

$567,000

-12.1%

24

-33.3%

92618

$682,000

35.7%

21

10.5%

92620

$790,000

-9.7%

34

-57.5%

It looks like we have a continuation of our rally in Oak Creek (92618) from last week, and it appears we have the continuation of the complete market implosion everywhere else.

Just a reminder of why we have had the dramatic decline in sales volume...

Impact of Tightening Lending Standards

Credit Suisse saw this coming months ago. Credit tightening has eliminated many prospective buyers from the market. Plus, the unusually high sales volumes of the rally years has seriously depleted the buyer pool.

The reason the median has not declined much to date is because those people who still qualify, are able to obtain financing just like the bubble years. That too is about to change. Below is a chart of the AAA rated ABX index. AAA is the highest rating. It is composed of the highest level of prime borrowers.

AAA ABX

This is the cost of insuring a loan against default. As you can see, the meme of "subprime containment" is no longer believed by the insurers of debt. This will cause a further tightening of credit.

  • Look for the volume to decline even further in the coming months as this makes its way through the system.
  • Also, look for a dramatic drop in prices this fall and winter as the banks liquidate their REO inventory at a time when there are no buyers.

Posted in News

The Nature of Market Reversals

Jul 21st, 2007 by IrvineRenter 

IrvineRenter

When I wrote Houses Should Not Be a Commodity, I wrote extensively about the psychology of the market and the dynamics which cause prices to rise and fall. Nothing I wrote was new or original.

I have been reading The Disciplined Trader by Mark Douglas. I came across the passage below on pages 199-200:

The reason why a bull market is ready to tum into a bear market when the general public gets involved is because the general public has the least tolerance for risk and consequently needs the most reassurance and confirmation that what they are doing is a sure thing. As a result, they will be the last to be convinced that the rising market represents an opportunity. If a bull market has lasted for any length of time, the general public will feel compelled to jump on the bandwagon so to speak, because of their perception that everyone else is doing it and making money. They will pick up on any reason that sounds the most rational to justify their participation, when in reality, they will know very little about what they are doing, but since everyone else is doing it, how can they go wrong.

A continuing bull market requires the continual infusion of new traders who are willing to pay higher and higher prices. The longer a bull market lasts, the greater the number of people who are already participating as buyers, leaving fewer and fewer traders who haven't already bought and fewer and fewer traders who are willing to bid the price up. These older buyers obviously want to see the market keep on going up, but they also don't want to get caught holding the bag, if the market stops going up. As their profits accumulate from the higher prices, they start to get nervous about taking their profits.

By the time the general public starts buying en masse, the professional traders knows the end is near. How does the professional know this? Because the professional knows that there is a practical limit to the number of people who will participate to bid the price up. There will come a point where everyone who is likely to be a buyer will have already bought, quite literally leaving no one else to buy. The professional trader would like the market to continue to go up indefinitely just like all the other buyers. However, he also understands the impracticality of that happening, so he starts taking his profits while there are still some buyers available to sell to. When the last buyer has bought, the market has no place to go but down.

The public gets stuck because they weren't willing to take the risk when there was still potential for the market to move. For the market to sustain itself, it needs to attract more and more people. As big as this country is or the world for that matter, there are only so many people who will buy. Eventually the supply of buyers runs out, and when it does the market falls like a rock.

The professionals have been selling out their positions before this happens, but once the supply of buyers runs out, the professionals start to compete among one another for the available supply of buyers which is dwindling fast, so they offer lower and lower prices to attract someone into the market so they can get out. At some point, instead of the lower prices being attractive to people, it panics them. The public didn't anticipate losing. Their expectations are very high with very little toleration for disappointment. The only reason they got in was because it was a sure thing. When the public starts to sell, it starts a stampede.

Again, people will ascribe their actions to some rational reason because nobody wants to be thought of as irrational and panic stricken. The real reason why people panicked and the prices fell is simply because prices didn't keep on going up.

Do you see the parallels between the behavior of our housing market and the description above?

 


Page 282 of 313 pages ‹ First  < 280 281 282 283 284 >  Last ›