When I first started writing for the Irvine Housing Blog in February of 2007, I wrote a series of posts culminating in Predictions for the Irvine Housing Market. I updated that post in I Was Wrong, Its Worse... When I first suggested that prices might crash, there was a certain amount of incredulity in the very idea of a dramatic price crash. In order to float the idea with a minimum of being called crazy, I wrote a post titled, What if Prices Dropped to Fundamental Values. In that post, I presented a series of projections for the Orange County median home price. I put it out there as a hypothetical because I was afraid predicting a catastrophic crash would cost me credibility with readers. Even this hypothetical was shocking to many (read the comments and you will see).
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How crazy did people think I was?
“Let’s not get too carried away. First of all we probably should not
really make economic prediction more than one year ahead. As
IrvineRenter said, this is just an “what if” analysis. It makes an
interesting game for bubble sitters but IMO we should not read too much
into it.“
“I am not agreeing that the blow off downturn will look as drastic.“
“I have been following all your posts for quite sometime. I think your price dropping theory is way too unrealistic.“ I hate to tell you who said that one…
“After tweaking your model, it seems that prices would need to fall
30-35% to return to fundemental values, not 50%. Considering the
factors above, it seems likely that once prices started falling by
significant margin that the pool of sellers would start to dry up.
Only folks that absolutely were forced to sell would consider it, which
would look more like a long, slow leak than a collapse.“
“I just don’t agree it will be as bad as you think. I *hope* you’re right ... but I just don’t see it.“
“If I had to guess, I’d say 15-20% overall drop in housing values over the next 2-3 years max.“
“While I agree wait for a couple of years (may be two) is a good idea, but I just can’t image the prices will gone down so much.“
“Your long-term forecast appreciation is just pure speculation.“
Sorry Cassandra I misunderstood Now the last day is dawning Some of us wanted but none of us would Listen to words of warning
So how did I do with my crystal ball? Well, DataQuick just released some updated numbers, and with the help of Jon Lansner and Lee in Irvine who has been tracking DataQuick numbers, I can provide an update:
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As you can see (consistent with the theme of I Was Wrong, Its Worse...) I was too conservative in with my dire predictions. At the time, I was predicting an unprecedented drop in prices. I did feel I was being conservative despite the conventional insanity of the day. I did not believe the median could drop so quickly. Perhaps I should have stood behind my predictions in How Bad Can Bad Get?
Today’s featured property is a short sale in Woodbury. Irvine is a bit behind the rest of OC with its price drops, but with the ARM Problem still facing us, a problem 60 minutes just discussed at length, it certainly looks as if prices will continue to fall…
There is a new, non-commercial site I want to recommend everyone go check out: Loanzen.com. From the website, “Welcome to Loanzen — the community-driven mortgage information site (100% anonymous and free.) I recently applied for a loan and the broker attempted to tack on all sorts of absurd fees. I had no idea what was fair. So, I created Loanzen: A place where you can share the actual rates and fees you’re getting from lenders. By sharing your deal, you help the community and also get valuable comments back on your individual deal.“
It is exactly what it says. People anonymously submit the terms of loans they have been offered, and other people comment on whether or not it is a good deal. I think it is a fantastic way for people to help each other out. In particular, it should help people from being screwed by unscrupulous brokers pushing them into a bad loan just to make a few extra bucks. The commenters often know where the best deals can be found, and they can point the borrower to a better deal somewhere else. I think this site is a great idea, and I hope it catches on.
Have you noticed there are a large number of homes for sale in Shady Canyon? Why is that?
Of all the new neighborhoods in Irvine, I thought this one would have the least selling pressure, not because it isn’t ridiculously overpriced, but because typically in the over $2,000,000 price range, the buyers really are rich and have the reserves to weather a storm.
In a normal real estate market, new neighborhoods see almost no resale activity for at least 3 years because people buy new in anticipation of living there for many years. There are always people that need to move for unexpected reasons, but for the most part, resale activity should be very low in new neighborhoods. The fact that all of Irvine’s relatively new neighborhoods are showing high turnover speaks to a couple truths:
The owners are all overextended and cannot truly afford their properties.
Many bought with the intention of flipping and never intended to live there long term.
I suppose no amount of buyer/flipper/speculator stupidity during the bubble should really surprise me, but flipping multi-million dollar mansions? That is stupid. First, wouldn’t a very rich individual want to design and decorate their own place? Why would they pay a flipper a premium for something they will probably redo? Second, how many people capable of buying these homes are out there? Even in the gross stupidity of easy credit, there were not many people getting $10,000,000 loans to buy houses, and the number of people with that kind of cash is very limited. Third, how much carry cost does the flipper endure on a property like this? Can you imagine making the debt service payments on a $10,000,000 loan waiting to sell the property?
Anyway, for whatever reason, many properties are for sale in Shady Canyon, and in all likelihood, prices are going to drop there significantly. It is just a matter of time.
Located within the prestigious guard gated community of Shady Canyon,
this spectacular sprawling five bedroom custom estate captures the
serene rolling hillside views of Shady Canyon. The 13,500 sq. ft.
residence features exquisite high-end finishes and reclaimed products
throughout. From the motor court entrance with reclaimed French pavers
to the subterranean wine cellar connecting the residence to the pool
house and home theater, no expense has been spared in this truly
breathtaking estate. The gourmet kitchen provides an ideal central
location for family to gather and offers Carrara marble counters, a
walk-in refrigerator, gourmet appliances, a service kitchen & large
center island with a pop-up television. A beautiful pool, pool house
and home theater provide hours of entertainment and includes an outdoor
kitchen, with barbecue, pizza oven, dishwasher & built-in heaters.
The surrounding vineyard provides two barrels of wine at harvest.
In
New Book, The Great Housing Bubble, Lawrence Roberts Offers Buyers Advice On
Real Estate Negotiation During A Price Decline.
According to
Lawrence Roberts, the Housing Bubble Cassandra, the dynamics of real estate
negotiation has completely changed over the last two years. In his book, The
Great Housing Bubble, he provides specific recommendations to buyers for taking
advantage of their new power.
Irvine, Calif., Dec.
12, 2008 – Lawrence Roberts, author of “The
Great Housing Bubble,”
observes that “In a buyer’s market, the buyer has the power in a negotiation.
Buyers should take advantage of this power and negotiate the lowest possible
price. Since the price determines the loan amount and often the taxes on the
property, the buyer benefits through lower interest costs and lower taxes by
minimizing the purchase price.”
Roberts advises
buyers to make their first offer their best offer. He says, “This is the most
counter-intuitive part of buying in a buyer’s market. Ordinarily sellers, or
more accurately the seller’s realtor, try to create a sense of urgency to buy
the house.” He goes on to outline the procedure for buyers to pay the lowest
possible price for real estate.
When asked about
his motivation for writing “The
Great Housing Bubble,”
Roberts responded, “Sellers have the marketing machine of the National
Association of Realtorsto help them. Buyers have few sources of
unbiased information to assist their decision. Part of the purpose of this
writing is to educate both buyers and sellers on the realities of the
residential real estate market.”
Roberts has not
been popular with the National Association of Realtorssince he suggested that realtors should be
subject to oversight by the Securities and Exchange Commission regarding the
false statements they routinely make concerning the investment potential of
residential real estate.
About the Author, Publisher and
Book
Lawrence Roberts,
author of “The Great Housing Bubble,” is known as the Housing Bubble Cassandra. He publicly predicted the
housing price crash as the primary writer for the Irvine
Housing Blog (http://www.irvinehousingblog.com/). From his unique vantage point
in Irvine, Calif. – the center of the subprime universe – Roberts carefully
documents in his book the conditions and practices that inflated the largest
real estate bubble in history. He holds a Master of Science in Land Development
from Texas A&M University, and he consultants to the land development
industry.
Monterey Cypress Publishing is a small press specializing in
real estate and personal finance related books, audio books, and video
presentations.
All
Housing Bailout Proposals Are Doomed to Fail, Fraught with Moral Hazard, and
Intended Merely to Encourage Homeowner Denial Says Housing Bubble Cassandra,
Lawrence Roberts, in New Book.
Lawrence
Roberts, considered the Housing Bubble Cassandra, in his new book, The Great
Housing Bubble, asserts that all housing bailout proposals will fail. He contends
these programs have a built-in moral hazard guaranteed to promote foolish
borrower behavior, and that the real purpose of these proposals is to promote
homeowner denial to keep them enslaved to their lenders.
Irvine, Calif., Dec.
6, 2008 – Lawrence Roberts, author of “The
Great Housing Bubble,”
claims the main problem with all bailout plans is the moral hazard they create.
He contends, “Those who did not participate in the bubble and instead behaved
in a prudent manner would be penalized at the expense of those who were
cavalier about risk. In one form or another either through free market impacts
or direct subsidies from the government paid by tax dollars, these bailout
plans all ask the cautious to support the reckless.”
Roberts observes
that many homeowners held out hope that if they could just keep current on
their mortgage long enough, the government would come to their rescue in the
form of a mandated bailout program. According to Roberts, part of this fantasy
was not just that people could keep their homes, but that they could keep living
their lifestyle as they did during the bubble. He notes that few borrowers seem
to realize was any government bailout program would be designed to benefit the
lenders by keeping borrowers in a perpetual state of indentured servitude, and
with all their money going toward debt service payments, little was going to be
left over for living a life.
Housing bailout
proposals are part of the myriad of issues surrounding the housing bubble.
Roberts discusses each of these issues in detail in the book, “The
Great Housing Bubble.”
About the Author, Publisher and
Book
Lawrence Roberts,
author of “The Great Housing Bubble,” is known as the Housing Bubble Cassandra. He publicly predicted the
housing price crash as the primary writer for the Irvine
Housing Blog (http://www.irvinehousingblog.com/). From his unique vantage point
in Irvine, Calif. – the center of the subprime universe – Roberts carefully
documents in his book the conditions and practices that inflated the largest
real estate bubble in history. He holds a Master of Science in Land Development
from Texas A&M University, and he consultants to the land development
industry.
Monterey Cypress Publishing is a small press specializing in
real estate and personal finance related books, audio books, and video
presentations.
Irvine Renter will be speaking at the monthly meeting of the Green Party of Orange County on Sunday, December 7, 2008, at 2:00 at the offices of the Irvine Ranch Water District located at 15600 Sand Canyon Ave., Irvine, CA. Also speaking will be Dave Levy, a valued return Green Party visitor from Orange County Fair Housing Council. He will speak about public and private ways to protect the quality of life in Orange County by ensuring equal access to housing opportunities, an important way to foster diversity and preserve dignity and human rights. December’s GPOC meeting topic will cover the importance of housing in these uncertain times, and will focus on the Green Party’s Key Value of Social Justice. “Radical Housing for Radical Times” will concentrate on novel approaches to help reach the goal of affordable, stable, quality housing for all.
Everyone is invited, so if you are interested in hearing a discussion of this issue, please stop by.
Does anyone have any good news they would like to share? I have been reading all the headlines lately, and I can’t find anything even remotely positive going on in the economy or the housing.
I don’t care what topic it is on. You can make it personal if you like. Just give me some good news…
I’m the son of rage and love The Jesus of Suburbia From the bible of none of the above On a steady diet of soda pop and Ritalin No one ever died for my sins in hell As far as I can tell At least the ones I got away with
And there’s nothing wrong with me This is how I’m supposed to be In a land of make believe That don’t believe in me
Get my television fix sitting on my crucifix The living room or my private womb While the moms and brads are away To fall in love and fall in debt To alcohol and cigarettes and Mary Jane To keep me insane and doing someone else’s cocaine
And there’s nothing wrong with me This is how I’m supposed to be In a land of make believe That don’t believe in me
