Jul 2nd, 2007
by socalhousingbubble
May 2007 saw the reasonably-well publicized departure of David Lereah as "Chief Economist" of the National Association of Realtors. To understate the point, Mr. Lereah has been the object of plenty of attention in the housing blog community. Most of the attention was negative, and resulted from the frustration of repeatedly seeing and hearing him quoted in the mainstream media as something of an impartial expert regarding the condition of the housing market. Perhaps not surprisingly, Mr. Lereah tended toward the positive in his interpretation of housing sales data and future predictions, even when signs of weakness began to appear in the market. This must-see graph captures some of his better quotes, and when he offered them.
For those that didn't explore the first link, Mr. Lereah published a book in early 2005 entitled "Are you missing the Real Estate Boom? Why home values and other real estate investments will climb through the end of the decade- and how you can profit from them."
In 2006, this book was retitled "Why the Real Estate Boom will not bust- and how you can profit from it. How to build wealth in today's expanding real eastate market."
It is therefore interesting and amusing to see Mr. Lereah change the spin on his way out the door, and begin to apply some revisionist history. In this interview with Bob Brinker from early May, he even goes so far as to chastise the "speculators who strayed from fundamentals...and got us in trouble."
David Lereah Interview
[audio:http://www.irvinehousingblog.com/wp-content/uploads/2007/06/DavidLereah.mp3]
If you want to skip ahead, his comments regarding Southern California arrive just after the 13 minute mark. Here are the highlights:
"L.A., San Diego, they are all out of whack right now. Prices got too high for the median household...there's going to be a long period here, of recovery. Homesellers have been stubborn, they haven't been reducing their prices as fast as their Northeast counterparts. Home sales are way down right now, and it will take price decreases- sellers lowering their prices- to bring buyers back to the marketplace. I suspect we're not going to see any type of recovery there until at least 2008."
While these decidedly negative comments may not sound particularly surprising to many of us, they are coming from the most prominent market cheerleader of the past several years, bar-none. The 'soft landing' holdouts may find this particularly sobering (and they should).
Despite this apparent dose of rationality, David still makes some bizarre remarks that are worth listening for:
- If speculators wouldn't have come in to Vegas...
- Commissions are Commissions
- The baseball team the could save D.C. real estate
- Fingers and toes crossed, X2
Bob didn't exactly give him a tough interview, but having David on the hook for more than a glib, obfuscated single quote was worth it to me.
It will be interesting to see how David's heir apparent, Lawrence Yun, does carrying the torch as the market continues to correct, unwind, fall apart, or whatever you want to call it. Donning the skirt and waving the pom poms will require even more gumption in the months ahead.
Jun 10th, 2007
by IrvineRenter
May 29th, 2007
by socalhousingbubble
There has been plenty of discussion on the issue of the fundamentals of why housing prices in Orange County are indeed, not rational. One of the most common metrics cited by those with or without a basic economics background is the rent versus buy 'price' (monthly payment). These prices are the net output of a large number of variables, including (very importantly) what amount can be mortgaged, as IrvineRenter has explained in previous posts. I would like to take an opportunity to focus on the supply side of the equation, to help frame the discussions. Some of this is for statistical consideration, and some is simply to discuss the housing product and this blog community's view of the current and future marketplace offerings.
One of the commonly-recited phrases heard in defense of high housing prices, especially in Orange County, is "they aren't making any more land." There are a number of technical arguments to refute the idea that (even if true) this justifies high levels of appreciation, which is not the point of this post. While Irvine is extremely desirable, it is far from built out, and it appears to this blogger that there is significant rental and new home inventory available and coming available even as sales continue their sluggish pace.
One area of particular interest is Orchard Hills in Irvine. As has been discussed on the forums, this area has attracted plenty of interest for those hoping for something less remote than Portola Springs and more scenic than Woodbury or the Villages of Columbus. Any hopes for something reasonably affordable in a nice location have been dashed by the recent market survey postcard showing prices starting at $1.25 million and going up from there. It would appear that The Irvine Company is attempting to take the Turtle Rock experience and move things even further upmarket.
Fewer than 4,400 homes are planned - reduced from the 5,903 in the existing General Plan for the city of Irvine, and dramatically fewer than the 11,800 units in Irvine's original General Plan. This will allow for 3 units per acre - fewer homes per acre than Irvine's original hillside village, Turtle Rock.
While these lower densities sound desirable, this is obviously coming at a price.
The area is large, and I have a preview of construction that has begun at the southwest corner near Jamboree and the 261. Some pictures from Sunday walks show the state of progress.
The new retail center, scheduled to open this summer.
Closeup of the Orchard Hills brickwork style at the retail center. This same rustic-looking brick is seen on the grand entrance walls in the residential areas.
Culver and Settlers, from the hill, looking west.
Settler's multiple lanes of gated entrance off of Culver, with the Irvine/Costa Mesa skyline in the distance.
Trees ready for planting along Settlers, looking east
IAC apartments on Whispering Trail, looking west from near the retail center
View of the apartments looking east, near the 261 toll road, with the privacy wall in progess for the homes up the hill. There is approximately 30 feet of elevation change down to the street level of the apartments.
Is the market ready for Orchard Hills?
Frankly, I'm a bit skeptical that more premium apartments and premium homes are what this market is looking for right now, and I foresee a bit of a miscalculation (or at least mis-timing) on the part of The Irvine Company. But TIC is well known for savvy market research and planning, so it will be interesting to watch unfold.
Regarding the apartments, we know that certain specific apartments at Woodbury Lane have yet to see their first rental, despite being available for over 10 months. If one checks the inventory at the newly-opened Portola Place, unit after unit has multiple available "now," status which indicates plenty of supply. I don't yet know the exact number of units they are building at Orchard Hills, but to my eye the number appears large compared to nearby communities such as Estancia, Anacapa, and Somerset.
Regarding the homes, we keep hearing reports about how the upper end of Orange County's housing market is holding up well, perhaps because the folks with all the millions are not subprime borrowers. But the housing food chain cannot be deprived of its plankton forever without impacting the big tuna. Given the challenges the homebuilders are having at the Villages of Columbus and Portola Springs, the continuing trend of increasing inventory and decreasing sales in the resale market could make for a rocky ride ahead.
May 20th, 2007
by graphrix
Having grown up and lived most of my life in OC I have come to the conclusion that the people here who seem to have money can be broken down to three types of people. The first is the person who actually has money and accumulated wealth. They may be a business owner or they may have a decent paying job. They may not have the most glamorous job but they live within their means and have saved and invested well. They don't really ever mention money or talk much about material items. They also are the most humble and happiest people I meet. The second is the person with a very well paying job but they live paycheck to paycheck. They always have a newer car, nice high end clothes and the latest gadgets like a plasma TV. They are the one who will have the IPhone before everyone else. I know too many people who lived like this in the RE industry. The third is the person who lives beyond their means. These are the people who you would never know that they are dead broke but appear rich and are best exemplified by Irvinerenter's post on Cultural Pathology. The third is in the worst situation today if they own a home because they no longer have the appreciation to bail them out. They are the type that always talk about money and material things. They think this will make people like them and they believe that really one day they will be rich. The only problem is they never seem to catch up or the reality is no matter how much they believe in reality it never happens.
Why do I bring this up? Well I am not one to gossip and I really hate to admit that I have watched The Real Housewives of OC but I couldn't resist the sad facts of a person who lives beyond their means. Most of you like myself will hate to admit that you have watched the show but even if you haven't you are probably aware of Slade Smiley. He appears to be like the third type where in the show he always talks about being rich. I shouldn't be so modest because he brags about being rich and the show makes it seem this is what his life revolves around. He rents owns a house in Coto De Caza that has been listed for over 250 days and with only one price reduction. Maybe the reason it is listed is because Slade needs money and the appreciation spigot has been turned off. He bought the place in July of 2005 and less than a month after he bought the place he got a new second pulling out $20k and ten months later he got another new second extracting almost $100k for a total balance on the second of $225k. It would be obvious things are not going so well when the NOD was filed on 4/30/07 and how he owes his pay option lender $15k at the time. Of course if he only made his minimum payment it would be an additional $50k on top of the $1.28mil he borrowed for the first loan. So assuming only the minimum payment was made we have a total possible mortgage debt of $1.57mil. But wait there is more since he hasn't paid his property taxes there is an additional $20k and of course a family attorney is owed about $12k and filed a lien against the home. Now the total with the commission and fees he is barely breaking even. If all those nice suits, diamond rings, high end cars and other various OC life expenses he has some serious credit card debt on top of all that.
What happened? He was one of the people who started United Title and an assistant vice president with them. It appears they sold to Land America and he should have received a decent amount for the buy out. Plus he has a highly rated show and is producing his girlfriend/fiance Jo's singing career. Even the LA Times had recent article about how well he was doing.
The lesson is don't buy Hummers, MBZs, big diamond rings for girls who won't marry you and a house you can't afford.
Oh and I almost forgot this house was a past bubble victim when it was bought back by the bank in 1995 at the trustee's auction for $568k when the unpaid debt was $573k. The bank sold it seven months later for $540k.
Apr 24th, 2007
by graphrix
Hello fellow irvinehousing blog readers. First I'd like to thank zovall and irvinerenter for inviting me to join them and irvinesinglemom as a contributor to the blog. Have no fear readers the failed flips will not go away and if anything we may have more. I decided to join them because I was not adding new posts to my blog ocecon101 which led to little traffic and even less motivation on my part to add new topics. Zovall thought that having me post here would get better traffic without the pressure on me to keep adding new posts. The idea is to add more content without taking anything away from the original purpose of the blog. Most come here searching for more information on the Irvine housing market and my goal is to add interesting and relevant content for those in search of more information.
For my first post I will give you a little background on myself, why I am a housing bear and what subjects I will be writing about. As some of the readers of the forums here know that I was in the mortgage business and for the majority of my time in the business it was for a lender for one of the larger homebuilders. I decided to leave the business for various reasons but it was on my own terms. I really did enjoy working there and gained a tremendous amount of knowledge from it. I am very thankful for all of great people I met there and remain friends with many of them today. I may in the future post topics on some of the reasons why I left if the curiosity is there.
Even though I am a homeowner I am a housing bear. The appreciation simply does make sense as there is no way I could afford my home that I bought in 2002 today. My income has increased more than inflation but housing prices have soared way beyond my income and many others in OC. I am also an investment property owner and I would like to buy more but I have this unique requirement called positive cash flow. Since 2004 it has been almost impossible to find and 2-4 unit investment property any where in OC with positive cash flow. Depreciation is supposed to offset your income from the property not your regular income.
I am a born and raised OC native who remembers the last crash in the 90s and I will be posting topics on the similarities that we are seeing today. My first topic on my blog has the headlines from the OC Register on housing from 1987 through 1993 and it really is not all that different than this time. I also will be posting about the economy and how it relates to housing. It may not be specifically Irvine but Irvine will be affected from these factors too.
Coming soon will be a post on a deeper look into the jobs in OC and what history can tell us.
Apr 16th, 2007
by irvinesinglemom
As a mom, my heart goes out to all the moms (and dads) whose beloved children were murdered on campus this morning.
Take a minute out of your day today to reflect on your family, your children. They are what really matters.
irvinesinglemom
Just a quick blurb. I've posted about this group before. They have their April meeting tomorrow at 7pm at the Double Tree Hotel at 90 Pacifica in Irvine.
One of the presentations is about how to access real estate records for Free. Here is the description of the presentation: "Accessing all real estate property records, including owner names, address, title history, previous purchase prices, current loan amounts and comparative market analysis-FREE. Doug Thompson of Lawyers Title Company, Irvine, will demonstrate how to access the system and use the information. The OCRE Forum in collaboration with Lawyers Title will be providing a FREE Costumer Service Account to all OCREs registered members."
Many of our readers have asked how to get this kind of information. If I go to this meeting, I'll report back on what I find out. If you end up going, please let us know how it went.
