Under $300/sqft?  I thought this was Irvine.  Not that I would consider paying over $500k for a condo…

If the taxpayers weren’t funding the whole housing detonation I would love watching the lenders take it in the a.  I am a bit curious to see where all of the money will come from, because unless there is a significant tax hike I don’t think the govt has the budget for it, but that’s just a guess.  I would think that raising taxes would be bigger political suicide than telling the banks that they are on their own.

Turns out that 2007 was the year that things finally took a turn.
——-

To think that this one piss-ant condo represents JUST ONE 100K loss for the mortgage hustlers.  Ugh. 

The total amount of money that has been pillaged is most likely far beyond any of our guesses.

I have a feeling that this is going to get really bad in the months ahead.

I’ve got my credit cards paid off.

I’ve got my 6 months salary in savings.

Very happy to sit on the sidelines for this phase of the game.

I just can’t see over $500K for a TWO BEDROOM dwelling place.  I know…I’m cheap and I rent…and I have zero debt and some money saved up.  Maybe when the market bottoms out a place like this will be in the high $300’s.  It would still be overpriced, but not over $500K.  That just makes no sense at all.

I am going to play Devil’s Advocate a little bit here, as I’ve been trying to do….

I think this property is Irvine Renter’s $2300 per month property in a nutshell.  $1800 sq. ft. / 2.5 baths, condo: seems about right.

On GRM multiples:

150 = investor (undesirable properties; landlord will not live there, my opinion a property like this will not fall in this category)

160 = Rent Saver (very ugly times in a good area; stable in less desirable area or area where owning is the norm, i.e. not the OC)

$2300 X 160 =~ $370K
(assuming it takes 2 years to hit bottom ~ $390K)

190 = Rent Saver who includes 20% down

$2300 X 190 =~ $440K
(assuming it takes 2 years to hit bottom ~ 460K)

What about when the interest on a 80% LTV loan equals rent payments?  That is a scenario where the money you would be using for rent covers interest while additional payment pays down debt and builds equity even if you want to assume 0% appreciation. 

$2300 rent = $520 K house (approximately)

$2500 rent = $570 K house (approximately)

These are crude approximations with the assumption that tax benefits cancel out the additional cost.  You could refine them but they would not change that much.

I wouldn’t say that you are cheap; just rational.

This place isn’t worth more than 150K in a normal market. 

I’m sure that someone out there will want to make the ‘sacred land’ argument to fluff the price up.  Either way, this is pretty much a starter home and without creative financing, you’ll have a tough time finding a first time buyer who can pony-up a 20% (60,000$ OUCH!) down payment for a 300K apartment. 

Drop the price down to 150K and then 20% (30,000$) down payment is much more workable.  Financing the remaining 120,000$ at fixed 30 year 7% gives you a monthly payment of about 800.00 a month.  Then when you add in the junk Association dues, our monthly expenses come to between 900.00 and 1000.00 per month which would be 25% the income of a single person earning around 60K per year or two people each earning 30K.

Seems pretty reasonable to me.

I believe a recent bill to cap credit card interest at 30% was recently defeated. Watch for massive defaults when people realize they are paying 40-50% rates on their credit card debts with no hope of ever paying it off. The problem with credit cards is that while you may purchase when the rate is 12% that can be raised anytime the balance is outstanding. Attempts to stop the companies from raising rates on current debt arbitrarily aren’t likely likely to succeed given the power of the lobbyists for the credit industry. So if rates begin rising people may find a manageable rate triple even though they’ve never paid late on a particular card because their credit score drops or they miss a payment somewhere else.

I agree that you should not use credit unless it’s an emergency or you get a zero if you pay it off in a set amount of time.

The Government doesn’t have to raise taxes…. it just has to inflate the money supply.  The problem, of course, is that it is hard to push a rope.

I lived off credit during my undergraduate years which was long enough for me to learn how much I absolutely detest credit card companies, their games and GOTCHA!s

I could not agree with you more in regard to the raising of the rates on monies borrowed at a lower rate.  It’s a total crock.

I’ll never pay a dime of interest to a credit card company ever again.  If I can’t afford something, I simply will not buy it.

Nevertheless, I do enjoy getting a yearsworth of 0% interest.  I’ll happily borrow their money for free and pay it off each month just so that my credit score will show that I pay my bills.  Then move on to the next 0% when the first expires.

There is no reason to pay interest on credit cards with all of the competition out there.

This crap shack is worth no MORE than $175k. ANYONE who pays more than that is BEYOND STUPID.

These are the types of entitlement comments I am referring to.

This is completely removed from market realities of living in the OC.

I was fortunate to have parents who taught me to avoid credit card debt completely.  I haven’t paid a single interest charge in my entire life.  This is one of those gems you pass on to your kids and pray they listen and obey.  Being a slave to your credit card company is the 21st century form of indentured servitude.

Sorry - interest charge on a credit card.  I’ve gone into debt for only the big three - home, vehicle, & education.  And then only wisely (e.g used cars).  I also recently finished an MBA at my employers expense.  No sense letting that generous tuition reimbursement program go to waste!

520k sure seems like ALOT OF MONEY for this 2/3 1800 sq ft, nice looking condo in Irvine.

Just think what would have happened to me if I would have made that statement one year ago. Certain bubble-head citizens of So Cal would hunt me down and string me up.

Check out the Zillow valuation…700k.

BTW, I dont see any listing description or pics on the Redfin link???

The corollary to Jimmy Johnson’s Texas bravado is that anyone who is willing to rent this place in the OC for more than $1000/month is a complete idiot.

If we were smart, I guess we would move to Texas.

Trying to calculate the highest possible break even rental point is a knife catchers game. People invented all kinds of fuzzy math to justify pricing during the bubble. Add in some projections on rental increases or appreciation, and there is no purchase price that cannot be rationalized.

It is a good exercise to know where breakeven is to make sure you don’t overpay, but to rush out and buy the first property that falls to breakeven because you are afraid the market is going to rebound and price you out forever is still a symptom of kool aid intoxication. When the market bottoms, it is going to spend several years near or below the rental breakeven point to absorb all the inventory. There will be some great deals on REOs from 2009-2012. Housing markets do not form “V” bottoms like stocks sometimes do. There will be absolutely no urgency to buy until inventories shrink and REOs stop being dumped on the market. We are nowhere near the peak of foreclosures, and we have hardly even begun to dispose of the REOs.

I would note that investors will not be running out to buy at 150 GRMs. To get a cashflow that provides a return that justifies the risk of real estate, GRMs will need to drop to between 100-120. This is the likely fate of undesirable properties. Desirable SFDs probably will find absorption closer to 160.

If you want to see what GRMs were during 1997, look at the ad in this post:

http://www.irvinehousingblog.com/2007/09/13/the-last-market-bottom/

The SFD in the post would rent for between $2500-$2700 in today’s market. In 1997 the rent would have been $2000-$2200 (20% lower). GRMs for SFDs would have been somewhere between 135-150. Anecdotally, people who bought in 1997 will tell you it was cheaper to own than to rent.

Tell me what has changed that would make the bottom higher this time? Do you think interest rates are permanently lower and 25% below historic norms? Do you think exotic mortgage products are here to stay?

http://www.irvinehousingblog.com/2007/05/07/your-buyers-loan-terms/

I believe history will repeat itself. In fact, since the foreclosures are going to shatter all old records, I think we will see significant downside overshoot while the market tries to absorb all the inventory. In the end, it still comes down to supply and demand. Demand will pick up as prices drop, but if the supply is overwhelming, prices will continue to drop.

Not quite sure what you mean by “market reality”.

As far as I can tell, the current status quo has been completely driven by easily available money. 

The money spigot is closed.  The well is dried up.

The fact that people were able to bid up the prices in years past is now meaningless as the lenders are no longer going to be able to enable that kind of foolishness.

It’s the beginning of a new world order where prices are going to have to come back down to levels that can be supported by income.

In other words, people are going to have to start paying for their houses.

We are undergoing a paradigm shift.

It’s a whole new ball-game.  A whole new “market reality”.

when I buy a couple years from now….. could I HELOC my MBA loan and get the tax deduction on the interest?  Has anyone here done that; good idea / bad idea?  It seems like it could be a profitable move.

I don’t see this property dropping to $175K any time soon. The incomes here are just too high. There will be someone ready, willing and able to bid more than that for this property even at the lowest point in the cycle.

I don’t know if this is a sense of entitlement. We get many people here who look at our market prices through the prism of their own market experience. In fact, I think many people come here from outside the area to marvel at the prices people were willing to pay for tiny stucco boxes during the mania.

this place would rent for about $2300.

Rent is driven by income, wealth, and demand.  That is the market reality of the OC.

1000.00$ a month sounds about right for this property.

Unless you don’t mind living paycheck to paycheck.

Believe me plenty of people here rent for 2 to 3 X $1000 / month and do no live pay check to pay check.

AZ, again, your observations from afar are quite useless.  This unit will never ever fall to $150K or even $200K for that matter…  We are talking about the award-winning masterplanned community of Woodbury, although I fail to see what is particular special about it and yes toney, it is flat.  The Irvine Company does’t want a household making $60K to be able to buy into this place.  The Irvine Company wants them renting an IAC apartments…  Better yet, a household making $60K should be picking up a place in Santa Ana.  You probably have no idea what that means though because YOU DON’T LIVE HERE.

I agree.  I have no doubt that a lot of people are going to jump in before this price hits rock bottom.

When you are so accustomed to the inflated prices a 200K price decline is pretty motivating.

I am not trying to convey entitlement; just sensibility.

For example, our household income is significantly higher than the Irvine 84K.  We live in AZ and earn more than half the households in Irvine.

We rent a decent (not fancy not ghetto)  apartment (smaller than this featured condo) in Scottsdale for around 800.00 a month (which rented for 600.00 before the housing tulipmania).  If we spent 2300.00 a month to rent then we would not be able to put any money into our savings accounts, go out for nice dinners on weekends, etc.  It’s just plain out-of-whack.

I still say that your California rent prices are way too inflated caused by the huge number of people who have opted to rent rather than buy at unaffordable prices.

As your house prices drop, I think your rent prices will as well.

Irvine Renter,

I agree with you.

Also I have to note, that you would really have to take a 100% LTV if you want to assume 0% appreciation in my last example. 

In my 80% LTV calculation you would have to assume appreciation on par with money market appreciation.

Is this assumption irrational?  Personally I don’t think so.

yeah, I tried to find this house on redfin, realtor.com and ziprealty and I couldn’t find it. Redfin only shows the sale history of the property.

I’m sorry, but if your median income in Irvine is 84K then that means that half the households there take home less than 5000.00 a month.  If you spend 2300.00 a month to rent and you are at the median income then you are spending almost 50% of your paycheck on rent alone.

I know you pay a lot of money for fuel costs.  I’m sure you probably need to get groceries every now and again.  Probably have cable TV, electricity, internet service, a cell phone, etc…

You don’t think that this scenario would qualify as paycheck to paycheck?

Wow.

I have to agree with ipoplaya on this one AZDavidPhx.  You’re simply throwin’ a number at this property based on Phoenix economics.  Google Irvine rents so that you can understand the price at which this unit would rent.  Then make a reasonable educated guess as to its value at the bottom.

Cash has always been king in my book, so fortunately I will weather this storm.

I can thank my “depression era” grandparents for teaching me the importance of living within your means.  I have been practicing it all my life and now raising my children with the same values.

Here’s to cash only customers.  Hip Hip Hooray!

IR says that the lenders will be more conservative is that “Lenders don’t like to loan money when people do not pay them back. The more they get burned, the more conservative they become. As they get more conservative, fewer people qualify for loans and loan amounts decline.”

This is way to simplistic.  The reason loans were given away to anyone with a heartbeat is that the lenders didn’t have to hold them, they were packaged and resold to investors as investment vehicles, the “SIVs”.  Thats suddenly gone.  People are so used to easy loans that they just haven’t yet grasped the magnitude of the credit cruch that suddenly hit us and the effect the sudden thinning out of the buyer pool will have on the market.  About 1000 people in OC in the mortgage industry were laid off, BNC closed, this will have a huge effect on the availablity of loans.

Bottoms always overshoot.  My 2 cents is that this condo should sell in the low 200’s but probably will dip below 200K for a year or two when the market bottoms before stablizing at it’s support level.

IR you didin’t live thru the last market crash in the early 90’s and you are too close right now to have any perspective.

Sure, someone will buy it before it drops below 200K soon, I agree.  But then what happens is 10 other similar units come on the market and have to align their prices with the new low.  But now there are only 3 buyers for every 10 sellers, interest rates rise, someone gets divorced, someone gets cancer, a unit forecloses, the bank needs to unload and bingo, now you are below 200K.

It takes three to five years to play out.  You just can’t see it now, be patient.

AZDavidPhx doesn’t understand the local economy.  He doesn’t know that the Irvine Co. owns most of the large rental complexes and that they control where rents go.  He doesn’t understand that they’re willing to let 10-20% of their units remain vacant to support the rental price they’re seeking.

The median income is not the sole indicator of where the median home price should be.

This isn’t a house for someone making the median AZ.  It’s in the Woodbury area of Irvine.  Has a brand new school in the neighborhood.  Has like 18 parks and a big common area recreational area with three pools, club-style amenities, etc..  The kiddies even get a water park play area of their own…

This house is for an educated young professional couple maybe just starting a family.  They are going to make north of $100K per year.  Your notion that houses should be worth 2 X income in a nice part of near coastal CA is absurd.

My friggin’ nanny makes more than $30K per year and she didn’t even graduate high school.  Her husband cuts grass and trims trees for a living and he probably brings in $25K…  Kids out of college make $40K to start.  The girl that answers the phones in my office makes almost $40K.  Get the picture?  Our wages are not like those in AZ so our prices are not going to be like yours.

If you are going to blog about Irvine, you might want to spend some time understanding the economy of the place you are talking about…

Let’s see Alan, you think $700K for 4000sf in guard-gated Northpark.  What’s your call for this 1800sf attached condo in Woodbury?  $150K?  $200K?

People talk about drinking the koolaid, you and AZ have sipped from the other bottle.  The one that make you think the sky is falling and that somehow real estate prices are going to reverse back to levels seem 10-15 years ago in spite of all the price and wage inflation that has occurred since then…

You all sound more like the types that should be buying a big ranch in Montana and hording guns and food for the coming apocalypse.

Mark - Are you suggesting ‘price fixing’?  This sounds highly illegal.  Have you contacted the local news station?  I’m sure they would look into it.

AZ,

Households making 60k either rent one of the abundantly available IAC apts or buy in the inland empire.  It’s that simple.

Let me try this again:

OC > IE > AZ & NV

Got it?

AZDavidPhx = the “Leeroy Jenkins” of Irvine Real Estate

“This house is for an educated young professional couple maybe just starting a family.”

There in comes a problem.  What happens when the first baby comes?  Do they do FMLA?  Can they afford to do FMLA?

Is this place really 1800sf?  I thought most of the 2/2s in Woodbury were 1300ish.  Does it have a den?  I’m thinking this is really the 3/2.5 at 1800 that is in woodbury but with the 3rd bedroom left as a den or office or something.  The Redfin link is for the sold info.

Either way, price competition will keep this place well above $200K.  Likely above $300K.  At 6% interest rate, $450K price point, this is no longer a jumbo with 10% down.  After taxes, it probably drops in around $2300/$2400 total out of pocket.

I don’t like it, but unless rents soften, you’ll see support for these places when a small down payment (10%) puts the loans back under jumbo.

“1000.00$ a month sounds about right for this property.”

You could not demonstrate a greater lack of understanding of Irvine rental rates.  I’m not saying it won’t rent for $1,000 (I claim no ability to foresee the future with such clarity as so many others here). 

AZDavidPhx, please check out this site: http://www.rental-living.com/.

That’s today’s reality in Irvine.  Sure all these rents could drop 75% within the next year, anything really is possible I guess.  But your scenario is so unlikely that it’s laughable.

ipoplaya -

Thanks for the laugh!  That totally made my day.

I know I know - just another one of those ‘Chicken Little’ doom and gloomers who are always wrong.

I don’t believe there’s anything illegal about refusing to sell/rent something for less than your understanding of its value.  Now, if you do so with ulterior motives (e.g. discrimination), that’s actionable.

In order to give you an idea on how bad things are out there, I work for one of the largest construction company in West coast. We do all commercial projects and currently have $600 plus million worth projects that have been pushed back due to lack of financing and uncertainity.  Looking at workload and number of employees if half of these project do not materialize you know what will happen…massive layoffs. This job losess will acclerate as we get into 2008 and 2009.  Each industry is tied to another and the domino effect will cause huge collapse of the system.  Save while you can.  You need a job in hte first place to keep paying mortgage for home and you need money to survive the collapse.

If you think home prices are inflated now, you should have seen them 30 years ago.  I have a brochure from the Irvine Company from 1979

Woodbridge Estates $132,000
Woodbridge Creekside 109,000
Woodbridge Townhomes 95,000
Woodbridge Place 137,000
Woodbridge Arborlake 145,000
Woodbridge Fairfield 87,000
Woodbridge Grove 110,000
Woodbridge Gables 90,000
Woodbridge Glen 73,000

Turtlerock Highland 190,000
Turtlerock Highland Townhome 109,000
Turtlerock Garden Homes 143,000
Turtlerock Vista 177,000

Villas at rancho Sanjuaquin 101,000

Jasmine Creek (Newport Beach) 200,000
Harbor Ridge (Newport Beach) 475,000

That’s too funny.  I’ve never played that game; I had to follow the wiki link understand what you were saying.

You get points for originality on that one.  I love it!

“At least I have Scottsdale.”

What were the actual sales figures? 

Is there any way to find out what one of these 1980 Irvine condos (that are still alive today) sold for originally?

Thank you guys!  I thought it was just me who was getting annoyed with AZ’s constant pricing comments.

And AZ, I am sure you are going to respond with how we all are drinking koolaid and idiots for thinking SoCal is special or something.  That is far from the case.  I can care less about what SoCal is and isn’t.  As I have said before, it simply is home and if I want to live here, I have to face the reality of what it costs.  I know we are in a bubble but I also know that if an 1800sq ft townhouse in a very very nice neighborhood falls to $200 a sq ft, it will be a steal.  You think it should be worth less than $80 a sq ft and unfortunately, this area just won’t see that.

“This job losess will acclerate as we get into 2008 and 2009.”

Thanks for the sobering info. There are some on this board that have their head in the sand and just wont accept that current real estate prices could drop in half.

In a couple of years, someone will think twice before paying 350k for a place like the one highlighted today.

It will be like the story of the emporers clothes - “Hey, wait a minute, 350k is alot of money for this, and I have to actually pay it back!”

What I find encouraging is that this decline/ reo is in Woodbury. 
Along with Portola Springs, Woodbury is one of TIC’s most recent projects. Builders are still trying to unload homes there.
Nice to see the downward momentum and market cracking.
About a year ago, many of my friends were dying to buy in Orchard Hills at whatever the cost, hoping to quickly net a few 100K. Since RE always goes up. Fast forward, today the market has shifted, Orchard Hills is on the shelf, and I haven’t heard a peep from them.

“You all sound more like the types that should be buying a big ranch in Montana and hording guns and food for the coming apocalypse.”

Great line ipoplaya!  Too funny.  This is the first thing that pops in my head everytime I read a comment about values dropping 70%+.

I went through the last market crash and bought a place similar in value to this at the bottom for 200K. (Smaller and in a less desirable city, but with a small yard.) Payments were quite easy even though me and my partner made less than 84K at the time, and payments were less than rent would have been. That’s 10 years of inflation ago too. Barring a depression, this place will never get to 200K - probably not below high 200’s, actually.

BTW, I’ve seen the places on Chantilly and they’re quite nice. Not shacks by any stretch. This place isn’t worth 525K but it’s not worth 200K either. Worth less doesn’t mean worthless, especially for a nice place in a nice neighborhood.

AZ - have you looked at what rents in Irvine were before the bubble?  Lets say they were 20% less and they get back to that point.  Well, I live in a 1100 sq ft 2b/2b in an Irvine company apt and it costs me $2000/month in rent.  If my rent falls to $1600, the rent for an 1800 sq ft townhouse would still be at least $2000 a month.  Using the 160 number, that puts it around $$320,000 and this particular area probably can charge a premium so even more. 

Honestly, think from my point of view.  My wife and I currently make in excess of $200K per year and we aren’t planning any kids for at least 3-5 years.  Why would we not pay a bit more per month than what we pay for rent to own a great townhome? 

A false part of your arguement is that rents will also fall when all this inventory of housing turns into rentals.  I think it will play a part but most of the house owners don’t want to be landlords and there are plenty of people who don’t feel comfortable renting such properties.  We skipped private rentals and went for a TIC complex for ease of mind.

Irvine - please scan that and post it in the forums!  Would be awesome to look at.

“this condo should sell in the low 200’s but probably will dip below 200K for a year or two when the market bottoms before stablizing at it’s support level.”

That is just not possible.  Right now a quick Craigslist search for 2 BR condos in Woodbury comes up with a range of rents from $1,900 - $2,700.  $1,900 is for 1,000 sq feet.  This listing is almost double that.  Let’s pretend for a minute that the market rate for this unit is $2,100/month.  You are essentially saying that at bottom rents in Irvine are going to drop 40%, because at a price of $200k you’re looking at a rental equivalent of roughly $1,200 a month.  I think everyone on this blog would be lining up to purchase this place LONG before it ever gets even close to that price.  The price equivalent of $1,700/month rent is $300k, which would still be an amazing drop in rents from todays levels.

This is not Garden Grove, Santa Ana or even Costa Mesa.  It’s Woodbury in Irvine.  I personally do not like Irvine and I’m not a fan of master planned communities, but unless we see the 2nd coming of the great depression in the US and Orange County you will not be able to rent a 2 bedroom in Irvine for $1,200/ month, how will prices drop that far?

While SIVs are gone, isn’t Fannie and Freddie still buying loans up to $417K and will always do so?  So at the least, getting up to $417K should remain easy right.

I’ve been a long time lurker here and I intended to stay that way, but AZ (and others like it) is just annoying the hell out of me.

I am happy that this place is only worth $150k for you. But the comp sales in Irvine and prevailing rents say that you are smoking crack.

I would never pay more than $30k for a Mercedes 500SL and no more than $50k for a brand new Ferrari. Does that mean those cars will be on sale for that price in any near future?

NO!!!!

I can spout off some non sensical fantasy prices that I would like to pay for everything. But it provides absolutely ZERO to the normally intelligent conversations around here. So, please STOP!

The same goes for those people who mention how they can get the same house for 50% in Kansas or in the middle of a swamp in Florida.

That is all nice and all but this is a blog about houses in Irvine, not Kansas. What the equivalent houses go for in other parts of the country means very little when housing prices are dependent on local demand. As someone else has mentioned, you can get a palace in India (with full staff) for what you pay for housing in Kansas. Does that really mean anything? No.

Sorry for the rant…

Your Humble Third Party Observer

AZDavidPhx:

What do you think this ‘dump’ is worth?

http://redfin.com/stingray/do/printable-listing?listing-id=1058870

The point is this: you have no idea.

CDM > Irvine > GG > SA > IE > AZ

AZ 6 months salary = $12K

SeattleGameBoy: See my post below for a reference you will truly understand.

Capatilismworks 6 months savings= 2 credit cards= -12k :mrgreen:

AZDavid would not pay more than $50K for a 1BR condo in downtown Manhattan.  Anyone who does is a complete moron.

You can argue my history and my sensibilities once I’ve posted this, suffice to say, I’m not the average “outsider”.

While AZDavid’s rash statements are, well, just that, rash statements, they do convey a sense that some of you Irvine locals/natives seem to miss in some part.  And I don’t mean to imply he’s right and the Irvine folk are wrong, only that there is some objectivity to what he says even if his numbers are wrong.

Irvine is a nice place with lots of nice jobs and some nice places live.  But I grew up in SoCal and while I haven’t been there for the last ten years Irvine is hardly the end-all be-all for SoCal.  Irvine itself, in the opinion many people not attached to the location is a relatively boring, cookie-cutter place (that’s a strength and a weakness).  The only advantage Irvine has over some of the surrounding communities is that much of Irvine hasn’t yet succumbed to many of the problems of the areas surrounding it.  There’s really nothing intrinsically special about Irvine other than it’s central geographic location.  For anyone willing to drive a bit more there are places with more intrinsic value (the coast for instance).

All I’m saying is this, be careful in thinking that communities never change and that everyone shares the same aesthetic values you do.  This upheaval we’re seeing in real estate will, in my opinion, ripple out and affect a lot of other things that people can’t even imagine right now (barring some kind of magical bailout, which would have its own effects).

Do I see this Woodbury condo sell sub $200k?  I don’t.  But in three years who knows where the market, the economy and what Irvine’s place in all that will be.

That’s just my opinion.

Whoa, let’s not get carried away here.  IE is an absolute dump.  Certainly OC > AZ & NV, on the whole, but parts of AZ & NV are very nice.  I can’t say the same about the cesspool that is the IE.  Yuck.

People that brag about companies that can continue to pay employees 30-40% more than what they make in other parts of the country are somewhat foolish.  This will last until a major recession.  Most of the younger people on ths post have not lived through anything that approaches one. 

One day may come where it’s either a pay freeze or cut or lose your job.

My company’s corporate office is in Dallas.  The number one gripe/resentment from employees there is how much it ‘looks’ like we get paid out here in ‘Disneyland’.

Unless, of course, you secretly believe the comment that is most often dismissed on this blog with regards to the housing market: ‘everyone wants to live here.’  Can’t have it both ways.

Joseph,

Claremont?
Chino Hills?
Upland?

Chino Hills median income is over $100k, well over Irvine and even Beverly Hills.

Point is, “parts” of any place are nice.  On the whole, IE Scottsdale Sucks</a> blog.

Oops messed up me html

On the whole, IE Scottsdale Sucks Blog</a>.

My fave blog, next to IHB:

http://nevercoldcall.typepad.com/scottsdale_sucks/

“This blog is dedicated to exposing the truth about the Land of the Fake - Scottsdale, Arizona. Scottsdale is a mecca for phonies who cannot afford to play in a real affluent market like LA or NY and instead come here and pretend to be rich and hip. It’s also home to the most mickey-mouse city “government” I’ve ever seen.”

I agree with most posters here that this POS will never reach 200k but:

we have to take into consideration what will happen as this downturn deepens. People on this board sound very impressed with Irvine and Woodbury. when things get even more uglier, people will become very careful about where they put their money, esp if they have to come up with a down payment. what happens to incomes when financial services start contracting, other industries start being affected. I believe OC will go through a local recession somewhat worse than elsewhere due to dependance on realestate to a larger degree.

Woodbury came out during the bubble, so we dont really know how low it will go. when people who have owned for more than 7 years and want to get out quickly for whatever reason and start pricing in the 200-250 per sf. what will happen to this big apartment(I mean condo). would you rather buy an older but bigger house or a 2 bd condo in Woodbury. also some of the nieghboring communities are seeing price declines, are people willing to move out a few miles to surrounding cities (some which are decent as Lake forest, foothill ranch, tustin, Aliso, MV).

Just questions I’m wondering.

I know people who bought in Irvine only 5 years ago( actually one of the houses featured by IR) at 200 per sf.        5 years later incomes have not gone up that much. look for this place to drop to the mid 300ks.  JMO :(

OK, don’t mistake me for a bull….god forbid.

I visited these properties in 2005 and they are very nicely done. I would not call them award winning, but they are a step above the typical tacky stucco boxes in Irvine. Most of the units have an office that can be used as a third bedroom.

So what is it worth…..between $320,000 and $350,000

The fact that we are seeing these units on the market south of $300. is a major milestone and a sign of what is ahead.

1. Are there other nice urban areas of the US where the median family income is > Irvine’s $85,000?

2. Are there 2 br, 2 ba attached condo’s at those locations which match AZDavidPhx’s prediction?

If so, .... , then what makes Irvine so special?  If it’s just that SoCal people are more likely to go into debt to buy stuff (house, car, etc), then the credit crunch should be the great leveler to get rid of that.

Just a thought…

I appreciate extreme views on either side for the perspective they provide.  However, they must be provided along with facts supporting their arguments.  Simply saying something’s worth just $200K doesn’t add value to the conversation.  Convince me how you’ve arrived at this conclusion.  Otherwise, all I know is that you would never pay more than $200K for this property.  Should I then go down the list of values I place on everything from homes, to cars, to education, etc.?

One of the things I keep hearing young couples without kids talk about is the school system.  If they had kids in the next year, it will be about 7-10 years before the school system even matters.  Most won’t be having kids for 3-5 years so how the heck can they predict how good the schools will be 10-13 years from now!

However, this is the case with any RE.  Beverly Hills can become a dump if some gangs took over the area and made it miserable for tenants.  Basically, anything can happen. 

Hence, you have to make the best decisions you can with the data that you have.  Have older Irvine neighborhoods maintained thier values?  Sure, TR, Woodbridge, etc which indicates that there is a better chance of Irvine continuing to succeed.

For the upteenth time Stupid, REAL ESTATE IS LOCAL!!!!

That means the market is driven by LOCAL SUPPLY AND DEMAND.  You cannot compare the median income and median housing price in Timbuktu to the median income and median housing price in Irvine.  It just doesn’t work…  Far too many other LOCAL variables are left out of that equation.

Prices will fall in Irvine and will bottom at the point when in general, it becomes more affordable to buy vs. rent.  If somehow interest rates were cut in half today, you can bet we’d be at bottom tomorrow…  It’s a question of LOCAL affordability and LOCAL economics.

The above being said, I can tell you that I prefer Irvine because of the 1) strong job market, 2) school district, 3) proximinity to decent colleges for my kids down the line, 4) the weather, and 5) being a relatively short drive away from the ocean, the mountains, wine country, etc.

maybe all of us highly educated renters should decide to buy out an undesirable community in the OC at 120 GRM, and raise our children together in a commune.

Maybe Santa Anna? Garden Grove?

Commune anyone?

For those of you who think I’m blowing smoke, a word of caution.

I own and rent property in OC.  I lived through the last crash in 90’s.  I had friends, colleagues who decided to become house builders, build homes and go BK.  I’ve seen paper net worth of 2M fall in half.  It was very scarry times.  There is nothing special about Irvine.

THIS TIME, THINGS LOOKS A LOT WORSE.  The economists have no event to compare the current crisis to.

Those who forget the past are doomed to repeat it.

When we increase the value of that neighborhood we could move on to the next.

It would be like “flipping neighborhoods.”

Question:

what have rents been doing over the last 20 years on OC. Have they fluxuated up and sometimes down like home prices or is the line pretty straight? Do rising home prices drive rents up as well? Will decending home prices put downward pressure on rents? Since the everyone seem to agree the absolute bottom of any bubble is where adjusted monthly housing expenses (for owners) meet rents.

I tend to think that way to.  I used to live in an area with a higher median income than Irvine’s, but that was more financially conservative (ie. no one I knew leased a car, everyone paid their’s off in 5 years, then drove it a few more before selling it).  Not surprisingly, the houses were also less expensive (ie. less crazy financing and speculating there too I assume).

There’s a reason Forbes.com rated LA the #5 in the world (and #1 in North America) lmost overprice real estate market.  Since their survey is adjusted for local incomes, that must mean that people in LA are more likely than other North American’s to borrow the difference…

World’s Most OverPriced Real estate markets - LA #5, http://www.forbes.com/2007/08/24/housing-overpriced-world-forbeslife-cx_mw_0824realestate_slide.html?thisSpeed=15000

Los Angeles
P/E: 31.25
Last month we named Los Angeles as the least affordable housing market in America. Despite higher costs in San Francisco and Manhattan, L.A.‘s overheated market was built up largely on speculators who subsequently exposed it to the credit problems now dogging the market. Top properties are still extremely expensive despite the price correction presently under way, which is expected to push down returns.

Stupid,

http://www.city-data.com/top2.html

Need to plot these against local housing prices.  Looking at the list, you’d be hard pressed to find areas that have “cheap” housing in the desireable parts of town.

Actually, I can make the argument that you can compare median from other areas.  You have to do so.  When evaluating your life and where you choose to live, you need to compare the cost of living.  The “Real Estate is Local” is the usual mantra that Realtors perscribe to.

If people are moving out of OC to cheaper areas, and they are, how can you say it doesn’t matter what other areas cost?  It does matter.  I know many people who have already moved or are contemplating relocating.

I agree that each RE market is different and unique but people don’t ignore the fact that prices are cheaper elsewhere.  I for one would prefer to stay in the Irvine/South County area even though I pay a premium.

Hey AZ,

If you can find what you’re looking for in Paradise Valley, then I retract my statements.

http://www.city-data.com/city/Paradise-Valley-Arizona.html

Estimated median household income in 2005: $161,300 (it was $150,228 in 2000)

Paradise Valley   $161,300
Arizona:  $44,282

Estimated median house/condo value in 2005: $1,189,800 (it was $722,700 in 2000)
Paradise Valley   $1,189,800
Arizona:  $185,400

I would strongly suggest trolling the “Scottsdale Sucks” blog.  Your statements would sound much more coherent there.

Now now.  You’re setting up a straw man and tearing it down.

All I am saying is that your house prices have to come back down to reality.  I personally would not pay more than 150K for this condo I mean apartment.

If you had 300,000$ in the bank right now, would you hand it over for this condo I mean apartment?  I wouldn’t.

Your house prices are solely based upon how the mortgage hustlers can work the numbers and frame your monthly payment in a comfortable zone for you.

If everyone in Irvine wants to stretch themselves to the brink of financial disaster just to show the Joneses that they are ‘keeping up’ - no problem.

Knock your socks off.

Want the CA minimum wage to be 100.00 an hour? Ok.

The thing to consider is that nobody moves up to their next house until the first time buyer is priced back into the game.  Without creative financing - either prices come way down or wages go way up.  Either way your house has less value.

I think this apartment I mean condo is worth 150K even though our houshold earns more than your median Irvine income.  We just aren’t willing to throw it all away like that.  But then again, that’s why we will never move to CA.  You who want to hang around and get ripped off - have at it.  Your salaries are 10K-15K higher than here for no reason other than your inflated costs of living.

You guys acting like you are way better than AZ need a serious reality check.  You have your own problems in CA.  I love visiting CA, but I would never for an instant ever consider moving there; just the same as many of you may like visiting AZ but would never move here.  That’s great; I totally respect that.  I don’t go around calling you sissies for not being able to handle anything shy of 75 degrees.  So quit with the elitism.

Per the dropping 70% ... did you catch the one liner in the video at http://calculatedrisk.blogspot.com/2007/12/video-krugman-speaks-at-google-dec-14th.html?

He mentioned there is a model for the US crash as a whole, and that model is the 30% loss we had in SoCal, which tells him that the US as a whole crash (which he is forcasting as 30%, which will put 40% of all homeowners under water!) will not be swift but take several years, just like the previous SoCal crash did.

He also makes an offhand comment after the 30% crash, that it will, of couse, be much worse in SoCal than in the rest of the US.

Irvine has two big things going for it:
1) Jobs.  Lots of jobs. Vast light industrial areas unmatched elsewhere near the coast, backed by a good university.
2) Extreme master-planning. Irvine is possibly the most thoroughly masterplanned community in the LA basin.

#1 isn’t going away, and will hold Irvine values above other OC inland areas.
#2 is a fashion issue. As long as more people like the Irvine style of master planning than there are masterplanned places for them to live in, that too will prop up the prices. Now that *could* change. I don’t like current masterplanning; I much prefer mixed-use development. Other people like to be able to make meaningful changes to their houses - or at least change the exterior paint color! If there are enough of us then, yes, Irvine property will take a substantial hit (but not to 200K for this).

Thanks.  Exactly.  I have no idea what your prices will come down to.  I can only tel you how ridiculous all of this looks to people watching this drama unfold from outside your state.

We believe heavily in living within your means.  If one of us loses a job, the other one can pick up the slack until the other gets back to work.  Our savings accounts get paid before our landlord.

I realize that a lot of you have different values and don’t see any problem with spending 40% or more of your income on housing.  While it seems ridiculously stupid to me; I respect that you are doing what you feel you have to since ‘everyone else is doing it’ too.

All I know is that I am glad that I don’t live there.  I would be sweating bullets!

You just blew up your own damn arguement Maestro - “I for one would prefer to stay in the Irvine/South County area even though I pay a premium”. 

Or in other words, all other things being equal, you are willing to spend more for the same house here vs. in some other place.  I would submit that you are even willing to spend a greater percentage of your income on housing to live here vs. in some other place.  Median prices here will be higher relative to median incomes for those reasons alone…

Demand for real estate is localized, i.e. when I am looking to buy my next home, I will not extend my search into other markets.  I can’t just go, oh well, house prices here are high so I’ll buy in AZ and commute via plane everyday.  People have families, jobs, etc. which are rooted to a particular area and that keeps demand localized.  Likewise, prices here are not influenced by someone living in WA and looking to buy a condo.  That person influences their local WA market…

Just because realturds say it, doesn’t mean it isn’t true.

What do you propose is the max you’d pay for housing?  I think 25% or less is reasonable.  That still feels high for me, but it just means I keep my 11 year old car for a while longer.

Feds can always just take on more debt. Not a new trick, but it still works.

Don’t worry about us over here, AZ—- we’ll be fine.  And rest assured that we are not worried about what you have going on over there in Arizona.

rkp -

Sure, let’s agree to disagree on the rents going down as the crash ensues.

I’d hedge my bet that they will drop, but I can see your argument as well.

Time will tell!

Why 2300?  That seems really expenisive for a 2 bedroom.  Granted you have 1800 square feet but you still have one less room than needed.  When I pull up Irvine on craigslist, there are 154 2 and 3 bedrooms for rent UNDER 2300.  That average price was around 1950.  That seems more reasonable.  Remember, you can’t borrow money to rent so at 84k median salary 2300. seems to be pushing the top for rents.  Anyone trying to save for a house would more likely rent in a lower price unit and still take advantage of great schools and other amenities.  I for one live in HB cheap 1600.  for an 1800 sq ft 3/2 townhome 2 car garage.  Good deal but they all rent for that around here.  I’m looking to buy in Fountain Valley where the kids go to a great school and houses, yes houses, are well under 600k and some as low as 520k.  Irvine seems way over priced to me.  Friends live in Oak Creek and they paid 356k in 2000 4/2.5 2500 sq ft.  on BLackbird.  Just 7 short (long) years ago.  That is another reason why even at 525k this townhome (apartment) is WAY over priced. 

Off topic.
NAHB Nation Association of Home Builders just made an announcement that they believe house prices have another 10-15% to fall.

Speaking of housing history ... here’s the classic Schiller housing price graph as a roller coaster video.  (Is that inflation/deflation adjusted? if so, ride is even scarier.)

US Real Estate Home prices adjusted for inflation plotted as a roll.er coaster
http://youtube.com/watch?v=kUldGc06S3U

AZ, you are a moron, not because you live in AZ and OC is better, but because you wouldn’t buy this place for $300K right now. 

$300K in the bank is earning $800 per month in interest after tax @ 5%.  Let’s say you bought this place free and clear for three bills.  This place would rent out for $2200-2400.  After paying property taxes, association, insurance, etc. you’d be profiting on the rental at least $500-600 per month more than if you left that $300K sitting in the bank earning interest.

This place would be a slam dunk no-brainer investment property at $300K and the problem is you can’t even fathom that.  You’re giving the good people of AZ a bad rep dude…  They all can’t be this dim.

I sure hope all these ‘high paying’ jobs stay close to Irvine for the sake of your economy.  If recession hits… EEK!

I think we ARE going have the 2nd coming of the Great Depression.  In fact, I don’t see what’s going to stop it.

Bush = Hoover squared.  Hoover at least was a smart man.

I have lived in OC for quite a few years, back in 94 I packed up the family and we moved to Idaho. Housing was very cheap, but everything else was expensive and you couldnt make any money.

People get jobs and stay there, you cant move up or make any extra money. I went from making six figures to 35K per year, opportunities were limited…..big time.

We moved back in 97 and it was the best thing we ever did. Yes it is expensive to live in Orange County, but…it’s worth it. You can make a lot of money and live in nice area’s and enjoy everything you can enjoy anywhere else in the country all within a couple hours driving distance.

It has its faults, but you cannot compare Orange County with Texas or Kansas.

We bought a house in 2000 for 422K and sold it in 2001 for 475K to start my business. It was recently listed for 925K and I believe it sold. We have been renting the same house since 2001 for 1800.00 per month and are hoping to buy back in the next year or two.

I guess in the bizarro non supply and demand world that AZ lives in, hordes more renters that have been foreclosed on don’t increase demand.  I guess the builders there in AZ haven’t hunkered down and dramatically slowed construction, thereby restricting supply.  Or maybe its just that increased demand and flat supply doesn’t translate into price INCREASES for rent in AZ world.  Wow, AZ world seems to work in opposition to the REST OF THE PLANET. 

Must be a very cool place to live.  People can’t buy or own places any longer, and yet they don’t increase the demand for rental units when they can no longer own.  I guess when they get foreclosed they just leave the state or get shot down in the street…

Boy, you said it—lenders are getting burned. Can you imagine? Look at this place. A nice revenue stream of, say, $4000 a month. And then not only does it stop for six months or more, but then they get hit by an additional $200,000, all in one month. It would take them 50 months to again break even after such a hit. As you can see, the business model is very vunerable.

Odds are near the coming bottom this place will be in the $300’s or lower. The down spiral is only in phase I after all.

tealeaf -

Paradise valley is a pretty interesting place.  When I think of Paradise Valley, I think of actually rich people.  You won’t find average wage earners living there.  It’s pretty exclusive : Phoenix Suns players, Diamondbacks players, mogul types.  It also covers a very small area.  The reason it is so popular is because it covers the base of Camelback Mountain.  Lots of HUGE mansions along it. 

I don’t think Irvine is in that same category. Although I am sure it is very nice.

I do take some offense to your painting Scottsdale with a broad brush like that.

Scottsdale has its problems as any place else would.

It actually has a very interesting history though.  The park system and golfing system that they installed to route the Indian Bend river is what made the city famous.  It really is a beautiful city.  We have phoney people just like you do.  We have people who live on credit above their means just as you do.

It annoys me that we get a lot of CA transplants with their phoney equity who think that they are superior just because they traded up a crapshack in CA for a ranch style home in AZ.  However, I’m not bitter enough to start up my own blog and trash the entire city.  That’s pretty extreme.

20% of Floridians are thinking of moving out of state, partly because we are no longer a low cost state, and that’s partly because of the local condition that we get hurricanes, and the insurance companies are charging ‘way more than they need to for windstorm insurance.  Also because of very high property taxes, which will surely come down when properties are revalued down to a reasonable price.

I read people are thinking of moving out of California.

If much of this comes to pass, we won’t be worrying about “too much growth” issues.

I’ve avoided saying anything about your prices, because I don’t know anything about your prices, but I must say that to this Floridian, bubbly tho we are here, I do find even your recent reduced prices eye-popping.