IR:

Good morning. For people waiting to buy in Irvine and elsewhere, patience is a virtue.

Be patient.

George
——-

... and I was just thinking it was time to ask for a rent decrease in for my IAC apartment given some of the rental deals in Turtle Ridge/Quail Hill.

This is exactly why I do not like when people on this message board misuse the compartive rent of today to extrapolate into the future what the purchase price will be in the future when the bottom is reached.

It’s fine for a quick back-of-the-envelope evaluation of how overpriced the house today-right-now; however, assuming that rents are commanded by god as fixed and using that to project into the future is faulty logic.

I’m glad that you are seeing evidence of rental prices beginning to come down.

Artificially inflated house prices also causes artificially inflated rent prices due to increased demand for rentals by the displacement of people who would rather own than rent, but choose to rent temporarily until purhcase prices come down.

In a market where pretty much nobody can afford to buy; they all decide to rent.  Seems logical to me that the rental prices will come down as the displaced buyers leave the rental market to become homeowners.

You would think that the current home-owners who lose their homes would be enough to replace the renters.  I’m hedging my bet that all of the speculators (people who own multiple homes) will take the hit on this one.  We will see renters become owners in greater numbers than owners who become renters due to all of the houses bought on speculation that are either empty or are not lived in by owners in the first place.

Ugh.  I biffed the grammar in that post. 

Is it possible to add a “Preview” so that people like me who can’t see slip-ups while actively editing can catch their typos before it is posted to the public?

Another factor having a downward pressure on rents is the out-migration caused by the high housing prices. Many people have given up on California and left the state. If the total number of households declines, the demand obviously declines as well.

Excellent analysis AZDavidPhx!  This bubble created many ‘spin off’ bubble in everything from renatl prices to luxury cars.  It’s economic law.  None of these excesses was compartmentalized.  It spilled over into the larger economy which is exactly why we will likely have a local recession at a minimum.  I heard this morning on CNBC that although the US unemployment ticked up .5% in the last year, CA unemployment ticked up 1.5% - a clear leading indicator of significant economic weaknss ahead.  IR, it might be interestng to post and follow some ot the larger macroeconomic numbers and trends for the US, CA and SoCal.  Thoughts?

IR, this is interesting because I hear all the time from folks how many new people are ‘moving here’ and how that will support prices.  That said, I recall reading somewhere that OC population is actually fairly flat because of the very out flows you site.

For the “How Bad Could Bad Get” chart…..

how high does local unemployment have to go to get there?

I think in order for that chart to come to fruition we would be seeing soup lines…. and most people who visit IHB regularly wouldn’t even want to live here anymore.

Careful what you wish for….

TIC will decide rent prices around here…  Are TIC renters getting increases or are their rents staying flat?  I thought they were getting hit with increases…  The one TIC renter I know did not.

more precisely those prices would be unafordable to most because most people with high salaries would no longer have jobs.

Interesting listing popped up on MLS.  Apparently it’s a Woodbury Portisol model that is already in backup offers after 1 day of list…  Weird.  Most interesting thing about it is the price.  $750K.  That would put it hundreds of thousands below asking for comparables and any recent comps.

http://www.redfin.com/stingray/do/printable-listing?listing-id=1421835

Since it’s a short sale and as you say priced so low beneath the comps I would find it hard to believe the bank would let this go through so quickly.

Actually, conditions do not need to deteriorate that much for that chart to come to pass. The first thing required would be any degree of economic upheaval that depresses rents slightly. The rental value base is not the big difference on that chart. The major thing we would need to happen is for the foreclosure numbers to get so overwhelming that rent-savers could not absorb the inventory and prices fell all the way to the support provided by cashflow investors looking to make money on the rental. All one has to do is look at the unprecedented levels of foreclosures we are now experiencing and look at the ARM resets yet to occur, and the big drop scenario does not look so unrealistic.

BTW, this isn’t a matter of wishing for these events to come to pass, I am merely trying to extrapolate where the market is going based on available data.

Calculated Risk already does a great job of tracking these trends. If you aren’t familiar with his site, go check it out. I go there daily.

http://calculatedrisk.blogspot.com/

TIC will decide for smaller apartments based on market conditions.  They will churn tenents, however they will and have reacted to decreases in the past.

The one thing I would disagree with IR about is the severe recession pushing rents down.  A recession will make the decrease worse.  The housing bubble by itself will decrease rents by collapsing returning large amounts of idle real estate to the market for habitation.

I too have seen reports that say we have a net outflow of people, but the increased traffic doesn’t seem to support these reports. Maybe people are just worse drivers now. Cell phones.

I think you are underestimating the job losses required to see rents decrease substantially and those prices coming to fruition.

Most of us lawyer / mba types with greater than $200K incomes would be out of jobs.

Look at Ess Eff after the Tech Boom.  There were dramatic losses to the local economy….. rents decreased. 

I think you would need bigger job / wage losses than the tech boom to have that kind of effect on the local housing market.  Incidentally the housing market in Ess Eff didn’t exactly crash even with dramatic rent decreases but we can blame that on other factors.

Good point on the number of people leaving CA.  That surely reduces demand.

AZ is supposedly the fastest growing state in the country.  I wonder where most of these people are coming from…

another point on rents:  even when they decline, they can go back up very quickly.  You can see this in Ess Eff today, over the past few years.

This web sits shows rental listing and price decreases:

http://realty.fatwalletdeals.com/overview.html

Lots of homes listed for rent followed by reductions in asking prices.

“Most of us lawyer / mba types with greater than $200K incomes would be out of jobs.”

In 2006, 7500 of the 64000 households had incomes greater than $200K.

6500 are greater than $150K.

13000 are greater than $100K.

Frankly, I can’t wait to see 2007.  Those numbers are going to take a hit.  IMHO.

The RE agents aren’t pulling in $100K plus anymore.  Most RE agents aren’t making a penny where as in 2004, 2005, 2006, like buyers, any agent with a pulse could suck down a couple commissions on million dollar homes easily contributing thousands to their household income.

Last cycle, rents in SoCal, decreased for 5 straight years.

I disagree, OC doesn’t have a single large stable employer such as Google, Apple or Qualcomm.

15% of OC jobs are related to realestate..  7% are in construction which is projected to decrease at least 20%.

At least 1/2 of the realtors will leave the field (a good thing)

10% of OC jobs are state or local goverment which has yet to feel the effect of the $14B state deficit and looming cut backs.

Not to mention all the sales related jobs..  Auto sales are expected to fall 10% or more leading to lower commisions, boat and RV sales always fall in a recession.

Heatlhcare, while always growing is facing increasing pressures to control costs and the number of uninsured will rise during a recession, it’s amazing the system stays stable.

My crystal ball says OC is in for some rocky times…

I agree with you, both factors will be in play.

Ipop,

Thanks for the link. Too bad there’s no picture. This one blows away the two properties profiled today. Its larger, much newer with about $100K difference in ask price.  I don’t see how those older properties can even compete. Frankly, I’m surprised that a lot of these older properties in Irvine have not already declined significantly. It’s like buying a 20 year old car, unless it’s a collector car, I’d pass.

BD -

Look no further than AZ real-estate to see a spin-off bubble that was partially influenced by CA.

Refinance your CA McMansion, cash out a couple hundred thousand clams; plop it down on a nice “investment house” in AZ where prices are much cheaper. 

All of a sudden, people like me who work in AZ have to compete for housing bids against people on CA incomes and whose primary residences are further ahead in the artificially inflated home equity gains.

AZ housing is imploding now that the speculators have bailed.  The locals are left holding the bag.

Next time you get one of these people claiming that “real estate is strictly LOCAL”; you can ask them to explain why refinancing a home in CA to buy an investment home in AZ does not count as national.

Rental rates are not just a function of total employment. The quality of that employment is also important. There are a lot of mortgage brokers right now going from $250K jobs filling out mortgage applications to $60K jobs selling insurance. People who are forced to take dramatic cuts in pay do not show up in the unemployment figures, but they will dramatically alter rental rates because they are no longer bidding up the prices on larger properties.

IR, the misspelled word in the first listing is “travelled.”

On my blog I featured a $2 million property with an error-filled listing.  My take on it was:

“Could you imagine a realtor, not even professional enough to run spell check on their computer, demanding a 6% commission (for this place, we’re talking $131,700)? Not being a perfect speller is forgivable; failing to proofread a $2 million house listing is not.”

One thing I’ve noticed during this housing crisis is that although there are more families looking to rent many of those families are coming out of foreclosures so they have lousy credit ratings.  So while demand for rentals may be higher than normal the number of desirable tenants has not necessarily increased.

When we looked at rental houses in a small, “Irvine-esque” area of Sacramento we had plenty of options and so could afford to be picky.  We were getting approved for leases before we even completed applications.  Six months later and there are even more rentals in our area than before and rents have fallen about 20%.  The problem is that few landlords are offering more than a 6 mth lease in hopes that the market will improve and they can sell the house this summer!

I am also still predicting that your equivalent 60K insurance salesman will be paid 50K to 55K in the coming years.

As house prices come down and the cost of living becomes more affordable, businesses will surely take notice.

Kind of hard to justify inflated salaries in CA when the cost of living isn’t THAT MUCH more than in other places.

It all depends on how hard your house prices fall.  Either way, I predict some decline in CA salaries.  Could be little or a lot.  Too early to tell right now.

So true.

Who would you rather neighbor with?

The professional couple who has been able to make a good impression on a perspective employers and acquire good jobs.  Shown responsibility by paying their bills in the past and being able qualify for a mortgage with 20% down yet chose to rent and wait out the decline?

or

The carnies who have declared bankruptcy 3 times, in between jobs, let their dogs crap on the community grass, and throw their cigarette butts on the ground in front of your door.

Tough choice.

Nice catch. The misspellings are easy for me to catch because I actually use a spell checker . (To be honest, without a spell checker, I am a poor speller.) You would think the MLS would have one. Perhaps if I embarrass enough realtors on this blog, they will get one.

They’re pulling out another weapon to combat this decline.  Looks like the “stimulus package” will include a Fannie conforming loan limit increase adding badly needed credit and lowering rates for typical CA loans.

“...To address the mortgage crisis, the package also allows Fannie Mae and Freddie Mac — government-sponsored companies that are the two biggest U.S. financers and guarantors of home loans — to buy home mortgages much larger than the current $417,000 limit. Rep. Barney Frank, D-Mass., and chairman of the House Financial Services Committee, said that lending cap might reach as high as $700,000 in areas with the highest home prices…”

http://news.yahoo.com/s/ap/20080124/ap_on_go_co/economy_stimulus

We are IAC/TIC renters and we did get hit with a rent increase. They tried to hit us with $150 increase, we balked, used our “we’ve been good tenants here for 6 years” card and got it reduced to a $100 increase. Still quite a bit under the market price for our apt. Also our complex has the least amount of available apts. we have seen in 5 yrs.

Regarding people moving to other states - all my daughters friends that have moved have all gone to Texas and one coworker just moved there too.

Here is my comment promised for yesterday but a long work day prevented me for posting it as promised.  I promised to outline the most tragic case of one neighbor who appears to have made a very wrong decision.

On Dec 31, 2007 I had visited the Land Records Office in Rockville for Montgomery County in Maryland and reported on the state of available equity in 40 properties for which I reviewed the mortgage (see comment from “Kottan” under Jan 22).

Alan, I take your point that a HELOC is not necessarily fully utilized and sometimes not at all.  When I see someone “re-HELOCing” in short order (such as the example that IrvineRenter described just a few days ago (“Dark Side”), it is perhaps fair to assume for practical purposes that at least the old lower amount is fully spent.  Still, point taken.

That said neighbor purchased a MiniMcMansion in 2002 for $641k, 2,600sf on a 7,000sf lot:  An earlier bubble-bird buyer.  In 2003, he refinanced into a $600k mortgage and in 2004 he took out a $50k HELOC.  So far, so familiar.

In 2007, the couple had apparently outgrown MiniMansion.  They purchased a lot from a builder in the street next to the one where they live (less thank 200 yards away) to start building MacroMansion.  That builder had built several in-fill spec homes - all tear-downs - in the street before.  In each case, the builder put the new house on the market when it was finished or almost finished.  But in spring 2007, that builder sold the lot with the old house still on it for $660k to said neighbor.  After accounting for commission, the builder broke even on that transaction.  The neighbor is now the only home-owner in the street that owns two houses in the vicinity, his current residence and that lot.

The neighbor, however, did not only purchase the lot from the builder for $660k.  In addition, he took out a mortgage from First Savings Mortgage for $1,500k in April 2007 (i.e. shortly before that fateful Black July 2007).  That mortgage appears to be a Construction Loan because it is due on June 25, 2008 (“borrower has promised to pay this debt in regular periodic payments and to pay this debt in full not later than June 25, 2008”) . This would be five months from now (time flies) !

If you walk past the lot, you see MacroMansion on the rise, rivaling for the biggest house on the block (approx 4,000sf first and second floor).  There is a builder sign - the one who sold the lot.  The house has a roof and doors and windows.  It is not finished.  And there is no further rise and other discernible progress since early December.

As you might have guessed, the current residence is for sale - at least since October.  Initial kool-aid asking price:  $1,300k.  In December reduced to $1,100k.  Do you hear a clock ticking ?  There had been no McMansions for sale on that street during the last twelve months and my guess is that the price will be at or under $1,000k at best.  There are a few spec houses around the corner that are now on the market and approx 15-20% less than in 2005 (e.g., asking $1,249k for a house that would have been offered for $1,495k in 2005).

Let’s do the math:  Current house must sell quickly:  Might get $1,000k (or less!).  Minus commission equals $940k (or less).  If HELOC is used (which I assume in this case), they realize a capital gain of $300k or less.  This could have been a tangible gain - if this would have been their only house.

Now to That Other House:  It will be of utmost interest to watch which bank in its right mind will refinance the Construction Loan on a house that is probably unfinished for at least another 2-3 months or even in the current condition in June.  Will the appraisal be at $1,5m for the lot and the bubble house ?  Unlikely.  The combined bubble value is $1,200k at best.  What, if the bank says, we finance only 90%.  That would be $1,100 at best (if the appraisal is generous).  The remaining 10% would be so expensive that it might be better to pay it themselves.  Therefore, I expect a new mortgage to be not more than $1,150k or so - if at all - and that leaves a hole of $300k.

Hmmh, where to take the $300k - perhaps that would be the capital gain from the first house.  What we have here is an example how to annihilate bubble equity by 2008 - well before 2010 or 2011 !  What we also have is a petri dish for appraising and financing a jumbo mortgage (remember that 1% surcharge that did not exist in spring 2007 and which is equivalent to 8-9% price drop alone) for an unfinished house with an owner who is also - for the first house - an increasingly motivated seller.

Two more items to put forward:  the $1,500k mortgage is not signed by the husband and wife but by his wife for herself and also as “attorney-in-fact” for her husband.  The proxy has been recorded at the Land Records Office at the same date as the mortgage.  Why would this happen ?  Why not sign yourself?

Secondly, the first mortgage on the first house ($600k) has a prepayment penalty for the first five years, that just expires on June 26, 2008, i.e. one day after the jumbo mortgage for the second house must be refinanced).  The prepayment rules state that if a large share of the mortgage is repaid (more than 20% which would be the case in June 2008) then a penalty of approx $10k is due.  The sequence of the dates appears to be ill-timed.

If the Construction Loan is financed at anything related to prime rate (equal, minus 0.5% etc.) then already approx $100k in interest payments will be made by June 2008 (remember the $50k HELOC of the first house?).

A tale from Suburbia at the end of the GreatHousing Bubble.  Stay tuned for the unfolding story of MiniMansion and MacroMansion ... 

As for the current focus on rents on this blog:  There has not been one single McMansion for rent in my street and their at least 25 of them.  Given their financing of 90-95% with mortgages would be $8,000 to 9,000 per month with comparable rents $4000 to $4,500.  Rents have stopped moving up for the other houses in our street since 2005 ($2,500 for the well-maintaned $1,800sf houses from 1552-1953).

Two corrections in my last paragraph (posted too quickly): houses are, of course, from 1952-1953:

As for the current focus on rents on this blog: There has not been one single McMansion for rent in my street and there at least 25 of them. Given their financing of 90-95% with mortgages would be $8,000 to 9,000 per month with comparable rents $4000 to $4,500. Rents have stopped moving up for the other houses in our street since 2005 ($2,500 for the well-maintaned $1,800sf houses from 1952-1953).

I agree with you all that the economy in the OC is going to suck for the next 3 to 5 years.

My point is that for it to suck enough for the median to hit ~270K the numbers that Alan and No Such Reality quote won’t just have to be bad….. the employment and fiscal numbers will have to be far worse than Alan’s estimates.

We all would be effected. 

We don’t know how resilient homeowners will be to resets.  Someone who should be paying $3000 / month in housing who is faced with a $4000/month payment can survive.  Sure their life is going to suck really bad.  The 401K (if it even existed) will be gone.  The expensive cars would be gone; vacations gone; cable TV, multiple cell phones… etc. 

If people change spending behaviors in the face of financial adversity the foreclosure numbers might be much lower than anticipated…...  the real effect will be in consumer spending…. and that will effect all of us in both financial and social terms.

The foreclosure numbers would have to be 10 times worse (dramatically worse) than current to see a $270K median.  I would anticipate that the effect on all of us (who work outside of RE)..... on our personal and professional lives would not be too pretty either.

LOL!!

Arizonas growith is from Mexico mostly.  http://en.wikipedia.org/wiki/Arizona

And the population of OC is growing, despite the myriad anecdotal evidence.

http://en.wikipedia.org/wiki/Orange_County,_California

You guys have heard of Google right.  Its real east to find facts.  I would suggest this would be a far more useful pursuit rather than spewing and endless stream of speculation to support further speculation.

“Rental rates are not just a function of total employment. The quality of that employment is also important. There are a lot of mortgage brokers right now going from $250K jobs filling out mortgage applications to $60K jobs selling insurance.”

Some anecdotal evidence to support that.  When I was working my refi yesterday I reached out to a Countrywide KB rep I became associated with back in the Spring.  Email bounced so I rang up his cell phone.  Turns out he had recently been let go by Countrywide, along with a number of his fellows.  He worked out of the Irvine Countrywide office.  He is not currently working at all…  As he has been doing new home developments via the Countrywide/KB partnership, his commissions had not exceed his draw for quite some time already.

Kind of feel bad for the guy, but then again the writing has been on the wall for some time.  As late as this past October, he was quite optimistic about his earnings future, e.g. he was talking about buying a cabin up in Arrowhead.  Amazing how quickly things can turn…

Anybody know of any good Phoenix housing bubble blogs?

A lot of heathcare spending in OC is discresconary..

LASIX is cash out of pocket..  people will put that off..
A large number of plastic surgeons operate out of OC… I heard one statistic that 1/2 of all plastic hooters procedures done in the US were done in So Cal, along w lipo and botox will tank.
People will put off dental implants in a slow economy.

“Most of us lawyer / mba types with greater than $200K incomes would be out of jobs.”

A sure bet as the economy wobbles further into recession. 

I remember reading an article in Forbes back around 1989 about how companies were cutting useless middle managers.  I forget the companies interviewed but one quote stuck in my mind; it was something like “we need producers who roll up their sleeves, not MBA’s that can only analyze models and theories”

There were also a few pictures of want ads that included the phrase “MBAs need not apply”

FYI…

BBC world news last night reported the sale of the most exensive home every in London $50M pounds ($100M dollars!).  New record.  They showed the inside… nicer than a 4 star hotel, looked like a palace…
Bought by an Israeli billionaire who made is money in diamonds.

They are saying that the 2010 census will mark the first time in its history that California does not add a new congressional representative. Growth is either flat or slightly negative, and much of the influx that continues is at the lowest economic tiers.

Here is some back of the envelope calculation without adjusting for inflation:

Potential Home Area = 2400 Sq feet  
Rental Value of Pot. Home = $3,333 (Assuming 1800 sq feet can be rented at $2,500 and calculating proportionate rent for 2400 sq feet)
Fair Value of Pot. Home = $533,333 (Using GRM of 160) (B)
Price per Square Foot for home based on Fair value = $222  
Likely Buying Price = $600000 (assuming $250/sq feet (A)
Likely Depreciation in Value = $66,667 (A-B)
Percentage Potential Decline = 11.11% (It could take 2-3 years before decline gets reversed)

Also, well kept should be well-kept, should it not?

The truth about these “low ball” rental units, it’s pretty simple.  The owners don’t need the money as badly as somebody else.  My wife and I just moved out of a condo we bought in 1987 and is fully paid off.  We intend to rent it out but really haven’t put any effort into it.  Our costs are $370 HOA plus $100 taxes.  So we “need” about $500 per month to break even.  Compare that to somebody who has a $400,000 mortgage and quadurple our taxes.

Simply put, when we put it on the market we will make it nice and easy by listing a rental rate of $200.00 below the comps.  We want a good, solid tenant who will take care of it and be no problem and no hassle.  So, we’ll be the low baller in the complex because we just don’t care that much.  I suspect the owners of these properties are in the same position.

I have said before that rents some posters here imagine is market for Irvine properties are simply bubbly.  I repeat my position that when you hit 3K/month rent, the number of available renters drops precipitously.  There can be only one outcome for a region (Orange County and SoCal in general) that has partied for so long on borrowed money:  a drop in living standards.  And with that drop comes a drop in rent:  no more easy money in Orange County. 

What is left are simply corporate jobs:  I used to work in a building owned by a large Irvine-based medical device corporation (we were subletting).  The parking lot would have made Tony Soprano blush:  lots of VWs and other middle class stuff (with plenty of tollroad tokens to show they are coming in from the hinterlands) and then a shiny Aston Martin, driven by the CEO pulling down 7 million.  So in the corporate world, you have a pyramid scheme worse than the Mafia: a few big boys making huge money and then a horde making peanuts.  That crowd will not support bubble rents, they can barely make their Ford Explorer payments.  So that is what OC is left with: no high-flying real estate types pulling down a windfall, just corporate drones that have to slave for their wages:  they will not support these bubbly rents, trust me. 

I used to look in their windows:  lots of ghastly cubicles right out of “office space.”  they even had a room for drones that didn’t qualify for cubes, just a long conference table filled with little people typing on laptops.  Nasty.  I don’t play that game anymore, thank you very much.  I have done my time and am now out-of-corporate jail.  But my point is that such people (while middle class) cannot support multi-thousand dollar rents.  Y’all have some it-is-not-different-here bitter medicine to take.

SawItComing,

I think we all have to grateful for what we have; those of us who made responsible decisions can still be effected by this mess in pretty horrible ways.

Wierd.  I see transplants moving here from all over the country for all sorts of different reasons.

But your still following the laws of supply and demand.  You just have more flexibility in asking price because you have lower margins.  As a sellar, you are looking at current asking prices ‘rents’ and going a littler lower to get your pick of the buyers ‘renters’.  If there were an excess of buyers to sellars you wouldn’t have to do that.  As more sellars do this, the number of potential buyers decreases, vacancies raise and other sellars ‘owners’ follow suit and lower their asking prices, thus downward pressure on rents.

Joe, google “Phoenix Flippers In Trouble”.

The guy who runs the “Housing Panic” blog regularly harpoons Phoenix as well.

You’re just flushing money down the toilet leaving that thing unrented. You’ve got an asset that could potentially bring you a decent return. Why not lure in a renter with lower than market rents and then you could just raise the rent later?

I agree that lower cash costs significantly impact the landlord’s thinking.  At the same time, you could always sell the place and invest the money elsewhere, so your true carrying costs are actually much higher than your cash cost (you also don’t mention maintenance, insurance, or the cost of your time dealing with the property and tenant).

This is one of the reasons I think rental properties are difficult to make money on: many of the landlords aren’t really calculating their true costs. 

If I were you, I’d look at net return on invested capital after all expenses, then make a tradeoff versus other potential investments.  If its an investment, you may as well optimize your return.  Its not like dealing with tenants is so much fun.  (Frankly, I would demand a much higher return on real estate due to the periodic liquidity restrictions (like now), the lack of diversification, and the high back-end load when you sell, and right now, the risk associated with its high valuation relative to fundamentals).

Nice…  Conventional limit going up as a result of the stimulus package.  Conventionals up to $700K.  Conv 30-year rates in the low 5% range.  IPO will be buying a million dollar place with no problem.

http://www.cnbc.com/id/22820909

Anecdotal evidence—we share a parking structure with a formerly high flying investment firm, among other tenants.  Every January (after the year end bonuses get cashed) the garage is filled with the new “it” cars.  Last year, we got several Bentleys and BMW M’s.  This year—not many new cars.  I can’t think of a single one.  Times they are a-changing.

“And the population of OC is growing, despite the myriad anecdotal evidence.”

First of all, you’re citing wikipedia—no problem with that, but you need to hesitate before using the “F” word (uh, that would be “facts”...).

Secondly, there is no demographic data on the wikipedia entry for Irvine for post-2005.  So, your claim that the population is growing is equally speculative at the moment.

Thirdly, I doubt the population is no longer growing, but ascertaining whether there have been any marked changes in the rate of growth would be more meaningful data.  Also, which demographic groups have increased/decreased?  Young professionals leaving?  Impoverished Latin American immigrants arriving?  I’m afraid you’re going to have to do a tad more research than just lazy googling if you want to put forth a story that has some meaningful and relevant data supporting it.

You are right, of course.  But we didn’t plan on being landlords.  We lived in the place for 20 years and don’t really see it as an investment (it’s more of a pain in the behind).  Selling now doesn’t really get us anything since there are five for sale in the complex now and nothing is moving even after they’ve lowered prices by $65,000 (from $415,000 - $350,000 and still not moving).

Also, into what would we put the money?  Stocks are trending down, bonds have yields that don’t keep up with inflation (especially after taxes) and precious metals are a suckers bet.  Might just as well rent it out for a piddling yield since that’s all we’re gonna get anyway from any other investment.

OC has a lot of service professionals:  consultants, accountants, attorneys, bankers.  To the extent the greater economy falters, those industries will take a hit.  I think OC is more vulnerable than most places, particularly because we were living above our means when times were good.  Like Jimmy Cliff said, “the harder they come, the harder they fall.”

Actually, both versions are acceptable: 

traveled/travelled, traveling/travelling

http://www.m-w.com/dictionary/travel

Equally correct.

The carnies who have declared bankruptcy 3 times, in between jobs, let their dogs crap on the community grass, and throw their cigarette butts on the ground in front of your door.

I see you’ve met my neighbors.

Skek, I would wager that many of the IHB folk fall into those categories.

I like the Jimmy Cliff mention…. IR should feature that song if he has not already.

You don’t sign the mortgage yourself if there is some reason that you cannot be at closing—e.g., he’s a consultant, salesman, lawyer who had to be in Cali or NYC the whole week of closing.  It happens and sellers are not always cooperative on movnig closing dates back.

We got hit with a ~5% increase earlier this month.  We’ve been at this place for a year, so we should have been around market price already.

This is the kind of stupid knee-jerk legislation that comes out of a Congress when they’re fully cooperating with the Executive and both sides are drinking the kool-aid.

The article doesn’t say if these ‘rebates’ have to be claimed against ‘08 taxes paid or what. That would mean that much more to come up with when filing season comes around next year.

I don’t have an opinion on raising the conforming limit on conventional loans, but I think this rebate crap is useless. That $1,200 might make a good addition to my HSA or to my wife’s ROTH IRA.

We live in a nation of financial anarchy.  If half of the population realized what was going on there would be open revolt.

Wow, what a story. That’s a lot of hurting in Maryland.

When I search our old neighborhood in Virginia, our townhouse (sold April 07) comes up as the highest-priced comparable sold property. And at the time I was mystified with my husband for listing it so low! Now I think he is some kind of genius for getting us out of there intact. I’m not greedy, but if we’d have gone with my idea of a fair-market price last year, we’d still be there and WAY underwater. Asking prices for identical units in our block are now $20,000 less than we paid in 2004, and they’re NOT selling.

We had a 2% increase for our IAC renewal this month.  Last year the increase was 5%.

I left with my family and did my part to help that statistic.

Oooh… Now there’s a good idea!  Toss a grammar checker on top of that and they’d be in a world of hurt! But at least you’d know who the good agents are without a lot of effort.

Increasing the conventional limit effectively means that many people are going to be willing to spend $75K more on a house…  That is going to have a big time effect on this housing correction IMHO.  There has been a spread of anywhere between .75 to 1.25 points between conventional programs and their jumbo counterparts. 

This change could mean that houses fall 10-15% less than they otherwise would have.

Beside fed rate cut, gov now try anything they could to prolong the recession, short pain is really pain vs long pain is getting use to it, insensitive after all.
Today stock market is dead cat bounce, get out if u can, at least partially, which I did.
play multiple cards in hand, and plan wildly, in this world this is always risks, manageable is essential.

I’m gonna use that rebate to defer the cost of some new furniture for the house I buy this Spring/Summer!  Should pay for a Vizio flat panel from Costco I would think…

It will give a small amount of support to houses priced between $417K and $700K, but so few people are going to qualify that it will not have a significant market impact. The GSEs do not take stated income, so people will actually have to prove they make the money and have the downpayment. In short, it will motivate a few more knife catchers to buy at somewhat higher prices, nothing more.

Has anyone seen a clear definition of the income limits for this rebate?  I’ve seen various articles which have said “likely $150k max per couple” or “phased down rebate above $150k up to a max of $174k” or “higher limits for those with children” but can’t find something that definitively outlines the cap.  I’m really interested in what that upper limit actually is….

It looks like the rebates only apply to singles making less than 75K or households less than 150K.

Can anyone confirm that?

I’m surprised you think conventionals into the $700s won’t have a bigger impact IR.  You talk about rent equilibrium being a market bottom for housing, i.e. 160 GRM.  If people can pay 1% less tomorrow to borrow the same funds, doesn’t that have to mean that we’ll get to a 160 GRM at higher overall price levels? 

I think you’ve also discussed the higher and higher risk premiums that will be built in to jumbo loans due to the credit markets, massive foreclosures, etc.  Didn’t Congress and Bush effectively just say “the government is now going to bear the credit risk between $417K and $700K so you lenders don’t need to worry about it now”.

I just got a mass email from Rep. John Campbell re: the stimulus package.  Here’s how he describes the pros and cons:

First of all, the good stuff:

* Raises FHA loan limits to $750,000 and also raises the “conforming” or “jumbo” home limits on loans guaranteed by Fannie Mae and Freddie Mack to the higher of $625,000 or 150% of the median house price in a market. This will help to free up more and cheaper home loan money in high cost areas like Orange County. This should help ease the housing crisis.

* Gives some taxpayers with adjusted gross incomes of less than $75,000 (single) or $150,000 (joint) some of their tax money from 2007 back.

As far as I can tell, that’s it on the good side. On the bad side, here goes:

* Gives roughly 35 million people who paid NO FEDERAL INCOME TAXES AT ALL a check for $300 per person in their family. So, a married couple with 3 kids would get $1500. This is a welfare transfer payment from other taxpayers, pure and simple.
Gives taxpayers with incomes over $75,000 (single) and $150,000 (joint) zero, zippo, nada. These are the people who pay most of the taxes and they will now pay a much greater share of the tax than they already do.

* We don’t yet know what, if any, mechanisms will be in place to keep illegal aliens from receiving these checks. If you file a tax return with no tax due and you have 4 kids, you will get a non-taxable $1800 check. The incentive for fraud will be huge. 

* The checks will likely not get to people before July or August, when the economic downturn is projected to be over. So, it will not provide any stimulus right now.

* The FHA and Fannie and Freddie loan limit increases are not accompanied by any additional regulation. The reason these loans are cheap is because you (the taxpayers) effectively guarantee them. If taxpayers are going to guarantee them, but someone else (the shareholders of Fannie and Freddie) get the profit, then the taxpayers ought to make sure that those entities are being careful with the money. This has not been the case in the recent past.  Although I have supported the higher loan limits, I have only done so on the condition that we would have better oversight of these agency’s actions than we do now.

There is absolutely nothing in this proposal that encourages what we need most, which is to free up investment capital for loans and equities. This economic slowdown was caused by a credit and capital crisis. Not a consumer spending crisis. We should be trying to free up credit and capital.  We are treating our arm when it’s the leg that hurts.

The government is agreeing to take on the credit risk between $417K and $700K, for those that qualify. People who qualified—those who actually make the money to support the loan balance—are not the ones who are defaulting. This will do nothing to stem the tide of foreclosures. There is no guarantee of refinancing to those with liar loans or those who have less than 10% equity in their property. This makes the financing a bit less expensive for a very small segment of the market.

Iblis: “They are saying that the 2010 census will mark the first time in its history that California does not add a new congressional representative. Growth is either flat or slightly negative, and much of the influx that continues is at the lowest economic tiers.”

Who’s they? Census estimates California’s population will have grown from 34.1m to 39.1m between 2000 and 2010. This exceeds the estimated national growth rate.

I am not adverse to research.  I take issure with unsubstantiated assertions (strawman anyone?)  My point is that those claiming there is an exodus from OC (ahem AZ Dave), are full of shit.  And that all available data points to an increasing population in OC.

That’s exactly how I read it.  Welfare for low-income.

it will be interesting to see what happens to interest rates in CA when the limit goes up to $700K for conforming loans

if interest rates stay at 5% and/or get even lower then this definitely shaves about 10% off the bubble’s bottom

That’s what the government intends it to be.  Low income families are much more likely to spend the rebates…  The point of the stimulus package is to stimulate spending in an effort to soften recessionary pressures.  Us hard-working, good-earning, big tax paying types won’t get anything.  If we did, we’d be likely to save it or pay down debt.

It appears the rebates will be phased out for married filing joints between $150k and $187K.  You make $187K, you get zilch.

I can’t believe this is actually f*cking happening.  How is raising the conforming limit a good thing?  It will just inflate prices, drive people further into debt, and socialize the risk that the banks are taking.

This whole mess is akin to negotiating with terrorists.  You’re already in a bad situation, and because you’re encouraging bad ethics there is an implicit guarantee that the next bind you find yourself in will be worse.

/soapbox

This country can burn to the ground for all I care.  At least then we’d have a clean slate.

I tend to agree mav, although the stimulus package itself being unveiled will actually drive mortgage rates up in the short-term.  The bond market was pricing in another half point Fed decrease, but that is less certain now.  The 10-year went up as a result of the stimulus package unveiling and that will make mortgage rates go up… 

If the equity markets start trending up because everything thinks the economy will be rosy, the net effect on mortgage rates could be nil by the time the GSE limits are raised.

Wow.  I’m all for helping out those in need, but this doesn’t seem too fair.

I know people who make less then 75k, who fudged their loan docs to get an interest only loan on a condo a few years back, who pay a miniscule amount of taxes, while i’m paying *thousands* a paycheck, and will get zilch back.

Although this government intervention could just drag this out further…  Fed lowering, tax rebates, higher GSEs, etc. could keep the bubble from fully deflating in the short-term.  Once inflation goes through the roof as a result, the Fed will eventually have to tighten, which will drive up mortgage rates and finally drive down housing prices to sustainable levels.

As long as there isn’t a massive recesssion or asset price bubble burst in an election year, the Dems and Pubs will be happy.

The government is telling you something 25…  You shoulda bought.

when are the new $625+K GSE limits scheduled to go into effect?

IR does brings up a good point on income requirements… however…., to me this sends a clear message that Bernanke is about to open the inflation flood gate.

It appears that the rebate is phased out for married couples by 5% for every $1K of AGI over $150K.  Fortunately my wife took some time off early in 2007 to stay at home with our second child after he was born so our AGI was surpressed this year.  We’ll at least get something…  Not quite a flat panel TV though.

Who gets what
How Americans in different financial situations would fare under the rebate plan proposed by House leaders and the White House.
— An individual with $2,500 in earned income in 2007: Disqualified because income fell below the $3,000 threshold. No rebate.
— A married couple with no children, with adjusted gross income of $100,000 in 2007: Would qualify for the full $1,200 couples. A $1,200 rebate.
— A worker with one child, who earned $9,000 and owed no taxes in 2007: Would qualify for the $300 rebate available to individuals who pay no taxes but earned at least $3,000, plus an additional $300 for the child. A $600 rebate.
— A couple with income of $145,000 in 2007, with three children: Would qualify for the full $1,200 for couples, plus $300 for each child. A $2,100 rebate.
— A couple with income of $160,000 in 2007 with two children: Would qualify for a partial rebate, reduced by 5 percent for every $1,000 in income above the $150,000 threshold. An $1,800 rebate — $1,200 for the couple plus $300 per child — would go down by 50 percent for this family. A $900 rebate.
— A couple with income of $200,000 and four children: Disqualified because their income exceeded $174,000, the phase-out limit. No rebate.

I guess I’m paying for half your flat panel IPOP, you can at least thank me…. get it before the Super Bowl.

I think your analysis of the plan is right on. Poor people will spend the money immediately. Most of the people on this board—the ones who are paying for it—would save it.

Speculation on multiple homes is not so rampant in Irvine.  True, you got a number of RE agents and brokers ( Hannuh Reddy in TRidge, that Palace in University Park, a few homes up in Shady Canyon ) that were bought purely as speculation with no intent to live or rent.

Places like Vegas, Phoenix and even Baja California had more such speculation.  That was because the cost of entry was lower.  Or rather, the financial exposure was lower ( homes running 500K instead of 1.5MIL).

(1)  They’ve done it again:

“The rebates would phase out gradually for individuals whose adjusted gross income exceeds $75,000 and for couples with incomes above $150,000. Contributions to IRA and 401(k) retirement accounts and health savings accounts would not count toward the income limit.”

Yeah…. we must be so rich….. I think I’ll buy me a summer house in the Hamptons too.. 

So, as usual, they’re gonna give money to people who didn’t pay tax ( making under 3000, and of course people making real money won’t care, but the bulk of us working stiffs we’ll get screwed again..

(2) OTOH, if they pull that $700K conforming ( that’s what it’s in Hawaii btw ), I’ll be first in line to get me a nice “conforming” loan at 4%. 

Perhaps that beach McCottage in the Hamptons might not be so hard to get?