As a matter of fact, Myford Elementary is the 13th best elementary school in Orange County, out of 400 or so (by 2005-06 API scores). Pioneer Middle is 3rd best out of 80.
——-

How is the location of 2 New Market? Noisy 261? It looks nice. Can it rent for $2800-$3000 a month?

I estimate the rent at $2,500-$2,650.

The long slow process of selling a property in a slow market is very, very painful. Every week that goes by brings a new level of worry and concern, especially if ownership is emptying you bank account.

The hardest part is that every time you make a price reduction, you realize that you are losing out and that you are trapped.

2500.00 a month rent on a condo!

That’s a full paycheck (or more) for many of you!

WOW!

Are the majority of people there fully dependent on a 2 income household? 

Doesn’t buyers remorse sting you every month when you see all that hard-earned cash go PFFF from your bank account?

Must be a hell of a mountain view!

That is a little high IR.  Average 2007 lease rate for those units, as reported by MLS, was $2387.

George - Andover (New Market’s tract) is very dense, which helps block out what noise there might be from the 261.  There really isn’t much of a noise issue from the toll road.

This property should get into escrow very soon.  They’ve had a bunch of offers already, a few in the ballpark, just not brought one across the finish line yet.

A great number of people would pay $500K today to acquire this condo.

Yeah SD, the TUSD schools that serve West Irvine are rock solid.  Myford is a Cal Distinguished school with a 932 API.  Pioneer is a fantastic junior high that tests out better than almost every IUSD intermediate school.

There are people that buy into West Irvine just for the school combination.  Heck, my wife teaches in IUSD, and we are looking hard at Tustin Ranch.  I wouldn’t mind at all sending my kids to Peters Canyon, Pioneer, and Beckman…

GRM is 200 assuming selling for $500k or renting for $2500/month.

For GRM 150, the price needs to drop to $375k. I wonder how likely this might happen in 2010-2011?

At the risk of opening myself to some serious blog-flog, I can answer anything about this home.

I’m a fan, and appreciate the fodder that helps bring unrealistic sellers to reality.

What would you estimate it would rent for? $2,400?

Why do 50% of pollers feel sorry for homeowners that lose their own equity? For all we know this owner may have rode the 1999-2003 Matterhorn before purchasing this condo in ‘04. Too bad they didn’t unbuckle and get off the ride at the apex. Now its time for the decent…

If you buy a home you can afford and plan to live in as a primary residence the whole concept of losing equity is moot. It doesn’t matter what your house is worth on paper because your house is serving its purpose—to provide you with shelter.

I also manage a couple of rental properties very analagous to this one within 0.5 mile.  $2400 seems very reasonable.  With this model, occupants have the loft which prevents cannibalizing a bedroom for office use, so you might be able to push a little higher.

Yes, isn’t it great to see an ignorant swipe taken at the West Irvine TUSD schools right here on the main blog.  The schadenfreude here is getting almost unbearable…I need to find somewhere else to spend my morning coffee.  There have been some nice trades in the NBA lately, maybe some more time on ESPN.com is in order….

The real decline in prices is not reflected in the Irvine median.  All you have to do to prove a 15%+ decline, is visit a new development.  New homes are selling for at least 10%+ less than they were a year ago and there are many incentives that weren’t offered then.

At 6% interest I get rental equivalence at $380,000. Not promising for our New Marketeers. Hope they drop their price low enough to sell fast.

Too bad Villa Rosa in Woodbury isn’t holding to your premise.  List prices there are down less than 10% off peak and I don’t believe they are offering any incentives.  If they were down 15+% from last year’s prices, they’d probably be completely sold out…

Interesting.  I haven’t visited Woodbury too much.  I’ll refine my statement:  Developments like Columbus Villages, Portola Springs, and Central Park West (& Avenue One) have seen double-digit price declines in the past year.

IR..

Maybe your being a little hard on these sellars..

Sure they are losing $60-80k now.  But look at it this way.  That money is gone.  All you can do now is stop your ongoing losses.  If they were to hold this property for another year or two their losses will more than double the $60-80k they lose now.  Maybe they are getting out because they just want to stop their losses where they are.

IMHO, prices will continue to fall at least 10%/year thru 2012 before bottom is hit so getting out in 08, maybe a little late, is still the smart play.

Actually, the old joke used to be that in SoCal there it was a 3 income household - the husband, wife, and the house.  But the house isn’t doing so well lately.  Maybe it’s getting lazy?

In addition to the seller incentives, builders are working with brokers again at a full 3% referral commission.  Builders stipulate that agents must be with buyers at initial walk-through (and that buyer has not previously signed on independently to IrvineCo’s interest list). If you are leaning towards a new home, I’m sure you can work out an agreement with your broker to get an extra bump on top of your already negotiated purchase price.

POITG,

I think folks feel sorry for people losing their own equity because they can visualize themselves in that position as well.  Just because someone is losing equity on their house does not mean that they purchased that house with the primary intention of building equity through value growth.  It may well mean that they purchased the house because they wanted to be home owners, intended to live there indefinitely (i.e., not to flip), and are now having to sell due to a change in circumstances.  It’s hard to say either way, and I would posit that the 50% who feel sorry for those folks (it should be obviously at this point that I’m one of those… are assuming the best about the losers’ intentions and feeling sorry for the fact that they got burned by bad luck, not bad decision making.

Cheers!
Everett

The wife and I decided to check out West Irvine this past weekend; we visited 59 & 73 Sapphire and checked out New Market’s open house.  We have to be honest; this house sure did pull on our heartstrings; it’s amazing that IR focusing on this house today.  The location is SUPER quiet, you can’t hear the Toll Road or Jamboree; it’s at the end of a sidewalk where it is very private, except for the neighbor in front of you.  Very nice patio and the size, sq/ft, floor plan was perfect.  The realtor, Scott, mentioned that he had 6 offers in already.  So I would guess it would enter into escrow soon; I’m confident that someone would snatch up this property real soon.  The “story” is that the couple has relocated to another state, and needs to sell for $520K in order to purchase new property.  New Market has been playing with my mind all weekend; and it’ll be really interesting to see what it sells for.  The wife and I were even discussing possibly even getting financing ready and putting in an offer; but thank goodness we got busy and it’s been a few days.  There is another exact property on the market, but I’m guessing not as quiet.  We are glad to have discover a new floor plan to keep track; and are still patiently WAITING!!!  Thanks IR for bringing use back to reality!!!

Sort like stop loss on a long stock trade?

I think the point is that the listing is misleading.  Generally, Irvine schools are better than Tustin.  But on a case-by-case basis that may not be true.

But then, the school itself (or the district for that matter) has been statistically PROVEN to be a poor indicator of adademic success.  Read Freakonomics (yes, written by award winning economists) as to why.  So, if the school and the district don’t even matter, is it just Realtard hype to even mention it?

All IR said was that there was a misrepresentation on the part of the listing agent as to characterize the schools as West Irvine schools when these in fact fall in TUSD. He never indicated that the schools are inferior. I agree with IR, that the agent has misrepresented the school information in his listing.

I think we should be grateful to IR and indicate our gratitude through respecting the person’s point of view.

Is there any hope for Northwood and Westpark homes to list below 2004 prices. Currently all i see is 2005 or 2007 prices.

I actually like the place.  It looks nice, appears to have a decent layout and been kept up well (or very nicely staged).  But over half a million for a 3/3 condo?  In Irvine?  Maybe in Manhattan or Paris or London.  But Irvine?  Mmmm….....I think not.

Too funny.

Now I understand the previous references I have seen people post in regard to the house not pulling its weight.

Probably having a hard time getting to the finish line because no bank wants to hold the bag on a 500K 1500 square foot condo.

That’s a tough sell when the buyer has to use their own money!

As the great housing bubble deflates, $500k will afford you much better property two year down the load.

Dead cat bounce is what is going on.  Please look at NASDAQ chart during the months of July-Sep. 2000. That is where we are at. The falling off cliff sensation is still a few months away. And the bottom is still 2 years away.

Patience is a great virtue.

Thanks for stopping by this weekend.

I do have another identical model with an interested seller, that is not currently on the market if you are interested. 

You are right that 27 Crestline is identical, but priced another $30K higher and in a poor corner location.

A bit of free advice for you also (worth every penny):

59 Sapphire is a TERRIBLE location with headlights from the toll road running through your master bedroom windows all night long. Run away!

73 Sapphire was bought at an auction and is a rare “flip” in this market… new travertine and carpets and still priced pretty attractively.  If you don’t mind the downstairs living space, it is a nice option.

I had the same thought.  I lived in West L.A. for six years, during the middle of this bubble, and passed up on some comparable condo opportunities in the bubbly $400 mil range.  This was in ‘02, but I couldn’t get past the fact that these were CONDOS.  Perhaps I could have flipped it, especially being West L.A. and all.  But IRVINE?  It’s like the Sesame Street game of “one of these things is not like the other”:

West Los Angeles
Manhattan
Paris
London
Irvine

Choose wisely!

Uh, Purplehaze—- The village of West Irvine IS in the TUSD, despite the fact that it is the city of Irvine. Everyone who lives here knows that West Irvine and Northpark fall in the Tustin school district, despite the fact they are in the city of Irvine. The realtor even named all the schools—- hardly trying to misrepresent what schools this home attends, more like promoting those schools.

And I’m sorry, IR’s comment “You mean the one’s that fall in the Tustin school district”  is a snarky dig at TUSD—- implying that part of Irvine serviced by these schools is somehow inferior.

“I think we should be grateful to IR and indicate our gratitude through respecting the person’s point of view”

Holy sheeple!!  Sorry, dude—- I showed my gratitude with the donate button.  If I see something I think is a wrongheaded misrepresentation, I’ll call it, regardless of who said it.

The survey is interesting!

about half number of people feel sad for those who lost money on real estate and the other half doesn’t.

wonder if it’s because about half number of people own homes and therefore more sympathetic, and even wishing housing would go up again.

This also explains why these bail out plans have some strength.  Imagine if 90% of people in this country are against it, there is no way these politicians would dare to bail out.

You have to wait for more of the fence sitters to fall under the knives.

These prices cannot be sustained on a wide scale without creative financing.

There are plenty of people who bought homes prior to 2002 who believe the bottom will not catch them and see no risk in “moving up” in the current market.  They can sell their current homes for well under market to other victims and still come up with a nice juicy downpayment on their new albatross.

It doesn’t matter.  The pool of knife catchers will dry up eventually.

The underlying principle is that the first time buyer is still priced out of the game which is slowly going to create more downward gravity on your prices as the body count of knife catchers piles up.

In the meantime, enjoy the schadenfreude of watching the gamblers call the bottom and fall off the fence.

Are you the listing agent ?

Yes, Trooper.

Welcome!
It looks like 73 Sapphire was picked up in 12/07 at $407K, is that right? If so, that’s 150K less than 2 New Market, like for like that’s not a bad deal.

Exactly right.  I’m assuming that these buyers are fully aware that they are spending 500K on an apartment and are fully content with paying back every penny in interest.

Today it is worth less than what you paid?  Oh well.  Good thing that the only reason you bought it was because you wanted to live in it and one day have it paid off.

But then again, if you only bought it because you felt you could make a monthly payment for a couple years and then transfer the outrageous debt (that you never intended to pay off) to the next victim then that is pretty shameful and you deserve to eat humble pie.

No violins playing over here.

You mentioned that it’s super quiet there and that you can’t hear the toll road or Jamboree….but you were there on a weekend.

Make sure to make a peak rush hour visit…get out and listen.  Might be another story. 

2400.00 a month in rent!  WOW!

REASONABLE!? WOW!

It must be something in the water over there!

Yes, $407K in cash at the auction.  Classic risk-vs-reward since they pick it up with no warranties and no recourse if anything is amiss.  If you’ve got cash, there are some good places to wait for on the county courthouse steps, on the trustee’s sale auction block.

Don’t hate, Phoenix.  SoCal bought all of your water fair and square.

Actually, it’s called 17 million people all in the LA area all competing for a place to live…

I guess one’s point of view depends what school you went to: the School of Hard Knocks or the School of Kindness.

I hope someday I can be as compassionate as you are.

Notice how all the buyers say the bottom is 2 years away and all of the sellers say the market will rebound in 2 years.

Who is right? Perhaps both are wrong…

From the economic projections I’ve been reading, the bottom wouldn’t happen until 2012, or 4 years off instead of 2 years.  Prices are projected to remain flat for many years after that and not recover until the mid 2020’s.

Don’t buy anything without seeing it during morning and evening commute hours, and late-night, as well.

Exactly, until I can buy (a first time home buyer) the market will keep dropping.

I think I’ll start a new business and call it “Priced Out IT Guy for the Queer Eye” to tell inquirers when the bottom has been reached.

The fee will be $5 per question. The only question you can ask is “Have we reached the bottom yet.“ The only answer you will receive is “YES” or “NO”.

There is no limit as to how many times you can ask this question.

PayPal and cash only. No personal checks accepted.

I’ve noticed your ad on Ipop’s site, most of your listings are in West Irvine. Unfortunately, I’m looking to buy in Northpark. Specifically, I’m interested in 1 Buellton, any idea where that one gets taken down at?

Buying a house is serious business.

When I bought my previous townhouse in 2003, I was earning less than 50K per year and had 5000.00 to put down.  The lender was qualifying me for loans greater than 300K. 

It was ridiculous!

I said “300K! WOW! That’s a lot of money!  I can’t afford to spend 300K!“.

Instead; I spent 80K!  It wasn’t in a snobby area of town, but it wasn’t in the middle of the ghetto either and I was close enough to work that I could walk!

That’s why I don’t buy into the bad luck argument.  I borrowed what I could afford to borrow and didn’t rely on creative financing to game the system.

If everyone else would have taken the same attitude then prices would not have ballooned in the tragedy of the commons that ensued; people engaging in bidding wars and driving up prices on houses using money that THEY DO NOT HAVE! Outrageous!

You have to look out for yourself and live within your own means without worrying about what everyone else is doing.  Just because the bank is willing to “qualify” you for some dumbass amount of money and the herd lemmings around you are willing to actually take the lender up on their qualification offer to “buy” an apartment does not mean that YOU should necessarily join the herd and use the “everyone else is doing it’ justification and become part of the problem.

Bad luck is buying a house the day before an earthquake demolishes it.  Being a dumbass and overspending on a tulip bulb does not count.

Ah-ha!

“Competition”!

I think that sums up your housing market perfectly!

Sort of like bidding for that tulip bulb on ebay when that jerk comes in and tries to outbid you in the final moments of the auction.  Screw that!  I’ll pay double what he offered!  NO! NO! TRIPLE!  I know it isn’t worth that much but I am too caught up in the moment!  Call my lender!

The Jone’s are offering 600K for that condo! F THEM! They will never match my borrowing power!  I’ll offer 650K!

Excellent post CK.  Seems “some” of the posters here are drinking the IR Kool-Aid.

Hey IR, can you check on these 2 properties? They’re listed as “Taking Backup Offers” which presumably means that they’re both in escrow at this point:

MLS # S511396 (no address)
65 Ardmore

I think both of them are bullsh*tting in terms of being in escrow. Is this the new tactic adopted by these desperate RE agents?

Yes, and if you don’t mind 5 more years of continued depreciation it’s quite an attractive buy!

Yup.  It’s either that or all the first time buyers of today spend the next 20 years saving up the down payment for a 1500 square foot apartment….which seems pretty unrealistic.

6 offers my foot. I can say I’ve got 10 offers too if I were him.

I’d like to sell you a horse whip if I may.

Is it bad luck when you buy in wooded canyon that catches fire in 105 degree heat and santa ana wind-conditions and burns your house down?

How about New Orleans.. Is it bad luck when you buy a house below sea level in a flood zone, don’t buy flood insurance and get 8 feet of water when the levy breaks?

There are measures you can take to secure your house for earthquakes also, you don’t have to be demolished.

Luck is a matter of perspective.

Like when I lived in the midwest..  they had a saying..  there’s no such thing as bad wheather, just bad preparation.

I would note your description is better than most I come across; although, you did slip in the three exclamation points…

I am curious if any realtors have cleaned up their sloppy writing due to the abuse I give them? Also, do realtors live in fear I will profile their property even though it is free press?

As for the property, is the little courtyard in the first photo the front of the unit? Does it have street frontage, or do guest park a distance away and walk up a sidewalk to the front door?

The property itself presents very well. Did you have it professionally staged and photographed?

I appreciate your replies. I am a first time buyer, under a lot of pressure from friends, family, realtor etc to buy now because prices are falling. I do not plan to be a knife catcher. Just looking for an ‘affordable place’ to stay.

I have been visiting open houses for the last couple of weeks and it is strange to see that bad unkept houses are being sold at 2-3% below list price.

There is a house on fort sumter that one has to visit to see the condition (if you do, remember to open the kitchen and bathroon cabinets). i was told that the owner is in europe the house has 6-7 offers varing from 5-10% list price but he will not budge. As a first time buyer I would never bid on the house but i was amazed that there are 6 people waiting with offers on that house. There is another in wood bridge at silkleaf which has a fresh coat of paint and nothing else (too much designed to sell). There is another wierd one on woodbridge with 5 bdrms and 5 baths that one should visit just to see how not to renovate a house.

That’s right CK.  You TUSD lover!  If you buy my condo your daughter can do to those wonderful schools…

CK, I get you now:-)

Very true.  I wasn’t making an argument that you could not prepare for external events.

My point was more that bad luck is more to do with unforseen events.

The bubble popping was not an unforseen event; the bubble pop was the big pink elephant sitting on the living room couch from 2003 to 2006.  Anyone who bothered to open their eyes could see it.

When I moved to Phoenix, I didn’t know anything about a housing bubble.  I considered buying and had sticker shock when I started looking around.  I googled house prices and only a couple hundred thousand blogs came up explaining what was going on.

Saved me from making a big mistake!

Chris,

www.ipoplaya.com

You think these all got into escrow without offers huh?  There is actually a good bit of buying activity going on in Irvine, IMO based on the idea that jumbos are going to be much cheaper.  Some people just ain’t smart enough not to buy…

Every listing is going to get 1-2 uber lowball offers.  Fishers that come in 20% or maybe more below list to see if they can pick up somehow pick up something on the super cheap.  Places priced properly, i.e. 15-20% less than peak, will get offers.  There are so many WTF distressed list prices out there that listings which have embraced this decline get good attention.

Look at the Irvine inventory graph the is link to the IHB home page.  Irvine inventory levels are falling.  There are less homes on the market today than there were on January 31st.  Why?  It’s because things here are selling…  Selling for 2004 prices, but selling nonetheless.

You have to evaluate your own financial situation.  Figure out what is affordable to you in the big picture (not just the monthly payment).  Keep renting and putting money into your savings account - in a few years you will have a nice chunk of change to put down when affordability returns.

Don’t assume that everyone else is just a lot wealthier than you are and therefore you need to overspend in order to keep your place on the social food chain.

If your family and friends are pressuring you to buy then tell them that you are thinking about moving to another state where real-estate is much more affordable.  That should pretty much be the end of that.

The bottom line is that homes provide shelter.  The “American Dream” of home owership implies a house that is paid for in full - not a house with a jumbo mortgage.

It’s going to take some time to re-educate the masses that real-estate is a lousy investment.

This is good advice. Our place is near a soccer field. The floods are so bright at night (even a quarter mile away) that it never truly gets dark at night. But you would never know if you only saw it during the day.

hahaha. wow, AZ is giving real estate advice.  I know plenty of people who made hundreds of thousands of dollars off real estate.  So its a lousy investment how? 

Maybe stocks are a lousy investment too since a lot of people lose money on them.  Or bonds.  Or commodities.  Hrm….

Everything is a excuse….
Everyone wants to be like the IUSD.
Why make do with an Oldsmobile when you want the Cadillac?

Uni…...

What else can be said?

At the track and x-country meets, Uni may not be test best, but you can be sure their kids have the highest IQs. 

;-DDDD

A house up the street just sold in less than a month… I think they wanted around 900K…  they had done a very nice remodel… 2000 sq feet, 4bd, 2ba…. on Saginaw Dr…  location was pretty poor though.

Is there any way to find out what the listing was?  It was taken out from Redfin two weeks ago and the “sold” sign just popped up.

I tried ordering broiled Gila Monster tenderloin and mesquite smoked cactus when I was in Phoenix recently, but all they had were very expensive aged steaks and California Nouveau Cuisine.

So, I gotta accept the fact that Phoenix has become a suburb of San Bernardino.

The steaks were excellent, at OC prices.

Irvinerealtor, your comments are welcome. And even though I rent in Tustin Ranch and my daughter went to Myford/Pioneer/and now Beckman I don’t take offense. There are similar good schools in Irvine.

That sounded like a wise move, AZDavid. The wife and I are taking a similar tack right now. We lucked out in finding a home that had just foreclosed. Bank took possession, relisted, we made an offer, and it’s been accepted. We looked at a wide range of prices, but we lucked out with one that doesn’t exceed our annual gross. We’re in a sparsely populated county in TN, in case you’re wondering.

Are there homes here going for quite a bit more than we offered on this place? Sure. Could we afford one or those higher priced homes? If we stretched and didn’t mind cutting back on our savings. But we gained at someone else’s expense. In this case, somebody lost their job and could no longer afford their house. Do I feel bad for that family? A little, but the I look at how much they paid and think that they paid waaay too much. My price is a good one-third off of what they paid.

A lawyer friend of mine told me that the giant pink elephant on the living room couch you speak of was not wearing Cal Trans sanctioned visibility devices (yellow blinking lights, a reflective vest, and reflective ankle bands) and therefore it was not apparent to prospective homeowners that prices were entirely unaffordable and outrageous.

One can justifiably conclude that the blatant lack of responsibility exhibited by the government to provide proper working supplies to the state owned and operated Herd Of Pink Elephant taSkforce of America (HOPES) entitles all citizens who were not aware of the Great Housing Bubble to be bailed out using government tax dollars.

I sold my place my property at the height of the bubble.

I didn’t make 100K profit, but it was significant nonetheless.

Took the cash and joined the renters.

If all of those people that you know took their 100K profits and immediately re-“invested” them in another property that is now 100K under peak price then the game is over.

It’s like the people who love to tell you about the time they won 10,000$ in Vegas without telling you that they lost 20,000$ the day prior.

I’m guessing the 25 year old with his 100K real-estate profit has his bubble profit cash tied up in other real-estate and can’t admit to himself that it was a charade and will soon have to change his blog name to ‘25wDiddlySquat’

Some people obviously feel like it’s time to buy. If they choose to buy and actually want to live in the place, why not? The place, at that price, fits their circumstances. But if they have crazy ideas about flipping cuz the price is cratering, then they’re smoking crack.

And time will prove them to be fools for paying $500K for that.

Sorry Tony -

Phoenix had no choice but to steal the idea of flame broiled cow meat from CA.  The Gila Monsters could only feed so many of us!

I love it!  Too funny.

Good post.

The sad truth is, for the majority of people who play in the market, be it real estate or (and especially) stock, they lose.  It’s a small group of people who make money.  Most lose their stake.  So, in general, “investing” in real estate or stocks is kind of dumb, for most people.  Now, if you have enough cash to diversify and you take the time to actively and intelligently manage it, you might money, big money.  But, like Vegas, the come on you hear is, “I know someone who made millions!“.  They don’t show you the losers.

If you say anything less you’re at best not telling the whole story and most likely just dishonest.

That’s the spirit 25K:  lets berate some knife catchers to make fools of themselves. 

To provide greater clarity to those that are contemplating what will surely be a financially disastrous decision (purchasing in this market), what follows are some of the sagest comments I have seen regarding the ongoing implosion.  In a nutshell, they may be summarized as saying the Fed is pushing on a string with their interest rate cuts. Note also the discussion about the great depression: 

What the upcoming recession “will look like” has been the topic of a fierce debate on the Internet. Everyone seems to agree that this is not a typical economic downturn resulting from overproduction, under-consumption or malinvestment. Rather, it is the crashing of humongous equity bubbles that were generated by the Fed’s abusive expansion of credit and the unprecedented proliferation of opaque structured-debt instruments. Many believe that the unwinding of these bubbles will trigger a round of hyperinflation which is already evident in soaring food, energy and health care costs. These prices are bound to increase substantially as the Fed continues to cut rates and further undermine the dollar.

But the real issue (it seems to me) is the unfathomable loss of market capitalization, the growing insolvency of maxed-out consumers, and the inability of the banks to freely extend credit to responsible loan applicants. These three things are likely to drag down all asset-classes, slow business activity to a crawl, and compel consumers to hoard rather than spend. The dollar will strengthen in a deflationary environment (if that is any consolation?).

Paul L. Kasriel, Sr. V.P. and Director of Economic Research at The Northern Trust Company answers some typical questions about deflation in a recent interview with economic guru Mike Shedlock (Mish):

  Mish: Would you say that consumer debt in the US as opposed to the lack of consumer debt in Japan increases the deflationary pressures on the US economy?

  Kasriel: Yes, absolutely. The latest figures that I have show that banks’ exposure to the mortgage market is at 62% of their total earnings assets, an all time high. If a prolonged housing bust ensues, banks could be in big trouble.

  Mish: What if Bernanke cuts interest rates to 1 percent?

  Kasriel: In a sustained housing bust that causes banks to take a big hit to their capital it simply will not matter. This is essentially what happened recently in Japan and also in the US during the great depression.

  Mish: Can you elaborate?

  Kasriel: Most people are not aware of actions the Fed took during the great depression. Bernanke claims that the Fed did not act strong enough during the Great Depression. This is simply not true. The Fed slashed interest rates and injected huge sums of base money but it did no good. More recently, Japan did the same thing. It also did no good. If default rates get high enough, banks will simply be unwilling to lend which will severely limit money and credit creation.

  Mish: How does inflation start and end?

  Kasriel: Inflation starts with expansion of money and credit. Inflation ends when the central bank is no longer able or willing to extend credit and/or when consumers and businesses are no longer willing to borrow because further expansion and /or speculation no longer makes any economic sense.

  Mish: So when does it all end?

  Kasriel: That is extremely difficult to project. If the current housing recession were to turn into a housing depression, leading to massive mortgage defaults, it could end. Alternatively, if there were a run on the dollar in the foreign exchange market, price inflation could spike up and the Fed would have no choice but to raise interest rates aggressively. Given the record leverage in the U.S. economy, the rise in interest rates would prompt large scale bankruptcies. These are the two “checkmate” scenarios that come to mind. (read the whole interview here)

Summary: When banks don’t lend and consumers don’t borrow; the economy crashes. End of story. The whole system is predicated on the prudent use of credit. That system is now in terminal distress. Everyone to the bunkers.

Perhaps the whole “inflation-deflation” debate is academic. The real issue is the length and severity of the impending recession. That’s what we really want to know. And how many people will needlessly suffer.

Breaking news.  On counter-offer #4 of the sixth offer, we have an agreement to terms.  Escrow to open tomorrow, set to close in 30 days or sooner. 

$5 goes to the closest guess in closing price.

Chris and Chuck… honesty pays dividends:

1.) Why would the statement that others have made offers rush a buyer? 
2.) If a property is in “backup offers” status it deters further offers from coming in.  Why would that be an effective sales tactic?
3.) Only work with someone you trust.  I can’t control how others work, but I’d guess you’d never work with that agent who told you one thing and then did another.  Sounds instead like a way to hamstring your career, to me.

I have a former colleague who has taken a new role in the company that is requiring to relocate.  He is selling his home in Anaheim and moving to Carlsbad.  Needless to say I referred him to this blog among other resources so he could become better acquainted and equipped to deal with the current housing market. 

He only owes around 100k on his home that’s worth probably 500-600k and my advice to him was twofold:

1 - Dump it.  Get out as soon as possible.  Price the home low and take what you can.  Do not chase the market!

2 - Rent.  Don’t be prideful after years of home ownership.  Sit tight with your cash and analyze the local market to determine the right time to jump back in.

I sent him a few Redfin links to homes in the area he will be working that priced well below their original 2005 sale price.  Hopefully this will illustrate how bubblicious the market has been and help him avoid making a major mistake.

Yup.

Not to spin 25w100k+‘s argument (dumb as it is) into a straw man or anything, but I suppose you could make the same argument that Vegas Black Jack is a good investment if you know someone who made some money playing one time.

He knew some guys who made some money during the boom.  Most likely all the money they made is now evaporating in another distressed property somewhere.

Those of us who made money and able to remain intellectually honest can see it for what it was: luck.  We got lucky and would not consider buying real-estate any time soon.

Ok, i’m going to suprise you and say maybe you arn’t giving yourself enough credit if you bought a place for 80k, timed the market, and made a ton of money?

I’m not planning on buying anytime soon. I’ve never owned property and (fortunate or unfortunately) I wasn’t one of those guys who made tons of money off the boom.

I just don’t think its as black and white as you are making it.  There are currently people bargain hunting, finding great deals, and renting it for a profit.

Could I do that?  Hell no.  I don’t know much about real estate at all.  But that doesn’t mean its a ‘bad investment’ just because I don’t have the time/experience to be successful at it.

So what are you buying right now AZP?

Generally you would not list a property as being in escrow if that were not he case.  Most realtors will avoid showing properties listed as in escrow to their clients because they see it as a waste of time.

Congrats.  I’ll take myself out of the running for the $5 since I already know what your sellers were looking for…

The uber bears always seem to forget that places get bought and sold all the way down.  If they didn’t, the market would just inflate exponentially with inventory and crash to bottom in a few short months.

I’m spending very little.

The savings account gets paid first every payday.

I did see an advertisement on television the other night that promises cash for mailed in jewelry.  Apparantly, you send them your gold earings so they can melt them down and they send you some cash.

Maybe I should start investing in gold jewelry.

Put me on the board for a closing price of $495K
Click the $5 donation on IR’s tip jar.

BTW… my fury lies with the Irvine Company for naming the development “West Irvine”?  The only worse moniker I could imagine would be “Beachside Irvine” for our Easternmost village (except the budding Orchard Hills and Portola),  maybe that’s coming soon?

SOLD!

To the chump with no shirt behind door number 1!

Hurry up and starting throwing confetti and popping champagne bottles before he gets a chance to come to his senses!

Lower the mirrors into position!

Start the smoke machine!

Do irvinerealtor and ipoplaya share the same IP address ?

Ipop,

How on earth do you know what the sellers are looking for?
Don’t be pimpin’ your home, cheerleading those multiple offers.

The first is 33 Moonstone, which was 2 New Market’s initial best active comparable and toughest price competitor locally. Specs:  (LP/SqFt $353.27 Orig Price $609,900 Prev Price $548,900 Cur List Price $529,900 DOM 249 Off Market 2/5/2008)  The agent represents both buyer and seller.  The reason you don’t know the address is the agent opted to hide this from advertising where possible in order to double-end it.  If it closes, he finally did, at the seller’s cost.

The second is 65 Ardmore, a little larger, and in good condition.  I believe this one backs directly to Jamboree, though.  Specs: (LP/SqFt $337.73 Org Price $619,900 Prev Price $549,900 Cur List Prc $529,900 CDOM 125 Off Market 2/18/2008)

irvinerealtor lives down the street from me ten.  He has represented me in two past purchase attempts…  I think we set a record on one -  six counter offers I believe and still no cigar.  We talk houses at night when the dogs are out pooping on the HOA grass. 

He being the good realtor type he is always cleans up after his pooch…  Whatever it takes to keep West Irvine’s values up!

Nah Troop.  I’m a regular ole non-realtor.  One can tell because I don’t walk around with that annoying thing hanging around my neck.

irvinerealtor will be selling my house for me when we move-up though.  He’s one of least BS-eey realtors I have come across in these parts…

Taking veiled swipes at the king huh?

Look out people, we’re in for a realtor war on the blog!

Just heard that all new (first year) teachers in IUSD are not being offered contracts for next year.  Evidently they are going to re-assess the need for all new teachers and cut where they can…

Wonder if this is the case in all districts or even statewide?