IR, you do great work, but it is starting to seem to me that even you are not realizing the abyss we are staring into.
I like the analogy that Mish attributed elsewhere:

If this were a baseball game, we are still in the National Anthem of a game that is destined to go extra innings.

Although now that the bailout bill is a reality, perhaps the first pitch has been thrown.

That’s a real, not a doctored photograph? I like the composition, and if it’s real (and looks better in person than on this slightly lower-res version, then I love it for the book cover, especially if those apartments (oh sorry condos) are in Irvine.

I like the picture - I didn’t even consider that it is real, but after Cara’s comment, I’m not so sure. Wow!

As a critique, the picture is a good one, but lose most of the parking spaces and increase the blue sky.  I don’t like the color or font of the title - I wouldn’t take a book seriously if I saw in on a bookshelf. It looks too comical and the color is jarring, but not in a good way.

Just my 2 cents, of course.  I do act as my wife’s editor on her corporate collateral material, so I have some experience giving notes.

Good luck!

I wonder if the banks are really going to drastically change their lending practices over the longer term. “The banks” are actually people, and the people towards the top were making huge salaries and incredible bonuses. There was and is no alternative way for so many people with no particular talent, skill or decades of experience to get such enormous sums of money in so little time and with so little effort or (personal) risk. They are missing those good times, and all of the ones attracted to the opportunity but not yet super-rich are looking for ways to get the ball rolling again to get theirs.

I think it could be argued that the HELOC abusers were just trying to get a little bit of what the banks and hedge fund managers were raking in, and in a similar way, i.e. pull cash out as fast as possible and leave the loans for some sucker to worry about.

While just perhaps a very, very few will eventually get called to account, there is no way they will ever work their way down to the hundreds who only got a few 10’s of millions or the thousands with a mere couple of millions. Out of the whole Enron scam, how many convictions? And Ken Lay’s wife/family gets to keep his money, and I doubt that Skilling will be poor when he gets out of executive prison. Those bank CEO’s are taking away $200 million severance packages plus all the salary and bonuses they “earned” during the good years. Where’s the dis-incentive? The dream to be the next Mozillo is so much a part of American culture now I don’t think it will so quickly be changed, when it’s just a corporation or some anonymous strangers or the US taxpayers who ultimately take the hit.

Love the gym, I mean bedroom.

It looks like the place is empty, yet the bed is unmade and there is a hair dryer on the counter in the bathroom. Nice staging. Perhaps the Realtor spent the night so he could take advantage of the early morning light to get some great photos of the house for the listing?

So what are the private remarks for the successfull (sic) offers?

“Please bid the asking price and every other home owner on the street will kick you back $5K”

This neighborhood is in line for a world of hurt as home values plummet. I believe IR has pointed out previously, these homes are closer to Northwood than Woodbury for comps. And were built/sold at the height of bubble speculation. It should be interesting carnage.

Sorry folks, the photo is doctored.  But not a bad one none the less. 

IR, if you re still considering covers for your book, I’d like to offer my services. I’m a professional illustrator in Orange County.
I’m such a huge fan of your blog, I would love to submit some ideas.

Sorry folks, the photo is doctored.  But not a bad one none the less. 

IR, if you re still considering covers for your book, I’d like to offer my services. I’m a professional illustrator in Orange County.
I’m such a huge fan of your blog, I would love to submit some ideas. 

I know comments like this are frowned upon by the locals, but those fans of this site from other states and/or housing markets have GOT to view the link to today’s house (in particular fool around with the Google street views)—almost a million bucks for a nice, but not fantastic house on a “nearly 5000 square foot lot.”  (The Realtor seems to think this is something special.)  That’s, um, for those of us who measure lots sizes in “acres,” ... a tad over 1/10 of an acre.  With no trees to speak of.

What is the point of single family homes such as this?  If land values are so dear in Irvine, wouldn’t condos be a better idea—sure, the open spaces would be communal, but at least they would exist.  These houses sit on lots with almost zero usable yards—even the “front yard” provides little buffer from the street.

I would suggest you work on the type a little more. To me these typefaces are unexciting. The shadow behind the title would be more appropriate on a fiction cover than a non-fiction title. Although the photograph is fine and good enough in it’s own right, I feel it makes the cover as a whole look busy. I also personally feel that while the photograph would makes sense to someone who is already familiar with the subject matter for someone who has not been following the ins and outs of the housing bubble they may not immediately make the connection between the title and the image. You want a simple strong image that encapsulates the main argument of the book. IMHO.

Putting photos of property in Irvine on book cover will catch my attention.

IR, I like the cover too—but I’ll disagree with Mikee over dropping the parking spaces.  I think you should keep them—the empty parking spaces reinforce the bleakness and vacancy of the situation.

Actually I like the whole composition—who ever took the time to do this did it right—even the housing units pictured look poorly planned (five garages per building for (6?) units per building ... the balconies overlooking the parking lot ... wow, I could go on and on….

A 5000 square foot lot and they’re asking 940k?  That’s ridiculous even by SoCal standards; take a trip a little ways south and you can get ocean-view property here in San Diego, on a lot that’s double the size, for the same price.

When I was growing up here, a long time ago, Irvine was nothing - just some farmland and some hicks.  My, how times have changed.

I agree with George8, putting real photos of property in Irvine would catch the eye. 

The current book cover just reminds me of a better version of AZDavid’s picture posts in the blog’s comments section.

I have to agree the cover has a cartoonish feel.  Frankly, the bubble has enough bizarre behavior that you shouldn’t need to doctor and overstate anything.  I like Matt P’s book cover.  It conveys a sense of the book without overstating.

I’m not feeling the cover either.
Instead of a bunch of empty condos.
You should go with a montage of shots from condos up to McMansion.
Show the full spectrum being effected.

LOL! Now the this has turned into an critic’s forum.

To add a human element, have a young family packing there belongings in to a big fat HELOC Hummer in the otherwise empty parking lot.

What these families did makes me mad and sad at the same time.

But would photos of plain old Irvine houses catch the eyes of people not in Irvine - not so sure.  I like this pix because the style is sort of generic - almost could imagine it anywhere.

Regarding the book cover, I had expected single family homes. 

How about a train of houses put onto a roller coaster?  While not a book cover, there is a nice animation of historic house prices as a roller coaster ride at http://www.speculativebubble.com/videos/real-estate-roller-coaster.php

Today’s most interesting finding to me on the redfin listing is the bottom where redfin lists asking prices for similar homes on the left and recent selling prices of comparable homes on the right.

Asking prices are all over $900k yet in the last six months, sale prices have been only $700-$800k and there have been no comparable sales since April, now ancient history.

Talk about a disconnect between wishing and market prices.  In a normal market, those two columns should not be so discordant.

http://online.wsj.com/public/article/SB121642367125066615-4K_l2jdjmxrSAZRs5Ii1mziroY8_20080818.html

But it missed the plate by a foot…

Bloomberg has another sombering headline today:

IMF Says U.S. Housing Slump End `Not Visible,’ Credit to Worsen

http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=a3LJHMF_2I0c

“Room over garage has seperate entrance, great rental or office”
Rental? Do people really buy a million dollar home thinking of renting out one of the rooms? Why doesn’t the realtor suggest renting the “HUGE TWO CAR GARAGE” out to another family?  Or is that what he was thinking when he all-capped it?

There are some older places in Irvine that have pretty good lot sizes.  Funny thing is, they are in the “cheaper” areas, because they built 1,300sf homes on 5,000 - 6,000 sf lots.  To me, these are far better deals than a McMansion squeezed into a smaller lot. 

Let’s face it, one of the reasons we live here is for the weather.  So does it not make sense to enjoy it in your backyard rather than sitting in the McMansion watching Idol?  You can do that in Iowa and not pay So. Cal. prices.

There is an interesting related set of points in allegedly immune Malibu.

“Single Family Home Sales from $1.5 M to $2.5 M
There were eleven (11) homes that sold between January 1, 2008 and May 15, 2008.  None of them were mobile homes.  The Average Sales Price was $2,060,227 while the Median Sales Price was $2,100,000.  What is more interesting to note is percent decrease from the Original Sales Price to Actual Sold Price.  The Average percent decrease was 17% and the Median decrease was 18%.”

Yes, the do have to say none of them were mobile homes.  Malibu has had seven figure prices for mobile homes in the past.

Also interesting, “Single Family Home Average Value based on Sold Homes between $0 and $2.5 million have dropped between 17% and 20%
Single Family Home Average Value based on Sold Homes above $8 million have dropped 20%”

Even really expensive homes are feeling the same price pressure.  http://activerain.com/blogsview/560303/Have-We-Bottomed-Out

I was thinking more of the juxtaposition of the lines for opening day on Ladera Ranch with the Great Depression soup lines and Hoovervilles.

But that would be overstating. I hope.

The book isn’t going to be published under the “Irvine Renter” acronym is it?

Sounds to me like you would need to come out of anonymity to publish this book - it would rather not look very credible if it wasn’t signed by a real name.

Income requirement of +200K a year?  Wow!  I don’t know anyone who makes over 200k a year.  Maybe I’m hanging with the poor crowd.  How do people in Irvine live? or are they all making 200k or over a year?  Where can I find me a job in Irvine?  I’d like to go there and make 200k a year.

My opinion on the cover is that it needs to be either more realistic (like a single run down house with a foreclosure sign) or less so (a picture of a tract housing street that stretches endlessly into the distance, with a sign on every lawn).

This cover looks sort of real, but if you look at it closely, its clearly doctored.  Its not quite unreal enough to be satire, and not quite real enough to be straight.

Also, I think you might want to go for housing that is more common across the entire country (single family homes).  I don’t think most people see that much super-dense condo development, so they won’t relate to it.

my 2 cents on the book cover illustration:

very generic and blah. Some banners should read, ‘FORECLOSURE’ or ‘SHORT SALE’.

Agreed re: above commenter who stated that it was like one of AZDavidPhx’s photo illustrations, only cleaner/more professional than his.

I work a pretty run-of-the-mill IT management job in CA, and I make just over 100k.  Marry me off to some woman (or man) making the same, and you have 200k.  The housing market is priced for two+ income households, and has been priced that way for a long time.

how about an outline of the google map of irvine with a red “For Sale” rubber stamp for the cover

For the cover, how about a picture of an abandoned, half built new neighborhood. I find images of those skeletal ghost-towns to be the most striking.

One of the Keating 5 is currently running for president…

nope. that was just the fat lady hitting her high note.

what most disinterests me of newly built homes, is the small lot size of so-called SFR. I guess this home does not have any sizable yard. I think as time goes on, builder will have to use more lands for the same living space to attract new buyers. I read somewhere that homes built in RE down trend time have better quality than those built in bubble time.
about the book cover, IMO, it mostly conveys Apartment Bubble not Housing Bubble and i agree that some banners should read differently.
btw, Good Luck with Book IR

That cover is not Irvine. Too much color and variety.

I have a story about that neighborhood.  I met a woman at the park once that had just moved in there.  She was dripping in diamonds, driving a tricked out Land Rover, and told me that she had worked for Donald Bren’s son.  The son is the CEO of California Pacific Homes, the builder of this tract.  So she told me that her house had all the best upgrades, better than was offered to the other buyers, and she was so happy to be in the best house in the neighborhood! 

It just makes me laugh now, and I sure hope Bren’s son GAVE her the house, because now she is the absolute FARTHEST underwater of anyone in that neighborhood.

further juxtaposed with the lines at IndyMac

that’s why there’s this statistic thing called “Household Income.” 

As of 2006 census in Irvine, the median household income was $84,270.  According to TIC, 26.4% of all households in Irvine exceed $200,000.  Dunno about the breakdown, but I venture to guess a material chunk of those are closer to the coast than, say, Northpark.

Funny - I think 80+% of all Irvine listings expect $200k+ income.

Oh the schadenfreude! She was probably a sales assistant for Pacific Homes (by the way that builder has already tanked). 20 bucks says she pawns her diamonds and craigslists the Land Rover to pay her mortgage before taking up a drug habit and losing her house to foreclosure.

“We have discussed on this blog the short-term memory of institutions and investors and the general level of foolishness, but they are not that stupid. They are not going to lose a trillion dollars then go right back to the behaviors that cost them all that money. “

With all due respect IR (and I have quite a bit of that for you) I think you’re missing something here.  In some cases (look at Wells Fargo) the lenders are already going back to those same behaviors.  The employees of said institutions will continue to wallow in bad lending practices as long as they continue to collect commissions and don’t suffer much of a punishment for engaging in these acts.

I’m not suggesting the bubble is coming back and happy realtor days are around the corner.  Far from it, I’m glad to see you post a fairly pessimistic timeline for the “recovery”.  But I think we still have years of abuse ahead of us.  Until and unless some kind of real and substantial reform takes place, these shenanigans will continue.

As for the memory of investors and lenders, that’s only as long as last quarter’s numbers.  And don’t forget, “next quarter” is always right around the corner.  So the lenders, propped up by a compliant, irresponsible and equally myopic congress will continue to do as they will.  Collecting bonuses and commissions and hoping to resell their crappy debt to the next sucker down the line.

Look, it may be an oversimplification but that’s the essence of Wall Street’s business strategy, musical chairs.  When the music stops even the loser can hold out their hand to the government and hope for support.

We need a lot of things.  I think we need serious re-regulation of lending practices and substantial reform of real estate practices.  Those two things are by no means a cure or the totality of the solution but they are part of it, a necessary part of stemming this tide of fraud and misrepresentation taking place in the real estate and financial world.

And finally, it brings me to the people.  Us.  All of us.  How many people are now inculcated with this ridiculous flip this house mentality.  How many people now think it’s absolutely normal for real estate to “make money for you”?  I’m sitting here watching MSNBC with my wife (she loves MSNBC, I love here, you do the math) and I just saw a commercial for reverse mortgages.  Now the elderly can reverse mortgage their house back to the banks, further impoverish the next generation and live better than perhaps they should due to the altruism of modern lending.  Are all reverse mortgages bad and all elderly people greedy materialists?  Of course not but my point is that this is just another example of how deeply ingrained unsustainable financial practices are and how pervasive they are.

Do you recall if it was a Range Rover or Range Rover Sport?
What, I’m looking to pick one (Range Rover) up at a nice discount.

I just got back from Australia.

The mortgage pains are beginning to be felt down under too.

One of their big banks (NAB) just did a HUGE write off because of their losses on the US market.  Now, why would some Aussie bank be in our US mortgage market is beyond me…

Also, the news is reporting that most people that bought in the last three years are gonna be looking at some serious bumps in their mortgage rates this year.

You know, if it hadn’t been for the tea, capuccino and great beer I would have thought I was in OC last year.

Anyone else notice that the listing price was originally $899,900 and then it was raised to $951,900 5 days later, and then lowered 4 days later to $940,000?

Hey ten!  Did you ever buy a house?  I know 1 New Dawn sold, and that you had looked at it.  Anyway, just curious.

And frankly, I am very uneducated about Land Rovers, it may have been a Range Rover, but I really don’t know.  Sorry!  It just looked very expensive and brand new to me.

The bastard child of Donald Bren is already in the ranks of management? My, how fast those kids grow up!

I believe he has 5-7 kids, and not all of them are illegitimate!!

I was being sarcastic because I see so many homes with 200k+ requirement in Irvine.  But what Periol said also surprised me a bit.  “I work a pretty run-of-the-mill IT management job in CA, and I make just over 100k.”  Clearly I am doing something wrong or need to get a job at Periol’s firm.

100k+ is quite common in IT in So Cal, esp if you have the right skills.

Go check the salary surveys put out by the major firms if you’re interested to know which skills provide that level of income.

Be forewarned, though: sometimes the curve swings (say from MS SQL to Oracle, or away from SAP) based on some major employers shifting demand.

Same here on the east coast: just saw a commercial for a bank pushing home equity loans. What’s their failure rate again?

My thought exactly. ‘We’re all subprime now,’ even those in million dollar houses.

You don’t have to worry. With Obama as Prez and a Democrapic Congress, regulation galore will persist.

Bank on it.

Yes. I see that type of Yo-Yo pricing on many listings. I have no idea why. My guess is that is allows the listing to show up different on various searches. - IR2 said as much when he explained why IPO’s listing was for exactly $600K; it hits the top and bottom of the search parameters. But that doesn’t explain the up and down.

I often see it when the listing goes from active to pending or contingent.

With as much transparency as the internet allows, these ploys (my opinion) to game the system are sad.

I don’t understand the pitch for why to buy the book - that should be reflected in the cover.  For example, on Matt P’s cover, there is a chain of money (ie. follow the money cover up, chain implies power, imprisonment, etc) - it’s an emotionally laden image that says “buy this book to find out where the money leads - who set it up, who profited, which immoral Gordon Gekko dude made my downpayment disappear?) - I could see the impicit promise & why people would buy that book.

What is the hook that your book promises the reader?  What emotional need does it fill for them?  Then make a graphic accordingly that conveys that emotion.

Actually, I rather like that satiric image IHB featured awhile back with the dropping house hitting the ground and exploding while people flee - walking by that in a bookshop would get my attention with a “what is that?” second look.  Might even flip over the back to figure out what that picture was about.

Hello Irvine Renter

Very prescient writing. Still a fan.

Just a quick question: What institutional mechanisms do you think need to be placed in order for mortgage excesses to never recur?

Do you think your country needs a new version of the Glass-Steagall Act now, or would the honest application of existing risk-management best-practices suffice?

According to the reports I’ve read from the Housing Department and the Budget Office real estate home prices are expected to be dead, i.e. will not appreciate for the next 10 years.

It was called a dead investment. That was in 2007. So if the freaking government thinks 10 years than…. damn

Also, the Federal Reserve is printing so much money it might make sense that housing prices will go back up. Heck it might be the 1970-1980’s all over again. Interest rates might suddenly go to 10 and to freaking 18 or even 20% which they did at their peak to get rid of some of those excess dollars. Bottom line so much money will deflate the currency and make the house prices appear normal.

Read and learn:

“The Senate Ethics Committee ruled that the involvement of Glenn in the scheme was minimal, and the charges against him were dropped.[15] He was only criticized by the Committee for “poor judgment.”[18]

The Ethics Committee ruled that the involvement of McCain in the scheme was also minimal, and he too was cleared of all charges against him.[16][15] McCain was criticized by the Committee for exercising “poor judgment” when he met with the federal regulators on Keating’s behalf.[6] The report also said that McCain’s “actions were not improper nor attended with gross negligence and did not reach the level of requiring institutional action against him….Senator McCain has violated no law of the United States or specific Rule of the United States Senate.”[12] On his Keating Five experience, McCain has said: “The appearance of it was wrong. It’s a wrong appearance when a group of senators appear in a meeting with a group of regulators, because it conveys the impression of undue and improper influence. And it was the wrong thing to do.”[6]

Several accounts of the controversy contend that McCain was included in the investigation primarily so that there would be at least one Republican target.[19][20][21][8] Glenn’s inclusion in the investigation has been attributed to Republicans who were angered by the inclusion of McCain, as well as committee members who thought that dropping Glenn (and McCain) would make it look bad for the remaining three Democratic Senators.[19][21] Democrat Robert S. Bennett, who was the special investigator during the scandal, suggested to the Senate Ethics Committee that it pursue charges against neither McCain nor Glenn, saying of McCain, “that there was no evidence against him.”[20] The Vice Chairman of the Ethics Committee, Senator Warren Rudman of New Hampshire, agreed with Bennett, but the Chairman, Senator Howell Heflin of Alabama, did not agree.[8]

Regardless of the level of their involvement, both senators were greatly affected by it. McCain would write in 2002 that attending the two April 1987 meetings was “the worst mistake of my life”.[22] Glenn has described the Senate Ethics Committee investigation as the low point of his life.[5]

Cover illustration idea - a set of bubbles floating up, lower ones with condos, moving to tiny SFR up to McMansions - to reinforce the bubble covers the spectrum. Possible cartoon of people leaping in space from one bubble up to the next, grasping (but failing to get hold). Bubbles surrounding each ‘home’ popping. Background montage of people falling and homes falling from burst bubbles. Sounds complex but possible to simplify in execution. Text overlay rather than separated above/below an image.

Just some food for thought. Current pic is suitably depressing, with apartments masquerading as condo ‘homes,’ dressed up with paint changes, piled above insufficient numbers of garages, and a retail-like parking lot in front for homeowners to ‘share.’ But… the image doesn’t really sell what you are getting at with your story.

Great blog, keep it up, and thanks!