IR:

I love your update on the informative prediction charts. It is so clear and powerful.

It speaks volume.

Thanks,
George

Do you think the speed of the decline will really effect the depth? Given the coming impact of Alt-A recasts, I don’t think the second prediction graph is yet ruled out.

What strikes me about some of these profiled listings is the sparsity of the furnishings, etc. in high-priced homes that are (or were) obviously occupied.

For example, this home features a glider in the front yard that I believe was on sale at Wal Mart for $79 last week.  The cheap roll-up blinds (I think these are one step up from the paper kind) in every photographed room would be another.  I’m wondering if the expansive bank of kitchen cabinets contain only a box or two of Ramen noodles inside.

It appears to me that many of these “homeowners” were stretched so thin that they could not afford to properly furnish their McMansions. 

A peculiar way to live, no?

It sure would be entertaining to know exactly how much income people really had when using Alt-A loans.

incredible

finsup, that’s exactly what happened. They bought big huge houses they could not afford to furnish. They took the money from the HELOC and bought new cars to show off in the driveway so their neighbors would think they were wealthy. inside their kids have a bed and maybe a dresser for their clothes.
On the other hand perhaps they are getting rid of furniture so they don’t have to move it.
Or their agent suggested they move half the crap out so the place would look big and people could imagine their own stuff in the spaces.
Or doing what we are, just divesting ourselves of crap we no longer want, need, or use. And we own our own home free and clear. I am just tired of dusting junk.

There isn’t much doubt in my mind the bottom graph will come to pass, at least in magnatude.

The shape of the graph as it reverts to the mean is subject to debate.

This home is located on the corner of Irvine and Culver.  The street noise must be terrible.

Do you think the electricity is already shut-off, or are they just conserving energy.  Those were the darkest interior pics I have ever seen.

BTW, this place looks like something from Ladera Ranch.

As has been noted several (many) times before, $1 million doesn’t get you all that much in Irvine. I presume the ” ... down to $888,777? It might sell there…” is a joke. $400k, including Irvine/CA premium? Even if major streets weren’t so close, the neighboring houses are. Personally, I’d rather have a much smaller house if it gave me more space to enjoy the CA weather plus some quiet and privacy.

based on the actual numbers, doesn’t it look like the new bottom would be somewhere in the winter of 2010-2011?

This property sold for $719,000 in 03.  I thought we were down to 03 prices already, so this is still priced at 04-05 levels.

Your charts are amazing, they take the breath away (most certainly for those desperate homeowners hoping for the much touted bottom). Luckily, I rent.

But they do pose a quandary. I was hoping to be a homeowner sometime in the next couple years. Best I can hope for is a quick bloody collapse.

Government intervention won’t stop the inevitable but will slow it down. That’s unfortunate for those looking to become homeowners.

Maybe the Realtor is thinking the eights in the listing price will pique the interest of Chinese buyers?

Seriously, as SoOCOwner pointed out, this home is at the corner of Culver and Irvine Blvd. Way too major an intersection when there are properties on Thorn Hill with similar square footage and priced about the same. I’d rather be near the freeway than at a major intersection with all the braking and accelerating all day long.

I think the “bad as bad can get” chart will accurately reflect the whole of Orange County. Not necessarily Irvine though.

Check out this new realtor spin site:

http://www.happyrenews.com/

The gang from HP went over and left a number of hilarious comments.

Thanks for the great post today, IR. Great to see a higher end property that is in distress. The graphs are amazing, I can point to your first prediction graph way back in early 2007 as the single biggest reason I put away the checkbook and decided to keep renting.  Owe you a lot for that analysis.

I also think we are likely headed the way of the “how bad can it get” graphic. I’m particularly interested in the rent saver line, as that’s my category.  I’m still planning on buying in Q1 2009, and although we won’t be at a bottom, this scenario at least seems to support we will be at rent parity…which is all I am hoping for.  Thanks again.

This web site is a reality check, based on actual facts on the ground.

Based on conditions on the ground… Where have I heard that before? LOL!

There is an eye-opening survey at http://www.marisolutions.com/pdfs/mba/mortgage-fraud-report-2008Q1.pdf showing what portion of applications had various forms of fraud or misrepresentations on them.  The source(s) of the problems are not stated, but they are probably a mixture of mortgage broker, buyer, ID thief, real estate agent, owner (refinancing), and appraiser. 

Even in 2008, apparently most CA mortgage applications contain some sort of fraud or misrepresentation.  I personally didn’t think the number would be 76%.  Is there anyone from the lending industry here that can comment on whether the numbers in this report pass the smell test?  Could the authors of the paper be classifying simple mistakes or sloppiness for misrepresentation?

Irvine Renter:

8 is a lucky number in the Chinese culture. Their word for “eight” sounds the same as their word for “wealth” or “prosper”. If you look at the aerial map you will see the house lies at the end of a cul-de-sac ... which many Asians will not buy (just like a house on a T-intersection) because a car could come crashing through - unsafe for your family. I suspect they might be trying to counteract that. Just a guess. I think it is smart to keep feng shui principles in mind when purchasing property if not for your own beliefs, just for the fact that you want it to be marketable to the Asian population in Irvine. Hope this helps.

Sounds like the FBI knew how bad it was to be:
http://www.latimes.com/news/la-fi-mortgagefraud25-2008aug25,0,7603327.story?page=1&track=rss

Problem is, they were ignored:
“Until there is a catastrophic loss, there is no incentive to investigate criminal conduct,” said Cynthia Monaco, a former federal prosecutor in New York.

What does the third (bottom illustrated) graph represent?

Correct me if I’m wrong, but the first represents what IR originally predicted.  The second, what is actually happening superimposed on the first.  However, the third shows a much deeper decline, but I don’t know upon what it is based.  Or is it just a “lower limit” estimate?

Thanks.

“General application misrepresentation includes, but is not limited to: incorrect name(s) used; occupancy, income, employment, debt and asset misrepresentation; different signatures for the same name; invalid Social Security number(s); incorrect address(es); and incorrect transaction type.”

Sloppiness is being counted. Still, the numbers are alarmingly large.

I wonder how much of the 42% increase over 2007 is due to certain types of fraud (i.e. stated income loans) are now recognized as fraud instead of being encouraged by the industry. In short, I believe the baseline data is flawed because fraud was rampant during the bubble, it was just not reported as such.

Fraud is far easier to commit in a 100% financing environment. Now that downpayments are the norm, the incidence of fraud should decline. Perhaps the reports of fraud will still increase because in order to be successful at it, it will need to be more obvious and egregious.

This is a short sell.  Soon to be REO.  Mobility Home loan is the loser.  Homeowner took out a 1st of $920,000 and then a second of $230,000 in 2007.  Original asking price was 1,200,000. On the market for 184 days.  Has Mello Roos and HOA’s.  Was served NOD.  FYI this proberty sold for $574,000 back in 2003.

Kirk,

As our resident expert on parody, do you think the site is for real or is it a parody?

The last one came from another early post: How Bad Could Bad Get?

http://www.irvinehousingblog.com/blog/comments/how-bad-could-bad-get/

well, the happy real estate people have not so happily disabled comments. they took a torrent of abuse in a matter of hours. ha ha!

you now have to email comments to the site’s editor, undoubtedly another masturbating Realtor (TM) with a lot of time and no income.

Unfortunately, this site does not appear to be a joke—it was profiled in the latest issue of Money magazine.

Love THEIR charts, though ... note the lack of metrics on the vertical scale—makes it seem like there were just as many homes sold in Jackson, TN as the entire SoCal market ... oh, wait.  I don’t think that’s what they had in mind….

Well, apparently the FBI was on some fraud way back in 04.

http://www.latimes.com/business/la-fi-mortgagefraud25-2008aug25,0,6946937.story

it was the facade, Potemkin Village values that those sheeple were living, and though those values will probably come roaring back with the next boom, I hope we have a few years of sanity.

I think much of the stupid energy of the real estate bubble was motivated by the boomers’ greed for high returns. they were such pathetic non-savers that with their retirement years staring them in the face, the only way to escape elderly indigence was to see 20% returns. they tried it with dotscum fever, and the bubble popped in their faces. Barely TWO YEARS LATER, many of the same aging idiots were trying to obtain 20% returns in real estate.

This time, though, the bubble cost all of us trillions. The boomers were willing to impoverish a superpower and wreck its economy all so that they could escape having to save 5% of income, even, and endure single-digit annual returns on investment.

Is there any way that a cohort of 76 million can properly be punished?

It wasn’t mostly the baby boomers.  If you go to http://www.jchs.harvard.edu/publications/markets/n06-3_drew.pdf, you can see that baby boomers were about 25% of home purchasers during the housing boom. 

If you look at this boom versus the late 1980s, one of the differences was a larger portion of single people buying houses, especially low end homes and condos.

Really good parody with press releases and everything.

http://www.reuters.com/article/pressRelease/idUS132482+27-May-2008+PRN20080527
http://www.reuters.com/article/pressRelease/idUS136830+01-Jul-2008+PNW20080701

This saddens me.

Irvine Renter.  I printed out chart 1 and 3, but could not click to enlarge and print chart 2.  Can you repost?  Thanks as always!

NewportCoastRenter

OMG… no scale.  Classic.  What a bunch of complete morons.

Congratulations, Irvine Renter! You have found a house that is surely going below the original purchase price: $719,000 when brand new. No way is this going to sell for even that much. Things are dropping over 50% in some places, and the Alt-A resets are not even getting started.

Sadly, there are not really residential ymca “suites” anymore.  Nor boarding houses, or poor houses per se.

Having said that, i would rather live eternally in a thousand fucking such places, with bedbugs, than live in the skeevy caucasian paradise known to the sorry as “Irvine, California.”  May a million Koreans and Armenian flippers suck out the life of this sorry part of “Orange County” and render it as empty as the CGI fantasies of modern masturbatory Hollywood entertainments.

There dwelleth (or dwelled) the intestinal parasites known briefly as the “upper crusties.”  May all of them and their noisome children be reduced to powder and released upon the breezes of the prairie.

Also, Irvine Renter, certain people think that due to the velocity of the downfall, we should hit bottom sooner, which is good news.

My intuition tells me that hitting bottom at such a speed might produce a nice cratering effect. Sort of like punching a hole in the bottom of you chart. At any rate, I can’t see things getting back to normal in 04/09.

well that’s a useful clarification.
all those single incomes thinking suddenly the laws of economics had been repealed.
this is a stupid country we live in, collectively. too stupid to be trusted with a decent income.

well, kirk you killed the golden goose with your trolling (laughter).

CK..

Note that the rent saver line is horizontal, meaning that IR thinks that rents will not change during the next several years.

This is not a likely scenario.  With unemployment up to 7% and climbing in CA and the vacancy rate rising, I would expect rents to decline.  Any decline in rent would lower the rent saver line and delay the crossover.

If you right click on the image, depending on the browser you are using, you should be able to print it or open it in a new tab and print it from there.

But tell us how you REALLY feel.

Looks to me like the “me” generation took the gold medal.

During the last downturn in the early 1990s, for a very short time rents were dropping.  Mostly, rent just rose more slowly while home prices were dropping.

However, if you go several years out, the difference between a 2% trend and a 4% trend can be significant.

To some extent, quickly dropping prices cause that to continue.  Buyers hang out and wait.  Lenders get even more frightened.  There is also a delayed effect.  It takes a while for people who are abandoning or walking away from homes to make it all the way through the foreclosure process.

In Chinese, number 9 sounds like “longevity” and 8 sounds like “prosperous”. I think it is likely that our Asian rescuer is jumping ship.

Ambiepants, meet bkshpr.  Bkshpr, meet Ambiepants.

?? I guess I’m out of the loop. Who is bkshpr?

A quick visit to the Forums section will tell you that bkshopr is IHB’s resident feng shui and Asian culture expert.  IHB <heart> bkshopr!

IrvineRenter, thank you for showing your predication against the available data. Please continue to post updates in the months ahead.

It is amazing to see reality is worse than expected.

Regarding the charts, don’t let IR fool you.  He was sandbagging the whole way

Interesting perspective Nut Buster, I mean Buck Thruster; Irvine is hardly a “caucasian paradise”.

Cool! Thanks. Ya know, I had no idea we had forums here until you mentioned. I thought I had seen some reference to it in the comments section but figured it was something that IHB used to have. Now I know better! (If the ad for it at the top of the screen was a snake, it would’ve bit me.) I will check it out.

This is great analysis.
Thing I don’t understand is houses are selling in Northpark and Northpark Square (this home is in NPS) at these high prices per sq foot.  All the analysis and fundamentals aside, there must be another factor at work here, because the homes are selling in these neighborhoods. Only the homes with less than desirable locations such as this one are on the sidelines;  the others, are selling.