Irvine Housing Blog

Only in Orange County is a $530,000 house considered a “starter home.”  This is how crazy things STILL are.

Well, it’s detached, has an 8,820’ square foot lot, and only $43/month HoA (for the pool it looks like.)

Might need some updating as it was built in 1972, but overall sounds ok.

The main issue here is that the $530k “price” is actually some fictitious number for a pre-foreclosure or short sale. Who knows what the actual price will be at this point.

Backs to Culver, basically in El Camino Real and the kitchen definitely needs work.

I though that a lower price / higher rate combo was better. Guess I was wrong, CAR says so:

C.A.R.’s monthly Market Snapshot offers REALTORS® information about the current market and provides consumer-friendly charts and graphs.

This month’s Market Snapshot, “The Price/Rate Trade-Off,” features:

  Which is better? A lower price or a higher rate?
  If home prices decline by 3 percent, the monthly PITI payment of a median-priced home in California in May, would decline to $1,492 from $1,538, a savings of $46.  However, if mortgages rise by 0.5 percent to 5.14 percent (the average rate for a 30-year fixed mortgage in May), the monthly payment would increase to $1,560, $68 more than the PITI for the lower-priced home.

  In the long-run, current mortgage rates can save you money
  The bottom line is that minor price fluctuations have only a minor impact on the monthly payment, while even small changes in mortgage rates can make a big difference when calculating the monthly payment.

The price is nice, compared to everything else in Irvine thus far. Cul-de-sac another big bonus. For a family all three schools (College Park Elem., Venado Middle and Irvine High) are very good one with 924, 938 and 872 API scores respectively.  I know, not a surprise to Irvine residents that they have good (actually comparatively “great”) schools, but lower cost SFH areas like in SVUSD don’t have may schools, if any, in the 900s for API score.  I won’t even mention Capistrano Unified, which is unfortunately a well-documented bonified disgrace in terms of performance.

Also, any home that butts up against a major 4 to 6 lane avenue like Culver is going to have some nice traffic noise and exhaust fumes to cope with, not to mention being pretty close to the 5 FWY and all that entails.

In 2004-2006, I was saying the crazy refinancing was going to crash sooner or later, and, unfortunately, it didn’t truly crash until summer of 2007 when all the banks suddenly started to require 4506-T forms and conditioned the hell out of their loans. Literally in August and September 07, the banks stopped giving liars loans, because of the Alt-A stock implosion in July.

Once that happened, everyone realized there would be a massive wave of foreclosures as all the people who had no business being “homeowners” were cleaned out of the system. However, the government tried one gimmick after another, with various regulations and subsidies, to stop the foreclosures. The banks, for their part, gamed the government programs, and their own investors, and part of these games resulted in long delays in actually foreclosing on people. Some undeserving and lucky people got to live for free in nice homes for years. This of course, benefited the lucky few, but hurt everyone else.

All these delays, some caused by the government, some caused by the banks, prevented the correction that should have taken place. The housing market decline was slowed, which only served to drag it out.

Then the recession hit and unemployment skyrocketed. Of course lost jobs means more foreclosures, and fewer people who can buy. Everywhere you look in the housing market, there are parasites who feed off other and dont add value. I’ve stopped a few of them, but it is like trying to empty out a lake with a bucket. The funny thing is, the predators are all so used to getting away with it, that when they actually get sued, they act indignant, as if they’ve done nothing wrong because “this is how everyone does it”! And people wonder why housing is in the gutter, and is going to stay there.

In 2007 I was saying that housing would probably crash and bottom within 3 years. In 2008 I was saying “another 3-5 years”, and now, I’d say at least 5 years and maybe longer. Everyone assumes the American economy is this unstoppable juggernaut that will grow no matter what happens, but isn’t that what everyone said about Japan in the 1980s? How’d Japan do the last 20 years?

The economy is in the gutter, we know we are in a double dip recession now, and the housing market cannot possibly recover until after the economy recovers. Until then, the housing market in Irvine will remain a black hole of wealth destruction, where suckers stupid enough to buy into it get robbed and either get stuck with bad assets, or sell for a loss. Sure, like IR says, eventually we might hit the cash flow breakeven point, but home prices are only getting dragged down kicking and screaming thanks to the constant efforts of realtors, the government, and banks, so I don’t think we will find the bottom too soon.

A few more things haven’t happened yet, that will happen, and will make things worse:

1. higher interest rates. IrvineRenter has already talked about this a lot. Odds are, interest rates will rise before the housing recovery, which will keep prices low while the cost of ownership keeps rising.

2. higher taxes. The Republicans will end up compromising with the Democrats, and the resulting budget will probably end up giving the Democrats 75% and the Republicans 25%, because as we’ve already seen, Republicans love fake, meaningless, gimmicky cuts, but lack the backbone to make deep, meaningful cuts. This means the difference has to come from tax hikes. Tax hikes will pull even more cash out of the private sector and stop or slow any recovery. This will, in turn, keep the housing market from recovering.

3. limiting the mortgage tax credit. I doubt they’ll eliminate it, but the Democrats would love to lower the cap or otherwise limit it to the “middle class”. That would, of course, warp the housing market around the new cap somewhat, and bring the pain to the higher priced homes, which would probably include most of the homes in Irvine.

You can’t build a dynamic economy on government jobs. Government work does not add value. It is a cost to society paid by those who do add value.

Wow, it is really not politically correct these days to admit that even one public school teacher or fireman creates wealth or efficiency.

I’m certain that our public sector contains no shortage of useless, clock-punching time servers, but the guys who built that bridge I drive across each day sure paid for themselves many times over. And my fourth-grade teacher, useless parasite that he must have been, taught me to love mathematics and boosted my lifetime earnings by 30% - probably this is not defined as “productivity”, even though I work exclusively for private-sector firms.

Do you include defense contractors in this sickening blanket thinking, or just middle-class government employees?

IR is a terrific resource, and his analysis is always insightful.  However, today’s snide aside about gov’t workers was off key. 

Police officers add value by keeping law and order; teachers add value by creating an informed consumer (not to mention citizenry); so on and so on (think infrastructure, traffic lights, pollution, food inspection, animal control, etc).

None of this undercuts the power of fair, informed markets.  Government workers often serve private markets by bolstering consumers’ confidence and, in turn, willingness to buy and sell. 

The trick, then, is getting the right state-market balance.  Turns out that’s a bit harder.  Heh.

OK, I usually let this one go because like IR both my parents were lifelong public school teachers.  However please stop with the “public workers are good because I had a good teacher” meme.  It doesn’t hold water.  Are you saying that without public union educators there would be no educators?  of course not.  any valid argument has to compare what is offered by the current public school system versus what a private school system of non-unionized administrators and teachers would provide. (and does provide in some cases today).  You might just find that without the 1000’s of Administrators each with a fully loaded cost of $300k p.a. + the community’s resources would be able to be better focused on the ‘customer’ i.e. the student.  Public education in the OC is ridiculous - the education system failing to deliver on the basic contract (euphemized as ‘furlough days’) while at the same time continuing to grow the absurdly bloated administrative level.  If education were private and accountable would you accept it failing to teach on certain days because there were too many managers and not enough educators?

Your bit about public schools misses the essential point: many government workers, teachers or otherwise, provide a valuable service that helps private markets. 

Okay, now tell me again about your parents.  My bet: they didn’t teach civics or economics.

Everyone is jumping all over IR for his government comment. He is, generally speaking, correct, because government spending that displaces the private sector is wasteful, inefficient, and harms the economy. The economy is harmed because government workers are, on average, less productive and cost more money. They still get the job done, just not as well

Of course, there are some jobs the private sector can’t do: law enforcement, the judicial system, and national defense, all of which are vital to ensuring that the private sector can flourish.

Teachers are a good example. Public schools are far less efficient than private schools. Public school costs to the taxpayer have skyrocketed over the past few decades while the results they’ve delivered have remained flat. Private schools have done just as well for a fraction of the cost. Every time there is a push for voucher programs, the massive, parasitic teacher’s unions try to blow it out of the water by dumping large sums of money in opposition. The choice is not between public school teachers and no education, the choice is between an inefficient government education monopoly, against a dynamic, competitive private sector alternative. All those great public school teachers you loved growing up would be making more money with better working conditions right now if there was private sector competition. Good teachers would be hot commodities and schools would have to compete to attract them, just like sports teams compete to sign the best players.

The only people who benefit from the public education system are the countless bureaucrats who add no value and simply feed on the taxpayer, as they fiddle around far from the classroom, and the bad teachers who can’t be fired thanks to the union and govt regulations. The students, parents, good teachers, and taxpayers, all lose.

Just because the private sector is better, doesn’t mean contracting out to the private sector is always better, because the contracting is still MANAGED by the government, and poor management often causes poor results. That is the government’s fault.

The only time the private sector fails is when competition is prevented by a monopoly or something similar. As long as you have competition, bad companies go out of business and good companies grow.

Watching everything that has happened with the housing market makes it very difficult to rationalize being a fiscal liberal. Even though people blame Goldman Sachs, the truth is that the government had its fingerprints all over the housing boom and burst from start to finish, thanks in large part to the leading role played by the GSEs. Aren’t those GSEs still making bad loans and bleeding taxpayer dollars? (letting someone buy a home with 3% or less down in this economy and market is absolutely a “bad loan”)

The abject failure of the stimulus to actually accomplish anything beyond making the deficit more massive than it already was should have been the final nail in the coffin of “big government” economics, but you know what they say about people, you can’t reason them out of a position they weren’t reasoned into.

Hi darms,

No, “Private schools are always better” is a ridiculous statement, easily disproven. It is not what I said. This is called a “straw man” argument. All you need to do is show that the best public school is better than the worst private school. Easily done, but also meaningless. Everyone knows men are clearly taller than women on average, but the statement “men are always taller than women” is ridiculous, because of course you could just compare a WNBA player to a midget.

First, charter schools are not completely private, they are less-regulated public schools that have more autonomy. Second, because charters are not truly private, the government can easily set them up to fail, or mismanage them like any government contractor.

People are greedy, but competition keeps people honest. The biggest problem with the housing crisis is that the government did a lot of things it had no business doing (warping the market through the GSEs and creating the bubble), the government failed to do what it should have been doing: enforcing the rule of law.

I would estimate that less than 0.1% of loan officers, brokers, and others who committed bank fraud have ever been held accountable for it criminally or otherwise, perhaps not even 0.01%. Fraud against consumers was laughably rampant. I know a processor who worked at a big place in Orange County where literally every single loan she law was a bait-and-switch fraud. You know, where the LO promises a great loan, and then at the signing sticks the borrower with a terrible loan. It is the government’s job to prevent this by either making it a crime, or ensuring that victims can easily hold predators accountable in civil cases. Neither was true here. The utter lawlessness of the refinance boom is what caused the ridiculous excesses that allowed things to spiral out of control. Had the law simply been enforced, the bubble could not have formed. The bubble wasn’t created by NINA loans, it came from a combination of stated income loans and loans where false documentation was submitted. Fake VoDs, fake employment, fake tax forms. Of course the banks were complicit and turned a blind eye, but it’s the government’s job to take action.