Irvine Housing Blog

I’d be curious to know the segment of Irvinites who buy these condos.

Are they currently living in a 900 sq. ft 2 BR TIC apartment for $1800-$2200 a month?

They see this and say:  I can have a 2 car attached, hard wood floors, 1450 sq. ft., more outdoor space, etc for the same or less than what I’m currently paying. ($1890 monthly cost of ownership, even less with a normal Irvine 20% down payment)

Or do those folks want to move and pay more per month for a house with a yard.  I’m sure there is a mix of both but curious to know the segment who buys these.

Bernanke obviously never talked to people at Fitch, S&P or Moody’s: <a href=“http://www.fpafunds.com/news_070703_absense_of_fear.asp”>

We were on the March 22 call with Fitch regarding the sub-prime securitization market’s difficulties. In their talk, they were highly confident regarding their models and their ratings. My associate asked several questions. “What are the key drivers of your rating model?” They responded, FICO scores and home price appreciation (HPA) of low single digit (LSD) or mid single digit (MSD), as HPA has been for the past 50 years. My associate then asked, “What if HPA was flat for an extended period of time?” They responded that their model would start to break down. He then asked, “What if HPA were to decline 1% to 2% for an extended period of time?” They responded that their models would break down completely. He then asked, “With 2% depreciation, how far up the rating’s scale would it harm?” They responded that it might go as high as the AA or AAA tranches.

You can just say that the housing market will bend and not break, but if you do zero research into it, by actually talking to people in the trenches, you’re just giving your opinion.  Just asking an i-bank or ratings house, “what will happen if home prices fall 5% (a small drop)?” would have given enough information to not say that the mortgage market could survive a large drop in prices.

Words are important too.  Do you want your builder to say that your home ‘may’ sit on a solid foundation.  I’d replay, ‘may’...WTF are you talking about ‘may’.  That is issue #1 for you to thoroughly check!!!

Bernanke is for the most part a manager.  Managers aren’t the ones pushing the paper or making things happen on a loan-by-loan basis, so they are often the last to know how bad things are.  Plus he’s rich & insulated.  When you see neighbors buying 2-3X more house than they can afford, you know there’s a problem.

There should be a bipartisan call for the release of all fed minutes up to at least 1/1/2008.  I understand the issues of the crisis minutes of 2008, but really, those should be released today also.  The odds of abolishing the fed are ZERO, but we can bring them a little more into the mainstream by hearing their dissenting voices and smelling their obvious BS.

Bernanke also said:
The ramification of house bubble is our next generation inherits a huge debt for this generation.
And, now, in order to stimulus economics, our generation is borrowing feature job from next generation.

I wouldn’t blame Bernanke.

The real reason of the current mess is that American workers earn too much money but spend their earnings on cheap foreign goods, not American. More money is left to pay for American houses, medicine, education; that’s why their prices skyrocketed.

Can you point to anything cheap manufactured in Irvine?
I think only about Maruchan noodles.

Fisker - produces $100,000 cars. Recently relocated from Irvine to a bigger place for a cheaper price. Its production is overseas.
Breast implants and Botox from Allergan - quite expensive.
St. John’s dresses - expensive.
Broadcom, Toshiba - use factories in China.

“The temporary liquidity operations launched by the federal reserve to get us through the crisis were quite successful.”

IrvineRenter,

Were the liquidity operations temporary?
Are we through the crisis?
Define quite successful.

I wouldn’t call this one a “gem” but If you can get it at 310-325k it beats TIC route any day as its at or below rental parity then. Its well below rental parity if you come with a large down.

IR said the low end is dancing near rental parity and other then the silly delusional owner priced properties (450k for a 2b2b) I am finding that to be true.  The mid level to high end properties have a further 15-20% to drop before they hit parity(based on the current Int rate). By then current condo owners will have amassed another large down payment and off they go irregardless of their current places worth. Because housing is a cost first an investment 2nd.

Hello All -

...ask yourself a simple question if you are considering a purchase in Irvine or any place in CA or other for that matter. 

Will rents or rates rise faster over the next decade or more??  Will incomes rise faster than inflation over the next decade or more??

If you subscribe to my thesis - that rates will rise faster than rents and that incomes will rise very slowly over the next decade as we work off the unemployment and underemployment - then prices in CA and the US in general will grind lower for the next decade as wages slowly increase. 

Remember, that for every 1 point rise in rates people loose 10% in purchasing power based on current incomes.  My bet is that we will have 8-12% 30 year fixed rates in the decade as the US responds to the growth coming from emerging markets (China, Russia, Brazil, India, Asia in general and Australia). 

With unemployment so high it is really unlikely that we see wage inflation. 

The result is that you buy a place now for rental parity only to find out that in a decade rates have rised from 4.5% to 9%.  This means that people buying your property have to have roughly double the income to buy your property and it’s current price. 

UNLIKELY.  There is NO appreciation on the horizon for CA or Irvine…. 

And worse still prices haven’t come down nearly enough for most of CA to even get close to ‘rental parity’.  Case in point.  I just leased a beautiful new place in SeaCliff on the Greens - condo in HB near the golf course and 3minutes ride to the beach!  The unfortunate owner subsidizes my living to the toon of $1200/month.  Thanks much!!!!  I rent 30% less than it cost to own with the very best rates!!!

My new place had a high asking price of $875K and now with $675K…it will grind lower to less than $500K as rates rise or magically I will make 2000 dollars more a month in the next decade!! 

I win either way!!!  Be dumb if you like…pay more than rent to own with all of the commitment and pray you don’t get fired or relocated.  Maybe you are just simply rich and can afford to loose lots of money.  Either way, I warn the practical and encourage the idiots (there are really remarkable number of well to do idiots) ...your loss is my / our gain. 

Remember its not the price you buy at - it is the price you sell at that matter.  This is clearly too pedantic but, also realize that if you buy with a 30 year fixed mortgage and money and do nothing but pay your mortgage down you only reduce principle by 19% in 10 years!!!  So if rates rise 2% over the next decade you loose your investment!!!  Idiots all who don’t do the simple math…

BD

We used to live in IAC’s Orchard Hills for three years.  We paid $2,500 for the largest unit.  We liked it but had to put up with neighbors who talked continuously from 5pm to past midnight, and neighbors who threw cigarette butts into the common areas, and neighbors above who would walk back and forth all night, for what reasons nobody can figure out.  We recently bought an Irvine townhome (nobody above) with a large down payment from money in a CD that was paying about 1.5% yield, so our monthly costs including the lost opportunity costs of CD income is slightly lower than IAC rent, and since we plan to stay in Irvine for a very long time, we are happy with our purchase compared to renting, both psychologically and financially.  Plus every year IAC tried to raise the rent and although so far we successfully negotiated rent decreases or same rent, it was stressful to anticipate proposed rent increases everytime the lease came up for renewal.  In comparison, over the next ten years, my cost of housing shold stay roughly the same (granted the HOA and prop taxes can increase slightly) but the IAC rent will probably go up, so in the longterm, the IAC option is probably more expensive on a monthly basis than buying at today’s prices (just in my humble opinion).

Best of luck all.  I’m sure PR has a reason why rates wont simply go back up.  There is no inflation in the market.  Or maybe my analysis and math are very poor… I would like to hear why you think in general buying a house now in Irvine or CA in general is now a ‘good buy’. 

Let’s hear all about affordability etc…. let’s hear how this is wrong????

Please…........ where will rates be in a decade when you sell??  Or do you really plan to be in the house for 30 years??

BD

One other thing about renting from IAC or any apartment complex that we found out the hard way(granted this may not hold true for renting from individual landlords who figure a lower rent from a good tenant outweighs the costs of tenant turnover) is that the initial attractive monthly rent is designed to suck in new tenants who are then subjected to rent hikes upon renewal.  After being shocked to find a proposed rent increase in 2009 upon our first lease renewal in a bad economy, we googled “rent increase” stories and found that it’s a common tactic to lure new tenants with low prices and hike them after renters settle in.  We found that it’s a common situation in many apartment complexes for long-time renters to actually pay several hundred dollars more a month than new renters, because apartment managers know that moving is such a hassle that most renters pay increases rather than move.

“Embarrassed Bernanke admits failure to see housing bubble”

You know what’s even MORE embarrassing? The U.S. population’s failure to see Bernanke’s failures BEFORE he admits to them.

Just an FYI as I live in this neighborhood.  HOA’s were $290 just a few months ago.  Although the letter claimed other reasons, I am guessing the hike from $290 to $348 is more due to people not paying their HOA’s.