Irvine Housing Blog

The FCB consortium officially thanks you for your comments.  One day they hope to achieve your status.  The FCB has the luxury to understand the most valuable asset in life.  This is time, not money.  One day the FCB hopes to achieve your ability to control your time and destiny.  With that they may be able to finally achieve your level of intellect, judgement, stability, and wealth.

Let’s Not Start Lionizing The Anti-Foreclosure Deadbeats

It’s a myth that foreign cash buyers are smart money that purchases bargains. FCBs are generally dumb money that overpays for declining assets.

NY Times ~ Japanese Buy New York Cachet With Deal for Rockefeller Center
Published: October 31, 1989

“Richard A. Voell, Rockefeller’s president and chief executive, said Mitsubishi would pay $846 million in cash for a 51 percent interest. The proceeds will go into the family trusts established by John D. Rockefeller Jr. in 1934 and be used to diversify the family’s holdings.”

FAST FORWARD 7 YEARS

NY Times
NBC Will Buy Rockefeller Center Space
Published: May 4, 1996

“Yesterday NBC announced that it would pay $440 million for the 1.6 million square feet it has long occupied at 30 Rockefeller Plaza, the flagship building of the 63-year-old complex.”

“Mitsubishi’s worst fears, however, were realized. The real estate investment trust’s debt service on Rockefeller Center had been predicated on having the annual rents rise as high as $65 a square foot by the early 1990’s; the center was lucky to get half that amount after the recession hit.”

Oh, those smart foreign all cash buyers!  LoL

“and just because that price is cut in half doesn’t make the price any better.”

While it still might not be a good investment, half off is better then peak price and you will get to break even much faster then if you had paid peak price.

Or am I missing something?

I am sucking it up and preparing to buy a cash flow rental in Sac. They are 2+2 condos trading at 1989 prices, that now will yield 7-9% at 10 months occupancy, with 20% down. They would seem undesirable by Irvine standards, but they are > a mile from CSUS, have reasonable HOAs and are popular rentals. If this works, I’ll do it again. My point is, I would never have given this a thought until I started reading this blog. I. R. & company have made it possible to eventually retire debt free, by retiring debt. Thanks!

It’s foolish to underestimate the impact of FCBs in Irvine
TIC’s 2010 NHC sales surpassed everyone’s expectations.
They’ve ramped up building in Portola Springs, with Laguna Crossings and Orchard Hills on deck.

In other news, residential construction remains at a stand still or is non existent in most parts of the state and country.

I would like to see more of these 2008 housing gamblers who are throwing in the towel.  We’ll be seeing a massive surge in strategic defaults by the younger folks in this group over the coming year or so as they come to realize they were had back in ‘08 and manipulated into buying overpriced properties from baby boomers.

Wasn’t this home purchased after the meltdown when losing loans were supposedly obtainable?  I’ve seen another situation where a home owner refinanced and is now in the position to short or walk away (and likely will) just three months later.  Are tax payers still picking up the tab for money the banks are giving away in todays market?

Billion dollar home

http://www.telegraph.co.uk/news/worldnews/asia/india/8063385/Indias-richest-man-Mukesh-Ambani-moves-into-630m-home.html

Don’t confuse FCB’s with new immigrants with good jobs and a healthy habit of saving. I would venture to say that most of the so called FCB’s in Irvine are actually immigrants mistaken as foreign buyers (many potential buyers I bumped into at open houses who carried their conversion in a language other than English actually work in OC), not foreign investors. Historically new immigrants tend to congregate in the same area and prefer to live close to people with the same cultural background. There are also added benefits of stores and restaurants and other social services that cater to people who speak their own language.

Irvine seems to have become a new immigrant center of some sort – particular for people of Asian origin. This trend certainly provides a boon to the local RE market due to new immigrants’ saving habit and obsessive drive to get their offspring into a good school. But markets heavily relying on immigrants’ cash often see their good fortune change over the time for these simple reasons:

1.  The place may reach saturation and high RE prices drive new comers to surrounding cities. New immigrant children will eventually improve the school quality (I mean test scores) in those peripheral areas once critical mass is reached. And buyer pool gets diluted and dwindles.

2.  The 2nd or 3rd generation will not be as attached to the place as their parents and move out. The place will lose its lure over time.

IMHO Irvine is quickly approaching its mature stage as the new Asian immigrant hub. I have seen increasing number of new comers got completely priced out of the market and decided to move to other cities. It’s just a matter of time. Think about all the parts of LA, SF or NY that at one time or another in history that were identified with the people of a particular ethnic group who lived there, and take a look at those places today – and you will know what I mean.

I know from personal experience that
there is a very
close link between foreign cash buyers
and resident immigrants.  I have seen
with my own eyes bank statements of
accounts maintained by recent immigrants
for cash rich relatives who wanted to
get money out of a country with a lot
of corruption (in which they were
heavily involved).

I have been saying that there is a lot
of foreign money being spent in the
desirable middle and upper class
neighborhoods in SoCal.  I’m glad to
see more discussion of this issue here
in IHB.

The national business press has picked
up on the foreclosure slowdown due to
less than ideal documentation, and the
legal cases mentioned above.  I wonder
what the experts at IHB think of the
problem. Will it be possible to
get title insurance if you purchase a
foreclosure in the near future?  This
is something that has me really
worried.  Am I worrying needlessly, IR?

I’m thinking about making some real
estate deals next year if the market
here and in the Northwest are both
favorable.  Hopefully no crazy assault
on the whole residential real estate
mortgage industry by the shysters
representing the deadbeats will
cause everything to grind to a halt.
By deadbeats, I mean the “strategic”
defaulters and HELOC abusers.  If
you’ve lost your home because of an
unforeseen dramatic loss of income,
don’t put the shoe on.  But I still
think that foreclosure is necessary in
your case too. No one is entitled to
make a commitment to pay a debt and
then walk away with everything without
paying.  If you don’t pay on your
car, you get it reposessed.  If you
don’t pay on your home you get it
foreclosed.  In bankruptcy, a Judge
decides by the law what you can and
cannot keep.

Joe