Irvine Housing Blog

Managers have fixed budgets for salary increases for a group fo people. Any F500 company or high tech firm likely has a rank and rate/up or out system. Bell curve distribution is usually how the increases are doled out. Some get 20+%, some get none.

Well, this post totally changes the argument from your first one!
I have been to CA a few times, and yes, it was nice. The weather was fantastic. But I still don’t get the living in the city on 85K/year, and still not being able to afford my own car. Never got it, never will.
As far as friends and family, fine, stay there. That has nothing to do with one place being a superior place to live over another, it just makes it better for you.
And as I alluded to, I am not defending Florida - we are leaving in a few months. And when we do, my mother and my in-laws will be following soon after.

are politicians going to go out and tell us to buy houses?  like after September 11, when they told us to buy stuff, just go out and buy it, use your credit card, just buy stuff…. consumer confidence !

Do something for your country, but a house !

I agree with the owner.  He’s trying to sell his house in a difficult market, pay off the 1st and the HELOC and move on without having to bring a check to closing.  Breakeven is the goal I’m sure. It was smart to take out HELOCS or Refi based on higher and higher valuations and you didn’t need to lie at all on the Loan App.  The appraisers get their money and deal flow thru the mortgage brokers.  The Mortgage Brokers were all too willing to just look at GROSS income and your Credit Rating and you were good to go.  Tell me and the Owner aren’t the only ones who knew this game was going on and got sucked into the ability to live large and keep current on the ever increasing debt because of the wealth effect of the bubble?  And tell me you don’t know that when me and the owner know the game is over that you gotta at least try to recoup enough from a sale to pay off the debt. And tell me you don’t know that me and the owner might have to consider walking away if you just can’t take paying for the deflating asset for perhaps years before you’ll have a chance to get out cleanly.  Who wants to lose money? No One. Who wants to do the right thing and sell their house and pay off their obligations and live a less stressed life? Everyone that I know of who is trying to sell their house.  How many of us will not have enough money or time to do this right thing because the market is so locked up?  I hope it ain’t me or this owner.  Please, buy a house today and get this economy going again.

According to The Owner, the memories only cost him 250 psf. I think he is in great shape, and should keep the house until prices go up. There is no way he will ever lose any money on this house… I would buy this house today at 350 psf if he/she would sell it.

This is truthi/ROC/hater/pebbles making this statement and not the real owner. You can tell by the style of writing.

A few question——- supposed owner:

a) First off if you purchased for $870.00; with a 30% down your mortgage would be $ 522,000 and not $696,000.

b) Where did you get the “several hundred thousand for upgrades?

And if you are the owner, why are you selling it now ?

Owner - thank you for sharing the true picture.  There are some doom and gloomer types on this blog but if you read through the posts, you will find a lot of intelligent discussion.

I agree with you that housing shouldnt be investments but then again, aren’t you expecting a very high rate of return?  You spend close to $900K and perhaps spent close to $200K in upgrades.  Why not price it at $1.1M if it isn’t an investment?  There is nothing wrong with wanting to make money if prices do go up but your asking price is well above the asking price of similar properties.

Heh, I got out of college in 2001 so my salary has tripled since then but I don’t think we are the average ipoplaya

oops - didn’t mean to double post.

Agent - stop with the condescending tone.  We probably have a lot in common seeing that you are a telecommuter just like me.  I have been a 100% work from home employee for over 4 years now and I was telecommuting half the time before that.  I clearly know how easy it is to call anywhere in the world home and be able to work from anywhere.  Heck, you might be a telecommuter as well but have you really taken advantage of it?  I enjoyed working in Europe for 3 months, Asia for 4 months, and most recently, 1 month in India.  Sure my sleep sucked at times but I was able to enjoy other parts of the world and truly get to live there vs. just visit.  So please stop with the rude remarks.

My point with RE being local is that though my job allows me to work from anywhere in the world, I need to live in SoCal because my parents are here, my wife’s parents are here, my brother and his wife, my wife’s brother, my best friends, etc.  Hence, I need to make do with SoCal RE though it might not be the best value. 

There are many people who’s immediate family is the most important thing and they can pick up and move in a heartbeat but its not the same for me.  I grew up here and my extended family and friends are extremely important to me.  Just last night, I was hanging out with one of closest friends that I met when I was 10 years old.  We see each other regularly.  How can I replace that kind of friendship?

Agent - stop with the condencending tone.  We probably have a lot in common seeing that you are a telecommuter just like me.  I have been a work from home employee for over 4 years now and I clearly know how easy it is to call anywhere in the world home.  Heck, you might be a telecommuter as well but have you really taken advantage of it?  I enjoyed working in Europe for 3 months, Asia for 4 months, and most recently, 1 month in India.  So please stop with the rude remarks.

My point with RE being local is that though my job allows me to work from anywhere in the world, I need to live in SoCal because my parents are here, my wife’s parents are here, my brother and his wife, my wife’s brother, my best friends, etc.  Hence, I need to make do with SoCal RE though it might not be the best value. 

There are many people who’s immiedate family is the most important thing and they can pick up and move in a heartbeat but its not the same for me.  I grew up here and my extended family and friends are extremely important to me.  Just last night, I was hanging out with one of closest friends that I met when I was 10 years old.  We see each other regularly.  How can I replace that kind of friendship?

That amounts to subsidizing bankruptcy. Probably not what you intended.

Hey Owner—I’d make sure to check into the apparent unreleased first mortgage—it does look like a release is missing or was misrecorded. 

Sorry about the bile-spewing; some people just like to believe the worst of others.

Hey Owner, if that is who you really are, you might want to think about having Gary drop your price.  Nice place, but will not command $1.6M in this market.  How exactly do you rationalize a price that is higher than peak in terms of dollar value and also percentage appreciation.  If you are just tossing some crap pricing out there to fish for a sucker, that makes much more sense…

In terms of defamation, you unfortunately have very little leg to stand on.  Let me educate you a bit:

#1 - A careful read of IR’s post suggests that his conjecture would likely not even meet the legal definition of defamatory.  Also, defamation/libel would require statements made of purported fact, not opinion.  Something like “if they had maxed out their HELOC” is very different legally from “I know they maxed out their HELOC and bought drugs”...

#2 - Statements need to be knowingly false or least grossly negligent to make a case for defamation or libel.  An incorrect interpretation of potentially confusing or incorrect public records would never legally be construed as knowingly false or grossly neglient.

#3 -  As IR never named you, and in the course of your day-to-day life or career, you likely would not make a habit of telling everyone your address, the issue of “damages” would be very hard to prove or even postulate.  Having some neighbors look twice at you when you are pulling into the garage because they read the blog would be tough to use as your “damages” in a legal sense.  Since you were never named, I doubt any sensible juror would agree that your reputation was materially harmed or that as a result of this you experienced extreme mental anguish.

The bottomline is that you won’t hold this blog or IR liable because 1) IR has the 1st amendment to fall back on and 2) you have a very shaky, i.e. very poor legal basis with regards to the comments made and the definition of defamation/libel.

Yep - those memories will cost about $405 per square foot.

Several friends contacted me last night to inform me that some little site is spreading false information about myself and family.  To me this is purely defamation of character, and whoever is responsible for creating such false information and this site will be held liable.

Since I am the owner of this house and have all the correct information, why don’t I share it with all the concerned bloggers.  We purchased this house in December 2002 for 870K without any landscape and improvements. We then spent a couple of hundred thousand on home improvements which brought our cost to about 1MM.  Our original first mortgage was $696,000 with nearly 30% down.  When the interest rates went down, we refinanced the first for $699,000 and last year our banker advised us to get a HELOC in the amount of $436,000 which has hardly been used. 

It seems like Irvine Renter and the people responsible for this site have bad data or just are just not familiar with the industry to analyze the data they find.  I have read other blogs on this site and it seems that everyone here is waiting for prices to drop by half so they can justify purchasing a home.  To me, a home is not necessarily an investment, but a place for my family to live and create memories.  In my opinion, the stock market at this moment is a perfect place to invest your money.

Several of my friends contacted me last night to inform me that some little site is spreading false information about myself and family.  To me this is purely defamation of character, and whoever is responsible for creating such false information and this site will be held liable.

Since I am the owner of this house and have all the correct information, why don’t I share it with all the concerned bloggers.  We purchased this house in December 2002 for 870K without any landscape and improvements. We then spent a couple of hundred thousand on home improvements which brought our cost to about 1MM.  Our original first mortgage was $696,000 with nearly 30% down.  When the interest rates went down, we refinanced the first for $699,000 and last year our banker advised us to get a HELOC in the amount of $436,000 which has hardly been used. 

It seems like Irvine Renter and the people responsible for this site have bad data or just are just not familiar with the industry to analyze the data they find.  I have read other blogs on this site and it seems that everyone here is waiting for prices to drop by half so they can justify purchasing a home.  To me, a home is not necessarily an investment, but a place for my family to live and create memories.  In my opinion, the stock market at this moment is a perfect place to invest your money.

Ok, forgot to add rkp… if you were as smart as me, you would be telecommuting, and could live anywhere there is a high-speed web connection.

But then again, you don’t even realize people DO that, do you?

Obviously not brilliant responders like yourself!! (well, at least Genius truly is)

We are leaving here next summer too, but there are plenty of jobs, trust me. And guess what? Less than 20% of the people have Neg-am or pay option mortgages, compared to what - 50% in Cal?

Yes, SoCal is the best…have fun with the bankruptcy of the state, which will lead to some wonderful “ideas” from your leaders, all your wonderful undocumented immigrants with TB looking for more handouts, etc.

SoCal truly attracts only the brightest and hippest people! Please never leave!

Mine has

Although it was under market in 2002 to begin with so don’t know how much an achievement that really is…

My opinion:  past GRM results are more macroeconomic related than “affordability” related.

Thats true but most peoples salaries havent gone up by 20% in the last 5 years.

How will you know what the rent is for the bigger properties.  It is easier to understand the rent for condos and townhouses which are frequently rented out but how does one gauge what the equivalent rent is for this kind of 4000 sq ft property?  The type of people who would rent such a house are very limited.  It could rent as low as $3000 if the landlord just wants a tenant as soon as possible and as high as $5000 if the landlord works with corporate mover types who will place an exec and their family in the house.

Obviously, those very different rental rates will produce extremely large swings in your calculations.

“In 1995, you could have bought a 2000 sf. house for $400k. Will that ever be possible. I can’t see it.“

IMHO, you lack imagination. We all tend to be victims of herdthink. Very few people predicted the magnitude of the dot-com busts and telecom busts. I woked for a high-flying telecom company and talked to many people. Not a one (even people outside the industry and company) predicted our stock would fall 95% in a year’s time. Look at JDSU. How many people would have said a 99% drop in stock price was even remotely plausible?

How many people would have believed that a rag-tag team of disgruntled Muslims would take out both WTC towers using boxcutters? Even if the Lord Almighty told them, the vast majority would have brushed it off.

How many people were predicting a multi-year run of 30% annual appreciation in OC real estate in 1999/2000? I think most people would have responded “I don’t see it.“.

I’m not picking on you. In fact, I’m not saying that $200/sqft in Irvine will definitely happen, though I tend to think it will. I’m just saying it’s very possible, and I doubt anyone visiting this blog could come up with a reasonable proof as to why it can’t happen.

I’m guessing that loan officer will soon be visited by a lone officer with a new lock for the door!

I keep reading that the price of this house should go back to 2002 price. But lets be reasonable. What is the price for a gallon of gasoline back in 2002? What is the value of a first class postage stamp back in 2002?

So if this house price should fall back to 2002. Should then the prices of gasoline and postage stamps also?

Does anyone ever consider the devaluation of the dollar in the past 5 years? What some of you consider a million dollars today might just be 800k of 5 years ago.

You can always tell which commenters are the real estate agents.

Nanowest,

You found the one scenario where “Rent Saving” does not save you; even the Rent Saver in a deflationary cycle catches a knife.

Any bets on what this older Northwood place just went into escrow for?

http://www.redfin.com/stingray/do/printable-listing?listing-id=832932

My guess is $865K.  Anyone want an over/under?  That’d put it at $330 per sf for a fairly basic 2600sf 4/2.5…

some food for thought in Australia:

I know Australia is also in a bubble.

I also realize that chart is average income and not median income.

But I still find it interesting that the chart illustrates that this “affordability” ratio could increase over time.

Interestingly it was already at a 5 X multiple back in the 1960s.

Looks like your friend has the same angle as the Inland Empire couple discussed in the last post.

His Texas home will be protected from bankruptcy, along with one vehicle, by the Texas homesteading law.

So, if he bankrupts out of the California HELOC, he will get to keep the Texas home, which is probably much nicer for way less money. And if the deficiency judgement is tax-free, what a deal for him!!

Now, there’s a catch- you have to move to Texas (or Florida or some other bankruptcy scam haven) and Texas is not coastal CA, to say the least.

To me, it would be a bad trade, but if you are a scammer and your whole objective in life is to get an almost-free house on other people’s dime, then it is an obvious thing to do.

This is not the way I would want to live, but maybe that’s why I’m not as rich as some people.

Thanks for the response.

Aren’t 45% (approximately) of properties in Irvine rental properties?

So back in 1997 the spread for homeowners went from 3 X to 4 X ?

Do you think this disparity increases over time?
The data would seem to suggest that.
I think the 1970s to 1990s data is an effect of wealth disparity.

Past affordability trends may not predict future results.

I’m with you 100% affordability is the driver.  However, I could easily see 5 or 5.5 X being the bottom this time around.

A HELOC is a loan similar to your credit card except that it is secured by your house. You can do anything you want with the money, and if you do not pay it back, they can take your house or go after any asset you have. Many people who took out HELOCs or cash-back refis spent the money and have no assets, so there is nothing for the lender to go after once the house is gone.

For those of you that make statements like…....“4 % appreciation doesn’t even keep up with inflation”............and….“Thats less than the cost for building new homes”.......

You will learn that there are no sure things with regard to the value of real estate or any other asset. Assets are only worth what people can and will pay for them. If the banks don’t open up the spigot on lending, we could go back to 1988 prices for homes and apartments.

I was in Tokyo last week and stayed in a hotel that would have cost $500.00 in 1988 and it cost me $150.00. If the United States economy enters a 10 year deflationary spiral as Japan did, all bets are off.

If our central bank lowers interest rates to 0% and that does not stimulate the economy because banks are unwilling to loan money….watch out. Remember, this run up in housing prices was not because the fed lowered rates, but because wall street cooked up a diabolical financial stew and started selling mortgages to anyone that would listen to them.

“My personal belief is the bottom is going to be higher than 4 X median income due to an increase in wealth disparity in the US and the housing supply in the OC.“

Wealth disparity will not positively impact the median. It may support the high end at higher prices, but if the haves have more and the have-nots have less, the median would actually decline because the wealth will be concentrated at the top. This would make more transactions at the bottom and fewer at the top. The “meat in the middle” would thereby be lower because the buyer power of the middle class would be diminished.

The 4 times median income is reflective of the fact that homeowners generally make more than the median income. If every house on the market sold for 3 times median income of homebuyers, the reported market median would be closer to 4 times the area median income because the lowest wage earners do not buy. The lack of low-end affordable housing is a chronic problem in California which also tends to make the price/income ratio somewhat higher than the rest of the nation.

Prior to the first bubble in the late 70s, 3 times median income was the norm in California. After the 70s bubble and the 80s bubble, the market bottomed at 4 times income each time. At that price level the market reaches a level of affordability prospective homebuyers find attractive enough to buy again. We have evidence from the lows in 1997 that GRMs were under 150 when the price/income ratio was at 4.

Personally, I do not care where the exact bottom will be found. When I can afford to buy something comparable to what I can now rent for the same monthly cost, I will look to buy. There will be no particular urgency about the decision until the REOs stop flooding the market, and that will take years. I want to buy a little before the bottom when prices are depressed and inventory is still high. I will have the most negotiating power, and the widest selection. If I buy and the house does not appreciate for years, I will not care because I will be saving money compared to renting.

So why then, did you just participate in this “wasted conversation”? 

I’m actually very curious to see what FB’s have done with their equity.  Perhaps IR is wrong, perhaps Zaleriana is right.  Either way, it makes for interesting and thought provoking discussion.  The financials are a matter of public record….

Wealth disparity and supply are not included in any affordability calculation.

That’s a flaw; we will see how big of a flaw it is in retrospect.

My personal belief is the bottom is going to be higher than 4 X median income due to an increase in wealth disparity in the US and the housing supply in the OC.

Affordability is probably the most important factor in this bubble; It is what will drive prices down; however, I do believe there are other factors not included in much of the analysis on this site.

Would someone please explain to a novice how a HELOC works?  Can it be spent on anything i.e. vacations, new cars?  And when the house sells for less than the outstanding debt, is it probable that the bank will pursue the debtors for the deficiency? I am especially curious to learn about this because an aquaintance of mine (a laid off loan oficer) just listed his mcmansion for sale and has already moved and bought a new home in Texas (I know, sounds familiar).  I know he has at least one HELOC.  I’m guessing that he has stopped making mortgage payments on the house here.  Is it possible to take a HELOC, buy a new home, and not pay the HELOC back?  Tell me this is not so.

The forgiven debt may or may not be sitting in a bank account somewhere. You do not know, which is why tax forgiveness needs to be constrained.

I’d be in favor of forgiveness under two circumstances:

- Tax forgiveness with a cap on $50k of forgiven debt (maximum tax break around $15-20k depending on bracket) on a single owner-occupied property. If you’re underwater for more than $50k, your house was probably $500k+ and it’s downright unconscionable to ask much poorer taxpayers to finance a greater handout.
- Full tax forgiveness in the event of a personal bankruptcy and evidence of inability to pay as determined by a bankruptcy judge. If you’re so screwed you have to declare bankruptcy, I’d be ok with letting the judge looking at your specific case make the call.

Affordability is an interesting topic, but it’s not an indication that prices will drop dramatically.  It’s a symptom of the supply/demand quotient.  Right now supply exceeds demand, so affordability will improve.  But you can’t reverse-engineer this conclusion. e.g. Affordability in Irvine is when the median hits 4x $85K, and therefore the median price will drop to$340K.  I don’t think that works.

It’s nice to conjecture about the scenarios of someone in the position that Irvinerentor has conjored up of this home seller, but how about a perfectly plausible alternative scenario.

The seller has refinanced a number of times to take some equity out to improve their home, get a better loan rate or make other investments.  They have made a wise move to shore up a HELOC while they are still available, but have no intention of using it unless there is some sort of emergency in their lives.  They are selling now because they want to be closer to family now that they have kids.  They hope to walk away with slightly better than break even and feel that the money that they have taken out during their refinances has made more money in the stock market than they would have made in the house.

Unfortuantely, these sellers didn’t predict that their reputations would be ruined throughout their community due to the hateful venom of a few bitter bloggers who like to make conjectures with less than the full story available to them.  If you have the facts it’s on thing, when you make guesses about what’s really happening it’s just wasted conversation.

Caddy, you are crazy.  The great Alan and his pal Jack Klugman think this pad will be going for $175 per sf (or less) in a couple of years…  Just hold out until then and you won’t have to steal as much to partake in the good life!

Although a million dollars is a lot of money, for this house in this neighborhood, it would be a steal. If RE in Irvine ever got down to $250/sq ft on this size and location of property, it would have to be a few years down the road. And I would beg, borrow or steal to get into a house as such.

Maestro must have been thinking of the 2003/2004 days when money was practically free.  $300K per year went a lot further then…

Maybe they are just fishers trying to find a sucker…

Wow, a 1999 buy in Northpark.  Must have been like the first NP sale sold…  The earliest I have even seen in there on SFRs was 2000.  Most of the larger SFRs in NP closed from the builder in 2001/2002 I think.  Betcha he was going gaga for the first few years watching his value skyrocket!

Bad skek!  Here’s the link:  http://lansner.freedomblogging.com/2007/11/28/oc-home-affordability-doubles-to-48/#comments

This post (from Lasner’s blog) is a little stale, but it indicates the point that IR and others repeatedly make.  OC is not affordable, and prices will decline until numbers like this return to a reasonable level.  The question is—at what price are 42% (i.e., natl ave) of OC homes affordable to a median household?  I’m thinking we have a ways to go…

An index from Wells Fargo and the National Association of Home Builders puts O.C. home affordability at 4.8% — that’s 4.8% of O.C. single-family homes sold in the third quarter being traditionally affordable to a typical local household. (FYI: This is a different number that the Realtors used to offer up!)

The recent affordability “surge” — if you can call it that — was largely derived from a 6.6% drop on home prices, by Wells/NAHB math. Local incomes grew only modestly (at a 0.5% annual rate.)

I think those numbers are too low…  One has to consider inflation.  Take your $600K 2000 purchase and inflate it by 4% per year to 2009 and you are at $850K or $284 per sf.  I think $250-300 per sf for the nicer areas at bottom in nominal dollars is more likely.

If I can pick up a place in NP or newer NW @ $250 per sf I’ll do some backflips and gladly empty my downpayment fund…  That would be a 30% or so drop from market today.

Just a reminder, there were plenty of houses in Orange County for $150 sq/ft in 1999, about 7.5 years ago. I bought one, and there were dozens at the time.

LOL

If they are planning on keeping this house for an investment-  then why is it listed FOR SALE??

My brother lives close to this house. He bought his in the fall of 1999 for 700K. Asking Price: $1,618,800…. HA! Crazy!

If these owners that you know so well are in fact wealthy enough to own several multi-million dollar homes, why would they be so desperate for cash as to pull out 900k from their housing ATM?

This house is an investment you say? I hope they’re willing to hold onto it for about 10-15 years until the next bubble.

Right…...

If you follow the threads, you can see that builders in VOC are going lower than $300 sq ft right now with fully upgraded houses.  However, one has to take in the cost of landscaping as well.

Personally, I think $250 is realistic and I will jump in at that price.

In late 2000 I purchased 3,000 s ft home in a gated(human) comunity on a greenbelt in Northwood for $600,000 (200 per sq. ft) The Realtor was very familiar with the area and said that this was too much to spend. She said we should pay no more than $580,000 for the home. We purchase any way ..........

I think that these home will sell for between $225 and $250 per square foot at the bottom.

As the full extent of the credit problems become evident, lending will be far tighter than it was in 2000 which will severely limit who can purchase homes. I believe that banks are just now starting to put in stricter policies and that the policies will get stricter.

This would be an atypical rental.  Not because of the price, but because rentals at this level are relatively uncommon.  To an individual directly even more rare.  If it did get rented, I’d give it an 80%+ chance it’s a corporate rental for an exec.

As for the bottom, I wouldn’t take IPO’s bet.  I also probably wouldn’t take at bet on bottom for this being below $1M. 

I think it has a fair chance of going below.  But if I want to play blackjack, I’ll go to Vegas.  Outside of Vegas, I do better odds. 

At $200/sf, this place is still $800K.  Not bad, but a lot families in Irvine make $200K+ a year.  By a lot, I mean in porportion to a property mix that is built in Irvine. 

This home works for $200K+ working family and is a mere 4X income between $800K+$1M.  And therein is the crux, this home is likely in the top 10% of Northpark and competes against the top 10% in the rest of Irvine. 

I think PSF numbers will go below $200 for the majority of properties.  For this property, and other like it, I doubt it.  Too many people want away from a townhome or detach condo with the postage stamp patio for a yard.

There are so many multi-families in Irvine.  My friend who is 29 and married lives with his parents and the total income in that household easily exceeds $300K.  Had they just come to this area, they would be perfect candidates for a 1M+ 4000 sq ft house.  I am not expecting a foreign influx or these multi-family housing arrangements to save Irvine prices but these people will buy such a house. 

People keep refusing to believe that sales are still happening.  Instead of refusing, lets understand what type of people are still buying and try to gauge whether that is a large population or not.

ipoplaya commented above that 2500+ sq ft houses in NP are selling right now.  Lets understand who these people are before commenting how foolish they are or even worse, not believing that some sales are still happening.

Dead at VoC is relative tea.  The Madison at VoC has a phase of 9-10 homes that closed escrow in early November.  They lost 3-4 of these buyers, but that means they still put through 6-7 sales in the $900K-$1.1M range.  I think they closed some of the homes they are building to order in the fourth phase there as well within the last month, another 3-5 homes I think, probably in the $900K-$1M range.

So figure just one homebuilder in VoC, while having a high cancellation rate, has sold 10 or so homes since 10/31.  That’ll prop the averages some, especially if other builders brought phases to conclusion during this time as well.

I am wondering, in OC - What does everyone think the market bottom is when looking at SF. pricing.

I have seen homes come down from $400 / SF. to $330/SF. Do people really believe homes will drop to $200/SF?

Homes have not been below 200/SF. for nice tract homes throughout OC in 12 years.

In 1995, you could have bought a 2000 sf. house for $400k. Will that ever be possible. I can’t see it.

My wife and I have been sitting on the sidelines for 2 years waiting for this to happen (like everybody here - I kept asking where is the money coming from for these ridiculous prices)

I understand view lots, gated communities can add $25 / SF. to the asking price.

I feel $250 - $300 / SF. for a nice newer home would be a market bottom. I can’t see $200 / SF. for homes. Are we dreaming too much.

2500 sf. home @ $250 /SF = 625k
2500 sf. home @ $300/SF =  750k.

Even homes in today’s market are still at 800 - 900k.

Is 625k even possible. Also how long—3 to 5 years of rent versus buying home a little higher will even things out too.

Thanks.

Hum, let’s see, 26 Maywood is around the corner, leased this year at $4700 on a 4/3 3000sf.  12 Fair Oaks, leased this year at $5500 for a 4/3 3400sf.  Yeah, really hard to find people willing to pay $5K to live in NP…  Uh huh…  Right…

Maybe you should have some idea of what you are talking about Alan before you spout off.  Unlike you, I am simply making deductions based on the MLS information I have here in front me, what I learn from my friends and co-workers that live in NP, and what I gain from my regular open house forays into NP.

I sure as hell wouldn’t rent a McMansion like this for that kind of coin, but there are people doing it right now.  I wouldn’t plop down $1M+ to buy one of these puppies either, but there are people doing that today as well.

i referenced this in Lansner’s, but why is Tustin Ranch 92782’s volume so high?  It’s not condo’s (the median is $704k on 58 sales in the past 4 weeks).  It has been the only shining zip code in all of OC in terms of volume for the past couple of months (one period a couple weeks ago it had over 70 sales in a 4 week period).

It CAN’T be VoC - it’s dead over there.  And the volume in that one zip alone is more than half of ALL of Irvine.  Any ideas?

Probably rents in $5500/month range.

YEH, and pigs fly

Asking rent and what you can find a sucker to pay you are 2 different things.

Again, the pool of available renters thins out considerably after rents pass 2K month.

This isn’t a house with a view in Malibu

Your proablility of finding a renter willing to pay $5500/month for this house is slim to none so the price-rent comparison isn’t valid since there is no maket.

Alan,

“You are only buying a “house” a deflating assest that is expected to bottom out at 700K or less between 2009-11 and not recover until 2016-20. And even that recovery will only be back to the 1M, not the 1.6M current asking price.“

I’d be willing to put my entire saved down payment fund, which is hovering around $175Kish now, into an escrow on a bet with you that this 4000sf property in NP will be worth more than $700K at market bottom.  You’re right, I don’t get to buy a house, I’m right, I get a much bigger place courtesy of you and Jack Klugman.  Loved that guy’s work in Quincy M.E. by the way…

This place sold for just about twice the median in 2002.  Median in 2000 was $320K or so.  Say this place goes for $650K in 2000, also twice the median.  Inflate that by 4% per year from 2000 to 2010 and voila, what do you have?  $950K.  No matter how you slice and dice it, my $1M sure seems a lot closer than your “$700K or less”.  You can watch all the Quincy or Odd Couple you want, but just don’t believe everything you hear…

tonye- I never really saw TR before so I got in my car this past Sunday and drove all around TR.  There were some beautiful houses but more so than not, I saw streets and streets full of ugly 70s tract houses.  Sure some of them were being remodeled but it will be years before every owner remodels or tears down.

What makes TR so special?  I love the hills and I loved driving around but NP looks much nicer when walking around in it.

Its not about SoCal being better or worse.  Its the fact the RE is a local thing.  I can buy a huge house in rural India for $500K and have a staff of maids, cooks, butlers etc.  But what kind of job can I find in rural India??  Orlando might have a cheaper RE basis than SoCal but who cares?

It probably rents in the $5500 or so range.  Smaller places (2800-3200sf) in NP have leased relatively recently in the $4800ish range.  GRM of 180 or so would put this place at $1M.

Zaleriana’s estimate is very close to reality. If houses drop below replacement cost, builders will stop building until there is a shortage and prices move back above the replacement cost level. Of course, that is still around $150/SF. I do not think the more desirable neighborhoods will drop that far, but sub $200 is quite possible.

“A sub-$1M price tag two years from now would mean this house price significantly lagged inflation for the better a decade…“

The calculation depends a great deal upon the starting point. If you start at the most recent bottom in 1997, inflation adjusted prices would bring us to 2001 levels. The last bottom as below a 150 GRM so it can be argued that there was overshoot of fundamental support from the last bubble. I still believe we will not see a durable bottom form, even in nicer neighborhoods, until we reach a GRM of around 160. Where does that put this place? $850K to $900K?

Heck, how does an exec making 300 afford a $2-3mm SFR with a waterview withOUT a wife and kids?  Or “afford” (meaning, have the vacays, cars etc. that an “executive” “deserves”) $1.1mm in debt service (i.e., this house) with a Fashion-Island-shopping-wife and kids?  Is our young executive driving a ‘94 Accord?

“Execs makin 300k a year do not buy tract homes in Irvine. They live in newport, cdm or laguna”

Maybe they instead come from old money Maestro, although I’d think those types would be more apt to be in NB or CDM. 

How does a exec making three bills, with a Fashion Island shopping wife at home with the kids, afford a place in Newport or Corona exactly?  A gross of $300K to support a $2-3M purchase?  Doesn’t really seem doable to me…

Or perhaps list it at the $1.42 that their *outstanding* loans are based on.  They’re definitely being greedy and disconnected from reality, expecting about the same %age gain in 2007 that they had (based on a dubious-quality appraisal) through their first 4 years of ownership—the asking price is a 13.21% annualized gain for a five year hold; through 4 years, based on the loans and an 80% ltv, it was just over 13%.

I know the owners personally and am sure they are not in any financial problem or will let their credit be affected in anyway.  They have already purchased a multi-million dollar house in Orange County, and planning to keep this house as an investment.  As far as I know they own several multi-million dollar homes in California, Arizona, and East Coast which they purchased several years ago.

If all the homes in Northpark went on Foreclosure, this house would be the last or would never.

Premium as compared to the rest of the flatlands tonye, namely West Irvine, Westpark, old Northwood, El Camino, etc. 

TR and QH have even higher premiums although we’ll see if QH can keep theirs up…

zaleriana, with blogs like this, you get all the sky is falling - everyone is a crook types.  Some people just can’t comprehend that their are real families, making good money, that can afford to buy homes in areas such as Irvine.  Many of those posts are from those out of the area that don’t necessarily understand the local economics/market or those that are so far down the median income chart that their posts are influenced by the knowledge they could never hope to afford something like this unless the global economy came to a screeching halt.

Maybe the owners of this place bought a Sports Clips franchise with the cash out?  Maybe their kid had a disease and needed hundreds of thousands in medical care over the past few years?  Maybe they bought Rovers and Benz’s and took some killer vacations?  Who knows and who cares…  Simply, it’s a house that is way over-valued in term of list price.  It’s a nice house in a nice area and we will all get to watch it chase the market down until they get desperate or realistic or both.  The places that have been selling in NP have been those that are more realistic in terms of pricing…  This will sit like those NSR is referring to, or they’ll drop this sucker down to a $1.39M list today and move it for $1.25-1.3M.

“Is $150/sq foot fair for nice, but not super-nice, construction “

In the inland empire, they’re building nice but not super nice for $75-$95/sf land included.

North Parke and North Parke Pointe “premium”?

Jeez….  from my view point in Turtle Rocke I hardly would figure that the flatlands would be “premiume”.

I didn’t see any Grey Poupon on those kitchen counters.

The video runs 60+ minutes, your rapid response indicates that you made no attempt to view it.  Your loss, it’s actually very good, Google’s not dumb company, you have to be really smart to be invited to talk there, it’s really worth your time.

Again, the last real sale was 870K in 02, this place never sold at 1M+, loans were made on it for 1M+.  According to Krugman, you should expect the market to return to 98-2000 levels of support, 2002 was already overheated.

This is based on hard data, not smoke and mirrors.

Sort of related question—isn’t the floor for housing tied somewhat to replacement cost (as well as rental value)? What’s replacement cost for a house like this?  And what’s the cost for going from raw land to buildable lot?

Is $150/sq foot fair for nice, but not super-nice, construction (as this appears)?  If so, the improvements for this house are about $600k at cost.

Obviously, Irvine Co’s cost of raw land is effectively zero—let’s say $1/sq ft to assign it a number.  What does it cost to get all of the approvals, level the site, utilities, etc?  What would the costs be for a similar lot outside Irvine (where the developer doesn’t control the process)?  I’ve read in some places that CA buildable lots include about $100k in costs, over and above the raw land cost.  Maybe that’s less in Irvine b/c of IC’s involvement? 

So, a duplicate house built on what is currently raw land in Irvine would cost IC about $700k (more for an outside developer who has to pay IC for the land).  Is that a fair assessment?  Add in developer profit and you’re looking at about $800k, no?  So the owners paid a small-ish %age premium because of the rising market, and the developer made a large-ish %age profit permium for the same reason.

Doesn’t this lead to the owner’s looking for a 100% location premium?