Irvine Housing Blog

Interesting trend of condos vs SFR. I wonder what the cause of it is? Perhaps people who already had some money and an SFR moving to Irvine to avoid all the school cutbacks elsewhere in OC/LA?  Or Asian investors looking for an inflation hedge since SFR is mostly land while condo is mostly aging depreciating structure?

While this is an analysis of condos vs. SFR in Irvine, it also serves as an excellent overview of the status of the bubble for the greater metropolitan area.  Like condos, the relatively less desirable areas such as the Inland Empire and the inner city are off their peek pricing 40-50 percent.  More desirable areas such as the South Bay and Irvine are only down 20%.  When you look at the area real estate prices from a historical perspective or analyze the fundamentals such as income vs. price, it is clear that it’s the high end that still has a long ways to fall.

Hey IR, I just read all ur posts about the OCAr and their accusations against you and free speech, I thought it was very very entertaining…I like the way u write and get the truth out…I don’t have enough time to read all the posts on this blog I may have read about 2% of the total, but I enjoyed these very much, it made me laugh at their lies and/or stupidity at many paragraphs and pictures.

If you only had training and experience, what you call a turd is really is chocolate and take out a home loan is an excellent investment.

Without spin:
The turd is beging sold as chocolate.  If you disagree, we will harass you, tell others you don’t know what you are talking about and are slandering our profession.

People need to know how do do simple math and live within their means. 

The market currently feeds on greed.  Greed is one of the 7 deadly sins.  What are the other marketing tools?

Too bad the bay area doesn’t have any “100% financing on our new homes” with 5% cash back for improvements.

This might be a dumb question for IR or anyone else out there that can explain.  How does IHB calculate the Income Requirement needed to buy a home? From my math on this purchase, an income of $48,156 as compared to purchase price on $229K is a 4.75 ratio.  Healthy ratios should be between 3-4x income. ?

I know my income somewhat exceeds $48K, but I’d never consider buying a place like this featured for $229K.  Seems to burdensome in debt service for what I’d be getting in return, as compared to a comparable rental.

First, thanks to Jaysen Gillespie of Global Decision and IrvineRenter for providing and presenting these series of very interesting hedonic price model data sets over the last few weeks.

I have lived in Woodbridge, in a condo complex [of about 100 units] called FairField for the past 32 years. (Coincidentally just down the street from today’s featured property)

When I first moved in during the summer of 1979, virtually every unit was owner occupied with few renters that I am aware of.

Now, 32 years later the ratio has changed dramatically,  and probably hovers around 50% owner occupied / 50% rental.

(Authors comment:  My data is based on local neighborhood knowledge and not very scientific).

Question for Jaysen and IrvineRenter:  Can the current condo faster price drop be correlated with Owner-Ocuppied/rental ratio?

One theory I have is that condos dropped faster in price compared to SFR simply because they needed to come closer to rental parity.

In other words,  any investor who a bought a condo since 2006 as a rental has less purchase price wiggle room compared to a SFR if such an investor expected his rental unit to be cash flow positive.

On the move-up market - it is frequently mentioned that with prices declining, the move-up market is no longer working.  I disagree and the move-up market was disfunctional during the bubble.  Miami had double digit annual appreciation from 2000-2006.  You could have started at a 200k home in 2000, and have 40k of equity to put into the next home, say 10% down.  $400k home sees 30% total appreciation over the next 2 years, so now you have $160k of equity.  Again 10% down, and you’re at $1.6M.  Two years later, by the end of 2006, your property is another 40% up and worth $2.25M.

Now has this person’s income 10X’d over the period from 2000-2006 to justify the 10X in home price he’s supporting?

Declining prices actually help from an affordability standpoint, but hurt equity positions.  This should make them a better time to buy than frothy markets.  Look at the $200k - $400k home jump.  The $400k home was $320k in 2000, and say declined 10%.  The $200k home has a loss of $20k, but you’ll pay $32k less for the more expensive home.  $12k (about 4%) saved.

The high levels of appreciation also fueled rapid moving up.  If you’re only going to be in a home for 2 years, you should really be renting (only looking at financials).  The high rate of appreciation masked the high transaction costs.  I’ll bet in 5 years, the average number of years in a home will be higher than it was 10 years earlier in 2006 (maybe have to factor in for foreclosures).

Or, perhaps it’s just supply and demand. I think the new irvine construction is mostly condos isn’t it? Is there anything like a SFR on a reasonable sized lot being built mow?

> “SFRs” (it’s in quotes because as you mentioned, the lots are not very big).

Not very big, but with HoAs and Mello Roos.

Yup, smells like condos to me.