Irvine Housing Blog

Is it possible this property outgrew its neighborhood?  Looking at the homes nearby, they seem to be all 1-level modest ranches, maybe half the sqft of this.

Then there’s this:

Obama may limit tax breaks for rich

NEW YORK (CNNMoney)—President Obama on Monday may propose limiting tax breaks for the rich, budget and policy experts say.

In the president’s past two budget requests, he called for limits on the value of itemized deductions for those in the top two tax brackets. That would include deductions for mortgage interest and charitable contributions.

... Take the mortgage interest deduction: It is seen as a big spur to housing sales, which in turn can bolster big swaths of the economy. But some argue the generous deduction contributed to an unstable rise in home prices, and tax statistics show that the wealthiest households disproportionately benefit.

While I do think the lowering of limits and moving to higher cost private mortgages will impact housing prices as a whole, I’m not sure it will “severely impact” Irvine.

A good number of Irvine transactions are high down or all cash payments so the lower limits (and rates) may have little effect.

But let’s look at some data from Scott Gunther AKA IrvineRealtor:

There were 2040 closed sales last year that were recorded in the MLS for Irvine.

Of the 2040, only 153 were reported as being FHA financed.

Of the FHA subset of 153, only 33 were above a purchase price of $648,186. That runs at a clip of 1.62% of sales that might have been actually affected. Keep in mind that some of the purchases were much higher, up to $1.6M, so the FHA finance vehicle was a choice, and not a necessity.

To be fair, he does go on with the caveat that lower limits should not be dismissed.

<a >http://www.talkirvine.com/index.php?topic=1453.0</a>

Regardless, I do think that until the economy and unemployment improves (despite where the DOW is at), it’s going to be tough to lower those limits across the board (maybe parts of OC will get classed as a higher cost area like Hawaii… heh).

The High Cost Area Temporary limits to $729k will likely sunset in October 2011. There is a Standard Conforming loan amount of $417,000, a High Cost Area Conforming loan amount at $625,500, and the temporary limits. Ratcheting down the $729k temporary limit to $625k national limit will also lower FHA’s loan limits as they are linked.

What people don’t remember is that Conforming loan limits were supposed to be reduced as early as 2006, but political and industry pressure was forced upon the Agencies to retain the higher limits. The free flow of cheap money at these levels allowed prices to halt their free fall, but only because the Agencies had to be pushed into raising the temporary limits, kicking and screaming the entire way.

Once $625,500 becomes the maximim, Irvine prices will falter as they will in any area that’s had access to the temporary loan limits. Non-Agency lending terms are not just higher in rate, these loans are also more restrictive in the underwriting guidelines. When private money isn’t given Government backing, risk tolerance shrinks. Is that a bad thing? Not at all. It’s how you or I would operate if we were lending our own funds. The collateral damage though will be sellers between $850k and $1M come October. Either they will withdraw from the market or slash prices to attract buyers who have suddenly found themselves unable to obtain financing.

My .02c

Soylent Green Is People.

I understand that this post is an introduction and I’m no real estate math expert, but I’m wondering if using current income to property value to project rough future values.

Assuming Gross’ value of 7%, adding the premium between bond investors and actual, couldn’t we get a rough future interest rate?

Then, using that rough interest rate, median income, DTI, and 20% down, couldn’t we come up with a new value of the loan?  Then couldn’t that value be compared to the some of the possible maximums (417,000 or 625,500 or 729,000) ?

Then, couldn’t the answers be compared to areas in Irvine that are above or below certain values to see which would be most impacted?  (Those above 729,000 would not be impacted, right?)

Is my logic flawed somewhere?

They should change their asking price to $1,888,888. That would draw in all those FCB’s that are making wise and rational home purchases around Irvine.

-Darth

Inflation - serious inflation is comming.  Think stagflation of the 70s or the ‘screwinflation’ of the 2010s…

Both the US and housing in the US go over the cliff when rates on the 30yr bond hit 5%. 

The US will not be able to make it’s interest payments without SIGNIFICANT cuts and those same SIGNIFICANT cuts will come to housing prices. 

This will be 7% mortgage rates and 700Billion dollars a year in interest on our EXISTING US debt.  Total US 2011 tax revenue is 2.2T.  That means that we will be spending a third of our tax revenue only on debt service. 

Grinding lower in housing especially in higher priced areas is here for the next decade or two. 

Higher taxes are coming - they must.  Lower lending limits and higher rates are also guranteed. 

Get out of the weeds.  Look at the big picture and ask yourself why is NOW the time to buy??  No hurry… grinding lower.

Well considering mortgage interest deductions are a just another way taxpayers money is used to bribe the banking cartels, I would wholeheartedly agree with canceling these “deductions” permanently. Of course a corresponding reduction in Federal income taxes would be also be necessary for this to be fair.

Since the Fed is still inclined to continue the charade, I’m would have to agree with them.