Irvine Housing Blog

It’s about time they recognize that they need to let the housing market take care of itself. You’ve only been saying that for circa 5 years.

Take it from this 28 year investment real estate guy:  If you buy real estate right now—residential or commercial—you are nothing but a nut job.  And you’ll lose your money.

Do you think that there are any safe markets?

When I told my grade schooler that we would have lost $100 grand had we stayed in the place that we sold 14 months ago, he said ” Does that mean that the new buyers lost $100 grand?” At least he sees that. I saw some old neighbors last weekend who just rented out their place since they’d rather wait for the market to recover (!)

Expecting the federal government - after everything they’ve done for the last decade to fuel this madness - to suddenly throw up their hands and say “OK guys, we give up - you’re on your own!” is wishful thinking. Some politicians may say otherwise but when it comes down to it, they’ll do whatever their bankster “clients” demand.

More likely, I see the US becoming more a country of renters in the coming years than it already has. Bubble areas will keep slowly inching lower, with shadow inventory taking as long as possible to clear out. Boomers will grow old in their too-big homes that they pay virtually no property taxes on. The majority of people buying houses will be wealthy fools or not-so-wealthy fools who are either given money or inherit from their parents.

Sure, prices will drop and more people will fall underwater, but that will just lead to less mobility for them. I don’t see a massive wave of strategic defaults coming, as the banks will randomly foreclose to keep the homedebtors on their toes. Maybe in a couple years you can pick up a house in SoCal for $600k that’s selling for $800k today, but you’ll still be over-paying. And in many areas of SoCal, you’ll be living in a neighborhood dominated by fixed-income elderly residents with awful public schools and crumbling local infrastructure.

Renting will be the way to go, and those of us with savings will have to carefully invest outside of SoCal housing for many more years.

With the Fed’s announcement that it’s keeping interest rates at near zero until at least 2013, and horrible gridlock in DC, I wouldn’t expect any rational decisions to be made anytime soon.

Has it not bottomed now for other OC cities? Or how about the IE?

Seems like newer 3CWG homes in south county cities are getting down to the $500ks which is probably around 2003 pricing.

How much lower is the bottom?

I question if it’s political suicide for a candidate to say, “Let the foreclosures begin.”  It might lose them votes in California, but what about the rest of the country?  Maybe to a larger portion of the country, where there are many few underwater homeowners, it’s only a minor issue.

“Actually, banks have been writing down their debts slowly and methodically. At the rate they are going, it will take another decade to write down the bad debts…”

Fascinating comment - is there a chart that shows this?

Is 2002-2003 pricing really the bottom?  OC real estate was already in solid bubble territory at that point.  And in fact, one can argue that practically anyone who bought a house in Newport, CDM or Laguna pre 2003 is still up close to 100%.  If they bought pre 2000 it may be closer to 200%.  What crash?  The 800k NB home in 1999 went to 3.5m in 2006 and is now 2.8m.

These zip codes are filled with people who literally could not afford to buy their current house at even now current prices.  And if they have HELOC’d and spent it, they cannot sell because they could not afford the tax bill on the capital gain.

I agree that prices will ultimately go down to 1999 prices.  The math never lies.  However, I must admit, when prices seem stuck at elevated levels, I wonder if either I am wrong… or that I won’t realistically be able to buy a house in OC for 20 years.  Time will tell.