Irvine Housing Blog

“How fast prices go down depends on the rate at which product is released to the market.”

How much product is available to go onto the market makes almost as much of a difference.  Areas where there have not been a lot of foreclosures, and delinquencies are < 5%, the speed of REOs hitting the market is not as important as people who can afford to sell at lower prices taking those lower prices.  The real bargains in our price point have been homes of relocating mid-management people, where either a relo specialist or their company eat the loss (biggest price drop I’ve seen was 20%).

A ‘healthy’ market with REOs moving quickly will not see prices drop as much as an unhealthy market with a slow trickle REO.  It is supply & demand though, and areas with weak demand already & excess supply, will not do well with extra REO supply hitting the market.

Those margins are lower than I expected you would see in Vegas.  I expected around 5% average per flip.  Those are probably some of your worse so maybe overall you are still at 5%.  At 2% if you can turnover 4 times per year you’ll achieve 8% yearly which still isn’t bad.  I believe those margins include you paying someone to deal with the white trash tenants or debtors, their dirty underwear left, garbage left, dogs left, extortion fee to walk away peacefully, etc…  8% per year would be bad if you had to experience all of that first hand.

Principle Reduction?

If so, please I hope someone digs-in to prove it and splashes this story on the front page of some MSM.

If true… Some guy whines and pleads, claims some “hardship”, threatens (got a lawer?), and gets a principle reduction of over $250,000 - only to turn around, sell and put it in his pocket?

That is ridiculous.

Ok, that’s an amazing pool. But, not much of a kitchen for the price. And how did they come up with $1,133,800?

Correction:

Private (but not quiet) end of cul-de-sac location backing to Irvine Center Dr.

It is possible the home owner refied to get a lower interest rate, and that was only available up to the jumbo limit, so he really did come to the table with a quarter million bucks.  Maybe he then immediately regretted it, so he turned around and put it on the market.  Or maybe this is one of those “If somebody is crazy enough to pay my high price, I’ll sell it, but if not, meh” things-the asking price appears to be significantly above sold comps (or even other active listings), especially if you factor in that it backs to a busy street.

Both those homes in LV seemed to be at the very outer edge of development.  Has there been a big discrepancy in how neighborhoods have held up that far out relative to more central areas?

New construction will be the canary in the coal mine for when housing will really turn.  In a lot of areas, I don’t see construction getting back to peak levels for a very long time.  Too much supply overhang and economies too tied to housing.  Construction will pick up when supply/demand pushes the prices of existing homes up.  So it might not lead by much, but a real housing recovery requires a healthy level of new construction.

I am a regular reader of this blog, but never thought the author will write something without doing proper homework…

Please get your facts straight.

You will wait quite a long time for your so called loan mod information to appear on this property.

BTW, what’s wrong with putting down $250K to get a better interest rate and what’s wrong with moving up when you possibly can?

I pulled most of my money out of Bank of America (MF, HIC, etc). I keep the balance to around $5,000 to use for paying bills every once in a while. BofA must have a lot of former WAMU and Countrywide executives on its board.

Now that the servicers have commenced write-downs on the principal for underwater homeowners, won’t it encourage others close to the edge to stop paying their mortgages?

Are the floodgates opening up?

With the Irvine Company you need to look at the sole owner, Don Bren. The fact that now his development AND home construction are self funded we have a sense/depth of his wealth. He has restarted his merchant homebuiling division and soon opening a homebuyer design center for his buyers (high margin options). With a land cost base going back to 1983 on the ranch and a solid drop of % in his hard construction/land development costs I think his margins are north of 50% per “for sale unit” with land factored in. I know this is a huge number. By far Don Bren has the best thing going in residental development in the United States.

Bren has no need for public homebuilders to takedown his lots, he is just making to much money on his own.

By the way it was great when Dan Young was on your IHB pod cast, thanks IR

Read a Dilbert, thought of here:

I am still waiting for Professional Landscaping.  I have missed that one.

You all have to drive by this place to truly get an idea of how ludicrous the market is in Irvine.  Three quarters of a million bucks?  I guess someone will pay it (because of the schools). http://www.redfin.com/CA/Irvine/86-Windjammer-92614/home/4692722

I commend you for sharing the info about your own flip. While PR stated if you do four of those you would get a 8% return I’m not sure that’s good. If you are on average getting a lot higher than that’s another thing. I look at that flip and say to myself..$3,000 dollars for four months work..that’s only $750/month. To tie up that much money for that low a return is a dangerous game. All it would take is a sudden downturn even more in that market and you would start losing money.
Have you lost money on a flip yet? If so/not what happens if you do in the future? Could you weather a sudden downturn?
Is this a personal flip or part of the fund that you started?

My own strategy has been to buy/hold/and rent. Still, I wish you luck.

Hey IR -

I have a question for you and the group.  I wonder to myself about this very question because it impacts me directly.  So here is the question: 

What do most people plan to do when the retire with their SoCal RE?  I personally would like to believe that I will have enough savings and retirement income that I can keep my dream home in CA in retirement. 

That said, it’s hard for me to believe that most Irvinites or other SoCal owners can buy their dream home for say $1M without significant downpayments.  So let’s say I put 250K down on the 1M dream and finance the remaining 750K over 30 years. 

This downpayment will take a large ‘chunk’ out of my retirement savings.  Furthermore if I’m 50 it means I will have to work untill I’m 80 to pay the thing off - at 40 until 70yrs to pay the thing off.  Let’s say I do this and work until I’m 70 or 80 to pay the thing off… In all likelihood I will not have enough money now in retirement and SS to pay my basic bills for property tax, HOA, Cable, electric / energy etc.  Much less travel or buy a car. 

I just wonder how any of this is possible for most??  I think most plan to buy here Irvine SoCal now with THE HOPE that the place doesn’t loose too much value or better yet appreciates so that they can move to a much lower cost area or a much smaller place. 

I’m single and earn well i.e., have no college to plan for or other currently.  I can’t imagine working until I’m 70-80 to just retire and be forced to sell the place to move to LV or Kansas.  But, this is the only option that makes practical sense. 

Again the question:  Does anyone here plan to retire here in their DREAM HOME?? 

Thanks,

BD