Irvine Housing Blog

1. Gov Brown and the libs will raise taxes (income, sales, car, gas, etc)

2. The Fed will bail out Wallstreet yet again with QE3.

3. I will be moving out of Irvine for greener pastures. This time I mean it!

At least you acknowledge Irvine prices were up in 2010 and were at their lowest point back in January of 2009.  That was 2 years ago.

We are now 5 years into the “crash”.  The prediction by Irvine Renter for 2011: 2-5% price declines in Irvine.  What a snorefest. 

5 years into the devastating housing crash, Irvine better hurry up and fall in price.

My prediction is simple.  In nominal terms the bubble prices in Irvine will look cheap by 2015, but in real terms prices will have declined.  In many areas like Las Vegas, bubble prices will never look cheap.

>In some markets the discount to own versus renting is close to 40%. Can you imagine that?

Is this about Las Vegas?
If I search on http://lasvegas.craigslist.org/apa/
the going rate for a 1x1 condo is $500, 2x2 - $700.

Does it mean that it’s possibly to own a 1-bedroom condo in LV for $300 a month: mortgage + association fees + taxes + maintenance?

“Most people who look for a home in Irvine search on the internet and when they do, they nearly all find the IHB. Unfortunately, not all of these people find what they are looking for.”

Heh ... Armageddon isn’t pretty.

I talked to Bay Area SFR shopper recently.

His agent told him that now’s a good time to buy since house prices will just bounce back.

I explained that it was a credit crisis and nobody was planning to give away money again.

Happy New Year!

Thank you for writing your blog IrvineRenter! Its because of you I know about shadow inventory, extend-amend-pretend, notices of default and sale and the like.

There are so many high-digit areas of Irvine (Shady Canyon, Quail Hill, Turtle Ridge, others and more coming etc…) were the prices are out of whack. 1.35 million for a 3 bedroom? Just thinking about the property tax on some of these places leaves one breathless. There must be a lot of high income folks around these parts…or prices have to come down.

“It’s different here, so we can ignore the basic rules of economics.” 

It’s amazing how people in places like Irvine can be so myopic and, consequently, deluded. I’m quite familiar with that state, since I grew up here.  Unlike many of you though, I actually understand economics and can apply it, thus the fact that despite having enough cash to buy outright, I will not buy. Not that I’d buy in Irvine anyway—I think I’d rather gnaw off an arm than live surrounded by Joneses burying themselves in debt-serfdom in a pathetic attempt to keep up with eachother. 

1) Irvine will tumble. Those of you crying, “Fret not, the FCBs will save us!” ... b!*@h, please.  That’s what they were saying when the Japanese were buying up Hawaii—another market I have intimate knowledge of, since I was born there and have family sprinkled all over the islands.  Didn’t happen there, won’t save your overextended butts here.  Hawaii got DESTROYED.

2) As the high end drops, it puts pressure on the middle. Please, put your delusions of grandeur aside; Irvine is the middle. It’s gonna get pushed down as Newport slides. And the low-end has NOT bottomed out.  As Irvine slides, Santa Ana and Mexi-Costa Mesa will be pushed lower too.

3) Scarce credit.  I won’t belabor the point, since even PR should be able to grasp this. (And retire the line that “all-cash FCBs” will snap up every house in some stage of foreclosure—it ain’t gonna happen.  There’d have to be an economic future for their kids in the US.  With cuts coming to the UC system, the old standby of rich asians/MEers coming here for school is gonna slide right down the tubes with the rest of the CA economy. Basic economics.) This leads nicely to…

4) Unemployment.  Yes, even Irvine will be affected.  The second income that you need to afford a mortgage here—because you don’t OWN squat until you can tear up the loan docs— may no longer be reliable. Despite the delusions of the Cheerleaders on this board, the median income cannot afford the median home in Irvine.  The laws of economics say that supply must meet demand, and demand does NOT equal desire, it equals ABILITY to pay. (And the aforementioned FCB kids?  If the Unis slide, and there aren’t jobs for them here, what in the world would be the draw?  The multiplicity of Ranch 99s?  BTW, that was HILARIOUS, someone arguing that the existence of mosques, Korean churches and specialty asian markets is what makes Irvine attractive.  Do you guys ever READ what you write before posting?  The Internet means FOREVER.)

5) Negative equity. Already a large number of people in this category in Irvine, even more are on the verge. As prices slide, more and more lose what little equity they claim, encouraging more strategic default—you can see the developing downward spiral of this, can you not?

Irvine isn’t any different than any other bubblicious RE market in California.  As such, it has a long way to go.  My guess?  Down 30% before 2013—and that’s a conservative estimate.

I strongly recommend that you guys get a reality check.  I’d start by reading anything at TheAutomaticEarth.blogspot.com or perhaps the front page at patrick.net.  For the more intellectually adventurous of you, I recommend The Wealth of Nations (Adam Smith) and the Road to Serfdom (Hayek).  Not that I thnk any of the “True Believing Kool-Aid drinkers will read, but perhaps some of the rest of you might. 

Good luck.  Be smart.  And remember: debt = slavery in this economy.

I am sorry to say but prices will continue to fall in 2011 and accelerate in their descent.  I will call it the “Southlake TX” effect.  For those of you not familiar with that town outside Dallas (Boasts highest median household income for towns 20-50k population range) it is a beautiful town, fantastic retail, mostly planned subdivisions, almost all high-end custom SFR homes, with one of the best school districts in the state (sound familiar - sans the custom home part).  Recently, they have felt the pinch as well, their pupil to teacher ratios have sky-rocketed, and people don’t see the need to pay a ~30% premiums for homes when the schools in adjacent towns are materially similar.  Irvine is in the midst of it now.  My child’s class has 33 students when last year the class had 24.  Where is the premium education in that?

We have friends in Southlake who can’t get anyone to look at their house, much less buy it.  Their realtor is not even renewing her license because the market is so poor.  CUSTOM homes, on 1/3 acre lots with CUSTOM pools can be had for $100-120 per sq ft all day long (and remember, TX has no state income tax)

It may take a year or two for the higher student to teacher ratios to show up on tests, and I know there are other districts with similar pains, but throw a 50 bps increase in the 30 yr, more distressed homes coming to market, and it won’t be long before ~$250 per square foot is the norm….

I feel sorry for those Quail Hill, Woodbury, Woodbury East homeowners who put money just to get the house complete (landscaping, interior finishes, etc.) that have to sell b/c they will see none of that money recouped…..

One small mistake IR:

“On the last business day of 2011, there were 725 homes for sale in Irvine.”

We’re not there yet.

Great job IR.  I’m impressed that you can crank this high quality blogging out so consistently as just a part-time endeavor.  It does take a great deal of discipline and skill.

I’m surprised IrvineRenter is now less bearish than CalculatedRiskBlog (5-10% declines vs 2-5% for Irvine). Of course, CRB is on a national basis while IHB is Irvine only.

This posts for me sort of hints as it being the true “end” of the real estate crash; 2-5% is more like watching snow melt and suggests to me “timing” the housing market won’t offer any substantial benefits in the future. The end of an era?

It’s been a very awkward crash. The extent of the damage to the banking structure, the amount of people affected, the enormous amount of debt that went unpaid - those numbers were far, far more than I ever expected when I started following the blog in 07.

The prices are a different story - prices in Irvine have declined perhaps 20%. That is far less that I expected considering the scope of the bubble.  All the crash did was erase the 10% yearly gains from 2004-2006. It took four years to give out what took two years on the way up, so 5% per year sounds like a continuation of the previous trend and could go on for a while. Prices went up 25% in Irvine in 2003; at this rate it looks like it would take five years to give out what was gained only that one year. This has become a long, tiring war of attrition, with sellers hanging on tightly to their houses and buyers to their dollars.

I reflect on what happened in the last few years, and after sitting out the bubble and renting, I must say I’m not entirely sure it’s been a sound strategy. One could have easily decided in 2004 prices were already too high made the decision to rent, which would have resulted in a seven year wait to get back to the same levels at this point. If another bubble develops, it pains me to think it just might be easier to go with the flow next time - a 20% rebate vs. a probable chance to wait seven years if the peak is not timed within a +/- one year window doesn’t sound like very good odds to me.

I’ve never been particularly interested in Irvine so fortunately I can get better discounts elsewhere that I would be satisfied with. But to me Irvine itself is a warning that despite all the data, the economics don’t turn out the way you would think.

IrvineRenter, keep up the great work.  I have been following your blog daily for the last 3 years.  I am currently renting and waiting out the storm, but do hope to purchase something in the next few years. 

If I had to make predictions regarding housing, I see a 5 to 10% decline next year in Irvine and other desirable parts of OC.  There is just simply too much bad economic news out there that can’t be ignored.  Unemployment has not budged and looks like it is getting worse in California.  Add in the completely incompetent Federal Reserve and we could have a recipe for disaster.  California is also a wildcard, looks like more taxes and cuts to services are on the way.  All this can’t be good for housing.

Thanks again for writing the blog.  If it wasn’t for the internet, most people would only be reading the MSM lies.

calculated risk does not understand that home prices outpace inflation due to 30 years of falling interest rates.

this will change.