Irvine Housing Blog

IR:

I hope that you can do some more digging and make it worthwhile to do milestone updates at 1000 days and 1095 days (3-year mark.)

I’m not surprised about house prices falling and credit standards tightening, but extended squatting sure caught me off guard.

The 3 years mentioned are a national estimate. Looking at OC and Irvine, can’t this be longer ? Or, considering the fact prices haven’t gone down too much, can it actually be shorter, as price would catch up (downward) ?

Also your comment about different market is right on, I’m amazed at the difference in low-end vs high-end. Or OC vs IE. I also had a friend about to buy a house in Sacramento. amazing, prices are in the ~<200$sqf for ~3000sqf houses. And it dropped ~30% within 18months.

I wonder if Irvine is going to see a big drop in the mid range within the next 6months.

The Atlanta woman was referring to the ‘move-up’ market that I’ve seen people mention here, and heard of doing in SoFla.  Put 40k down on a 200k home in 2002.  ‘Value’ goes to $300k in 2004, sell, take the $140k, and you could put a dp on a $700k home.  700k in 2004 becomes maybe $1M in 2006.  Now you have $440k ‘equity in that home.  This type of ‘move-up’ helps with down payments, but not with capacity to make payments, as the mortgages went from $160k to $560k. 

This is one reason focusing on down payments and not DTI is problematic.  If you think as long as there’s a good DP, then the loan will be OK, then you’re biased towards people who already owned pre-bubble.

The ‘move-up’ market is a myth that should be shattered.  You should ‘move-up’ when either your income has ‘moved-up’, or you want to transfer more savings into your home (using income-produced savings to buy a more expensive home is fundamentally different than using appreciation fueled equity, and distorts markets much less).

The lost interest on this house is close to $75k.  How long would it have taken the occupant to save $75k after taxes?  Lenders need to do a better job.  A rental will kick you out after only a couple months of missed payments because they can, but a bank can’t forcibly evict until post-foreclosure?  The ability for a bank to hold a loan at one value pre-foreclosure and a much lower value post-foreclosure is a travesty and any bank getting FDIC benefits should not be allowed to do that.

I love some of the quotes like “Right now, buyers know it hasn’t hit bottom, so they’re sitting on the sidelines.”

They make it sound like the majority of America is slick investors like Wall St. Yup, we have hundreds of thousands of dollars just waiting to invest in property, but the time isn’t good enough.

How about the fact WE THE PEOPLE in America will not continue to be debt slaves to the financial world that never gets their hand dirty, and only make money off usury. 6X-10X incomes to purchase the holy grail? I think not, because people ultimately know that life is worth living, and you aren’t doing much living when all your income goes to the BANKSTERS.

Everyday I get closer to defaulting myself, as I cannot stand seeing my monthly payment be significantly more than rent, while prices dive, and there will be no recovery in time to even re-coup my already lost capital before I retire. The scam has been played, and the responsible, conservative, WORKING are victims. Most like me hold on, but how long can the hamster run?

[url=“http://www.lvrj.com/business/nevada-s-unemployment-rises-climbs-to-14-4-percent-103275189.html”]Nevada unemployment rises to 14.4 percent
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If you’re seeing positive cashflow from a house that is rented out, declining values won’t bother you much, but with unemployment this high what happens to your supply of quality renters? How long can your cashflow scenario remain positive?

IR, I know your bullish on LV RE, but what’s your take on this? To me, it still seems like there’s a lot of downside left in LV.

This is ridiculous.
The realtor must be from out of the area.
Everyone knows it needs to be priced at $288,888 to generate those multiple all cash FCB offers.

My ex purchased a 3 bedroom condo in the same development in 2006 for $740,000.  For a few years she made neg am payments on a option ARM.  She did this on an income well below 6 figures. She was in complete denial about the market and her ability to afford this property. In late 2009 I convinced her, with the help of a RE lawer and my tax accountant, that strategic default would be the best option.  Her father fought with me about the direction of the market at that time, quoting such luminaries as Eli Broad who stated the market was near a bottom at that time.  Overall I lost a tremendous amount of money trying to help her get out of that bad situation.  We separated late 2009, so I have no idea if she has had any success negotiating with the bank (B of A formerly Countrywide).  She still lives at the address.  Chances are she’s still squatting and pocketing the payments.

That’s interesting about Case’s house.  I saw a picture of Shiller’s house (can’t find the link).  It was an older modest SFR he bought a long time ago.  Definitely looked like just a place to live in, not an investment.

I have seen house prices drop up to 70% here in Palmdale and yet the builders are continuing to build despite having thousands of empty houses.

It would seem that the builders have no interest in seeing property values rise.

IR “...The foolish series of mistakes made by people in our government and their lending overlords has squandered our resources and accomplished nothing—expect perhaps to shift these losses to US taxpayers.”

That why they continue to do the different programs and continue to “fail” by your (IR) standards.  The programs are extremely sucessful if you understand the true intent of the new loan assistance programs.  They show for the elections that the govt cares for the needed (make squatters) and are trying every measure to fix the bubble problem. Mostly smoke and mirrors to transfer liabilities, while collecting new bank fees.

I fully understand holding on a property to sell at a later date if the expenses outweights other investments and you get something out of the property.  On a free and clear vacation property: 
Oportunity cost:  0.5- 1.5% with the current low interest rates.
RE Taxes:  1% (if Prop 13 then even lower)
Maintance:  1%
Utilities and insurance: $1500

Income:  Short-term rents and virtual income personal usage (saved vacation money).

BTW - the house from the Godfather movie you had a picture from the other day is now on the market

http://latimesblogs.latimes.com/money_co/2010/09/former-hearst-davies-mansion-for-sale-for-95-million.html

Have any of you seen this?

http://www.nakedcapitalism.com/2010/09/latest-real-estate-time-bomb-title-of-foreclosed-properties-clouded-wells-fargo-dumping-risk-on-hapless-buyers.html

Irvine Renter ... this one bedroom you feature sure looks like “home sweet home” to me ... being a single person who keeps to my self, it would be ideal ... and in Turtle Ridge ... like WOW ... unfortunately all I could afford would be the association fees and utilities.

I’ve provided a link to the Keith Jurrow,  RealEstateChannel article Shadow Inventory, an Avalanche That’s Coming Soon? He relates:

Adding all of these together, we come up with a total of roughly 6.97 million residences which are almost certainly going to be thrown onto the resale market as distressed properties at some point in the not-too-distant future.  This massive number of homes will put enormous downward pressure on sale prices.  To believe that prices are firming now is to completely ignore this shadow inventory.  Ignore it at your own risk.

Will three years be enough to bring prices back up as the title of your article suggests?

Well if there are now 6.7 million homes in shadow inventory to hit the market, and more next year, then home prices are never going to come back up.

It will be like in Detroit where as Sarah Cwiek reports on September 17, 2010 in Detroit Michigan Radio article Tax Foreclosures Surge In Wayne County:

“Wayne County County puts a record 13,000 tax-foreclosed properties on the auction block starting today (Friday). Ted Phillips is Executive Director of the United Community Housing Coalition in Detroit. He says the number of occupied properties facing tax foreclosure jumped tenfold this year.

Phillips says the economy is driving the problem, but tacking water bills and high interest rates onto back taxes contributed to the sudden surge.

He adds the huge amount of property available raises fears that speculators could buy much of it on the cheap, further degrading already hard-hit neighborhoods.

“In past years there’s been a half a dozen out of town investors that have purchased the property,” Phillips says. “We’ve been at this now long enough to see properties that were purchased at the auction that are now coming back onto the auction because the investors don’t pay the taxes, don’t keep the property up.”

The Wayne County Treasurer’s office says the sheer number of properties is forcing them to conduct the auction online.”

Finally here is something to ponder, I am writing at 4:00 AM Pacific Time on September 21; and at 2:15 PM Eastern Time the FOMC will announce the minutes of its meeting.

A bear market in stocks started September 17, 2010 as currency traders sold the Euro, FXE, in response to the Bank of Japan intervening in the currency markets on September 15, 2010 and selling Yen, FXY, to stop the rise of its currency; this caused the Yen to fall to its 20 day moving average, which in turn terminated “long carry trade investing”. The Euro, FXE, fell 0.32% to close at 129.88.

Yesterday, September 20, 2010, September 20, 2010, the currency traders went long the the Australian Dollar, FXA, and the Swedish Krona, FXS, in front on the US Federal Reserve Meeting, causing stocks to rise.

Whether there be disappointment or satisfaction with the Fed Meeting, I believe the Euro will fall from the region of 129.88 and that this will cause continuing disinvestment from stocks as well as all currencies, including the US Dollar over time, to fall lower in value.

Yes debt deflation has come to stocks and bonds. And with falling currencies, real estate as well.

Irvine Renter please understand the only bottom is zero, like in Detroit.

Just ask anyone in Hungary, as their currency the Forint has fallen, and no one, repeat nobody repays the Austrian and Switzerland banks back on their Euro and Franc home loans.

I said it before, and I’ll repeat it again ....  While many write that Ms Warren has been appointed as a lapdog, I believe that Ms. Warren, is more likely to turn out to be the top dog, that is the Seignior, meaning top dog who takes a cut, and be called upon in time of crisis, to assume the role of Financial Regulator overseeing investment, banking, lending, credit, seigniorage and house leasing as her many articles would apparently qualify her for such a role.

Hi,

I was wondering where you got the income requirements for the FHA loan numbers—-is this income listed your gross income or after taxes?  It seems downright dangerous to take out a loan because it takes up an overwhelming amount of one’s income.

Taking the listed income of $58,768 this amounts to $4897 per month, but that’s GROSS. If you have taxes taken out, and being very generous here, maybe you get $4000 each month—this means that your monthly out of pocket expenses are over 50% of your monthly check.  Even if no taxes are taken out, it’s still 44% of pay!!

I don’t know, but unless you want to eat top ramen and bike to work, this is not a plan that can realistically work.