Irvine Housing Blog

I see what you guys are saying.  You both make good points but I think outside of this property being zoned a condo, it is an SFR for all given purposes.

Maybe its because I grew up near Santa Monica but the idea of not having a yard doesn’t bother me.  Many beach houses or houses near the beach fill up the lot and don’t have a yard.  This condo is like that.  Its an SFR but has no real yard.

I have many friends who live in “condos” like this and they don’t see it as a starter home.  A lot of communities that have this type of product have shared parks and shared community centers.

Trust me guys, I would love to see this place drop down to the $300s so that I can buy a nice real SFR for $400s but I just dont see that happening.

They have to come down, rkp - it is only a matter of time and how long the government interferes with the free market. 

People simply cannot afford at even today’s levels.  There is no reason that people should have to sacrifice their first born to live in a house.

Buster,

Agreed.

$350k - $400k???  Are you kidding?  Less than $150/sq ft?  What is that, like 1995 pricing? C’mon folks, it’s going down but talking out of your a$$ like that is just as bad as someone coming here saying this place is *worth* $900k. Agree with the voices of reason in rkp and tonye that this is easily $550k - $600k at the bottom. I am quite sure there are a LOT of working families in Irvine who would be just fine with a 2,400 sq ft townhouse/condo. Not everyone is looking for a back 40 to take care of after working 50-60 hours a week…

Your household incomes are not going to support those prices.  Sorry, CK.  Get ready for re-education.

I think that AZDavidPhx is failing to realize is that this is not a starter home.  Ergo buyers of this home will typically bring in a bunch of equity to the purchase, so hence their income does not need to support a purchase with 100% or even 80% financing.  While this blog highlights those that overextended and speculated, the majority of homeowners that did not purchase in 2004-8 are flush with old equity, and they will apply that to this home.

Here we go back to AZDavid household incomes anaylsis.  I cannot and won’t speak to anyone else’s household incomes, but I can tell you my household income would support $550-$600k very nicely --- and I’d be just fine with something like this for my family. I doubt I’m the only one around here in that situation, but since you are likely tell me I am, I guess it is fact.

Steve -

The biggest downer is that it’s a CONDO.

These are going to be pummelled much worse than your detached homes.

Ergo buyers of this home will typically bring in a bunch of equity

If this is your assumption then I think you are assuming that a buyer of this condo will be able to actually get a bunch of equity out of a previous house sale.  In a depreciating market, this will be difficult.

I can tell you my household income would support $550-$600k very nicely

Then I am assuming that your household income is in the 150K range and that you have 120K cash on hand to put down.

Congratulations on all of your success; you are earning well above the Irvine median income.  If this condo is considered the dreamhouse of someone earning 150K then so be it.

AZDavid,

Yes and yes.  And we are hardly in the elite crowd in that bracket. I even own TWO Honda’s ---what’s that say about my social status?

I know you have mountains of government data that says otherwise, but it seems to me that household incomes of $150k - $200k are more common that you might think.  Lots of dual income professional households these parts.

here’s another irvine stat - i’m single and make $69,680/year.  after taxes, insurance, and 401K i bring home $2200 a month.  i realized along time ago that housing here was overinflated and that i would never be able to afford to buy a home.

it’s great that there are so many irvinites that bring home high salaries, but unlike pop’s i will never be able to plop down, i think he said, $700,000 on a place and another $100,000 to remodel and think “nothing of it”.

Anela -

That’s a pretty good salary.  Certainly you should be able to afford a place to live on that.

The Charlatans are going to try to keep up the facade as long as they can hold out.  They are going to make claims that most people earn 150K to 200K.  They are full of it.  They don’t know because everyone is lying for each other to keep up appearances.

Prices will come down the meet the median income sooner or later.  It’s only a matter of time.

AZ—Do you have any clue what you are talking about?  Charlatans?  Dude, I don’t know you or anyone else out here for that matter. I’ve got no reason to exaggerate my income.  $173k on the 2007 W2 for me and the wife. And that is nothing special here. You can believe me or not --- but a professional degreed couple in Southern California has NO trouble clearing $150k. Go to any job board and look at the salaries advertised. Then multiply that x2 for household. Keep in mind that professionals tend to marry professionals.  Not too many $100k guys married to the girl sitting at the security guard desk.

Yeah, we know you its hard to comprehend on your $22k income over there in Phoenix (remember, that was figured out when you pounded your chest that your same job paid $6k more in OC than Phoenix. Any doofus working in a Finance or HR department of a multi region firm knows that about a 25-30% salary differential from Phx to OC is pretty standard. So if $6k is a 25-30% premium for YOUR job, then you make about $22k, dude).

Are you sure about that?

$69k/year is about $5,800/month.

I make $55k/year and after I contribute 5% to my 401k, my take-home is about 73%.

Your take home is only 38%???

You are only taking home 38% of your weekly pay????

oops - made an error:  $2,400 take home, and $400 to savings account each month.  i refuse to touch the money in my savings account, it’s not large amount but just having a small amount is comforting.  in my yoot i cashed out my 401k and am now overcompensating - 15%.

according to CK-->but a professional degreed couple in Southern California has NO trouble clearing $150k.,

the highest 10% of earners in the US live in Irvine specifically, forget about NY, Boston, SF, Newport, Laguna Beach and these other pretender cities.. Actually contrary to popular belief, not many households make more than 150k in Irvine, and of those that do, they tend to be homeowners already for the most part. if some one has proof that the median household pulls in 150 k in Irvine please share

Median income in Irvine for a *household* is below $100k, and that’s it. $140/sqf is not outrageous actually, it’s still high compared to many other cities. Under $100/sqf is very typical.

Median income in California in 2003-2005 was $51,647. In 2001-2003: $51,977. 1998-2000: $51,045. (http://data.iowadatacenter.org/datatables/UnitedStates/usstincomehhmedian19862005.pdf)

And without more up-to-date statistics we can assume that the incomes haven’t probably risen significantly since due to the economic climate we’re in. So what is that? 1% increase in income?

Why then would 2008 prices be any different from 1998 prices? And 1995 prices aren’t far off from that, maybe at most another percentage point or so.

So if something sold for $140/sqf in 1995, that should have increased mere few percentage points considering people’s ability to afford the houses. So the right 2008 price would be something like $148/sqf at best.

Sure Irvine has been developing a LOT since 1995, but But I don’t think it has become the most sought after destination in the U.S. to warrant such huge leaps in prices.

CK -

You might be surprised by salaries in other parts of the country.  I’ll go so far as to say that I am not receiving any economic stimulus check as the government considers me too well off.

That puts me in the same earning category as many of the people in Irvine - yet I spend a fraction of my paycheck on housing as people in Irvine do.

Can you see how ridiculous this looks to someone living in Phoenix with comparable earning power to many in Irvine while you go off foaming at the mouth dismissing people from outside your state as jealous low-wage earning buffoons?

It doesn’t make sense to say that anyone *should* be able to own something.  Imagine me saying that I *should* be able to own a Lexus.  Afterall, it is just a nicer Toyota.  That doesnt sound right and neither does it to say that the median income should be able to buy a 2400 sq ft place regardless if it is a condo or not.

One has to figure what the median property type is and then figure if the median income of *buyers* can support it.  That is, take out the college students, the retirees, etc and do a real analysis on the area. 

Personally, I see tons more condos and townhomes in Irvine than other areas.  I went to school in the valley and it was just a sea of houses but Irvine isn’t like that.  There are tons of older communities that have a good share of condos.  Hence, the median property here might be a 1400-1500 sq ft condos which will go for $250K-$300K at the bottom which would be supported by the $90K median easily.

AZDave,

Just curious, what field are you in that provides you such wealth and allows you the time to blog?

I hate when people comment on one’s amount of posting.  When I do go into my office, I notice tons of employees wasting time chit chatting about nonsense or going out for a smoke etc.  This is my distraction.  Some days, I visit IHB 20 times in the day but each time is less than that a 2 minute visit. 

I see AZ posting a ton but the total time is probably less than half of what my coworkers spend in going to starbucks together at 10am everyday.

Take that back...I can’t in good faith defend AZ in any way possible

Imagine me saying that I *should* be able to own a Lexus.

rkp - come on.  You have to do better than create your own straw man and whack it around like that.

Yes, I think that people working on school teacher, police officer, etc salaries should be able to find affordable housing.  I know that point of view is highly offensive to some people but the fact of the matter is that affordable housing is just plain GOOD for the economy.

School teachers? Police officers? How about college professors, public defenders, senior programmers, engineers, and the like? I write from the professorial angle knowing that the California universities have great difficulty hiring because of housing costs.  I have a kid making way over 100K a year (not married, unfortunately), who has always rented.  When I lived in Palo Alto a few years ago, I rented a room from a lovely elderly couple who lived on one of the nicest streets in the old part of town, about a mile south of downtown, maybe 3 blocks east of El Camino.  The gentleman had been a high school teacher.  Of course all of his neighbors were dot-com gazillionaires with Lexuses, 700-series BMWs, Range Rovers, and the like parked in the driveways of their 3 and 4 million dollar homes. I have to agree with AZDave—Arizona solidarity, but also because we really need to have reasonable communities where decent people have decent housing.  The other possibility is that we are moving in the direction of Europe, where it is actually quite rare to own a home and most people rent, and California is just well along on this curve.

There are affordable housing in So Cal. Santa Ana, Compton, East LA, Inglewood,.....

Need I go further?

Gazillionaires tend to live in Atherton and hook up with Larry E.

Again, why should anyone have the right to live in any neighborhood.  You don’t need to go to a bad part of town to find a deal.  Aliso Viejo, Lake Forest, Tustin, Costa Mesa, Garden Grove, etc all have houses that are much more affordable that Irvine. 

I am not saying that Irvine is something amazing but for whatever reason, there is more demand and prices are higher here.  But you can be 20 minutes away and get much more affordable housing so its really not a big deal.

AZ—that’s great, and I’m certainly not mad at you if you are in the $75k+ bracket as you infer. Pardon me for suggesting otherwise. It just would seem, however, if you are making that kind of money in Phoenix, why is it so incredulous to you that people in the Irvine home buying demographic probably take in $150k+ per household.  By home buying demographic, I mean mid-career folks in the 30-45 age bracket.  Many if not most in that demo are likely to have dual incomes.  We can debate the merits of dual incomes all day, but its 2008 and that’s the way it is. 

So, if you are making $75k+ in Phoenix, why is it so hard for you to believe there are likely many households in Irvine bringing in $150k??  Does not seem like a big stretch. Heck, a big player like you could be in that bracket, too.  All you need to do is marry the girl who sits in the cubicle across from you.

That is your most bearish assessment to date (and quite accurate.) Welcome to the Dark Side

I was hoping you wouldn’t notice!  I suppose -4.2% month-over-month price declines, a whole series of charts with vertical lines (prices and sales going down, supply and forclosures going up), is a reality that is impossible to ignore.

Haha that’s funny, because I was going to say the EXACT same thing.  I think CW wins the most drastic switch from bull to bear award.

His post was 100% accurate

Welcome CW

Thanks. I always considered myself a bear, but just had a hard time integrating the full measure of pain into my forecasts. I believe incentive caused bias (I as selling my home) played a part.

CW - the problem comparing housing to stocks is that we all need a place to live but none of us need to own stock.  I am paying $2000 per month to rent a 2b/2b and if a SFH house falls to the point where I could pay the same to own it, why would I stay in my rental?  Hence, there is a natural bottom on housing.

And I do realize that rents can go down as well but its the same arguement.  If I commute 30 minutes to save some $$$ and rents fall, I will move closer.  Basically, houses might fall to nothing in the outlining areas like Riverside but an area near jobs will eventually bottom out.

Even if rates fall, no one will loan more than the house is worth so the only way these guys get to refinance is by bringing cash to the table.  Problem is that most don’t have that kind of cash.

Is that accurate?  A colleague of mine has an adjustable rate mortgage on a second home.  It just reset and the rate went down a hair.  I don’t know if it was initially a 1, 2 or 3 year teaser rate, but it did reset lower.  Maybe he’s the exception?  He’s ipop-like in his financial savvy, so I wouldn’t doubt it.

Short-term rates have been dropping with the rate cuts, but long-term rates have been rising. If all the people with ARMs manage to refinance with short-term rates, it just delays the inevitable.

How does it work if they don’t refi?  Could the reset rate on the same old loan be close to or lower than the teaser rate?

If it was a fully amortized (full principle) loan then their payment could be lower after the reset.

Many of the ARMs are interest only during their teaser rate, so at the end of a say 5 year fixed portion of their ARM, they suddenly have to pay 30 years of principle in only 25 years. In that case their payment will most certainly go up, even higher than a regular 30 year fixed, even if their rate ends up dropping some.

Good explanation except the example margin of 2.8 is extrememly low. Brokers were getting paid on the back end depending on how high of a margin they could sell the borrower on...most of the time a borrower would get a margin between 3.5-4.5 even though they qualified for a margin of 2.5, the broker would get the difference in points paid to them by the lender as a “ thanks for ripping the borrower off with this high rate, we love you and will reward you for it” The other thing is most neg-am’s that would allow a initially high LTV would cap out at 110-115%, I believe the 125% neg-ams were harder to get, as in they had stricter LTV limitations. Option arms are very complex and there are many different options to them, that is why we see a very large window of when they will recast....then foreclose.

Yes, you did have some cash showing up in your pocket if you sold in 2006.  However, most folks don’t like carrying around such a load (contrary to what they may say) and are/were eager to dump their “winnings” in an equally inflated house asset, which is now deflating. Just ask the braggard, Sui Generis, who posted his triumph many months ago on this blog.  How’s the investment Sui?

If one cashed out and is now renting, then they played the game right.

I generally think, oh azdavid with your “this condo is only worth 100,000.” but his points today about median income seem...strangely compelling! what could the mechanism be, really, whereby a median income remains insufficient to buy the median home product, year after year, in a serious recession? the mighty force of past zestimates? he’s got a point, nu?

Well, given the amount of Real Estate “intelligence” I’ve seen in Irvine, I’d say just about anyone has the authority to price a home.