Irvine Housing Blog

A 1% rise in bond yields is not unusual in today’s environment, so it should not signal impending doom for Spain.

Spain’s problem, and Ireland’s too, is the Euro.  Yes, their prices are too high, but relative to other Euro-zone countries that lent to their banks.  They could very quickly get to where they need to be by a devaluation of the peso, but the Spanish peso is long-gone.

Also, for those saying gov’ts need to run low deficits or surpluses to be safe, that’s what Ireland and Spain did.  It was private sector debt that is doing them in (for Ireland, it became public sector when they back-stopped their banks).

We are also not Spain, nor Ireland.  Our debts are, for the most part, to other Americans, so the politics, while still thorny, is not nation-v-nation.

The one similarity is what inflated the bubble.  Spain being on the euro made their debt seem the same risk-wise as German debt.  In our case it was AAA rated sub-prime MBSs being considered comparable or better (they yielded better) than AAA rated prime MBSs.

No one is trying to re-inflate the bubble, at least no one in power at least.  I think Obama finally understands the nature of the housing bubble .

subsidized mortgages allowing buyers to pay 25-40% above market:

?como se dice “knife catcher”?

check out distressed properties on google maps (this is for the SF bay area).

CRAZY!
http://maps.google.com/maps?f=q&source=s_q&hl=en&q=&mrt=realestate&sll=37.391709,-122.026863&sspn=0.172391,0.362206&ie=UTF8&ei=lREBTdSEGovKpQSR8riaAw&attrid=ee6d68e1e5cb9843_&rq=1&ev=p&split=1&radius=11.93&hq;=&hnear;=&ll=37.333586,-121.973991&spn=0.172525,0.362206&z=12

Check out “Government, Fannie Mae Considering Help for Housing Investors” http://www.cnbc.com/id/40590863

Son of bitches again trying to make rich richer! Let the damn thing correct! If vulures want to buy, let them pay market rate and not discounted rate or any assistance!

Hello All -

It seems that the bond bubble and RE mortgage rates maybe starting to loose the hot air. 

Let’s hope that QE 2/3/4 can keep things low long enough to absorb all of this overpriced housing in OC.  If not we will see a significant step down in pricing.  Also, please realize there is a huge difference between commodity inflation (which we see now) and the pressue put on “leveraged assets” like housing.  It’s one thing to pay more for gas and milk (those prices will go up with inflation) but, totally different when you have to borrow money to pay for “leveraged assets” like housing. 

There will be terrible compression IMHO for housing prices as rates rise.  If people can barely afford housing at 4% rates wait untill you see what happens when rates hit 7,8,10% rates on a 30 year fixed. 

It’s not the price point you buy at but, the price point you have to sell at in a decade when people have to borrow the money at much higher rates. 

Inflation will raise the cost of cash purchases but, destroy the prices of assets that need leverage. 

Just my .02

BD

All this said, I never would have thought that a bus driver in LA working for the city would make 65K a year.  Let’s hope we all see huge wage inflation. 

We are in a bad, bad, bad, scenario.  This is the result of a bubble and huge excesses.  We in the OC will likely be Japan.  Prices grind lower for a decade and then go sideways for another….

BD

The public and private pension excesses will keep the ‘redistribution of wealth’ at the top of the agenda.  We in CA and OC / LA / SF are in for a long bumpy ride over the forseeable future. 

How do you raise taxes on the makers to give to the takers?  Housing is just a symptom of the problem compounded by ‘never seen on Earth’ excesses in housing - especially in the high-priced markets. 

Timber! 

My .02

BD

Ben Franklin and FDR come to mind of American who used inflation to pay off the US debt.  Pay back with cheapen money.  It’s worked for 200+ years and the bankster got to Federal Reserve to keep that sort of inflating in check or at least for their members.  It’s just human nature at work—greed.

Any long term graphes on Japan’s housing prices to see the span for the bubble and the burst.  Mostly one the burst, but how long did it take to inflate?  The US policy is Japan II, low interest, high unemployment and attempts to inflate housing.  As I recall, there’s a number of Japanese Gen-Xers that have never worked.  Their parents continue to work in their retirement year to support their grown children.  Very sad and a high social cost that those families.  Will it happen in America? 

When will housing be affordable in OC?

IR - Although not an Irvine property, will you work your magic and post a property history on this Riverside listing?  The owner is an acquaintance and is bragging about not making a mortgage payment in 3 years.
http://www.redfin.com/CA/Riverside/10133-Woodbridge-Ln-92509/home/6444230

Thanks for writing another interesting article.

1) You write: “the level of debt isn’t supportable by incomes are forces that will put more inventory on the market preventing house prices from rising until the debt is purged.”

The debt will never “be purged”.

I believe, currencies world wide will collaps, and then the debt be applied to all people, that is every man, woman, and child: all will live in debt servitude. 

2) You reference your article of earlier this year where you state: “Prices are only sustained by very low inventories which are a result of lenders refusing to foreclose.”

It MAY be that this will continue.

3) In my article ...
Mortgage Backed Bonds And Real Estate Tumble Lower As The Ten Year Interest Rate Moves Higher ... I wrote: “The rise in the mortgage interest rate has terminated the bankers FASB 157 entitlement to mark real estate to managers best estimate; now higher mortgage interest rates are calling real estate prices lower.”

As interest rates go higher the sham of current valuations will be exposed and may produce an incentive for bankers and real estate companies to foreclose and rent.

4) In today’s article, which I have linked to, I write: I believe that we are on the verge of another strong sell off of the world’s major currencies, DBV, and emerging market currencies, CEW, driving financial and small cap shares quickly lower as concerns arise once again over the ongoing European sovereign debt banking symbiosis crisis.

5) You ended your article with this rather postive remark:  We may find out here what prices are supposed to be in 2011. The Federal Reserve is no longer buying mortgage debt and the government tax subsidies have expired. The government is no longer directly supporting house prices; although, it can be argued that the explicit backing of mortgage debt through the FHA and the GSEs is a market support. With the props removed, the market will wend its way toward a natural equilibrium. Most likely that means falling prices in 2011.”

My response is that I see a catastrophic failure of banking both in the US and in Europe, and I see that coming withing days and weeks, most certainly by February 2011.

6) You write: “Since the banks were giving out free money, most homeowners (at least the ones who have tried to sell houses in Irvine since 2006) took the free money as it became available and spent it. Their goal seemed to be to make sure no equity was left behind.”

I find that helpful, because you are one of the few to reveal the truth of the widespread use of mortgage equity withdrawl ... No equity left behind was an important economic stimulus, that I believe after having read other reports, Alan Greenspan was aware of ... Not only was it the homeowners goal to make sure no equity was left behind, but also Alan Greenspan’s as well. He could have shut down toxic lending, but I think he wanted to have an expansionary economy, and I think that he and Robert Rubin, knew of a day when the banks and the Federal Government would be integrated into a combine, that is melded together into state corporatism. So he let things go their wild way.

Had I not found your blog, I would have been to “callow” to comprehend and believe in the widespread and deep practice of mortgage equity withdrawl, even to the point of leaving no equity behind.

My callowness precluded me from getting and coolaid and stimulus.

7) The Fed has a real problem on its hands, its QE2 is not working, as it has set the bond markets on fire. And there is 1 Trillion in excess reserves that will continually destroyed by higher interest rates. And it has distressed securities, which trades like junk bonds, on its books.

So I am expecting deleverging, disinvestment and falling financial market prices and no real estate sales.