Irvine Housing Blog

Here’s another house Ponzied from 1999 prices all the way to damn near 2010 rental parity.

How long before a 30 year mortgage is at 4.0%?  How about lower?  As I predicted not very long.  Meaningless to most housing markets, but meaningful to areas like Irvine.

Breaking NEWS, the recovery continues at a craptastic pace!

Private Pay Shrinks to Historic Lows

Look out Zimbabwe, there’s a new Sheriff in town.

I think $485,000 was too much for this place in 1999. My friend bought a 2,900 sq.ft. house for $450K in West Irvine, in 2000. Maybe this house is full of marble?

Glut of bank-owned homes means prolonged agony for California governments.

Tens of thousands of homes in the East Bay are in foreclosure or are owned by banks. Some sit empty; a few are boarded up.

Beyond the squatters and overgrown yards blighting neighborhoods, the glut of bank-owned homes means years of decline in the property taxes on which cities, schools and the state of California depend.

So local governments that already have sent out layoff notices by the hundreds may be forced to make more cuts.

For those losing their homes to foreclosure, the end of the line comes when banks reclaim the house keys.

For governments, that is just the beginning.

Foreclosed houses do not obtain lower property tax assessments until banks sell them. So tax revenue will keep falling until banks sell all the houses they end up with, creating a long-term lower tax base.

In the East Bay, banks own more than 10,000 homes, only a fraction of which are listed for sale. Another 20,000 are in foreclosure, headed toward bank ownership, according to data from RealtyTrac.com.

About one in 20 houses in Contra Costa County is either in the foreclosure process or is bank-owned, according to the data.

“There is no question government services at all levels are going to suffer because of this,” said Contra Costa County Assessor Gus Kramer. “It’s just one of the trappings of the economy we’re in.”

The number of bank-owned homes is a double-edged sword. For the moment,
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banks are still paying the higher taxes associated with the original values. So for the moment, local and state governments still receive the higher allocations.

“(Banks) are not dumping all these properties on the market at once,” Kramer said. “If they spoon-feed them out, it just spreads out the pain a little bit longer.”

IR,

The escalation of Ponzi mentality probably all started in 80’s when Reaganomics took the center stage. Before Reagan, under the typical Keynesian framework, gov’t only engaged in large deficit spending during economic downturns (recession/depression) to fill in the demand shortfall from private sector. But Reagan started massive gov’t borrowing (due to tax cut) during a BOOMING economy. The rationale of the Reaganomics is that cutting taxes would stimulate the “supply” side of the economy and therefore expands corporate investment, earnings and employment, and the incremental tax revenue will not only pay off the fiscal deficit, but also creates surpluses in the long haul.

I always wondered whether Reaganomics had a profound impact on American society in terms of its general attitude towards debt/credit and public view on what constitutes a sound policy. If the federal gov’t believes leveraging on debt could be an effective way to produce greater good for the society on a national level, then it must be a sound financial decision for individuals as well. It is no surprise that deregulation was another hallmark of Reagan era, which unleashed the wicked “creative” power of Wall Street. Widespread use of debt instruments proliferated during the decade – securitization of loans (including MBS), junk bonds, leveraged buyout (LBO), credit card debt … all flourished.

Although Ponzi thinking wasn’t really a new phenomenon, it did become much more ingrained in American public psyche during Reagan Administration. America finally completed its transformation into a true “financial economy”. Debt financing was no longer just the lubricant for the real economy, it became the economy.

It seems as if people and the govt analists are confusing real and virtual realities.  The real disposible income from a debt load that excedes income is negative in real accounting.  But with the HEW, HEW money feels and acts like a positive income.  The virtual income can become real if the debt is forgiven.  Real at least to the one who borrowed and didn’t pay it back.  It becomes a real debt to the taxpayers, who stuck with the bill.  The real debt should be with the borrowers and lenders.  Sandbagging the taxpayers with the real debt is unethical, theft and standard practice in the USA welfare for the banksters and indrustialists for the last 100 years.

Correction on my last post on the number of police cars in RPV, they might have increased it to 5 cars from 2 cars at all times.  If they would only have increased it to 10 cars, they wouldn’t have had their crimewave.  Where the website the FBI UCS for Irvine?

I think there was a lot of focused attention on interest rates, interest rates, interest rates in the early 2000s.  Some people were freaking out about how times like these were so rare and that now is a once in a lifetime opportunity to borrow money, and lots of it because, like, just look at the cost of funds will you! It’s rigodammneddiculous.

Maybe this fed the acceptance of more and more borrowing beyond the means of real income to ever pay it back. 

What I consider sad is that even today (May 2010) OC Realtors at open houses are still plugging the fact that interest rates remain at record lows, and that this should serve to remove any pause to buying now, particularly the higher priced 4 Bed SFHs for families.  It is a NAR- and CAR-sanctioned Herlihy Boy appeal to buyers: “Please go into debt. Please consider placing your financial well-being in the 4th column.  You’ll like it there. And we’ll be paid a nice commission in the process”

“FOR THE LOVE OF GOD, leverage yourself to the hilt and buy a house beyond your means!”

I cringe at the thought of living on freeway Jamboree.  I just walk along it and wonder how anyone can enjoy their yards or open their windows without being annoyed.  Does anyone know how much if at all that factors into someone’s desire to buy a home? To me it’s like living on train tracks. I guess if they want the home and the “lifestyle” enough, they will pay the same amount as a house not near a busy street.