Irvine Housing Blog

“I should have known better. No matter how well things are going, borrowing 100 percent of the purchase price of a home is not a good idea.”

Our government disagrees with Mr. Richard.  It has enacted legislation that Fannie and Freddie must now guarantee refinanced home loans at 125 LTV and is encouraging home owners to do so.  Who do you think is smarter, Mr. Richards or our federal government?  My money is on Mr. Richards.

A 3 bed 2 bath condo at $789,000 ?  Rental Parity is still here praise the lord.

Inventory was supposed to sky rocket by now, it’s below 800?
Irvine is not supposed to be different, yet it still is 6 years and counting.  It better become “not different” soon.

Surely for a $631k mortgage the income required is $210k or are you playing the realtor game and stretching what you can borrow just because interest rates are so low at present. If you use the 3 times salary then when interest rates rise the amount buyers can borrow will not change with rate changes.

At 3% annual appreciation since 1988 (a bit generous given the state of the world economy, but for argument’s sake) this would be priced at $547,670. Still more than I would ever pay for a condo on a tiny lot. Poor value.

Taxpayers, get your wallets out: FHA Bailout on the way.

the federal agency that insures more than $1 trillion in mortgages faces a nearly 50 percent chance that it could need a taxpayer bailout next year, according to a government report released Tuesday.

Under the best-case projection, the report said, housing prices would drop just 3.8 percent this year and increase 1.3 percent next year.

The mistakes this guy made are really simple, and clearly outlined by Larry.  I don’t think people should be taking his advice now or in the future because he so easily made such bad decisions in the past.  Falling into bubble mentality is one of the things an adviser is supposed to guard you against.  If they can’t do it for themselves, you should really question if they’ll do it for you.

Thanks for that.

I just asked my imaginary financial planner for a copy of his credit report.

Larry, great post! While I completely agree with your analysis, I would like to point out that Fallacy #1 is the most understandable. If you are starting a family and thinking about buying a home, being priced out for 10 years might as well be forever. In retrospect, people should have recognized the bubble and just waited it out by renting, but that wasn’t as obvious then as it is today.

Greed, greed, and more greed…

I’m renting a beautiful home in Ottawa, Ontario right now for $1450 per month. If I were to buy it, it would cost me an extra thousand per month once insurance, condo fees, property taxes, mortgage insurance and mortgage interest were factored in. And that’s a very conservative estimate.

Here in Canada we haven’t had our housing bust yet. But it’s coming. It has to. My neighbours are living in identical units to myself and they’re paying $1000 per month more than me to live here? In their OWN houses??? How is that a sustainable over the long term? When prices get that far ahead of rents, you know there is going to be hell to pay.

The attitude amongst home owners and home buyers in Canada right now is, “We’re different. We never had NINJA mortgages and teaser rates like the US did, and our lending rules are tighter and blah blah blah blah…” Sure, this time is different.

They’re in for a hell of a shock. I don’t care how much better our lending rules are, interest rates have been so low for so long people just expect houses to go up forever. Sound familiar?

I lived through the housing bubble in the SFBA and never bought into it. Our house in an up market neighborhood went tripled in value in a few years but we never pulled money out, never used it to finance our lifestyle - just kept our noses to the grindstone and lived within our means. Meanwhile I watched everyone around me buy luxury cars, go on dream vacations etc…they were living the life. Now, several years after the bust some of them are in financial straits - but what exactly does that mean? For the people I know it means that they still live in the nice house but instead of paying the exorbitant loans they took out they bank the money.  It means they still drive the mercedes and some of them still take the vacations - afterall they aren’t paying their mortgage anymore.  One friend is still making a lot of money and stopped paying the $5K mortgage in 2009 - she said it was good money after bad. Meanwhile she still travels, still lives great and has a huge financial cushion that I don’t have.  Is it rational to pull money out of your home in an expanding market and live really well when you can just walk away from it all later and in many cases still continue the lifestyle indefinitely? I didn’t go that route but if I had it to do all over again and I knew then what I know now - I’d be crazy not to.  On an individual basis this behavoir seems rational to me - but of course it has driven our economy to the brink. When my friend is walking down the street in Marin nobody knows she is one of the ones who fueled our current economic crisis - and until the day finally arrives that the bank locks her out of her home she really has not any negative consequences to her choices - and even then she is prepared and will move to a less affluent area and pay cash for an REO with all the money she’s saved. She’s an MBA and not stupid - in fact sometimes I feel like the stupid one.