Irvine Housing Blog

The bubble was hugely geographic in nature.  Orange County, CA had a different run-up in prices than Orange County, NC, which in turn was different than my part of NC.  You also had some more remote areas experience huge gains - Port Charlotte & other areas of SWFla are similar to the inland empire of CA.  How one area recovers can be very different than how others recover.  The small supply of OC homes, even considering shadow inventory, is a good sign for the OC.

I think there are two predictions to make: when housing will bottom, and what type of increases can be expected.  I’m more bullish than Larry on the bottom - I think most areas have already hit it.  However, I think 3% appreciation is wishful thinking.  Appreciation will lag overall inflation, so we’re at 1-2% until inflation gets above the fed’s target.  Areas that might be a little overpriced may trend off slow by having prices stay flat for 3-4 years - this depends on how problem mortgages get resolved.  If a lot of owners are underwater, there will be increasing supply pushing prices down faster.

But, as the author noted, the recovery is slowing.  That combined with lower inflation will keep interest rates low.  I think rates have been low long enough for people to not worry about rates spiking high (those that did worry have probably already bought).

“Unfortunately, on 1/12/2007 they thought it was a good idea to take out a $880,000 Option ARM and a $109,995 HELOC. That $500,000 in mortgage equity withdrawal cost them their house.”

I’m glad that the vocabulary is changing from losing a “home” to a “house.”  The controller of the words and defination controls the thoughts and arguements.

I don’t see them losing a house, but locking in the 2007 price and getting free rent. With the one action rule, the prior owner locked in the 2007 profits plus may have gotten free housing (no RE tax, HOA or loan payments for a year).  In 2010 he excercised his put.  The bank is current holding the bag, but that bag may be transferred to the taxpayer in due time.

With the govt backstops for the too big to fail, the USA has most of the evils and few of the benifits of capitalism—It’s socialism of the banksters loses and privatization of the profits and capitalism to move the jobs overseas.

I know we use peak prices as a reference point, but is “peak pricing” really valuable for anything else?  Does it matter if it takes 19 years to return to peak pricing in Irvine?

I have a slightly off-topic question: Since the market is still sliding, why is the Irvine Co. going to tear down Wild Rivers and build more houses? A friend of mine at the water district said that she saw the paperwork and it’s a done deal for this coming year (after years of delay). I was at Wild Rivers yesterday and the place was packed.

We just don’t need more housing.

Wait a minute. Wait a minute.  Wait a minute. Weren’t Bill and PR telling us about how the OCAR was all about the relationship between IR and Shevy and how the OCAR was going to shut down this blog, strip IR of his MLS access, and fine him $50,000?

Are you tellling me the solution offered/accepted is to actually feature Shevy MORE on the blog? How can this be?

Love that we will get to see more of Shevy’s stories from the front lines.

I’m simply confused why people are so hungry to inflate their housing costs again.  We treat our homes as ATM’s, but all that ill-gotten gain is simply another loan.  It’s not like ya earned it, and ya gotta pay it back, unless you find the greater sucker out there so you can abscond with tens of thousands of profit; just enough to convince the banks to sucker you into another inflated mortgage.

The only people who make out like bandits when we mind-numbingly inflate our own living expenses despite ourselves are the bandits who run the ATM’s. 

I find it amazing people are salivating at getting back to the “good old days” of rising housing prices.  What’s wrong with cheap housing?!  What’s wrong with having more money flowing into the economy instead of into the banking families’ trust funds?  Why aren’t we doing whatever it takes to LOWER house prices whenever we can?  Stop the insanity!

Imagine instead a world where, starting now, a house is built or bought and the original owners pay 1/3 of the mortgage before they move.  Then the incoming buyers assume the mortgage and continue paying.  The original owners simply walk away.  They don’t get to rape profit from the new buyers, but when they buy their next house, it in turn is 1/3 paid for already.  They just assume it’s mortgage and change the paint and re-carpet.  Soon, every house is paid for.  Screw the ever-regenerating mortgage.  Pay off the cost of the land and the construction and be done with it. 

Now the house is free and clear.  You don’t sell it for profit, you simply trade it. 

So what happens when everyone wants to move to La Jolla from Riverside?  You trade.  Either you have cash that the La Jolla owner is requesting to relinquish his claim or you don’t.  Just like either you can afford the mortgage or you can’t, only you aren’t paying gobs of middlemen for the privilege.  Save up the money that you’re saving by not paying a mortgage and blow it on a luxury abode.  Or, stay home and buy toys, pay for college, travel, retire, etc.

Local governments that lose tax value will have their lost revenue replaced with increased sales taxes from increased consumption.  Economic feedback will occur, raising all ships.

Now, who’s going to be crazy enough to pay for new construction when you can just trade houses even Stephen and incur minimal new costs?  What do I care, my house is free and clear.  Perhaps the government will fund responsible housing developments instead of for-profit, no-yard McBox crapholes.  The government will create housing like it creates parks and infrastructure.  The consumer’s money that is saved that doesn’t go to the banking families trust funds in the form of mortgage interest is more than enough to compensate for lost property tax revenue.  Just divert the tax to other sources and there will still be substantial cash flow for all.

The substantial losses in housing industry employment will be offset by the reduction in housing costs, making single earning families viable again, as well as increases in manufacturing for consumer goods, housing upgrades, tourism, conversion from brokerages to trading facilitators, etc.

I’m sure there’s plenty I haven’t thought of, purposefully inflating the price of your own home so you can borrow more money to pay into banking family trust funds is insanity.

I would encourage anyone in distress over their mortgage to walk away.  Banks and businesses walk away from their debts as a matter of prudent fiscal policy, but they con us into believing it is shame incarnate to do the same to protect our ability to eat.  Screw that.  Walk away, and when the bankers won’t lend to you and millions more, enjoy the time off from funding their kid’s yacht.  Rent.  Survive.  Recover.  Wake up from the illusion.

All it takes is for people to walk away when they sell, just like they’re walking away to live another day free of their ridiculously inflated mortgage anyway, right?