Irvine Housing Blog

Thanks for posting the LPS presentation. Excellent resource.

You relate the states with most non-current loans: Florida, Nevada, Arizona, Mississippi, California, New Jersey, Georgia, Illinois, Ohio and Indiana ... this is where there was a lot of subprime and option-arms lending; the sunshine states saw a flood of investors, that is flippers, who saw the TV ads encouraging one to invest in property; and the Georgia banks lent recklessly in Florida and Georgia.

And you relate that the tates with fewest non-current loans: North Dakota, South Dakota, Alaska, Wyoming, Nebraska, Montana, Vermont, Colorado, Washington and Minnesota. The Great Plains states with the exclusion of Colorado did not see a mass influx of people and consequently no mad rise in property values. I use to live in Colorado, it had a lot of boom and bust cycles; I finally moved to Washington state where there is no personal income tax and a milder climate; here Boeing and Microsoft have been major employers helping maintain property values despite some toxic lending. Many states with California at the lead borrow from the Treasury to pay unemployment benefits; that is not the case in Washington state. I firmly believe that Los Angeles and the State of California are insolvent and headed to bankruptcy ... it’s too bad, that the Republicans and Democrats could not settle their differences and arrive at a budget accord.

The GSE’s losses that you reference will only make the Fed’s deficit spending worse causing interest rates to rise ... actually I am more concerned about liquidity evaporation, that is a condition where there is a strong stock and bond market sell off, and one is not able to obtain funds in one’s money market and brokerage accounts.

You relate that the banks have not begun foreclosure proceedings against these people, and as you can see from the data, it is not a phenomenon isolated to California. Well this as we know is in large part due to FASB 157 and the monetization of the banks by Federal Reserve facilities where by the banks sit “high and pretty” being well capitalized. Well today, in my reference blog article, I relate the downgrade of Greece sovereign debt by Standard and Poors represents an epic investment turning point; yes, both a mega investment and social shift. It is somewhat of an incentive for banks to sell their real estate property. A federal and feudal, political and economic government will arise in Europe; national sovereignty is quickly becoming a thing of the past: we are witnessing the birth of a one euro government where leaders announce policy and the people follow. Yen carry trades globally will unwind carrying out the same process in the United States, Australia, Canada, Mexico, Latin American, Brazil, Russia, India and China ... risk aversion to sovereign debt and fears of sovereign default will cause competitive currency deflation globally; housing prices will be going down to unbelieveable levels. I believe that in the future houses will be leased and not sold with mortgages.

Very interesting….this post is for Planet, as well as those that see beyond blaming the small fry (although they gamed the system and suck):

I see the sharks are circling (Goldman Sachs). But along the lines of “be careful what you wish for,” this process needs to proceed carefully, or, the individual investor needs to take measures to protect against a sustained market decline should the technical signs arise. Why? At one time GS comprised 70% of the volume on the NYSE. Should that decline sharply, if the big six banks merely stood aside and refused to buy, the market would likely free fall.

They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

In the post industrial paradigm Wall Street ‘is’ the economy. Wall Street may kindly remind us of this fact by simply doing nothing as the market falls.

This system needs to be dismantled as carefully as one would defuse live ordnance. If this is done precipitously this bomb is going to hurt many when it explodes.

The system as it stands is doomed but how it unravels and on what political party’s watch it occurs and therefore upon whom the blame will fall will be attempted to be controlled on both sides of the aisle.

In essence, fraud, embezzlement and corruption of the political process are the only profitable businesses left on Wall Street.

The same can be said of the housing market: without gaming the system, the housing market would go into a free-fall. This holds true not just for the mortgage lenders and Wall Street but also for the American public, many of whom are happily complicit in the fraud perpetrated by the mortgage packagers and lenders, as described by a Nevada resident:

“During the boom years, many (in fact, most) people purchased more than one home. In order to get around the “primary resident” issue (a.k.a. “wink and a nod” clause), contracts were drawn-up under the name of a sister, father, family dog, whatever.

Now – these “investors” are not simply living in one of their primary residences rent-free – they are also collecting rent on the other homes that they stopped making their mortgage payments on last week, month, or last year! This is the reality here in Las Vegas; it is the norm.”

When you looker deeper into the economic ramifications of this ongoing housing mess as it relates to consumer spending, you begin to see … the Deadbeats are so happy to get “free” money on their many homes, they offer attractive deals to tenants. A property that might normally rent for – say – $1,500/mo, is being offered for $1,000/mo. Now that puts extra money in the tenants’ pockets to spend on the economy as well.

Stop the gaming, fraud and lying, and you gut the U.S. economy, which has grown dangerously dependent on Wall Street and housing for its “growth” and stability. Cripple the gaming which produces the out sized profits, and you cripple both Wall Street and housing, which would then eviscerate the stock market and the sick-unto-death U.S. economy.

Defusing the incentives to game the system is literally like defusing a very large, very volatile, very unstable weapon of mass destruction.

I say it can’t be done. The gaming mentality is now so deeply woven into the U.S. economy and culture that it is akin to a parasite so interconnected with its host that killing the parasite will also kill the host.

This is how empires dwindle, grow vulnerable, and then collapse: the productive are taxed while the wealthy game their way out of paying their equitable share, while the status quo (the State/Plutocracy partnership) showers bread and circuses on the unproductive to buy their silence and complicity as the Oligarchy/Plutocracy loots and ransacks what is left of a productive economy and culture.

” FHA loan performance is slightly better than subprime, option ARM and Alt-A. Hurray! We as taxpayers are going to lose a great deal of money.”

Does anybody know yet what will be the new government health care expense code for “intensive anger management therapy” and “straight-jacket”?  It will no doubt be useful to us over the next several years.

Question 2: Is there any way to record or quantify the number of “delayed auctions” by lenders in Orange County?  Where could this information be located? I think this would be interesting to study.  When these “delays” happen at auction, does this involve a whole portfolio of REO houses being yanked off the auction block at the last minute, or just 1 or 2 homes at a time?  I wonder too whether these last minute auction withdrawals coincide with the end of a financial quarter in a small effort to temporarily improve the bank’s books in some way?

This is a great post. It explains to why people/and banks are still listing homes at 12 to 10 times the median income in the area.

My Mom made us shirts out that “Primo” fabric in 1975!

So I’ve been watching the prices on Irvine inventory in the 4/3 SFR category and the 2010 Collection for quite a while now and it doesn’t seem like there is as much of a drop as been predicted. In fact, The Irvine Company has raised prices on every phase in Woodbury and some of the neighborhoods are sold through (Montecito is winding down and will probably open up a second site on vacant land south of Woodbury Elementary).

So what is going on here? I read endless accounts of looming foreclosures and I have no doubts they exist but what impact will it have on market I am looking at in Irvine? It can’t just be gov intervention (and if I remember correctly, many of the permabears here claimed that no amount of gov intervention could “save” Irvine).

Sure, I can point out specific high-end and low-end properties that have taken a 40%+ hit but across the breadth of the mid-range, I just don’t see that kind of movement. Legend of the FCB anyone?

At some point won’t the receiving dock at the banks just overflow with these foreclosures? I mean 2010 is only a quarter in and there is still a mountain of junk yet to come through, particularly in California.

So what do these foreclosures and REOs look like on the banks’ balance sheets? They are assets that must attract a lot of unwanted attention by investors, and would need to be earmarked for sale at slow and methodical rates so as not to panic the market and cause a failure to capture maximum value for these assets.

Surely there are a high number of smaller and medium sized banks that have REO/foreclosures on their books too. 

Are we to believe that these smaller and medium sized bankers are all agreeing to collude on some giant conference call with the likes of cigar-smoking WAMU and Wells Fargo execs ( with special guest star Clarence Beeks and his citrus fruit crop report!) and agreeing to release REO inventory at equally slow rates, no matter how bad things are piling up behind them? 

Is it possible for any one of these big, small or medium sized banks might step out of line and pull a book cleaning exercise of their own?

There appears to be no financial/accounting incentive to clear these homes from the bank’s books.

I’m perfectly happy renting and pouring my bacon grease down a drain that I don’t own.

Time for a BLT!

I live in Irvine, I would like to buy a home in the same neighborhood that I live in, in Irvine, and I go to open houses in Irvine.  I have lived in Irvine 10 years and am a former home owner, now renter.  I am sort of “feet on the ground” in Irvine, and I think I have a good perspective of what’s going on with the Irvine market.

I think there is no more give on the down side for Irvine homes below about $600,000.  I see 40 year old, 3 bedroom properties at $500,000 + snapped up by investors and prospective homeowners.  I wish now that I had bought last spring, when I was still hopeful that prices were going to go down another 10%.  I thought that prices were crazy last year, but now I believe that the market will hold up, and that is the price to pay to live in Irvine, just like Newport Beach or Newport Coast.

People have down payments, large enough to cut the mortgage down to a reasonable level.  I’ve seen several young couples successfully outbid me on houses.  I assume that they are getting down payment money from parents.  I’ve also seen houses and condos in my price range bought and reappear on the market as rentals within a month or so.  The rent being asked does not cover a mortgage, HOA and insurance if the buyer put down 20%.  I assume the investors put down more. 

When I moved to Irvine nearly 10 years ago, it had a good reputation, it was desirable, but it was not a “hot” area to buy in.  I think TIC has been very successful at branding Irvine as a safe, upscale community with great schools, and that appeals to a huge number of upper middle class buyers.  I think there are many families who buy into the Irvine image and would like to move there.  I think there were plenty of prudent people who waited, and saved during the bubble, or who have other resources like family, and they outnumber the available inventory, and they will outnumber any remaining shadow inventory that hasn’t sold short.  When I look at the foreclosures, pending auctions and defaults at least in the neighborhood I live in, it’s not a huge overhang.  I’m not sure of the percentage, but I think about 30% of Irvine sales last year were short sales.  Those are properties being removed from this ‘shadow inventory’ that keeps getting talked about. 

I think that demographics of Irvine has changed in the past ten years, and there are many people who have the resources, either through themselves or family, who desire to buy into Irvine and are seeking to do so.  I don’t think Irvine is “immune.”  I think it has successfully marketed itself as the perfect family community, and that prices have increased there to the level of a two-income professional family.  People have waited seven or eight years to buy, and they can afford the monthly payment and prices.  If they are in their 20’s or 30’s, they have time for the market to recover, why wait?  I’ve said before on this blog, an infant in 2000, when prices were starting to get bubbly, is now 10 years old.  Why wait another two or three years?  Children don’t stay the same age, time is of the essence.  Maybe those mansions in Shady Canyon and Turtle Ridge, are going to crash, but not the typical 3 bedroom house in Irvine.

“Why am I wasting time with these idiots?”
lol

great post today. lots of information. lots of sarcasm (or maybe bitterness)?

i feel the same way but still managed to have a good laugh.

Thanks IR.

The last socal bubble peaked in 1989-1990 driven primarily by the Savings and Loan silliness.  Between 90 and 1992 it dropped significantly.  For the next 5 years it leaked down another 10%.  Eight years to reach bottom.

This current bubble was magnitudes greater driven by absurd lending practices and insane borrowers.  We are only in year 4 on the long slide to prices matching fundamentals.

The historically loan interest rates and artificial liquidity being pumped into the housing sector will cease, and will it does prices will continue to go down.

Residential property in Irvine is no longer, imo, geared toward the American family or partnerships or American singles.

In the past, Irvine was geared toward a traditional single-income family. This was in the 1970’s. In Orangetree, singles could afford to purchase a small one or two-bedroom single-level TH.

In the eighties, this situation changed and home prices in Irvine were geared toward a 2-income family.

In the 2000’s the situation changed again with the international buyer the focus of sales efforts.

The IC and real estate agents do not care if anyone here can or cannot afford Irvine or if prices there are out of reach of American singles or families or partnerships.

Irvine is not for the local buyer anymore, imo.

Unfortunately, there are plenty of people from various countries that want to move here and thus prices do not have to come down to any rational affordability scale.

~Misstrial

I don’t know, $389/square foot.  I think this more appropriately priced at about 175-200 square foot.

I’m sorry but 1 bed/1 bath for $320k? Is this Manhattan?

Effing ridiculous.