The California Social Contract

It’s the end of the world as we know it.

It’s the end of the world as we know it.

It’s the end of the world as we know it and I feel fine.

End of the World — R.E.M.

Link to Music Video

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Do you remember in Houses Should Not Be a Commodity, there was a long discussion on the stages of grief as they relate to the housing market? The market is shifting from denial into bargaining.

Stages of Grief

Jim Cramer has made news lately with his antics. The links below are to videos where he has demonstrated for us the following progression as it relates to the chart above:

Denial — On housing, November 2006

Anger — He is always angry. His show is Mad Money

Depression and Detachment — Plow under the Inland Empire

Dialogue and Bargaining — Lobbying for a Rate CutIrvineRenter

When you think about it, isn’t the whole discussion about a bail-out bargaining? We all know the government is not going to save the millions of overextended homeowners. They couldn’t if they wanted to. Isn’t this one last gasp before the market capitulates? I think so.

Empathy and compassion are at the core of my spiritual life. I feel the pain of all the effed borrowers (FBs) out there. To prove it, I want to share with you my meditation on the emotional bargaining of FBs everywhere: The FB Plea…

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You fence-sitters are failing to fulfill your part of the California Social Contract. Your failure to continue buying homes is disrupting the social order, and it is causing those of us who bought before you psychological, emotional and financial damage. It is time for you to get off the fence and buy — NOW!!!

In any social contract, you give up something personally for the greater good. When those of us who bought before you purchased our homes, we had to commit unrealistic percentages of our income to housing, lie on mortgage applications, and take out financing on unstable mortgage terms in order to do our part for the continuing social good. We made these sacrifices willingly because the benefits of maintaining the social contract are worth the price we paid. Look what those who bought before us received in return:Mercedes Benz

  1. Dramatic increases in wealth through home equity. I think we can all agree this is desirable. You want to be rich, don’t you?
  2. The ability to spend more than what is earned through productive activities like work. Think of all the BMWs, Mercedes, vacations to Maui, Coach bags, designer jeans, Rolex watches and other items purchased with home equity lines of credit. Don’t you want to double your spending power?
  3. The ability to buy furniture and home improvements without saving or spending income. Your house should be a self-sustaining asset which provides the ability to maintain itself with perpetual appreciation. Who wouldn’t want that?

We provided all of this to the buyers who came before us, and all we ask is that you do the same for us. Isn’t this a fair bargain? Don’t you want the same for yourself? Won’t the next generation of buyers we willing to do the same?

Not my faultSome have argued it is our fault that the social contract is falling apart. If we recent homebuyers had simply made our payments, the contract would not have been broken. This is rubbish. The lenders failed us. They knew we couldn’t make those payments when we took out the loans. They knew we were lying on our loan applications. They knew they were going to have to provide opportunities for serial refinancing of ever increasing amounts of debt. They failed us. They are the ones who broke the social contract, not us.

Lie, Cheat and StealThe tightening of credit just means you will have to make more significant sacrifices to keep the social contract. You may need to borrow money from family members or solicit larger gifts. You may need to become more creative in your attempts to inflate your income or assets. All we had to do was sign some fraudulent paperwork, but you may have to forge some documents or buy a seasoned credit line or find a hard-money lender who doesn’t record the debt (loan sharks.) It is going to be tough, but look at the benefits listed above. Isn’t it worth the sacrifice?

It is time for you to buy now. Trees really can grow to the sky; prices really can go up forever — if you hold up your end of the California Social Contract. To paraphrase Winston Churchill,

Let us therefore brace ourselves to our duties, and so bear ourselves that if the {California Social Contract} last for a thousand years, men will still say, ‘This was their finest hour.’

This is your chance to stand up for what is right and perpetuate a system that is beneficial to our society. History will remember what you do. Will you be the generation that lived up to its duties, or will this be the end of the world as we know it?

You decide.

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If you don’t know what an FB is, try this link.

94 thoughts on “The California Social Contract

  1. IrvineRenter

    I thought this was timely…

    http://www.marketwatch.com/news/story/proof-americans-living-beyond-means/story.aspx?guid=%7B66122EA4%2DB773%2D46D0%2D9BFC%2DCC94968EEE77%7D

    Americans living beyond their means

    Prior to the recent, unprecedented string of deficits, Kasriel says there have been only seven other years American households have been so upside-down in their finances since 1929. Two of those were during the Great Depression. Three more were just after the end of World War II. Another was in 1955, then again in 1999. That leads to an obvious question: If they can’t afford it, how are people continuing to spend as Thursday’s report of retail sales suggested they are continuing to do as if all is well?

    The answer, which has become all too obvious in recent weeks and months, Kasriel says: They appear, in large part, to be borrowing against their homes, which will become less available as a piggy bank going forward. “Households are going into debt like never before,” he says. They also have been net sellers of stocks. All of this means, Kasriel says, that there will be less cash for things we like to buy.

  2. lee in irvine

    I have a family friend who I’ve known for almost twenty years, that I have great respect for. He looked me in the face two years ago and told me point blank that his secondary condo in Laguna Niguel would never decline from it’s existing $750,000 price tag because demand was too strong to live in that area. The most shocking part of this statement is this friend also has a PHD, and warned me about the stock/technology bubble in 1999.

    Logic and reason has been discarded by smart and reasonable people.

    I have pity for people that signed these foolish loan docs, but they are going to get precisely what they deserve. From 2001 to 2005, I was not participating in the housing ponzi scheme … I was building a business. And to think that during that same time, dummies were bidding up real estate to unsustainable levels is just amazing, and quite frankly, pisses me off. The quicker it’s over, they better off we’ll all be.

    I chose to tell the housing “social contract” to F.O.! I’m not playing ball until prices return to fundamental supported levels, and anyone who doesn’t think that’s going to happen at this point, has got their heads in the sand.

  3. IrvineRenter

    From the above link:

    ” No region is better represented with ready-to-tell stories than Orange County, Calif. That is where, until 2005, Donald Parker owned a large insurance agency. He recalls how low mortgage rates spurred business in late 2001 with refinancings and home-equity lines of credit that required proof of insurance. “It really became excessive by the summer of 2004,” he says. “That’s when I started noticing that many of my clients had either refinanced or added a second mortgage or home-equity line of credit multiple times within the prior three years often doubling or in some cases tripling their mortgage balances.”
    He adds that it wasn’t the expansion of mortgage balances that was so alarming. “It was all the new, expensive cars being purchased and added on to their auto insurance,” he says. “Often people were calling to replace a Honda Accord with a new BMW or Mercedes. We were also receiving a lot of phone calls from our customers asking coverage questions: for instance, ‘Is my new Rolex watch covered if I lose it on vacation in Hawaii?’ ”
    If CPAs and insurance agents are among the first to spot the problems while they are occurring, divorce attorneys like Bruce Hughes, also of Orange County, are among the first to see the actual fallout. “We see it as it happens,” he says. “From industry to industry over the years, they come in groups when various industries go through turmoil. Now it’s real estate’s turn. I can’t tell you how many mortgage brokers, builders, developers and others associated with the building industry have come in for a divorce in the past six months and it’s increasing.” Those not associated with real estate, but hurt by the false sense of financial security because of it, are no doubt next. Calling Stanley Johnson.”

  4. Live And Work In Irvine

    Congratulation IR.

    Your blog address was profiled on page 3 in the business section in the O.C. Register on Sunday.

    Expect some more traffic πŸ™‚

  5. Kirk

    LIES! LIES! LIES! I AM NOT A SOCIALIST!! YOU’RE THE ONE WHO’S THE SOCIALIST WITH YOUR CONTRACT WITH SATAN!!!

  6. ochomehunter

    A little off topic here, but I learned that Lennar’s tower project got put on shelf after they dug a big hole for one of the towers at Jamboree/405 Fwy. The reason for shelving it for a year is cited as the banks pulled the plug on financing due to lack of presales. There is another tower that is going forward, it wont be long before they realize that they will lose on that as well

  7. Live And Work In Irvine

    After 9/11 it seemed the economy was going into a meltdown for invalid reasons.

    I went and purchased two vehicles to support the social contract at the end of September.

    This time it is different. I’ll be sitting on the sidelines for the next two to three years.

  8. Live And Work In Irvine

    I took a look on their website and they don’t display the page like it is printed, so I guess not.

    It was below and to the right of Matthew Padilla’s column.

  9. corea

    I believe the 405/Jamboree intersection is at the epicenter of the SoCal housing bubble. From there you can see the shiny new office building slated for their anchor tenant New Century. New Century’s old building is also visible from that location. Right next door is the Home 123 building that I believe is also part of New Century. Plus you get to view the Marquee Towers (don’t look at night because its lights out). Right on the other side of Jamboree is that huge Lennar project. I might even be missing some others.

  10. NanoWest

    My belief is that Irvine and OC are in the shock/denial stage of this process. Most people still think that their home is worth what it was in 2005/2006 and are in complete denial about the effect the changes in the mortgage industry will have on the price of homes.

    Anger will bring lawsuits……and lots of them. The good citizens of OC will start to sue everyone, from RE Agents, to escrow companies, to mortgage brokers and banks. The Anger/Lawsuits are about a year away.

  11. lowrydr310

    I don’t know about traffic, but I notice the number of comments per article has increased about 500% since the early summer. It used to be rather quiet here, now it’s full of people (flames and trolls too)!

  12. No_Such_Reality

    I’d agree. I thought as a whole it was moving along. But it isn’t. It’s still in the Denial/Anger transition. The bargaining isn’t bargaining, it’s anger. It’s of the form ‘If I burn, you burn’ and not ‘please just let me see my child born/graduate/married, before I die’.

    The banks are in denial/anger too. REO inventory and pricing makes that clear.

  13. No_Such_Reality

    Minor note, in the lead in graph, I believe stages 3 & 4 are transposed.

    1. Denial
    2. Anger
    3. Bargaining
    4. Depression/Detachment
    5. Acceptance.

  14. IrvineRenter

    Perhaps so. The whole grieving process is like a tennis match bouncing back and forth from one stage to another.

  15. ocrebel

    somebody mentioned about massive develpoment of last few years. I and wife were driving towards newly opened Costco in Jamboree this weekend. Once we passed 405, I was amazed by massive amount of new condo development on the right side. Those condos pretty much look like prison cell. I don’t know if those are for rent or for sale. Anyway, we may need quite more phycologists for the depressed people living there.

  16. Mike Jenkins

    Ha, when I lived in SoCal in the early 90s there was a letter to the editor in the LA Times from a woman objecting to the paper’s coverage of real estate. They were saying prices were declining! This woman thought the LA Times was irresponsible to report bad news. If people read that it might affect their decisions. Buyers might sit on the fence for a little longer and wait for prices to decline. Sellers might lower their asking prices! The LA Times was not doing its part to maintain the market. That’s the mainstream media for you. Never patriotic enough.

  17. caliguy2699

    Traffic in that area was abysmal even before all these high-rises went up. I can only imagine what it would be if all these new units were ever occupied.

    By the way, I don’t like the whole idea of high-rise living in OC, especially the way it’s portrayed by the builders as hip and the way of the future. In cities/metro areas that have good public transportation and are concentrated in a very small area (eg Manhattan), high rises are fine because you can get around fairly easily. In a place like OC that is spread out and you NEED a car to get anywhere, they just don’t make much sense to many buyers.

  18. American-Screamer

    Right with ya, lee! Stand together and refuse to play their game. Time is truly on our side and it is OUR finest hour.

  19. American-Screamer

    High rise living in OC near the coast is okay as long as you are facing away from the IE as that view sucks pretty much 95% of the year.

  20. ElricSeven

    I’m a big proponent of hi-rise living. You’ve got to start somewhere and having those hi-rises near the employment center actually reduces the amount of traffic. There’s still an anti-density bias out here with everyone thinking it will mean more residents. I’ve news for you, you’re not going to be able to stop population growth and the infrastructure and maintenance needed for a bunch of clustered tall buildings is a lot less than a like amount of SFH’s for the same number of people.

    They’re learning about this on the East Coast, even in some of the cities in the South. I agree that the hi-rises here are way overpriced for what you get. On the other hand, I think these types of homes will be our only viable solution in the future. By future, I don’t mean tomorrow, or next year, or even in ten years. 40 or 50 maybe.

  21. IrvineRenter

    The problem with the high rises here is they are not pedestrian friendly. Even these towers located near the high rises are not so close that people are walking to work. These towers are not being done like they would in an urban core. If they were, and if there was some rail transport nearby, these might be successful. As it is, they are just very high density housing serviced by automobiles: a recipe for traffic gridlock and unhappy residents.

  22. Rocker

    Quick Loan Funding and and DiTech.com are very close to that area, probably in 6 months it will look like San Diego downtown with all those condos, penthouses towers with the lights turned off.

  23. Charles Wilson

    The Five Stages of Real Estate Grief:

    DENIAL: “Don’t listen to those doom and gloomers. They’re nothing but a bunch of jealous renters. Probably Democrats.”

    ANGER: “You traitors in the liberal media are driving down prices and killing the American Dream! And dammit, stop laughing at me!”

    SADNESS: “I’ll be ruined, I’ll tell you! Ruined! Everything I’ve worked for will be gone! Just kill me now!”

    BARGAINING: “Okay, maybe things got a little out of hand. If I take a 15% haircut, will you give me a bailout?”

    ACCEPTANCE: “Honey, who knew that we’d be so happy in a trailer?”

  24. Laura Louzader

    I’m not seeing any give-back in the house prices here in Chicagoland, either, even those sitting on the market for 100, 200, even 500 days!

    It’s the same everywhere. The prices are in lalaland relative to local fundamentals, and the credit has dried up. Yet, the codo conversions continue apace as suspicious fires in empty, new houses in new suburban subdivisions are on the upswing. We have had no fewer than 5 suspicious fires in new, unoccupied homes in Naperville and other burbs.

    In every location I check, prices are 30-50% over 2004 prices, and the same places are on the market a year later.

    When people finally capitulate, it will be an avalanche.

  25. Adam

    Maybe Wall Street is nearing the Bargaining, but Main Street is still in Denial and Anger as evident by the comments in under yesterday’s Irvine Income Data post.

    Wall Street is flat out begging for a cut and I hope Bernanke stands tall and holds. Earlier this morning Cramer was going all ape again and sarcastically mentioned the Fed should just raise rates to 6- or 7%. lol. What a hilarious coincidence to a comment made just the other day.

    Instead of just getting by skipping from bubble to bubble, let’s smooth out the ride in one fell swoop!

    πŸ™‚

  26. PurpleHaze

    Are the prices not coming down sharply?
    Do brokers and sellers feel content to sit on the market longer if required rather than sell the house for significantly lesser?
    Why are foreclosures not breaking the back of comparables?

    WHY are prices still so high?

  27. Major Schadenfreude

    “I chose to tell the housing β€œsocial contract” to F.O.! ”

    Amen to that Lee!

    And I want to say “F.U.” to the realtor who back in 2004 said I ought to buy sooner rather than later and who chuckled after I said I didn’t have enough for a 20% down payment to which she replied, “No one puts down 20% anymore! I can get you in a $500,000 condo for as low as 10K.”

    This, after she told me she was also a “certified financial planner”! F.U. – who’s laughing now!!!!?

  28. CapitalismWorks

    The housing market will cling to prices and move sideways. In a downturn housing volume goes through the floor, first. Optional sellers, “good inventory” will be remain at the previous periods prices. Forced Sellers, Foreclosures/REOs, is what moves a market downward.

  29. NanoWest

    Yes, an avalanche…………….good description……..we are about a year away from the avalanche…………

  30. lowrydr310

    We’re still in the denial phase. Many people are dismissing the negativity in mainstream media as a little blip on the radar, as something that will merely pass in a few months, until appreciation continues climbing.

    As IR has pointed out, the full effects of the bubble have yet to be seen. It’ll take a while before things catch up and we really start to see the trouble. High income households or not, prices can only go in one direction when there are 5 houses for sale and there’s only one person willing (and able) to buy.

  31. BLT Bill

    Prices are coming down. And the inability to get a loan is now a big factor in the acceleration of the trend. The OCR today is finally getting
    bearish. A 4 year supply of homes in Santa Ana ??
    http://lansner.freedomblogging.com/
    I think we are just starting to get into the Panic phase of the trend.
    We dont have blood in the streets just yet. But you can smell the fear.
    Next is the panic and prices will slide LARGE.

  32. Rod Stengle

    Or you can avoid the entire cycle by hitting “shock and denial” before purchasing. I found myself sitting on around $300k cash with an income of aropund $240k annually and could not believe the crappy box house $800k gets me in LA so I moved to Seattle and bought myself an amazing home in a really cool neighborhood.
    Life is so much better now. Affordable decent home in a great neighborhood. No state taxes and no stress keeping up with the conspicuous spending of 85% of the population of CA.

    IT always amsues me how much californians are prepared to sacrafice in order to live in California. As a long time California ex resident, I just don’t get it. California has some positive attirbutes but the negatives far outway these. IF you bought 10 year ago, congratulations. If you’re looking to buy all I ask is why? Why settle for a crappy box in CA when you can buy a great home in a much nicer neighborhood in pretty much any other area in the USA.

    I just don’t get it.

  33. tonye

    True.

    Mid and High rise living zoning works when the first and/or second floors of each building are dedicated to retail. As more and more buildings get built, a cluster of residential and retail uses is created that can be accessing by walking.

    All of the support activities must also be within walking reach: schools, nightlife, movies, parks, parking, busses, etc…

    It’s OK if the residents need to drive to work, that’s not a problem. But is not OK is for the residents to be marooned as an island in a sea of car friendly streets.

    The towers and apartments on Jamboree are an example. Specially as all other “villages” in Irvine are designed around shopping/service hubs which are easily accessible -if not always waking- by car and bicycle.

    The location around Jamboree is office, light industrial and a near by airport. There are no nearby schools, supermarkets, etc… the shopping center in Michelson and Jamboree is too “upmarket” and specialized to be a neighborhood shopping center.

    That area is an island surrounded by business that go dark at night and the streets are laid out in automotive sized blocks. Yuck!

  34. Ghost Town

    The area by the spectrum is looking empty as well. There are a lot of mortgage / real estate businesses in area too – People’s Choice, Wachovia, Indymac and several others I can’t think of. I’ve noticed a lot less traffic at noon and you can actually find parking in shopping centers without having to fight for a space

  35. tonye

    Seattle is also experiencing the same thing. They are a bit behind the curve from us.

    I know this from my family.

    And, oh, Seattle weather… well let’s be nice. It sucks.

    Been there.. for years. And years. And years….

    And of course, deep down your neighbors think your the Californian that is hosing up home prices.

    Except, maybe this time, they’ll think your the fool from the South that is helping prices stay a float just one month longer.

    Because, let me tell you, homes in Seattle are NOT selling right now.
    And good homes in Seattle were not cheap either. It was not unusual to find homes in King County going for 400/500 per square foot either.

    Plus, WA doesn’t have a Prop 13 so their RE taxes are pretty high. Specially their excise taxes.

    And their sales tax (Seattle.. yikes) is sky high.

    Sure, they don’t have income tax… but their excise taxes are obnoxious…. and if King county has a way, soon there’ll be an income tax.

    WA is not the heaven you paint. It’s more like a grey purgatory.

  36. carl

    Ugh.

    Could we please stop having so many “I moved away and live like a King in BFE” posts followed by some “But the weather sucks in BFE and hope you like mosquitoes! post”

    We all know that other parts of the nation are less infected with asset inflation than Irvine. If you want to bail out of Irvine with your equity and get more house for less, great. That is what I did. But the comments are starting to feel like noise.

    We all know Irvine is a wonderful place. That is why we read this blog. We also all know that you get less house for the money (and probably will even in the trough of the bubble) here than elsewhere. We deal with it in our own ways.

  37. MMG

    some anecdotal evdence from friends and family: while people have started to agree that prices will come down telling me I was right, I have been hearing for the past few weeks that the market will correct next spring!

    when I ask- why is that? I get silence.

  38. caliguy2699

    Right on, Tonye. As I said in an above post, it totally defeats the puropse of living in a high-rise if you can’t walk to your destination/access efficient public transportation to your destination. That and the association fees are insane – up to $1,000 a month.

  39. Stupid

    Huh? I thought people usually get to keep what they have in this life in the contract with Satan deal. It’s in the afterlife they have to pay up. πŸ™‚

  40. HAPPYHEART

    Look out, Rod. Tonye will only be able to give you negatives for any positive information you wish to point out. Don’t take it personally; he’s just a bit of a know-it-all troll. Smart people know there are other great locations to work and reside besides Irvine, even though Irvine is a lovely city.

  41. CK

    Thank you, Carl! I could not agree more. I’m not mad if you choose to bail to Washington or wherever. Live and let live, baby! But, please — you don’t need to tell us anymore what we can buy in Peoria for the money, WE KNOW. You should be happy we are not following you there, ruining your towns with our big German cars and Gucci bags. What would your neighbors do to you if all of your chest pounding about the good life out there caused a run on your town by a bunch of bleached, tanned, and enhanced fools from “The OC”? You would not want that, would you?

    Please feel free to reply to add any additional stereotypes you have that I may have missed above.

  42. ElricSeven

    There’s always a cart-before-the-horse problem. Rooftops will lead to retail eventually though. Although not ideal right now, these towers are the start of something that out of necessity has happen sooner or later. It just bothers me that even in downtown LA they’re complaining that hi-rises bring more traffic and strain the infrastructure. They’re wrong, on a per person basis these places are still much less infrastructure intensive. That many single family homes would require a lot of paving and utilities just to fill out the neighborhood. Also, even the places on Jamboree aren’t too far from several amenities, including the park/reserve across the street, Staples, several restaurants acrosse Jamboree and up Campus. You can’t get everything, but it is quite possible to spend a whole weekend without getting in your car, and still get dry cleaning, newspaper, coffee, restaraunt meals and office supplies.

  43. tonye

    I think the high rises are way too out there.

    Instead, I can foresee mid rise… buildings in the 4 to 6 story range.

    This is how most cities react as they move into higher density. Think Westwood and parts of downtown Pasadena as an example.

    And even in NYC, you don’t have a whole ton of high rise residential buildings… the landscape is dominated by 6 to 12 story buildings next to each other.

    These high rises are simply 30 years too soon. OTOH, because of their location and soon to be rock bottom prices they might make some nice projects for lower income people. They can be kept together and not be injected into the Irvine mainstream. πŸ˜›

  44. Charles Wilson

    tonye, given that I live in Seattle I have some reactions to what you wrote at 12:11

    1. Seattle is a laggard market. I think we’ve very recently hit the peak, but things are still selling here. Of course, like anyplace, there are micromarkets of all kinds. It depends on where you are. But, as of yet, there is no generalized crash like there is in California.

    2. In my neighborhood, things are selling for about $350/sq ft, maybe a bit more. I think this is ridiculously high, particularly seeing as how house rents are pretty much unchanged in the past 10 years. The rational value for my house relative to rents here is about $350K, not $8o00K-$900K implied by recent sales here.

    3. WA has a proposition that limits annual property tax increases to 1% plus anything that a majority of voters approve in a local area. I bought my 2,300 sq ft place in a nice neighborhood in 1996 for $260K. It’s now assessed at $500K plus, and the inferior house next door sold for nearly $800K about six months ago. My property taxes will be $4,800 this year. WA has no state income tax, but the sales tax in the Seattle area is 8.75% plus another 0.5% for meals.

    4. The lore up here has long been that transplants from CA and the East Coast are responsible for the house price inflation here. I don’t have any data that backs it up.

    5. It’s not the rain, it’s the clouds. Seattle is the cloudiest city in the Lower 48. I live here but I am not from here, so I have no hometown loyalties. I make that point to introduce my opinion that, as far as I’m concerned, the gloomiest late December day in Seattle beats the sunniest day in Irvine, which as far as I’m concerned has all the character and charm of a Wal-Mart. That said, I’m glad not everyone thinks so, because I’d just as soon not see Seattle turned into Orange County any more than it already has.

  45. Bret

    I personally know of a Countrywide office where the officers and processers were told to “lie, cheat, steal, and do whatever” they had to do to make the loans go through.

    They had income verification “templates” – figures, bank statements, and statements of income they would print onto a phony CPA office’s letterhead.

  46. tonye

    I moved from the flats in Costa Mesa to an impeccably finished chateau in The Hills of Irvine eons ago and I must tell you I live like a King. No more mosquitoes or undesireables…… . And the weather up here is simply much better….. πŸ˜‰

  47. HAPPYHEART

    Which absolutely qualifies you as an expert on living conditions outside your bubble.
    Since you are without question the most informed person on any topic will you please recommend a fine wine to go with my fresh Northwest Dungeness crab this evening?
    Honestly, Tonye your arrogance is sickening.

  48. tonye

    My brother in law’s house has been on the market for four months.

    He’s house is impeccable, with all new appliances and finishes.

    The south facing location is on a hill overlooking the Fauntleroy Ferry, Vashon, Southworth, Kitsap County and the Olympics. He’s got a view that people would die for.

    To top it off, he’s got tons of equity and has priced the house to move.

    He’s always kept abreast of the RE.

    According to him, the market ain’t moving.

    Then, I got family all over King, Pierce and Kitsap counties. One of them is trying to sell her house and buy into Edmunds. Again…. the house is not selling.

    Now, I’m not talking about Federal Way or South Tacoma here…. I’m talking about really nice houses, with sellers that have room to move and are motivated because they want to buy a larger house elsewhere.

    The lore is correct. Back in 90, quite a few Californians moved to Seattle and jacked up the prices. I usually drive every summer, and for two summers in a row people yelled obscenities at us ( and some idiot in Tacoma threw full Bud cans at our car on Tacoma Way… the TPD showed up and I got a report taken). The weird thing is that some clown yelled “Californian go home” right down the street from my graduating High School in Silverdale.

    BTW… from my house I can see the mountains when it snows in the winter. And I have lived in Seattle for quite few years. The clouds get you down dude… It’s dark grey at night and light grey in the daytime. When the clouds clear in the winter it’s because you got an Alaskan Train bringing down supercooled clear air and the ground freezes down a foot or more.

    Back in 90s, during the course of one day, the weather changed from a SW rain to an Alaskan Train. The end result was water, snow and ice in that order. The entire NW from Vancouver to Redding hard froze. Now, this is a bit unusual, but the cold weather and grey, humid skies are the norm.

    So, no man… you’re drinking some serious Kool Aid to tell me that the gloomiest day in Seattle beat the sunniest day in Irvine. Either you lived in a dump in OC or you’re lying through your teeth.

    Been there, done that.

  49. tonye

    As a matter of fact, Hoodsports makes a very good Riesling. Chill it just a little.

    However, I prefer a Full Sail Golden Ale ( form Oregon to boot ) with my seafood.

  50. lendingmaestro

    sounds like ameriquest style to me. It wouldn’t surprise me if that occurred at CW. It’s so big, it’s bound to happen. When you have that much money, you can afford to pay congressmen and women to “look the other way.”

    Which brings me to another topic. The disusting two-faced politicians that received millions from banks and did nothing to enforce existing lending laws or create new ones. They came out smelling like roses then and they’ll probably come out smelling like roses after they bailout consumers.

    This should enrage you as a tax-paying citizen

  51. tonye

    My brother in law’s house has been on the market for four months.

    He’s house is impeccable, with all new appliances and finishes.

    The south facing location is on a hill overlooking the Fauntleroy Ferry, Vashon, Southworth, Kitsap County and the Olympics. He’s got a view that people would die for.

    To top it off, he’s got tons of equity and has priced the house to move.

    He’s always kept abreast of the RE.

    According to him, the market ain’t moving.

    Then, I got family all over King, Pierce and Kitsap counties. One of them is trying to sell her house and buy into Edmunds. Again…. the house is not selling.

    Now, I’m not talking about Federal Way or South Tacoma here…. I’m talking about really nice houses, with sellers that have room to move and are motivated because they want to buy a larger house elsewhere.

    The houses my friends and family own were already up into the 400K range back in 99. My friend in Redmonds.. well, he’s home was worth as much or more as mine, and is smaller. But, that’s Redmonds for you. Then there’s horse country with acreage that a cousin owns….

    Those homes are all in the jumbo loan range.

    The lore is correct. Back in 90, quite a few Californians moved to Seattle and jacked up the prices. I usually drive every summer, and for two summers in a row people yelled obscenities at us ( and some idiot in Tacoma threw full Bud cans at our car on Tacoma Way… the TPD showed up and I got a report taken). The weird thing is that some clown yelled “Californian go home” right down the street from my graduating High School in Silverdale.

    BTW… from my house I can see the mountains when it snows in the winter. And I have lived in Seattle for quite few years. You can not believe how often you can NOT see Mt. Raineer on an otherwise “sunny” day. Those clouds get you down dude… It’s dark grey at night and light grey in the daytime. When the clouds clear in the winter it’s because you got an Alaskan Train bringing down supercooled clear air and the ground freezes down a foot or more.

    Back in 90s, during the course of one day, the weather changed from a SW rain to an Alaskan Train. The end result was water, snow and ice in that order. The entire NW from Vancouver to Redding hard froze. Now, this is a bit unusual, but the cold weather and grey, humid skies are the norm.

    So, no man… you’re drinking some serious Kool Aid to tell me that the gloomiest day in Seattle beat the sunniest day in Irvine. Either you lived in a dump in OC or you’re lying through your teeth. I loved the day I finally moved from the Puget Sound (into a snowstorm no less) and drove my Vega GT into California.

    Been there, done that.

  52. Stupid

    “Social contract” implies you care more about other people than yourself. Which would therefore imply that you live below your means and donate regularly to charity …

  53. Sue

    IrvineRenter, your 20% down is starting to look like not enough…

    New York, California Metro Home Prices May Decline (Update1)

    http://www.bloomberg.com/apps/news?pid=20601109&sid=aMG3vdK3Qt2k&refer=home

    For those who need financing, it’s a different picture. Qualification standards at banks including Countrywide Financial Corp. in Calabasas, California, and Seattle-based Washington Mutual Inc. have become stricter for loans of more than $2.5 million even for buyers with down payments of 25 percent, said Suzanne Bach, senior vice president at New York-based mortgage broker Guardhill Financial Corp.

  54. Sue

    There’s nothing special about the 20% after all … didn’t it used to be 40% in the US long ago (I think it was before WWII, don’t remember if it was before the Great Depression)

    It’s still 40% down in Germany.

    http://seekingalpha.com/article/25314-comparing-mortgage-markets
    Germany: Borrowers have limited options and usually put down at least 40%. If they want to borrow more than 60%, they can take out a second mortgage for up to an additional 20% of value.

    The rates charged on first mortgages are only slightly higher than rates on government bonds with a similar maturity. But if the loans are paid off early, they are required to pay the lender all the interest they would have paid had the loan amortized through to maturity.

  55. Sue

    O.C. home deals drop 33% in 4 weeks
    http://lansner.freedomblogging.com/2007/09/10/oc-home-deals-drop-33-in-4-weeks

    Recent financial turmoil has slashed the number of shoppers willing to enter contracts to buy O.C. homes from their owners by 33% in just four weeks. New inventory stats from Steve Thomas at Re/Max Real Estate Services show 1,206 deals in the works as of last week, down 600 from four weeks ago, before nervous traders in financial markets made it hard to get riskier mortgages and far more expensive to get big-dollar home loans. This hints that future reports on completed home sales in coming months (DataQuick reports August’s final results this week) will show further weakness.

  56. Kirk

    That’s a popular misconception put forward by the liberal media. The standard Satanic contract taxes the goods/services received through a pay as you go progressive system. The contract also includes a “free” health care provision which is really the most disturbing part when you consider that you loose the freedom of choice.

  57. CrashHappy

    Interesting data from Sue’s link above. Wonder how accurate are these data. If this is true or even somewhere close to this, then things are correcting faster than I thought… and as someone above stated it’s the beginning of “the avalanche”

    Remember: What goes up must comes down. It is the law of nature. And the faster something goes up, the faster it will come down. Every action has a reaction that is of equal but opposite force.

    “take a look at some of these numbers from the MLS for resales priced up to $5,000,000 during the Aug 8 to Sept 7 time period:

    2007 $757,328 avg / 1,546 closed sales / 1,846avgsf / $410.25 per sf
    2006 $729,699 avg / 2,363 closed sales / 1,707avgsf / $427.47 per sf
    2005 $706,580 avg / 3,761 closed sales / 1,677avgsf / $421.34 per sf

    2003 $509,557 avg / 4,363 closed sales / 1,718avgsf $296.60 per sf

    1999 $279,171 avg / 3,237 closed sales / 1,726avgsf / $161.74 per sf

    sales really have plummeted, down 34.6% vs. 2006, down 58.9% vs 2005, down 64.6% vs 2003 and even down 52.5% vs. 1999.”

  58. Laura Louzader

    What a great find! I can’t believe this listing? Is that lot in San Diego worth anywhere near that price?

    And is that fire being investigated? Did the insurance co. pay?

    “motivated seller” indeed!

  59. Laura Louzader

    I think the developers and agents and mortgage hustlers are on Prozac.

    I read a very point-on blog post somewhere in which a commentor wrote a very fine piece in which he posited that a large factor in this bubble and others of recent years was the fact that many people in positions of power are taking pschotropic medication that may be causing them to be biased towards brainless optimism- that, in fact, most of our policy makers in the public and private sectors alike might be hopped up on something, and that their drug-heightened emotional state might be getting in the way of their objectivity and judgement.

    How else do they think that the population will absorb 20% yearly hikes in housing costs?

    If I find the blog link, I’ll post it. Thought I had it bookmarked but didn’t.

  60. slacker kate

    They are trying condos out here in flyover country too. Granted, for a few years there really was a need for upper-middle income low-maintenance 5-6 story housing downtown… but then they started building 10-story things at freeway intersections… not remotely pedestrian friendly.

    Then a year and a half ago they started building 20-30 story things downtown… went to the marketing schpiel for one where the first 6 stories were parking and there was an outdoor dog walking area on the 7th floor – not remotely pedestrian-friendly.

    Interestingly, they seem to want to appeal to hip young professionals from California. Somehow, I don’t think HYPfCs are going to want to plunk down 500K +condo fees for a 2BR – especially when the median for detached SFs is just under 200K (granted the hip areas are closer to 400K).

    BTW, when was the last time you saw a real loft – as in a high-ceilinged configure-your own space? All the new stuff is apartments with identical espresso-stained cabinets.

  61. Laura Louzader

    Bret, if what you are saying about the inner workings of Countrywide is true, there could be many indictments of their key people coming down in the months ahead, as thousands of disgruntled former Countrywide employees, armed with such paper evidence (bank and income statement templates, for example) decide to go public with it.

  62. Kirk

    If I’ve told you once I’ve told you once that that smear tactic doesn’t work.

    But, I’ll educate you on true socialism. This guy knows what he is talking about:

    “In fact, cutting interest rates will only encourage investors to borrow dollars at the lower rate and bring the cash to places like Europe.”

    Liberals who want the terrorists to win will of course abandon America and give to the French, because all they care about is money. I think we all know who the liberals are. Watch the documentary “Passion of the Christ” if you are uncertain. It’s killing two birds with one stone with these people. Christianity and Freedom.

  63. Lost Cause

    People pay good money for views. It makes sense for the sellers. I think empty nesters might like low maintenece condos too.

    But surely the wrong time to build.

  64. lg

    a few comments to this string…

    one reason why prices may not be falling as sharply as it will is that bank owned property (REO’s) are still on the market for near their original prices. it seems that most banks are not properly staffed to manage their assets such that many realtors who handle REO’s for banks are complaining that banks are slow to listen to realtor’s request for downward adjustments in price. for instance one realtor suggested that a bank reduce the list price of a particular property due to market changes and the bank took 2-3 months to respond at which point another price reduction was needed only for another long wait.

    another reason for the denial phase of many is that the media continues to feed homeowners’ perceptions that the current frenzy is only temporary. just this morning, the bloomberg ticker was flashing that Home Depot was expecting the housing market to rebound by mid-2008. i’m sure if they were asked why they felt this, there would be even more silence.

  65. Gray

    Some house investors seem to feel uncomfortable relying on a “social contract” to bail them out. Noticing, just like IrvineRenter did, that rents are too low to sustain their mortgages, they now rely on ‘social contacts’ instead to push up their ROI:
    Home Unsold, Mortgage Brokers Open Brothel
    http://www.cbsnews.com/stories/2007/09/10/business/realestate/main3246900.shtml

    Yup, even in the real estate business, entrepreneurship ain’t dead yet!
    πŸ˜€

  66. dvanngo

    Rod,
    Very nice move on your part, I have been a SoCal resident most of my life, but sadly I seen things turn for the worse, traffic, gangs, graffiti everywhere, immgration issue. Man, it’s a mess. Out of curiosity, where in Seattle have you moved to?

    I bought my house in 2002 and sold in 2006 and an unbelievable profit and I want to relocate somewhere nice to raise my 2 year of daughter, but not exactly sure where. Seattle was the first thing that my wife mentioned. Any info would appreciated. Thanks.

  67. carl

    CK,

    The funny thing is, where I live now, you would look like a complete ass if you rolled up to the Food Lion in a Porsche Boxster and waltzed in wearing your Jimmy Choos and carrying your Gucci bag.

    What is hilarious is my neighbor across the street is a Physician who used to live in Northpark and the lady I bought the house from has a BS from UCI! (I am a Turtle Rock refugee.. sniff). And we’re over 3000 miles away from Irvine. And I should mention none of us fit the plastic OC mold. I suppose that is why we bailed out.

    You can leave Irvine, but it never leaves you. I can’t wait to come home.

  68. carl

    Tonye,

    Umm… are you calling me a buffoon? LOL

    Carl

    DISCLOSURE:

    Portland, OR : 10 years
    Oakland, CA : 7 years
    Davis, CA : 10 years
    Irvine, CA : 3 years
    Cary, NC : 2 years

    nicest place to live? A toss up between Irvine and Davis.
    most value for money? 100% Cary, NC
    where do I want to live in the future? IRVINE

  69. carl

    Dvanngo,

    I lived in Portland, OR for 10 years. It has a very similar climate to Seattle. I would be very careful to make sure you and your wife can handle the climate. Some people can hang with it, some can’t. Just make sure you do some soul searching. It got me depressed to have the heavens spitting on me day after day after day.

    Other than that, let me tell you that the culture and walkability of Seattle is incredible. If you live in the right neighborhood, you can walk to everything (my sister lives in Seattle and doesn’t own a car).

    Seattle is in a bit of a delayed bubble as well. Not as serious in magnitude as the bubble in SoCal but it is real. Their market is just starting to seize up.

    Good luck with whatever you decide. I hope you find happiness.

    Carl

  70. diogenes

    Stupid, I wouldn’t trust someone who cares more about me than about his/her self. As the old Demoncrat Jim Wright from Texas used to say “we just want to hep you”.

  71. tonye

    Hmm… in the Broadmoor we don’t have that many Porsches. My neighbor (the splurger after both kids made it through college) went and bought a VeeDub SUV… but he’s the flashy one.

    Two of my friends/neighbors do have Benzes.. one has a very nice S500. But they’re not the norm, and besides those are SEDANS.

    My wife does have a Gucci watch that I bought here like 15 years ago before we had kids (the old DINK syndrome). I think it still works but she seldom wears it.

    My neighbor the (my) doctor, sold his WRX and got a Bimmer 540 (545?) station wagon. He’s got a lead foot… he used to own an SLP Firebird and a GSR in the past.

    Yes.. a lot of people play the stereotype based upon what they see in the apartment communities ( always the fanciest leased cars) and on some of the newer “Flatland” communities (I think that TRidge is also a “Flatland” community) where money was cheap and borrowed.

    By “Flatland”… I mean the book. Go look it up… It’s about a two dimensional world that can’t see the 3rd dimension.

    All of those buyers in 05 and 06 with their teaser rates were living in “Flatland”.

  72. tonye

    Typical Northern Californian attitude.

    IMHO, we should split California and make everything north of Gilroy and West of the I5 a colony of the South.

    In all of your life you’ve spent 3 years in Irvine. WooHoo! I lived in the NW for 6 years and I have been going up there year after year (including vacations) for 25 years.

    How’s that? I was living in the Puget Sound before you were out of kindergarten!

  73. tonye

    Their market in Seattle has seized up. Been seized since this summer.

    I talked to my brother in law last weekend.

    Their home has been on the market for three months now… a really well priced beautiful home with a breathtaking view and completely redone (my brother in law and sister have no kids, dual income and are fastidious) per the nicest Craftsman style.

    He’s decided to drop his price by 15% to generate interest. He’s got lots of equity and is moving because he wants to. In the beginning, he priced the house below all other comps and after several open houses they’ve had no offers yet.

  74. carl

    Diogenes,

    Chapel Hill is a nice town. Have you been to the Flying Burrito? It competes well with anything in California! yum that Flying Mayan!

  75. Stupid

    Mercer Island, a suburb of Seattle, has the best public schools. Alas, it’s also got some really pricy real estate to match.

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