Originally posted January 27, 2006
Address: 52 Tea Garden, Irvine, CA 92620 (Northwood)
Plan: 1600 sq ft – 3/3.5
MLS: S442227 DOM: 246
Sale History: 11/27/2004: $754,000
Price Reduced: 06/13/06 — $899,000 to $859,000
Price Reduced: 06/24/06 — $859,000 to $848,000
Price Reduced: 07/17/06 — $848,000 to $819,000
Current Price: $819,000
First, we’ll look at the flip. Here we’ve got a Plan 1 in the Serissa tract built by Lennar in the Village of Northwood. I believe this particular area of Northwood is called Northwood II and it consists of 4 neighborhood tracts that were built around 2003-2005 or so. This home was purchased from the builder for $754,000 in November 2004 (Phase 5). The private remarks on that listing were “This is a model leaseback opportunity. Rare to buy new home on the Irvine Ranch with no owner occupancy requirement. Builder will cover monthly PITI&HOA until the end of June 2005. 2% referral fee paid for escrow that closes no later than November 30, 2004. Please call with any questions, or come and see our beautiful models. Thank you!” I find it strange that the builder was advertising this on MLS at that time.
Lennar found a buyer who came up with a 20% down payment and took out a mortgage for 80%. This buyer purchased the home as an investment property. Perhaps he leased it back to Lennar for a few months. Then he found a new tenant (MLS S397784) to rent it for $2900/month starting in May 2005. I don’t know how $2900/month would cover a $600k mortgage + taxes + HOA. But those were good times and the property probably saw some huge appreciation (on paper).
Anyways, a year later (after the 12 month lease was up), this investor placed the home for sale in May 2006 (just in time for the peak summer buying season). The initial asking price was $899,000. That would give him a nice $150k profit (excluding commissions). Unfortunately for him, the market did not like that price. After a few price reductions during the summer (the investor knew he needed to find a GF that summer), the price stabilized at $819,000. Soo.. for the last 6 months the price hasn’t changed. Why not? Maybe he doesn’t want to lose money on the sale. Perhaps he thinks he’ll wait out the downturn and in the meanwhile just bleed a little money since the unit is rented out.
The private remarks on the current listing state: “VEry VEry MOtivated SELLER!!! REduCEd THe PRICE , REduCed And REduCEd, Now offering 3.5%, yes 3.5% to the buyers’ agent. SHOWS like a model!. MOTIVATED agents.” If sold at the $819,000 asking price and assuming 7% in selling costs, this investor stands to make a whopping $7,000 profit!
Here’s the competition in the Serissa tract:
- 48 Bamboo – Plan 1 – $798,000
- 37 Wonderland – Plan 1 – $789,000 (Thanks EvaLSeraphim!)
- 45 Bamboo – Plan 2 – $819,000
- 47 Secret Garden – Plan 2 – $849,800
- 43 Secret Garden – Plan 2 – $849,000
- 68 Shadowplay – Plan 2 – $869,000
- 62 Shadowplay – Plan 2 – $879,000
Unless there’s a considerable difference in upgrades or location, our seller will have to adjust the price at least once more. It gets better (or worse)… Thanks to IRVINITEEE, I learned that the Serissa tract is pretty much the same as the La Casella tract in Woodbury. La Casella has just started to sell their homes and from what has been gathered in the thread, the Plan 1’s that just sold started around $690k. That is $130,000 LESS than what our featured seller is trying to unload 52 Tea Garden for.
How will the La Casella sales affect the appraisal values for Serissa? Anyone hear the sounds of instant equity evaporation?! Lennar has priced Phase 1 of La Casella in Woodbury (a full Village with a ton of amenities) in January 2007 to be lower than Phase 5 of Serissa in Northwood II which was sold in November 2004! (I am comparing $690k to $754k) As has been stated before, the builders are going to do whatever it takes to move their product.
UPDATE #1 – February 2, 2007
Thanks to a tip from EvaLSeraphim in the comments, I’ve learned that this property has been relisted.
MLS #: S473840
The asking price is now $799,000. With 6% in selling costs, the seller will be about $3,000 in the hole. Will a $20k reduction in price help sell this place? I doubt it. But only time will tell.
UPDATE #2 – December 28, 2007
52 Tea Garden is still on the market (it’s been on the market under various MLS listings since May 2006). Here’s the latest listing: S494270
The new asking price is $759,000 which is about the same as what the investor purchased it from the builder for in November 2004. It’s yet another example of a seller chasing the market down. Had this property been priced at $759k in May 2006 it probably would have been sold.
Here’s what happened to the other properties in the original post:
And here are a few other properties that are on the market in the Serissa tract:
27 Wonderland (short sale) and 61 Wonderland are definitely going to make it harder for the rest of the sellers in the tract.
Ooooh! Great work! That’s an even better story than I expected. What’s funny is that when La Casella opened (but before they had pricing), the sales ladies were telling us that Plan 1 would start around $750,000. They were the ones who told us that they were the same as Serissa. Based on that, we thought we might find a “pre-owned” Serissa for less. Shockingly, that was not the case, and I’ve been watching two of these ever since (as they just sit, and sit, and sit).
—–
How the heck will flippers compete when the builder can just cut their profits in half and drop back to normal profit margins? Not to mention your more current post about Lennar squeezing contractors.
With land writeoffs, etc. Builders should have no problem cutting prices 30%. Oh, they’re report losses… yawn. The slide has begun.
Got popcorn?
Neil
Interesting how the original pricing from November 2004 is 65,000 higher than the price at Woodbury is currently. That would put prices lower than they were almost two and half years ago! Wow.
We toured La Casella 2 weeks ago and I remember the $694K for plan 1. Seemed unusually low for other similar square footage in Woodbury. It appeared they were more serious about selling.
Good research on comparable Serissa. The original asking price was a pipe dream.
Looks like this just got de-listed and re-listed. MLS # S473840
Cool! I’ll update the post 🙂
Nice piece of detective work!
Great, another in denial flipper. Think about the psychology that goes on behind here:
“Well, I’ll just drop the price until I break even.” What do you think is going to happen when they reach the pivotal -0- breakeven point? Ooo, that is when the fun will begin. This is the spring and summer stalemate. Sellers will lower until they hit their breakeven point but the problem will be that the market will want it lower. They want the buyer to say “uncle.”
Guess what happens after that?
Dr. Housing Bubble
Dude, where was your blog earlier today?
I just wanted to add that I “was” interested in the one story plan at La Casella after the price drops. I had been visiting the sales office during the week when nobody is touring the homes. Recently I stopped by on a Sunday afternoon when a few people were touring the units. I decided to spend some time sitting in the family room to get a feel for the place. As I sat there, I heard something disturbing. When someone walked up the stairs in the the adjoing unit (on the left side), you could hear them. I though perhaps it was kids jumping or something else so I had my 110 lb. wife walk up and down the stairs next door in a normal manner and to see if I heard the same noise and I did. So we switched and I had my wife sit and I walked my 210. lb body up and down the stairs in a normal manner and she said it was pretty loud. That was a deal breaker for me! I can only imagine having someone next door with kids or who likes to run up and down their stairs and have it shake my kitchen wall. We are now only considering detached condos/homes. If you are considering one of these, I recommed you try the same test to see if you are comfortable with the noise.
What does it mean by one level living with the photo showing 2 story structure? Does it mean that another unit is either above you or below you? In addition, the unit has two neighbors left and right?
If so, this unit is indeed in bigger trouble than the owner realizes.
27 Woodland has an asking price of $315/sf with generous Plan 2. I wonder why it has not sold yet? Are there many other homes listed at about this $315/sf level?
Why would anyone pay such ridiculous prices for attached housing when there are detached homes available for less? Do some people actually enjoy listening to their neighbors make noise? These are basically apartments and they should be selling for $200,000 max.! People still just don’t get how far out of whack this market is.
what happens when the seller owns 3 or 4 of these and bankruptcy creeps in?
the only way to get back to fundamental pricing is for the banks to take ownership. even then, they become the flippers, they will sit on the properties for a while….. but as the properties pile up on their balance sheet eventually banks will act like builders.
When the banks begin liquidation the real fun will begin.
People place such a premium on living in Irvine then end up listening to their neighbors bedsprings go squeaky squeaky? I don’t think so. After having lived in apartments in my younger years I wasn’t about to listen to that anymore when I moved to Irvine. Sure, my detached home was in need a bit of work, but it was better than listening to my neighbors moaning through the wall!
This home would have to rent for $5110 to barely justify the price of $819K.
Would it? I don’t live in your area, so I don’t have a handle on the current rental market there.
However, if it would rent for only $2900 in 2004, then would it rent for, say, $3200 now? That would be a rent hike of about 9% over 2004 rents, and that would give us a price of $512,000 for this place, if you multiply rents by 160, the max multiplier, since this is a new home with all the amenities.
Investors will be doing things strictly by the numbers from here forward, as they do in any normal market.
And that’s what is happening- the market is reverting to something resembling normality.
Yes, Steve — they are attached but they are not like apartments. Do you live in Irvine, Steve? If so, I implore you to please wait until this home drops to $200k (and a SFR drops to around $300k?) because thats where they should be in Irvine, right?
If you do wait until the price points you think “should” be, you’ll be one less joker in my way when I buy around the time this gets to $400k and a SFR gets to $500k.
$200K max? That would mean this place had a rent of $1300 or so… Good luck sucker. Never ever gonna happen.
1585 sq ft for 759k. This has to be a joke.
ipop, hurry up, this one wont last.
About $9500 per year in prop tax for this little condo.
$250 per month in assoc dues.
Dont play your radio too loud, you might piss off your neighbor.
At $500K its a good investment property. If they’d sell it to me for that much, I’d jump on it…
You first. 😉
I had a friend who would have jumped at these at $650k a year ago. Thanks to his lurking on this blog… this type of property might interest him at $450k today. He’ll buy in ~2011.
Generally the floor on prices is a 7% ROI, buying with a 15 year fixed. That puts a floor on the prices at about $250k.
So somewhere between $250k and $350k will be the bottom.
Thanks for the updates! I’ll send this link to my friend.
We have at least two more years of decline. Decline at a faster rate. We haven’t seen motivated… yet. 😉 As I noted above, the builders have more room to cut.
Note: My prices assume an attached garage.
Got popcorn?
Neil
That sucks, it’s a big draw back having attached properties. My house is not attached, I’ve got a small backyard, and one side yard. I wish I had two side yards like a traditional plan because my neighbors kids use the side of my house as a basketball court and the noise wakes me up in the morning. My place is in Westpark.
Have you ever rented a condo? I have, lets see how far that $1300 will go…
Take out $250 for association dues.. $1150
Take out $300 for property taxes… $850
Take out $70 for insurance… $780
Take out $30 for upkeep… $750
Now how much mortgage can you buy with $750/month, and figure it at 6.4 – 7%
This puppy will not pay the bills if you buy at 500K
I wouldn’t pay over 350K for this place. That’s what it’s worth to me.
Depends where you think rents are going long term. I didn’t understand the bubble prices and I don’t understand how the economy is supporting current rents.
Long term, my bet is that this property will rent in the range of $1800-$2200/month. Sorry Ipoplaya, most people only make so much money, you can’t squeeze blood out of a turnup.
A rent of 2000 x 160 comes in at $320K. Thats where I would guess long term support level is.
Crashes overshoot support levels at the bottom so my prediction is as low as $260 at bottom in 09, comming back to the low 3’s by 20011-12.
It’s great when everyone comes here and posts what they think a house should cost because its what they would pay. Personally, I wouldn’t pay anything over $0 for this because it’s not what I want. But does that mean it’s worth $0 just because I would not pay it? No!!
My belief is that Irvine will bottom at $250/sq ft or about $450k in 2010 or 2011. I don’t base this on what I think it “should” cost, or what I would pay — but based on a buildup of inflation over the last 10 years. In 1998, the median sales price for a SFR in Irvine was $310k. At 4% per year, that would mean the median “should be” $434k in 2008, and $459k in 2010. Now, this townhouse is not quite median — but it is certainly not a 1972 piece of crap either. This is NOT going to fall to $200k, and $350k is a stretch. $400k – $450k is probably it, folks. I would still not pay anything for it, but what I would pay does not mean anything to the guy who will pay that, does it? Wishing for $200k is just as silly as the fool wishing someone will buy it for $800k, let’s be more realistic than that.
Huh? Alan, if you don’t ‘get’ rent, theres nothing any of us can do to explain to you why your wishful thinking is crazy.
There is no ‘bubble’ for rent. It is a result of an efficient market for housing, not a result of investors playing with tricky loans.
Check the Irvine Apartment website and show me where you can rent a place 2/3rds this size for $2200. You wont find anything close.
I think 2900 to rent this place is about right. Rents will come down a smattering, because people will rent their houses for survival to survive while they are in denial about the loss of their equity, but you will also have more renters then buyers in this market too.
And ipoplaya, THANK YOU for continuing to be the voice of reason. I have as much (if not more) incentive than anyone to hope for a huge crash, as I currently don’t have property and have a fair amount of cash. But I want to come up with a reasonable and realistic forecast of where things are going.
I just think its ridiculous and defeats the point of this blog when people like Alan leave reality and just start fantasizing.
Anybody know why the linked page lists a 7/22/05 sale for $919,000 – doesn’t seem to correspond to the property taxes or the price history of this property.
I hear ya former_irvine_resident: we have a neighbor like that but lately the boinking has quited down. Good thing it was so loud it would wake me up usually around 12:30-1am.
FYI,
This is the same investor that purchased all of the Cantara models from Lennar last year. They are all short sales and all in escrow.
Interesting. Those Cantara models were nice. Of course, they were priced a bit high for my taste.
“But I want to come up with a reasonable and realistic forecast of where things are going.”
I’m right there with you 25w100k+. Unfortunately, some commenters don’t use reason and realistic facts. A lot of things could happen. Residential Irvine real estate could depreciate 60%. But let’s try to focus on the most likely forecast according to the facts we know today.
Oh, sorry I got your gourd up but I beg to differ.
While there may be some places in Irvine that command higher rents, several posters conclusivly showed that plenty of rentals could be found for a lot lower than $2900/month which I consider a WTF rent for Irvine.
With 1 in 8 jobs in CA related to real estate which is in the tank, I think you will end up seeing for yourself where rents end up going.
Again Alan, you fail to read the posts… It’s almost uncanny how you can skip through information, pull out something irrelevant, and then take the time to post about it.
This place rents for $2900, not $1300.
Take out $250 for association dues.. $2650
Take out $300 for property taxes… $2350
Take out $70 for insurance… $2280
Take out $30 for upkeep… $2250
$400K mortgage, 6.5% 30-year fixed I/O, payment is $2166. It would be cashflow positive today at a price of $500K.
Needs to go a little lower though to generate enough ROI to make the investment worthwhile… $450K would be a good price for it. It would throw off $300 in positive cashflow or about a 6% ROI.
If rents go down, of course it’s not worth $450K. They stay the same or tick up, assuming this mortgage rate environment, the place bottoms in the $450-500K range.
If we overshoot the bottom I’d think investors might need a 10% ROI to start pulling the trigger en masse. That would put this down around $400K, again assuming the current rent and mortgage rate environment.
And what exactly will be the catalyst for a near 30% drop in market rents? I would think it would take an economic depression for that to occur… Please enlighten us.
Here’s one take on where rents are going:
http://lansner.freedomblogging.com/2007/12/28/oc-rents-eyed-at-3-hikes-for-08/
Where do you get the 1 in 8 jobs in CA are related to real estate? I assume you are saying that 12.5% of CA jobs are related to RESIDENTIAL real estate because that is the only thing that is in the tank…
If you want to know about jobs on the commercial side of real estate, just drive around Irvine and count up the number of office buildings, strip malls, etc. that are being built. It’ll take more than your fingers and toes for sure.
That’s the statistic for CA… construction, lending, selling residential & comercial account for 1 in 8 jobs in CA. Lending is more concentrated in OC, hence increased job loss as mortgage co’s close.
Or did you think that Disneyland, Toshiba and Broadcom paid all the bills.
Based on this, I can’t see 1 out of every 8 CA jobs has anything to do with real estate:
http://www.lao.ca.gov/2004/cal_facts/2004_calfacts_econ.htm
At least half of CA jobs are in trade, transportation, utilities, government, education, and health, i.e. nothing to do with real estate. The entire professional and business services sector, which can’t account for much more than 15% of the total jobs, would pretty much have to be all real estate related for your stats to be correct…
Where is the statistic? Let’s see it. Sure looks like you are just making it up…
I put little faith in companies and CEOs that quote 10 years of bubble history. Why only ten? Because the company formed in 1994.
San Diego is already down 5% yoy. Last cycle rents decreased.
Will rents decrease 30%, doubful. How much, who knows. How much of the rent increase since 1998 has been due to rentals and homes being taken off the market.
Wait a second…
if you look at the Redfin sales history for 52 Tea Garden you will see that the seller paid 919k in July 2005.
or am I reading something wrong?
This is shoddy construction, period. Builders know how to effectively soundproof multifamily properties and have for 50 years. There are numerous large buildings in this city of high quality, built in the late40s through the 60s, where no sound passes between apartments.
The biggest injury of the housing mania just may be the massive number of houses and condos of extraordinarily shoddy construction foisted upon us during this period in which people would buy absolutely anything with 4 walls and roof.
In my city, that formerly had very tight building codes, we are stuck with thousands of houses and condo units of horrendous quality. A new condo building with units priced at $1,000,000 in Bucktown had to be vacated immediately when the residents, noticing that the floors were seperating from the walls, called in an engineer to take a look and were told that their safety could not be assured and that they should vacate immediately- that very day. These people will be in the courts for years while they pay $4000, $5000 a month on mortgages for places they can’t live in or sell. If they walk, they destroy their credit forever and some will lose substantial downpayments (though not many- even some $1MM apts were sold with no down payment)
Near me, an illegal conversion sits half vacant while the lower-middle-income residents fight in court to get the developer to pay the $400K or so in assessments he owes for the units he owns. He is also the board president, and did not pay the utility bills, causing the building to be without heat or water in the middle of a Chicago winter. This is an 80-year-old former rental delivered to the condo buyers totally unimproved and in shabby condition. But the worst part is that these people found out that they do not even really own the place, as the conversion is illegal. Many have defaulted. Others are fighting in out in court at great expense.
There was so much of this all over the country. The number of badly constructed or rehabbed housing units with major defects is staggering everywhere, because during the boom, buyers bought anything, routinely waived inspections (which you should NEVER do even for a new place), and in general threw normal buyer’s caution to the wind. Meanwhile, the city completly discarded the building codes, let politically-connected developers slide on the codes, and in general did nothing to ensure that newly constructed or developed dwellings were minamally safe and habitable. Appraisals and inspections were unspeakably corrupt.
So, in the future in which you want to buy and see places at an acceptable price, you might want to be really leery of anything built in the past 6 years.
I guess Alan must think that renters are cashing out on their HELOCs that they don’t have to pay the rent every month…
The asking rents believed to be market by suckers/flippers on this blog kill me. I rent in Westpark a nice 4bed 2 1/2 bath 2400 sq foot home with a sizable yard (by Irvine standards) for 3K a month.
I would never rent inland of the 5 (once I pass over the 5, I figure I might as well be in Corona). But if I did, there is no chance that I would pay $2900 for this apartment-by-another-name.
Read the LA Times today (yes I know that might be highbrow for a lot of you here but give it a try). There was the next horror on the horizon: auto loans that have been securitized and sold are soon to default in big numbers.
Orange County has been living on credit cards for over a decade. What you think of as “normal” is smoke and mirrors. Anybody can look prosperous if you lend them buckets of money to spend. There is hell to pay soon and this is obvious for any sane sober observer. There can only be one outcome when you have lived beyond your means: a drop in living standards. So stuff it with this bullshit about this BFE apartment being “worth” 2900 a month, you folks are dreaming.
Here is my catchphrase for 2008: put your hands on the granite countertop and STEP AWAY from that mortgage!!
I owned two condo’s on PCH in HB built in the 89-90. (picked up the second in a foreclosure auction for a song in 94). Both associations ended up sueing for building defects, as did most of the other buildings. In one building, believe it or not, the builder cut corners by skipping the sound proofing cement pour between the second and third floors!. City inspectors are either lazy, corrupt or both. I’ll bet this is happening all over So Cal (e.g. Mike Carona).
Should be lots of work for attorneys soon.
It rents for what it rents for professor shiny. Just because you elect not to pay a premium for Woodbury doesn’t mean others don’t. What amazes me is how narrow-minded people like you think your opinion is somehow what makes a market. Not everyone thinks like you… Votes are cast with dollars. I personally wouldn’t pay to buy or rent the craphole you have in Westpark, but that doesn’t mean it doesn’t have value.
MLS tells the tale. There are similar sized places to this in West Irvine and Northpark (1600sf 3/2 condos) renting for $2500-2700 so $2900 is a very real possibility today for this since its in Woodbury and people are still paying a premium to live there.
You’re right, I for one don’t read the Times. Not enough time in the day after I finish my WSJ and the OC Biz Journal… Those are a little more my simple-minded speed given my meager undergrad in Econ, Masters in Business, and 15 years of work experience in finance.
Totally off topic…
What’s with the names of all these streets? Shadowplay? Secret Garden? Wonderland?
Did some developer ask his 5 year old to start naming streets?
We’re at the start of a bubble burst. What the market will bear today is significantly different from what the market will bear tomorrow. This is true for both rents and list prices.
It’s difficult to predict where the real estate market in south OC will be a month, a year, or a few years from now. But one thing seems pretty certain: it’s got a long way to fall. Given that, I think it’s unwise to even consider a purchase until the market shows initial signs of stability. Real estate bubbles have a tendency to let their air out slowly over a multi-year period.
Rents are also going to undergo a shake-up. Foreclosures, increased inventory, tightness in the credit market, retirement of the baby boomers, prospects of slow economic growth, and other factors will create significant forces in the rental market. Some of these forces will act to push rents up, and some will act to push them down. But the bulk of them appear to be lining up on the down side.
Business school eh… I suppose you forgot the part where you learned about fundamentals e.g. blood & turnups.
Take a family making making somewhere a little below the median income for Irvine 80K which is still pretty good. Everyone in So Cal thinks there worth more but thats pretty good. Thats 6.7K/month before taxes.
3K/month for rent means that a family making a good income, still has to spend nearly 50% of their pre-tax income on rent.
This place is a an apartment for MIDDLE CLASS WORKING people. Everyone’s been overextending themselves for years and now the partys over.
That’s why I don’t see how these WTF rents of $2900 are sustainable long term for a “nice” but not GREAT suburb.
That’s OK
MBA types like Mr IPO sucked my butt into the tech bubble just before the burst.
An MBA doesn’t mean squato unless you need it for your job.
Does Mr. Buffett have an MBA? He’s about the only one I trust.
ipoplaya reminds me of truthiness/Jimmy on the lansner blog. the comparable-to-mine house across the street from me sold for 900K 10 months back but good ol’ truthy/playa deems it a “craphole.” OK. You got me. Ouch! The asking prices in the MLS for rent are comparable to the wishing prices for sale: they are not lease-signed rates. just as the wishing prices for sale do not represent the market value of those homes. moreover, such rates are always higher than those advertised privately because of the one-month-rent (or higher) commission charged by the realtor.
bottom line is that households such as mine that can comfortably handle 3K rents are not a dime-a-dozen in Irvine. Irvine is not Newport, it is just middle class.
my prediction for 2008 and beyond: we will come to find out that 2002 housing prices for Irvine were bubbly themselves. the tie to real estate for the OC economy is very deep. All my in-laws and assorted friends/acquaintances worked in some capacity in real estate. All are in deep doo-doo now. And the real estate workers were absolutely at the front of the pack in investing/buying additional real estate. Leverage works both ways, up and down. yes, the “loss” on the downside need never be realized if you are not forced to sell, but these folks all lost their (formerly-high paying) jobs with no replacements on the horizon. here is my Gary Watts crystal ball: I see forced sales/foreclosure a plenty in OC as 2008 grinds on.
Not only did they double down on real estate, my observations of my mortgage/agents/brokers/title/whatever friends and relatives is that they spent disproportionately on everything: H2s, X5s, Range Rover sports/vacations/HDTV big screens, you name it. All that spending has produced a thriving economy in OC that is turning into a imploding souffle: implosion because there is no more easy money.
c’mon now Alan, good ol’ Truthy/Playa has an undergrad in econ so he knows better. and he reads the MLS so he knows that baby is gonna rent for 2900 — wishing prices don’t lie, do they?
regardless of whether one is inland of the 5 (c’mon, you deserve better) or not, Irvine suffers from the following: one cannot plan community, a community is organic. It is like planning evolution, it doesn’t go down that way (oh, sorry, it is Sunday, let me clarify in that evolution could never be human-designed). All of Irvine suffers from this flaw: an obnoxious plastic feeling. you can just see Bren and his cronies choosing the salmon tile, whatever, layout of the streets, etc. It is so fake to me.
whatever you want to say about Newport, Corona del Mar, and Laguna, these gems have community as compared to Irvine. Been there and did that. but the rents be a bit too much there for 4 bedrooms (I could swing 3) for poor Shiny, thus I am exiled to Irvine. I am an economic refugee!
You should have ridden the tech bubble while it was inflating Alan. Such easy money… I paid off my car, all my credit cards, saved for a down on my house, and banked six figures, all from 1998-1999. It was indeed a special time.
In case you didn’t realize it shiny, MLS shows CLOSED leases, i.e. it shows houses and the prices they leased for, just like it does with sales… If you think a “wish” price is the price renters are currently paying on properties somehow, well then by all means keep using the term backwards. What I am talking about are recently leased units.
Let me give you some recent examples from MLS professor:
8 Bonsall in NK, that means Northpark in MLS terms, an attached 3/2.5, 1510sf built in 2002. Currently leasing for $2750. Days on the market you ask? Try 18… Boy it took them long to get that $2750 price huh?
How about 62 Salton, another Northpark unit, attached as well, 1646sf 3/2.5 leased for $2600. Hum, how long was it on the market for? 14 whole days… Man they must have really been sweating out that wait!
So here we have two similar sized properties in NP, with an average rent rate of $2675. Took both of them less than three weeks to find those tenants. You really think it would be that much of a “wish” to find someone to pay a couple of hundred more for a similar unit in Woodbury? Woodbury is IUSD vs. TUSD, so there is a premium there. Woodbury has a brand new elementary school in walking distance of this unit, again little premium there. Woodbury has umpty-two parks, a bunch of pools, a kids water park, etc. etc. so a little premium for all that. Get the drift?
Again, just because you or I won’t spend close to $3K on a mid-sized 3/2 in a newer area of Irvine doesn’t mean that others won’t. Obviously that could change, but it is what is happening today.
“Take a family making making somewhere a little below the median income for Irvine 80K which is still pretty good. Everyone in So Cal thinks there worth more but thats pretty good. Thats 6.7K/month before taxes.”
Wrong. The median income for a family is $103,600 according to wikipedia.
shiny,
you hit the nail on the head
ipoplaya – I recommend giving up arguing with this new crowd of posters who all state asinine prices with nothing to back it up other than the fact that everyone in Irvine is fake and lives on CCs.
To the rest of you guys, look back into the archives and you can see guys like ipoplaya have been posting for a long time. Referring to everyone who is trying to gauge a realistic bottom as truthy or an RE mole is simply dumb.
I know I said to give up arguing but I can’t help it. It kills me that this blog has suddenly become a place for people to post their fairy tale price vs. the intelligent discussion that used to happen. For those that believe rents will truly fall down dramatically, please provide the reasoning behind this. Regardless of what a family *should* afford, people seem to keep renting out here and many IAC buildings are full. At least mine is and avg. 2b rent in my property is $1800+.
Based on everything I have read, I believe rents will fall a little from the increase of rental properties but not by much. One has to remember that many people who are trying to sell right now can’t afford taking in low rents as they can’t cover the difference. Also, the foreclosures won’t turn into rentals as banks are not in the landlording business. Finally, the new folks foreclosed upon will need a place to live as well. Hence, there simply won’t be a widespread rent decrease.
And on another point, people keep using median incomes to justify what people should pay for. Is the property here the median property in Irvine? I don’t know but please think about this a little before just posting blindly. Irvine is quite large with multiple neighborhoods. Though the median is around $100K (stop quoting $80’s as its simply not true), the distribution can be quite large. Perhaps the folks looking into Woodbury are all joint income familes with $150K+ and perhaps everyone looking at another neighborhood are all old folks with $0 income.
My point is that we need to be a little more intelligent about our analysis. All of us are on the same side. We know prices have to come down. The best we can do is work together to make sense of this crash and try to predict as best as possible when it will bottom out.
I wanted to stop typing but I guess after avoiding the IHB comments section for 7 days, I have a lot on my mind 🙂 So just one more thing for all of you with crazy wishing prices to think about. One of the points that many of you state is rent to income ratio. I have stated the following before and have been lambasted and called an RE mole so please refrain from that and instead, explain to me why my argument is flawed. Ok here goes: the problem with the rent to income or even mortgage to income ratio is that it is just a percentage but doesn’t actually take into consideration the amount left to spend. That is, everyone freaks out when they hear that someone’s rent is 50% of their take home but that 50% is very different if the persons take home is $50K or if its $100K. In the former, the person only has $2000+ a month to live on while in the latter, they have $4000+. Regardless of what their ratio is, without looking at the total income and how much they actually have to live in, its a meaningless number. One of the commenters above mentioned that this is a median property for a median family. Though I disagree with that, lets say it is and lets use the real median income of $100K and assume family of 4. After tax, they have about $6000+ per month. With the $2900 rent, they have a 50% rent to take home income ratio!!! But wait, they still have $3000+ left per month which is plenty and should easily accommodate a family of 4.
My recommendation is to come up with better metrics than what the RE industry has devised for us. We should create average monthly spends for a family of 4, subtract it from the expected income for this family, and then compare the debt ratio.
Ok enough typing for one post…I guess I am back to being an IHB regular commenter…
yes, lets just dedicate the blog to ipop and rkp so they can stroke each other as being the IHB sages for chrissakes. the bottom line is that Irvine is just a middle class suburb but you all think it is something holy for reasons that baffle me.
based upon the rent I currently pay for a nice 4 bedroom 2400 sq. ft place in westpark (which ipop deems a “craphole,” isn’t that professional) I know these “MLS” prices are bullshit. let me see those leases, they are NOT PUBLIC RECORD LIKE MORTGAGES so they are just playing games with wishing prices. but you fucking morons take it as gospel.
and the other thing that kills me about these blogs is the pinheads who become possessive of the comment section as they have some property right in it: “giving up arguing with this new crowd of posters.” I ain’t new, I have posted under an assortment of names on this blog since its inception. You a-holes are junior in seniority to me in that regard.
and I have facts to support my argument, I am paying a lease that bolsters what i say.
BTW ipop, if you want facts, here you go:
The only leases normally recorded are commercial leases where there are purchase options, leasehold improvements, leasehold mortgages, subrogations of lenders, & similarly complex and expensive provisions.
nobody records Irvine house leases, they are private deals. Don’t you suppose they would lie on the MLS, they have a VESTED interest in doing so because lease rates are how they get commissions.
LOL, you are funny shiny. Your landloard’s HOA must get a lot of complaints about that tin foil on your windows…
You’re right rkp, just a waste of energy on some. Some just choose to ignore facts, figures, reality for the sake of their own personal opinions. Maybe it’s a personal validation thing? I don’t know, too irrevelant to spend any cycles on.
For people like shiny, living in his shiny-centric universe, the bottom will come and have gone before he realizes it’s all not a grand conspiracy to cheat and defraud him… I can just see it now, “Let me see those purchase contracts, they must be lies! Lies I tell you!!!”
k.o.: I assume you are agreeing with how god-awful plastic Irvine is.
I have thought about it more: planning communities to the degree that Irvine has is about as successful in creating an organic, thriving community as the Soviets were in planning an economy. You can’t plan either, they are best left to the market.
so when you do, you are left with the wasteland that Irvine has become. Mile after mile of nauseating sameness, salmon tiles, etc. There is no there there.
go and live in Corona del Mar, Newport, or Laguna. Setting aside their considerable physical charms over Irvine, they are real communities. there is a charm to Corona del Mar that you cannot create in a corporate boardroom of the Irvine Co. it is alive, I love that place. But i am stuck in hellish Irvine (divorce can do that to you).
on the contrary, my home shines over my neighbors (beautiful new luxury SUV in the driveway, thanks to all the moolah i save by renting). Look at the owner across from me: two shit-boxes in his driveway. We’re talking hyundai and worse. faded paint to boot. nasty.
In any case, go ahead and read the MLS and daydream about the riches you can earn renting Irvine property, your future flips, etc. Time will tell which one of us is right but I confident which one it is.
plus my yard is better than my neighbors: although we have a gardener, I make sure the yard is green and thriving (Midwestern upbringing). My immigrant neighbors were not raised in suburbia like I was so yardwork is rather foreign to them.
ipop: you have no facts, just what the MLS says. I, on the other hand, have a lease that I pay every month that is 3k. And my income starts with that number as well so i know that there are relatively few Irvinites in my income bracket yet you tout this 1600 sq. ft smallish place as worth 2900.
ipop: your bull-horns are showing, already talking of a “bottom.” guess what, just like it was different this time on the way up, so it will be on the way down.
come back in 12 months and we will see if you get your bottom. the only place you are getting bottom in 2008 is in a gay bar.
Ok professor, whatever you say… I’m sure people on this blog take your “since shiny rents 2400sf for $3,000 in Irvine, no one rents anywhere in Irvine for more than that” argument for about all that it is worth. I wouldn’t even know where to start trying to plug all the holes in your reasoning or lack thereof so just keep on posting brutha. You’re doing a good enough job for me.
One thing you might want to consider, I know it’s tough, but stay with me here… You’ve got neighbors with beater cars across the street and others that don’t keep up their yards. Ever consider that your rent is low as compared to the rest of Irvine given these factors? If you rent on an eyesore of a street, you get a better deal. Simple supply and demand.
Whoa there, making too much sense am I? I’ll stop now. Don’t want to burst your bubble.
the “eyesore” with the beater cars was recently purchased for 900K. I told you that before but whatever. My point being that the section of Westpark i live in contains no “crapholes” whatsoever. the home kitty-corner to me sold for over a million just recently as well. two doctors. All to immigrants who don’t have the green thumb that I do. But that doesn’t mean the homes are “crapholes,” far from it.
my further point being that I am renting a 900K home (OK, the poor neighbor bought at the peak, maybe it has dropped 100K since) for 3k per month. But you posit that 1600 sq. ft apartment will rent for $2900. You gotta remember: swinging a 3K rent is far different from paying a 3K mortgage. I get no writeoffs, that 3K at my tax bracket needs nearly 6K of gross income.
there ain’t that many irvinites who can handle such a load. and if they can, why live in a 1600 sq. ft. box?
Hey professor, the place you are posting about sold for over $900K at peak too.
Hum, similar sale prices at similar times and yet in shiny mind, the rents couldn’t possibly be similar. You are truly a great thinker my man, NOT.
ipop: Having just visited Woodbury, I find your bullish touting of a $2900 rent for a 1600 sq ft place that much more laughable.
Whereas West Park has large homes on relatively large lots (by Irvine stds), Woodbury represents the post-industrial Irvine: what appear to be condos/apts all crushed together. But whats worse is how far it is — you might as well keep driving to Foothill Ranch once you get to Woodbury. Since i was invited to a party, I looked around the unit: the “modern” smashed floorplan that tries to hide the smallness through multi-levels. even had the troll closet that used the triangular space under the stairs — who could use such a closet without bashing their heads unless you are under 5 ft tall? reminded me very much of Ladera Ranch, another bubble disaster now imploding.
This bubble has really amazed me: jackasses like ipop think $2900 is market for a 1600 sq ft. closet. You are gonna find out just how wrong you are.
Market is whatever people are willing to pay for it. The only gauge of what the market is at a given time are transactions.
I know people that paid $1.25M for a 2900sf Lennar home on a small lot in Villa Rosa. Did I and do I think they are crazy, yes? Did my opinion at the time have anything to do with the market, no? People were lining up to pay that much in Woodbury at the time so their price was market. I told them to keep their smaller place in my neighborhood, wait it out, the fall was coming, but they had their reasons I guess.
Maybe some people don’t like yards? Maybe they feel comforted by density? Who the hell knows why they pay a premium to rent or buy in such places in Woodbury or Northpark… I totally agree with you that the places are closets, but that doesn’t change the market. If enough people thought like you, Woodbury would rent for less per sf than Westpark. That’s how markets work.