To everything (turn, turn, turn)

There is a season (turn, turn, turn)

And a time for every purpose, under heaven

A time to be born, a time to die

A time to plant, a time to reap

A time to kill, a time to heal

A time to laugh, a time to weep

A time to build up,a time to break down

A time to dance, a time to mourn

A time to cast away stones, a time to gather stones together

A time of love, a time of hate

A time of war, a time of peace

A time you may embrace, a time to refrain from embracing

A time to gain, a time to lose

A time to rend, a time to sew

A time to love, a time to hate

A time for peace, I swear its not too late

To everything (turn, turn, turn)

There is a season (turn, turn, turn)

And a time for every purpose, under heaven

Turn, Turn, Turn — Pete Seeger / The Byrds / Bible (Ecclesiastes 3, verses 1–8)

Sorry to recycle this song, but it is very fitting for today’s post…



If you compare the cycles of the housing market to the cycles of the seasons, our local housing market is entering Autumn. Spring was from 1997-2001, Summer was from 2002-2006, and Autumn began in 2007 and will likely continue through 2009, Winter will be here from 2010-2012. Spring will come again, but only after a cold, dark winter.

68 Autumn Front 68 Autumn Kitchen

Asking Price: $699,900IrvineRenter

Income Requirement: $174,975

Downpayment Needed: $139,980

Purchase Price: $620,500

Purchase Date: 11/14/2007

Address: 68 Autumn, Irvine, CA 92602

Sales History



11/14/2007.. $620,500

09/29/2006.. $835,000

08/28/2003.. $628,000

Beds: 4
Baths: 3.5
Sq. Ft.: 2,341
$/Sq. Ft.: $299
Lot Size:
Type: Condominium
Style: Mediterranean
Year Built: 2001
Stories: Two Levels
Area: West Irvine
County: Orange
MLS#: U8000308
Status: Active
On Redfin: 1 day

LENDER OWNED. Fantastic detached end unit home with 2 master suites, one upstairs and one on main floor. Large living room with french doors that open to a private patio, inside laundry room, beautiful tile floors, and a nice quiet location at the end of the street. Walking distance to Homestead Park.



It is nice to document asking prices, but it is even better to document final sales prices in the market.

Today’s listing is sale that closed at 25% off its peak sales price in 2006, and it is a 2003 rollback.

The REOs are obliterating the market, and in doing so, they will drive more homeowners underwater which will create even more REOs: a downward spiral. This is the dynamic of the market, and it will continue to be until enough buyers enter the market to absorb all the inventory. Right now in the market, the desire is there (remnant kool aid intoxication,) but the lack of available credit is getting in the way (just as was predicted in Houses Should Not Be a Commodity.) The realtors are out right now trying to convince people it is the negative media creating the problem. This is not accurate. The credit markets are creating the problem. Market psychology has not changed yet, and people are still trying to buy. Later this year, market psychology really will change as people fully accept the price rally was a bubble and prices will decline further. This change in market psychology will fuel the next leg down in the market continuing through 2009.

109 thoughts on “Autumn

  1. NoWow!way

    From another site in regards to REO’s and MEW’s:

    MEW (mortgage equity extraction), which has been called a neutron bomb because it destroys the inhabitants while leaving the building standing. The interesting thing about MEW is that it is invisible. You don’t know it’s happening in your neighborhood until the Bank Owned For Sale signs start to appear. And as your examples illustrate, it is not a subprime phenomena, it cuts across all income and credit levels.

  2. AZDavidPhx

    Seems like an OK place.

    For a 630K knife catch, I would hope that they made the seller throw in some new carpeting.

    Or maybe they are going to re-carpet, install granite, and relist for 1,500,000.

  3. George8

    Prime mortgage and home equity line default have not yet been priced in the market much yet.

    A neutron bomb indeed.

  4. No_Such_Reality

    “Lanz said he’s interested in the house because it has a larger yard than the house he lives in. He plans to bid as much as $700,000 for it. “That’s the highest we’ll go,” he said.”

    Hence we’ll have slow trickledown. Or like many of the properties in these auctions, failed bids.

  5. Land of Delusion

    Exactly. “2003 Rollback” sounds pretty dramatic but when you realize the ’03 price was an inflated WTF price to begin with, it loses some luster.

    However, at just under $300 per square foot we’re approaching reality–which is dangerous territory for nearby sellers.

  6. Mr Vincent

    An REO in Irvine? This is blasphemy!

    I like this condo. Its got some character to it. Esp on the outside architecture. And no common walls.

    Too bad its like way overpriced. LOL @ the cutout in the wall for a TV. Is everyone suppose to scrunch against the wall to watch?

    AZD is right. I bet that is expensive carpet, but its pretty thrashed now.

    If this was a 3 bedroom with larger living and family room then this would make a great retirement home. You could live very well here and be able to travel for long time periods.

    I think someone will buy this pretty quickly. I would pay about 525k for it.

  7. tonye

    We must remember, as I keep noting, that ALL new construction since ’02 was overpriced.

    This place when new solf for more than many larger places in Turtle Rock. Figure that one out.

    Why would someone buy such a crowded place far from the ocean? Because it was new?

    Well, now those places are no longer new and the poor quality of that rush, rush building is catching up.

    IMHO, all of those new homes will drop to parity to what existing homes were fetching then. This means that while existing homes will drop to 02 and 03 prices, these “new” homes will drop significantly below their initial asking price.

    So, when you look at the price of “newer homes” don’t look at the rollback in terms of years, because there was no year they sold so cheap. Look instead into achieving parity with the older villages.

    And, then do note that the older villages have no Mello Roos and larger lots. Also, in many cases the homes are as large and better maintained ( not all mind you ).

  8. Land of Delusion

    There is an article in the Seattle Post-Intelligencer (I’ve always loved that name) about a buyer who, upon realizing she overpaid for her house, sued her real estate agent. The agent blames the buyer for not being a “knowledgable, sophisticated buyer” and failing to perform due diligence. The real estate blame game has come full circle.

    Could you imagine if this type of litigation catches on?

  9. Chicken Little

    That’s all fine and good, but the Fed just cut interest rates by 75 basis points. They have EVERY intention of bailing out the RE market by printing money until the cows come home. We could see prices shoot up again very soon.

  10. Kirk

    People that don’t buy now will be priced out forever. Good, I hate these commifacists and don’t want them living in my neighborhood.

  11. NanoWest

    The fed can cut rates to zero and it won’t help the real estate market in Irvine………….the downward spiral in prices is not established and will continue until homes are affordable.

  12. surfing in newport

    mortgage rates are set by long-term interest rates (unless you get an ARM). Long term interest rates factor in the expected rate of inflation. If the fed cuts interest rates too much, enough that wall street thinks inflation will increase, mortgage rates will go up, not down.

  13. IrvineRenter

    “That’s all fine and good, but the Fed just cut interest rates by 75 basis points.”

    I think you are failing to see the reason for the FEDs actions: homedebtors are insolvent. The FED has realized people are unable to support current debt loads. This has the potential to become a Minsky Moment and a downward spiral of deflating asset values — all assets, not just housing. House prices will continue to fall in nominal terms, and they will be obliterated in real terms. Measure the value of housing in terms of gallons of gas, and you will see houses have already dropped in comparative buying power by over 50%.

  14. IrvineRenter

    Actually, if they do buy now, they will be priced in forever, and you will have to deal with dimwits for the next 15 years.

  15. buster

    Everything comes back to fundamentals. When RE becomes reasonably affordable, people will buy. The panic is long gone, so serious buyers will take a throughtful, reasoned approach. And if they don’t, the lenders most certainly will. So the RE market willl “normalize” when the prices come down to something reasonable and affordable.

    IMHO, almost three quarters of a million dollars for this condo is clearly not reasonable. Think about that for a minute — almost a three quarter million dollars. For a condo. In Irvine. Not a new condo, a well worn condo. After closing costs and getting it into nice shape, it will be well over a three quarters of a million dollars. For a condo. Time for some perspective.

    Don’t get me wrong, real estate in Irvine will never be cheap. It will always be a stretch the first time in, as it should be. But as IR has documented, who in their right mind is going to plop $140,000 cash down? And doesn’t someone earning almost $200,000 per year deserve more than a used condo?

    Which leads to my final (long-winded, sorry) comment. Buyers have begun to realize that they DESERVE MORE. I’m the customer. I’m the buyer. I deserve more than a used condo for my three quarters of a million dollars. And if seller one won’t treat me fairly and provide me with fair value for my money, I’ll move on to the next seller. Because, as a buyer, I have the power to move on to the next seller or just keep my cash in my pocket.

  16. Priced_Out_IT_Guy

    Exactly, no rate cuts will solve the RE market correction, and here’s why: Even if I could get a loan for a decent starter house in Irvine for 600K at 0% for 30 years I still wouldn’t be able to make the payment. And I am making much much more than the median income in Irvine.

  17. ipoplaya

    What are you talking about NSR? This property already went to auction and the lender bought it back for $620,500 in November. It’s already bank owned… It’s a bank owned comp killer. A smaller place in the same tract (1900sf) but worse location sold for $695K in early December.

  18. ipoplaya

    I agree Mr Vincent, this is actually a pretty decent condo. Totally detached, which a not the norm in this tract. This Summerplace tract is almost all paired homes.

    I would bet it will sell before too long and for way north of $525K. If the lender took it back at $620K and wasn’t carrying a 2nd, I think it will go in the mid to high $600K range. It’s in a nice location. Low traffic street. Short walk to a nice park, pool, etc.

  19. ipoplaya

    Another escrow entrant:

    I was intending to go look at this NW place but it got into escrow before I could even go see it… Was hoping it dropped into the low to mid $900s but alas, it appears to have been snapped up.

  20. IrvineRenter

    I think he was referring to using a 30-year fixed with an amortization schedule. That would be a $1,666 payment with 360 installments.

  21. IrvineRenter

    It terrifies me. The FED knows this is going to be very inflationary, and this will make the dollars being repaid on these loans worth less and less. Since the FED is the central bank, one can only conclude they are telling their member banks it is better to get back a few worthless dollars than no dollars at all.

  22. IrvineRenter

    “I get the feeling a lot of them are investors,” he said. “They do this for a living, so they’ve got it all worked out.”

    They have figured out how to become a knife catcher. Brilliant!

  23. Mr Vincent

    Looking at the description again, this has a master downstairs so I think this might make sense for a multi-gen young family.

    MIL in the dowstairs who takes care of the babies during the day while the parents work their ass off to make the payments.

    30 yr fixed rates are coming down and with the MIL contributing to the down and monthly, a higher price than what I would pay is not out of the question.

    My lender friend says they are now doing a 50/50 split between purchase loans and refinance. He expects refis to increase even more now that the fed have sent out a new heli-drop.

  24. Kottan

    Comment by NoWow!way
    2008-01-22 04:23:51
    “From another site in regards to REO’s and MEW’s:

    MEW (mortgage equity extraction), which has been called a neutron bomb because it destroys the inhabitants while leaving the building standing. The interesting thing about MEW is that it is invisible. You don’t know it’s happening in your neighborhood until the Bank Owned For Sale signs start to appear.”

    Actually, you can make extent of MEW visible in places where mortgage information is public and on the internet. Mortgage information is almost always public in the US, and very often on the internet, too:

    I live in Montgomery County, Maryland, where several bubble ZIP Codes surrounding Washington, DC are located, including Potomac and Bethesda.

    On Dec 31, 2007, I went to the Land Records Dept. of Montgomery County in Rockville and the friendly staff explained to me how to navigate the internet at the computer installed there. I had come to this Office to x-ray the mortgage situation of the street where I live to get a hard empirical look at the situation: An old neighborhood with houses from 1950s where one quarter of houses are McMansions built after 1999. This is a good neighborhood with the NIH (National Institutes of Health with 15,000 scientists in walking distance). McMansions are on 8,000 sf lots with 2,600 to 4,500sf (still moderate when compared to Potomac where 5,000 to 9,000 is more common). In 2006, the larger McMansions peaked at around 1,5m.

    I searched approx. 40 addresses and identified three broad cluster of houses:

    1) The old houses from 1952-52 with old owners since or earlier have either no mortgages at all or small remaining mortage from their last mortage refinancing that has happened more than 20 years ago (in the rare cases of recent refinancing there was almost never a cash-out refinancing, at least no significant one when I estimate the remaining balance). So these houses with the lowest market value are the most stable in terms of hme equity and financial prudence of their aging owners. Current declining – but still bubble – value: $550k to $640k. Since 1999 these are tear-down values since all old houses in bad conditions have been torn down by a builder (with prices rising from $190k in 1999 to $650k in 2006). In 2007, two houses still sold for more than $600k (again, lots of 8000sf). One construction site has stopped seeing building progress, the other house has not started yet).

    2) Old houses that have not been torn down but changed hands during the last ten years because they had been maintained well. Bubble value: $700-$750k. Almost all of them show serial refinancing and almost always cash-out refinancing. HELOCS are the norm, not the exception. Until 2003-4, the typical HELOC was $50,000. That changed almost overnight to $100,000 at that point. Amounts higher than $100k are the exception, with two examples of $200k. Remaining home equity: almost always less than 20% and half of them under water.

    3) The McMansions. They range from $800k in 2003 to $1,5m in 2006 depending on year and size. I searched the mortage records for 10 of them. I always thought that these were “trade-up” with downpayments of at least $300k-400k. Wrong. The McMansions show the most precarious financing: Nine of them were financing with less than 10% down and 5-8% was the norm. Also a norm was than one single bank financed the remaining 92-95%, usually 80% + 10-15%. Houses that were bought prior to 2005 all had HELOCS incl. one with a $300k HELOC and house that was purchased for $1.0m in 2003.

    Needless to say, all nine McMansions are underwater.

    All McMansions show 30-fixed mortgages except for one that shows an interest-only balloon after 10 years and one that shows an interest-only for 10 years. No subprime (2/28 or 3/27) and no APRs in general.

    Not one neighbor had negative amortization mortgages and not one had loan terms associated with sub-prime.
    On Sunday, I talked to the realtor for one of the builders that has build five McMansions on speculation and shared with him what I found at the Land Records Office for this street. He confirmed my obervation and said, particularly for the financing pattern of McMansions: “I know. Some of them will be in trouble”.

    This is a prime neighborhood with 10 McMansions that are primely under water with 95% financing.

    My point is that you can check the mortgage situation for your street by yourself if you are willing to spend a few hours in the County Office and the clerk then showed me how to navigate the site from home. Together with the Tax Assessment information you can drill-down sales and mortgage information for any property in my county.

    Tomorrow, I share with you the most tragic financing of one of my neighbor (who is wiping out all his equity on his first house in the street and faces a perilous refinancing in less than five months from now) in order to keep this post short.

    I commend Irvine Renter for your analytical posts and your profound guidance as well the many thoughtful comments from peers. I am a regular reader since July 2007 and this is my first post.

    Good luck to all.

  25. tenmagnet

    Consider yourself lucky, this one could drop to 700K and I wouldn’t touch it. Other than the square footage, I don’t see why you’d be interested in this one.
    At this price point there are numerous homes on the market that are both newer and much nicer than this one.
    This home looks old and feels dated to me.
    To be fair, the realtor included only one picture, the outside, which was enough for me.

  26. ipoplaya

    The yield on the 10-year is down below 3.5% right now, firmly into 2003 territory which were all-time mortgage lows if memory serves correctly.

    It was back in 2003 that I got my 3.75% 5/1 ARM that I’ve been riding for almost five years now… I would think tons of people will be refinancing early this year to take advantage. Those that still have better than 80% LTV that is.

  27. tonye

    Don’t think of this condo as 750K DOLLARS… think of it as 750K PESOS….

    The Fed is driven to drive the US Dollar to parity with the Mexican Peso.

    Que Viva Zapata!

    Time to buy real estate in Rosarito Beach again.

  28. tonye

    We’re sitting on a 6 1/8% 30 year fixed. Plenty of equity. Do you think that the 30/15 year rates will drop below 2003?

  29. No_Such_Reality

    I thought I was commenting on another comment that had a link to Auction article in the newspaper and the big difference between the minimum opening bid, the kool-aid bidding, and the current WTF price.

    The article was identifying the desire of a move-up buyer, Lanz, and his willingness to still go $700K.

    I apparently put the comment in the wrong place.

  30. IrvineRenter

    Thank you for the informative post comment.

    I guess the subprime containment theory is not holding up there…

  31. ex-Tangelo

    Could you imagine if this type of litigation catches on?

    Not in America, not in a million years. “Caveat Emptor” is our unofficial national motto.

  32. ipoplaya

    tonye my man. if you are talking about a conventional 30-year you can probably beat your rate by a full point. 5.25 on a 30-year conv is doable today, probably without any points.

    Interesting note that I haven’t seen posted here. Apparently the bottom cut-off for the prime tier of loan packages has moved up to a 740 FICO score. It had been 720 for years…

  33. ex-Tangelo

    IMO, the Fed is not reacting to the housing market. It’s reacting to the crisis of confidence in the credit market caused by excesses in the housing credit system, and trying to stimulate all credit. If the damage were contained to the housing market the Fed would probably not do much.

    And if credit markets are truly insolvent, the Fed can’t help. The Fed can only increase liquidity as the lender of last resort.

  34. ex-Tangelo

    Fortunately for we Americans at the moment, all of our debts are in dollars. Inflating our way out of debt is a strategy most nations don’t have available.

    Except we are utterly dependent on foreign investors to finance our ongoing, continuing debts. We could ourselves in serious trouble trying to find backers of new debt. (OTOH, increasing the interest rate also makes our debt more attractive to investors.)

    These foreign investors may “make us an offer we can’t refuse”… This is the leverage the United States used against Britain in Egypt in 1956.

  35. No_Such_Reality

    Very nice post. Interestingly, it sounds like most of the McMansions are actually Okay. They may be upside down on the purchase price, however due to the long term financing, it sounds like if they could afford the payment then, they can afford the payment now.

    It is precarious in terms of they can’t sell, however unless they’ve MEWed to oblivion, they should and likely can make the HELOC payment and the original payment. If they’ve serially re-HELOC’d with increasing balances, they may be doomed. You commented on serial refinancing with the non-mcMansion resales, but not on the McMs.

    From your post, I’d guess the middle group is actually the group that is going to cause the neighborhood to be hit by the foreclosure tsunami. They’ll lead with insolvency foreclosures. The McMansions may follow with cutting their losses foreclosures.

  36. FairEconomist

    I doubt this will be very inflationary. The money supply was dropping at the end of last year, showing that rates at the time were too high. A 0.75 drop from “too high” is not going to cause serious inflation. The bond markets have weighed in on the cut and predict no significant inflation – short rates dropped, long rates were unchanged.

  37. TurtleRidgeRenter

    Hello, Kottan!
    I love all the work you did to find out about each house on your street of 50s homes and MacMansions (I call them Tyvek Palaces) in MD. Interesting stuff you uncovered there. I look forward to hearing the story of your one neighbor tomorrow.

    We moved to Irvine in Jan 2007, sold our house in Loudoun County VA in April 2007. We priced our townhouse $50,000 less than the identical other 13 units for sale in our small subdivision. We saw that most of those units had been on the market for over 6 months, nothing was moving, and we guessed that it was only a matter of time before we’d be competing with bank foreclosure sale prices. So we led the market with a bargain asking price. It still took 4 months to sell.

    Now we look at listings on our old street, and the asking prices are $50,000 less than what we sold for in April. We feel like we got out sooooo in the nick of time.

    The real estate boom in 2004 was just insane in the DC metro area. We had been renting our townhouse for a year when the owner decided to sell it. We bought it from him because we had just gotten settled after moving from California, and didn’t want the expense and disruption of moving again so soon.

    I recall feeling forced into buying the house in 2004. Our realtor said to me at closing: “You’ll see, you’ll be very glad you bought the house, real estate is a great way to build up equity.” And I said: “I’d feel so much better putting this down payment into Apple stock right now.”

  38. Alan


    clicked on said site..

    put in state CA and some numbers

    they quoted 2 points to get a rate of 5.875

  39. Joe33

    Agree with FairEconomist. We mentioned this briefly on the discussion board. I don’t know the stats on money supply, but I do know that capital across all segments of the economy has completely dried up over the last 6 months. No new investment is happening. Dollars are not moving in the economy. Does not feel very inflationary to me.

    The other point for inflation is housing. Why the real cost of housing hasn’t been reflected in how they look at inflation is ridiculous. But right now the real cost of housing is dropping. So while the core inflation numbers will show one thing, I think the biggest chunk of consumers budgets is getting less expensive.

  40. ipoplaya

    Put numbers in where? In order to get a rate point combo you need to do a full app and you don’t get an offer of rate/point combo online. They email it to you…

    I just got off the phone with a mortgage broker, and with 740 FICO, better than 80% LTV, he can do 30-year fixed conventional for around 5.50-5.75 without any points and low fees.

  41. cenobite

    It sounds like the last moments of the chernobyl unit 4 reactor.

    Large changes are being made in the control inputs, and they’re having little effect on performance. The system has been pushed into a state outside the limits of where the controls are useful, and chaotic rapid changes in state are possible.

  42. ipoplaya

    Heck, even ETrade is quoting 5.75 on a 30-year conventional in CA right now with zero points… ETrade’s rates can always be beat. Low market on a 30-year fixed conv for a super prime borrower is 5.25-5.50 with zero points today.

    Expect those rates to drop tomorrow as well. Fed futures are forecasting in another 1.5 points off the Fed Funds rate by Fall. I think 30-year conventionals for a prime borrower will be south of 5% with no points and low fees before too long.

  43. ipoplaya

    Or maybe an even better deal:

    IndyMac is offering in CA 5.375 with a small points credit back on a 30-year conv. You can pay it with an Amex and get rewards.

    The Fidelity Amex will give you 1.5% back on charges up to $1500 per year toward a Fidelity 529 plan. Could get one of those cards, refi with IndyMac, and put $125 per month toward the kids college savings.

    Personally, we have a Fidelity mastercard and Fidelity Amex, one for each kid, and we charge everything and pay the bill off in full each month. I charge some whopper work-related expenses through our personal cards. We contribute a free extra $3K per year to college savings as a result…

  44. IrvineRenter

    I think you guys are missing the point on inflation. We will not see asset price inflation, in fact, we are likely to see a protracted period of asset price deflation, but we are certainly seeing consumer price inflation. The devaluation of the dollar is causing oil prices to rise, and it will impact the cost of imported consumer goods. I suppose if you trust the numbers in the CPI — the made up numbers the government uses — we are not seeing much inflation.

  45. IrvineRenter,0,5559243.story?coll=la-home-center

    A record 31,676 Californians lost their homes to foreclosure in the three months ended Dec. 31, the third-straight quarter of record-breaking foreclosures, records released today show.

    Foreclosures were more than double the level of the worst quarter of the last real estate downturn, when 15,418 homes were taken back by lenders in the third quarter of 1996, according to DataQuick Information Systems.

  46. 25w100k+

    I agree, *prices* not rates need to come down even more for things to be more affordable.

    Just the other day I was looking at a brochure for the new homes in woodbury and portola springs.

    there was a 200 dollar HOA.

    100 dollar maintenance fee.

    1.02 % taxes. (425 a month on a 500k house)

    395(!!!!) mo mello roos.

    So basically that adds up to about half of what my mortgage payment would be…

  47. No_Such_Reality

    “Heck, even ETrade is quoting 5.75 on a 30-year conventional in CA ”

    Conventional Schmenzinal. For this fairly common detached 4 bedroom in Irvine, you’ll need to belly up $282,900 to get a conventional loan. You do a second and take the hit on the first’s rate, the seconds rate, and pick up PMI.

    Oh yeah, I know hordes of rich Irviners bringing that kind of cash to the table.

  48. Alan

    Just a reminder, just because a HELOC is recorded doesn’t mean it’s been used.

    I had a HELOC for 50k which I kept for a rany day, needed 45k temporarily (since paid back) thru well fargo and the interest rate was nearly 8%. I wanted to raise my credit line to 100k, wells gave me grief and citi came thru with a no cost line of $400k 1% lower then wells so a switched. My deed shows a $400k HELOC which I keep open for emergencies, of which 0 is in play.

  49. Genius

    Find me a house for under $550k and then I’ll worry about conventional rates… and I don’t mean in Santa Ana.

  50. Alan

    iPooP doesnt’ check his own links..

    click his link.. splash page announces 5.25% of 0

    click on get quote and holey bait & switch higher numbers magically appear.

  51. FairEconomist

    Oil prices are going up because we’re running out of cheap oil. That’s a supply issue, not a monetary issue. *That* part of inflation reflects that it’s really becoming more expensive to do things. Deflation is not the way to deal with genuinely increasing costs – regardless of monetary policy, that increase is still going to happen.

    The fact that the oil price increase are real and permanent means the core CPI (which ignores it) is incorrect in measuring the cost of living (and thus real growth as well). But it’s still the right guide for monetary policy.

  52. ipoplaya

    Uh NSR, this particular section of the comments is about tonye potentially refinancing out of his 6.125 30-year on his TR home.

    It’s not about the home IR posted about… It would appear you are a bit out of sorts today.

  53. ipoplaya

    Check your own links Weird Al. Any person following the markets should realize 30-years conventionals are way better than 5.875% with two points. That would mean they would be at 6.5% or so with no points. Rates haven’t been that high in forever.

    I ran the customized rate quote with the following options – 30 year fixed, CA, No to I/O, Refi, SFR, Primary, $400,000, $1M, got the same as the rate sheet.

    5.25% with ZERO POINTS and $2,738 closing costs just like the splash page says. No bait and switch there…

    Your 5.875% for two points is nowhere, I mean nowhere at all to be found at this lender or any other lender on this earth on a 30-year conventional program with better than 80% LTV. Wells Fargo is at 5.5%. Even BOFA is at 5.625 with no points.

    You really shouldn’t be posting false and misleading info to the good people on this blog… Bad Weird Al.

  54. ipoplaya

    Oh I get it Weird Al. You are being a pain today because you held on to your AAPL shares I bet… Down to $138 in after hours – off almost 15% since Friday’s close. You might get a little bouce up tomorrow.

  55. WaitingForFiveYears

    I decided not to buy in 2004 when I felt that there was something not right with the house prices. For 3 years, I had to put up with friend and family telling us how much their house has appreciated and how we probably have been priced out of the market. The more sympathetic ones offered advices like moving to AZ or TX.

    Needless to say, the chattering voices have died down now and it is considered rude to bring up the housing issues at family gatherings 🙂

    Now what I have learned from reading this blog in the last few days is that a fair price of a house can be determined by multiplying what it rents for with a factor of 160. So I am currently renting a 4 bed room in Irvine for 2600, does it mean that it price would eventually be 400K.

    Are there any predictions on when is it likely to happen? Is there data that can support such a conclusion?

    My apologies if this has been covered here before. A link to the relevant info will be appreciated.

  56. CapitalismWorks

    Ten year TIPS are yielding ~1.4% with a 10-year Treasury at 3.48 Giving us a break-even inflation rate of ~2.08%. BEI is a a headline number by the way. The market does not believe inflation is much of a risk in the current market.

  57. CapitalismWorks

    Ok, then if you are making the median income in irvine and can’t afford 1,667/month in mortgage, you probably can’t afford to rent either.

    So what overpass are you living under currently?

  58. lawyerliz

    From what I’ve read here, there, and on Calculated Risk, the M family of money is flat, and that what the Fed giveth, it taketh away, in the form of draining liquidity. Thus, except for stuff like oil which really is running dry, I think we are in for deflation, and some were saying oil may go down in price for a while at least, due to less demand.

  59. houseonlegs

    …and lending standards didn’t even begin to tighten until about a year ago. Lenders were still approving 90% cash out, neg-am, stated or no ratio with a 620 FICO, and plenty of people did just that, and that was for a neg-am. The people that put themselves in that loan can still afford the neg am payments until it resets in 2008/2009. Foreclosures are going to be popping up for a long time.

  60. shark

    I’m with you on a Citi HELOC. Prime -.5%, 10 year 1/0 then 20 year amortization, no fees, done over the telephone in early October just as the bottom was falling out. The program was no-doc (I wanted a bit more than they offered, so I documented assets and was approved in a day). I’m not carrying a balance, after repaying the $25,000 I was forced to withdraw to open the account.

    But I am more than a bit worried about how many other HELOC’s Citi has out there with the loose oversight I experienced. That said, I’ve always found the mortgage end of Citi easy, reliable, and honest to work with (unlike their branch network).

  61. ex-Tangelo

    Want some data?

    Average new U.S. home size, per year
    1950 1,200*
    1970 1,500*
    1973 1,525
    1980 1,595
    1990 1,905
    2000 2,057
    2006 2,248

    *numbers are from Census website, except the first two

  62. lendingmaestro

    I believe investors are afraid to buy anything other than treasuries, which have a guaranteed yield. A flight to safety super-cedes an inflation scare. The wealthy have enough money where inflation doesn’t impact them as much as the average joe. They want wealth preservation.

    However, money (credit) is evaporating from our economy by the second. At the same time, the FED is inflating the money supply. So is the money supply really increasing? If there is a greater amount of credit issuances than FED monetary increases, isn’t the net effect a decrease in the supply of dinero? I don’t think that matters. What matters IMO is the fact that there is more USD in the supply of global funds and this will weaken the value of the dollar versus other currencies even if assets are devalued world wide.

    Inflation or no inflation, costs are rising, especially fuel and transportation costs.

  63. lendingmaestro

    What idiot bought that house for over 1 million? It looks like an old barn far away from the beach

  64. tonye

    Hey Einstein!

    I’m talking about refinancing. Not buying. Jeez…

    I gotta check at my FICO score. Last time I check it was like 730 and change because of a screw up with the County ( they lost paper work on a RE transaction on the rental…), a late payment at Macy’s back in ’99 during the middle of our construction (lost paperwork) and “too many open personal lines of credit accounts”.

    Maybe I ought to close some of those open lines of credit. I don’t need them. At one point I was playing the game of moving money from one to the other at the teaser 0% while I kept my money in the stock market growing nicely. But that’s all cleaned up now and the lines are just sitting there doing nothing but lowering my FICO score, I guess.

  65. tonye

    And when the folks first put their house on the market..

    “[i]They got an offer for $750,000. Acting on their agent’s advice, they rejected it – a decision the Freemans now regret.”[/i]

    Hmm…. do you think they could sue their agent for stupidity? Are agents liable for bad advice?

  66. Shooby-doo

    What an awful kitchen! The stove is in the middle of that peninsula thing that does nothing beyond creating a “cramped” vibe.

  67. Genius

    Something nice, and preferably over 2000 sqft. with a reasonable yard. San Marcos is about the only place I will live that has homes I like at that price. I could end up anywhere between west LA and north county SD, depends on where I get the best offer after I’m fully vested.

  68. Genius

    Oh yeah, $540k… That $100k I had for the down payment magically turned into $90k over the last couple of weeks. Ouch.

  69. furious sugar

    Hey Tonye- Another Irvine Terrace home came on the market today on Croyden Terrace. This is the flip I spoke of last year- came on the market then pulled off about 30 days later. New listing -250K from former price. Great lot- but flipper chose really strange upgrades (sisal thruout, floor tile on the counter tops, etc). I love this area too- this one will be interesting to watch:

  70. Kirk

    We are not seeing classical inflation – yet. We are seeing a commodities bubble driven by fear of the dollar and inflation talk. Seriously. People are flocking to commodities because they feel they are safe. They will get a harsh lesson.

    Ironically, it is some of the same mentality that drove up housing. “Oh, it’s a REAL asset that has REAL value.” Especially gold – now a cult metal. I think commodity prices will rise for a year or two and then go pop. Commodity prices can’t be sustained as long as housing prices were, because there isn’t a credit bubble backing the speculation. Investors are selling to investors. There will be a drop in demand from the actual consumer.

    This is, of course, if you believe there has been no increase in the money supply. Regardless of what Jim Rogers says, it appears the Fed has been pumping credit, not money into the system. Credit evaporates, new money doesn’t. Personally, I think this has more to do with allowing balance sheets to slowly deflate rather then introducing liquidity, but I really don’t know. In other words, I don’t think Bernanke is as stupid as he appears. He’s pumping credit to the banks, but the banks aren’t pumping credit back into the market, because the banks are just using repos to slow down write downs. Could be wrong, but that is my guess.

    That said, I still think – barring any big moves from other central banks – that the dollar will keep falling and this means imports will cost more. Yes, that adds to price inflation, but we can always reverse rates and I think we will once all the mortgage garbage has been written off.

    So, I would say this is stagflation. Deflation (money + credit for Joe America and Joe Incorporated is decreasing) with price increases (commodities bubble/dollar decline). Awesome! Thanks Bush!

  71. IrvineRenter

    The price of oil is not rising due to any supply issues. The cost of oil in Euros has not changed much while we have seen oil prices rise 40%. The rising price of oil is purely a monetary policy issue.

  72. IrvineRenter

    It is likely that house prices will find support in the range where the cost of rental and the cost of ownership are at parity. In fact, this is why buyers enter the market at the end of a bear market. There is plenty of data on this phenomenon sprinkled throughout the analysis posts.

  73. CapitalismWorks

    Actually, IR the price of oil has changed in Euro terms even after adjusting for the currency revaluations. (this is a little dated)

    Additionally, the case can be made the both the BOE and the ECB are very likely to follow the interest rate path of the Fed and erode support for their respective currencies. BOE has started already now at 5.50% and the ECB should get off the dime when the German economic number continue to disappoint to the downside.

    To say that oil supply is not constrained is incomprehensible. There hasn’t been a new U.S. offshore oil drilling project in 25 years. Please reference the latest oil market info at:

  74. Kirk

    CW is correct that the price of oil has risen significantly for the Eurozone. However, I disagree that supply issues have pushed up the price as high as it is. What has pushed up the price is the worry of supply issues due to the conflict in the Middle East and the worry of increased demand from growing economies such as China. The price is forward looking and not reflective of current conditions. Another bubble in my opinion.

  75. ex-tangelo

    I disagree that purchase prices can ever be at rental parity. If parity is the point at which people can afford to buy and home prices are stable or expected to rise, then any property for sale at rent parity will have as many bids as there are buyers. Since owners get the capital gain of the home, that means that there will always be someone willing to bid over parity. The equilibrium point is where the buyer thinks the risk of the ownership is worth the premium over renting.

    (The biggest caveat here is “prices are stable or expected to rise.” And this is why rent trends are more important than anything else.)

  76. soapboxpolitico

    Thanks for the LA Times article about record foreclosures IR. Was going to post that myself.
    Did you happen to notice that Orange County is a close second to Riverside County for percentage increase yr-over-yr?

    Guess that puts to rest the idea that the OC is immune to the carnage and it will “just be an Inland Empire thing.” Buckle up kids, the ride is about to get REALLY bumpy!!

  77. IrvineRenter

    “I disagree that purchase prices can ever be at rental parity.”

    History disagrees with you. This is the mechanism is what causes the decline to stop.

    The expectation of rising prices is what works to create financial bubbles. The premium is invented at that point. There is no fundamental reason for a premium. In fact, at the bottom of the housing cycle there is a perceived premium for renting because renters have freedom of movement underwater homeowners do not have.

  78. ex-tangelo

    Oil will never run dry. Human civilization will have killed itself off long before we figure out how to get all of it out.

    We are running into a refinery capacity wall, and we’re running out of oil we can extract cheaply. And we may have hit a worldwide Hubbert’s peak for extraction, too.

    We’ll pay dearly for it, but we won’t run out.

  79. zoiks

    …and average lot sizes for new homes, in sq ft:

    1950 22,000*
    1970 14,000*
    1973 13,500
    1980 10,100
    1990 6,400
    2000 3,800
    2006 2,200

    * – these numbers and all subsequent numbers were pulled from zoiks’ ass. not to be taken as real data.

  80. FairEconomist

    Oil consumption increases 2-3% a year. Oil production has actually *dropped* since 2005 and looks likely to remain flat for the indefinite future (oncoming projects approximately balance failing fields). Increasing demand + constant supply = higher prices. Oil has very inelastic demand and it takes a huge price change to reduce demand.

  81. Kirk

    While I agree that the fundamentals supported a rise in oil prices, I disagree that the fundamentals supported the huge rise we have seen. It’s a bubble. Unfortunately, it’ll take two or three years to find out if I’m right. Like I said, the price is forward looking based on forecasts that most likely won’t pan out as expected. No one will cry about this bubble bursting.

  82. Laura Louzader

    Once we have extracted all the oil we can, whatever remains is moot, and we are effectively out of oil. At current rates of depletion, that will be about 2060.

    Given that the easy oil is gone, and production has dropped since 2005 in the face of rapidly increasing demand, we can now say we are on the downward slope.

    We are now post-peak, and I believe that oil is still very cheap. I expect $150 a barrel at least within the next five years, especially once Mexico stops exporting in another 3 years. We import 15% of our oil from Mexico, and their major field, Canterell, has been badly worked and is collapsing rapidly.

  83. tonye

    This is indeed a nice location.

    The biggest limitation is that you can not put a second story because of view restrictions. Some homes have done it, but it was messy and their HOA clamped down.

    The homes are very nice, though and they have three car garages. I wonder why there are no views of the inside.

    We were inside one of these homes last fall that had just been redone ( it was a party, home’s not for sale ) and we really loved it. The view alone is worth a bunch.

    These are the homes that truly will destroy the RE values in TRidge.

  84. Kottan

    Alan, I take your point that a HELOC is not necessarily fully utilized and sometimes not at all. When I see someone re-HELOCing in short order (such as the example that IrvineRenter described just a few days ago (“Dark Side”), it is perhaps fair to assume for practical purposes that at least the old lower amount is fully spent. Still, point taken.

    I will post the tragic neighbor case tomorrow.

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