This one goes out to a struggling realtors lurking on the blog. We feel for you…
Out of self respect, I'm out of bread
I'm underloved, I'm underfed, I wanna go home
Will you tell the folks back home I nearly made it
Had offers but didn't know which one to take
Please don't tell 'em how you found me
Don't tell 'em how you found me
Gimme a break, give me a break
Seems it never rains in southern California
Seems I've often heard that kind of talk before
It never rains in California
But girl don't they warn ya
It pours, man it pours
It Never Rains in Southern California — Albert Hammond
Today I want to look at the rental market and share with you some properties that caught my eye as good deals in the market. I have not been to any of these properties, so I don't know anything more than what is shown on the internet. A careful inspection of the property may reveal it to be less of a deal than it appears. Also, as a way to relate these properties to fundamental valuations in the for-sale market, I will provide links to comparable properties.
To start, I will share with you one of the craigslist scans I use to get a quick feel for changes in the rental market. I will search for 4 bedrooms in Irvine under $3,000. By limiting the search to 4 bedrooms, I avoid all the Irvine Company spam advertising their apartments, and by setting the limit under $3,000, I get a small enough list to tell at a glance if product availability is growing or shrinking. This scan turns up the following properties that appear to be a good deal:
The one at 4601 Kimberwick Circle (second one on the list) looks like a particularly good deal, IMO.
One interesting note is the decline in prices on these 4 bedroom properties. Last year, it was difficult to find a 4 bedroom under $2,800. As you can see above, the leading edge of the 4 bedroom market has dropped to $2,500. This would put the valuation of older, not-updated 4 bedroom properties at around $400K based on a 160 gross rent multiplier. So what are asking prices on properties meeting this description in Irvine?
|5,139 sq. ft.
|Single Family Residence
|El Camino Real
Beautiful family home in great family neighborhood. Three lots from greenbelt leading to park, pool and elementary school. Centrally located in the well kept community of Greentree on a lightly travelled street and away from busy streets. A sunny back yard with jacuzzi invites gardening and relaxing. A downstairs master bedroom increases this home's appeal. A newer shake-like tile roof, remodeled kitchen and many other upgrades add to the quality of life for the new owners.
Can you spot the misspelled word?
|Single Family Residential
|Out of Area
BEAUTIFUL GATED 4+ 3.5 TWO STORY IN PARK LANE IRVINE. BRING ALL OFFERS!!!! POSSIBLE SHORT SALE /LENDERS APPROVAL. PROPERTY AS IS, NEEDS A LITTLE PAINT. LOWEST 4 BED IN THE TRACT!!!HOA FEE LOW. GREAT COMMUNITY. A MUST SEE!!
ALL CAPS, multiple exclamation points. This is written by someone with an advanced degree in awful real estate writing. I wonder if they go away to seminars to learn to write this poorly, or if they just copy each other's bad habits.
As you can see, the leading edge of pricing for these properties is around $650,000, and based on the comparative rents from the craigslist properties, the values for an owner-occupant are closer to $400,000. At the peak, prices were double (100% overvaluation) their fundamental worth based on rents. Now that properties have declined about 20% from the peak, the level of overvaluation is somewhat less. We are a bit less than half way to the point where prices in the market are at parity with rental valuations. Of course, if rents decline — and they appear to be showing some downward pressure — then valuations will drop.
When I did my initial Predictions for the Irvine Housing Market I did not factor in the potential impact of a severe recession causing a decline in rental rates.
In the post How Bad Could Bad Get?, I did.
BTW, I lifted the chart below from Pigginton.com. San Diego peaked 1 year before we did. Will Irvine's chart look like this in 2008?
While we are looking at rain, let me share another video with you…
"I'm Singing in the Rain", Gene Kelly