It's Not the Economy, Stupid.

Many people seem to think the housing market will recover when the economy does. The economy is not the cause of problems in the housing market, and economic recovery will not save the housing market.

The rollbacks keep getting going further back in time. We are now seeing rollbacks of 2003 pricing more frequently.

143 Stanford Court inside

Asking Price: $380,000

Address: 143 Stanford Court #36, Irvine, CA 92612

The Scientist — Coldplay

I was just guessing
At numbers and figures
Pulling the puzzles apart

I want to let you in on a little secret; all market prognostication is guesswork. Many people looked at the same puzzle pieces I did and came to different conclusions. For several years, oracles like Gary Watts were right with their bullish predictions, and for a time, I was very incorrect in my bearish outlook. The bearish sentiment has been running very high on the blog lately. Most of this bearishness is justified because market conditions are pretty grim; however, we must always keep in mind the possibility that we are wrong.

OK, I considered the idea…

and rejected it…

Prices will still fall. It is pretty hard not to be bearish when you see 2003 rollbacks in 2009. I will note that economists who project overshoot of price fundamentals due to unemployment and foreclosures are guessing. Everyone can look at the same data and determine where affordability lies. The rest is guesswork. Some of these guesses will be good, and some will not. There is less science there than most prognosticators would like to admit.


When the housing market peaked back in May of 1990, the economy was doing fine. It was not the economy that caused prices to peak; it was buyer exhaustion and financing limitations just as caused our most recent market peak.

The economy did suffer in the early 90s, but the problems did not not begin until well after the housing market peaked. In fact, scholars have argued that the Housing is the Business Cycle. The problems with the economy of the early 90s were rooted in a loss of disposable income because homeowners were overextended on their mortgages, and the money they should have been spending in the local economy was instead going to debt service somewhere else. It is a problem we will face going forward as well–unless the foreclosures wipe out the debts of most homeowners. Unfortunately, that would require wiping out most homeowners financially. There are no good solutions.

The other problems with the economy, including the defense industry layoffs, came after the market was already in trouble. These made matters a bit worse, but the layoffs of the early 90s were not the cause of the poor housing market. Prices dropped for 7 consecutive years from 1990-1997. The recession lasted less than one year.

Recessions do serve to make a bad market worse, but they are not the cause of housing market crashes, and the end of the recession does not signal the end of a housing market crash. As you can see from the chart above showing unemployment and recessions, the recession of the early 90s saw a peak in unemployment in 1993. Employment improved from 1993-1997 while house prices continued to drop.

In short, to paraphrase Jim Carville, the campaign manager for Bill Clinton in 1992, it’s NOT the economy, stupid.

143 Stanford Court inside

Asking Price: $380,000

Income Requirement: $95,000

Downpayment Needed: $76,000

Monthly Equity Burn: $3,166

Purchase Price: $413,000

Purchase Date: 12/9/2003

Address: 143 Stanford Court #36, Irvine, CA 92612

Beds: 2
Baths: 2
Sq. Ft.: 1,200
$/Sq. Ft.: $317
Lot Size:
Property Type: Condominium
Style: Other
Year Built: 1986
Stories: 2
Floor: 1
View: City Lights, Treetop, Trees/Woods
County: Orange
MLS#: S570805
Source: SoCalMLS
Status: Active
On Redfin: 5 days


That description is so bad, I don’t know where to start.


Three exclamation points can be found in multiple locations.

If this is so highly sought after and desirable, why is it leading the charge for lower prices?


SUNNY, AIRY & SPACIOUS… what? There is a list of flowery adjectives and no noun being modified.

A VIEW OF SKYLIGHT AT NIGHT. Does that mean you cannot see the skylight during the day?

EVERYONE:INVESTORS,COUPLES, SINGLES,KIDS AND/OR STUDENTS. How can a property possibly be ideal for everyone?

LOCATION, LOCATION + VALUE AND FUN! It must be an amusement park. Yippee!

There is more in there to pick on, but I have had enough…

  • This property was purchased on 12/9/2003 for $413,000. The owner used a $330,400 first mortgage, a $82,600 second mortgage, and a $0 downpayment.
  • On 9/21/2004 he refinanced with an Option ARM with a 1.25% teaser rate for $425,000.
  • On 11/10/2004 he opened a stand-alone second for $97,000.
  • Total property debt is $522,000.
  • Total mortgage equity withdrawal is $110,000.

If this property sells for its asking price, and if a 6% commission is paid, the total loss to the lender will be $164,800.


Tell me your secrets
And nurse me your questions
Oh, let’s go back to the start

Running in circles
Coming up tails
Heads on the science apart

Nobody said it was easy
It’s such a shame for us to part
Nobody said it was easy
No one ever said it would be this hard

Oh take me back to the start

I was just guessing
At numbers and figures
Pulling the puzzles apart

The Scientist — Coldplay

68 thoughts on “It's Not the Economy, Stupid.

  1. thrifty

    Irvine Renter:
    interesting link on today concerning the potential use of tax liens (by individuals or large corps) in lieu of the foreclosure process in Maryland. Delinquent taxes are paid simultaneously with the lien being placed. Apparently the lien is senior to the bank’s first mortgage and foreclosure proceedings can be instituted by the holder of the lien if the taxes are not repaid by the owner within 6 months (in Maryland). The waiting period seems to be the only drawback – can vary up to 2 years in many states according to the article. Any idea how that might work in California?

    1. IrvineRenter

      I don’t know the nuances of tax lien law here in California. I also suspect this strategy would not necessarily result in foreclosure clearing. An investor getting a large return on their money relative to other investments is more inclined to leave the money there than they are to force a foreclosure and get their money out. What I think is more likely is that banks would buy these tax liens to prevent investors from forcing foreclosures and cutting in to their proceeds at the eventual auction. Basically, the interest rates paid on these tax liens will come out of the sales revenue the bank was counting on. This makes it a loan to the bank at usurious levels. Any lender with half a brain (which eliminates many) would go buy these tax lien notes themselves.

    2. WaitingToBuyByAndBy

      Thrifty, I am curious about the effect of obtaining the tax lien as well.

      However, don’t most mortgages now include the mortgage insurance and property taxes in the monthly payment? If that is the case, doesn’t the loan servicer continue those payments even when the original buyer stops?

      Also, for Gemina13, folks like to hide profanity in acronyms these days. FB = F***ed Buyer

      Personally, I prefer the term “Fooled Buyer” so that’s how I read it.

      1. thrifty

        I googled for information on tax certificate sales in California. It appears that a property owner must be 5 years in arrears in not paying property taxes before the tax lien sale can take place. While the certificate does take precedence over the 1st mtg, it does not over any federal tax liens and several other somewhat esoteric items. The matter is not something to be entered into lightly or without investigating the property or without substantial cash that may be tied up for a while, etc. Any houses affected by the current mortgage crisis will be years away from being eligible.

        1. thrifty

          Neglected to answer the rest of your question. The mortgage servicer simply receives and processes the monthly payment on behalf of the lender. If no payment(s) is received, the servicer has nothing to process. Mortgage insurance is only required if the buyer put down less than 20% at the time the property was purchased and if it is a “conforming” loan that the lender may sell to Fannie Mae or Freddie Mac (i.e, the loan must conform to Fannies and Freddies requirements, 20% down being one of them). I don’t know if the rules have changed now that Fannie and Freddie are involved in the current government bailouts.

  2. winstongator

    The fact that there are rollbacks to 2003 shows that you were NOT incorrect in your analysis.

    Prognostication has two elements: what will happen and why? Bullish prognosticators were ‘correct’ in the what but nowhere near correct in the why. If you factor in the element of bubble predictions that the home price gains were sustainable, their predictions have been shown to be wrong.

    If you told this owner in 2003 that they weren’t getting a good deal, or in 2004 that their option-arm wasn’t a great idea, would you have been correct? They wouldn’t have taken your advice, but what would have been the prudent action then.

    Many housing bulls are permabulls. Look at the NAR talking points. They have a viewpoint – it’s a good time to buy (always buy – never advocating the other side of the transaction) – and then massage the evidence to support their view. That’s not analysis, it’s persuasion.

    I have been bearish on FL housing, but am wondering if some of the condo/townhouse rollbacks to 90’s era prices are becoming good investments. Lots of higher end still has a ways to fall, but some are prices are falling below ~2003 new construction pricing. The biggest problem in FL is overbuilding – there is too much volume at every price point to be supported by primary residence homeowners. Lots of snowbirds. Maybe ‘je me souviens’ means they remember the last FL housing decline.

    1. IrvineRenter

      “That’s not analysis, it’s persuasion.”

      Well stated. I have been looking at a large number of realtor websites lately, and the vast majority are static sites (do not change) that say now is a good time to buy. You would think a rational person would question the information on a site that says “now is a good time to buy” when the text never changes. Is it really always a good time to buy? In a couple of years, it really will be a good time to buy, and like a broken clock that is right twice a day, these static sites will be providing good advice.

      Think about the disrespect these sites show buyers. An entire industry is telling its customers, “I don’t care if you go into foreclosure and bankruptcy as long as I make money today.” It isn’t a practice likely to build much trust and loyalty.

          1. awgee

            It worked just now using cut and paste.
            I did not link to it because I do not know how to use the link facility here on the main blog.

    2. Gemina13

      Here in Phoenix, ReMax is airing commercials showing people kicking themselves–literally, doppelgangers coming up behind them and planting a foot in their rears–for not buying homes. While a few–very few–zip codes have actually seen home prices go up by a few percentage points, most neighborhoods are riddled with For Sale signs. We’re starting to see bulldozed lots here as well.

      I don’t know who it’s a great time to buy for, aside from the NAR. But from the look of things here, nobody’s buying (sorry!) that line.

      1. AZDavidPhx

        The lawyers are having a field day with it all too. DUI’s and fatal motorcycle accidents are so 2006 and before. Nowadays everyone is a “FEN-ANCHAIL EX-POIT”

        You cannot turn on your radio or watch anything on your television without being slammed by an army of frothing at the mouth sleazebags standing in front of a billion books, wearing expensive suits and greasy hair wanting to help you fight foreclosure, declare bankruptcy, etc.

  3. Geotpf

    This is a short sale. List price on a short sale is completely meaningless, IMHO. Just because somebody lists something at a low price on a short sale doesn’t mean the bank would approve such a price-or any price, for that matter. I see short sales as (usually) just previews of upcoming REOs, in a year or so hence.

    I would actually like to see fewer short sales listed here (because of the whole fictitiousness of the short sale process) and more REOs, as well as more follow ups on older posts (to see whether or not they really sold as a short sale, what the final price was, or whether they turned into an REO, and then the final sale of that).

    Organic listings are only mildly better, since they usually have WTF prices still. REOs are the market these days, IMHO.

    1. IrvineRenter

      Several people have commented on earlier posts that lenders are beginning to approve some short sales. For a time, short sale approvals were less than 5%, but now short sales are between 10% and 20% of sales. The market is still dominated by REO, and it will continue to be because it is quicker and easier to get approval on the REO sale, but some short sales are selling.

      1. Anonymous

        Wonder if that’s because bank short sale crieteria are relaxed, or whether it’s because more people meet bank short sale crieteria (ex. job loss or income reduction makes mortgage unaffordable)

        1. Aquagirl

          New Policy on Short Sales Could Reduce Foreclosures
          American Banker | Tuesday, April 21, 2009

          By Kate Berry

          Trying to cut its losses, Bank of America Corp. has changed its policy on short sales, making it easier for borrowers to sell their homes instead of going into foreclosure.

          Until a month ago, B of A and its Countrywide Financial Corp. had required that 10% of a home’s sale price go toward paying off home equity lines of credit before they would agree to a short sale. But Terry Francisco, a spokesman for the Charlotte company, said Monday that it changed its policy last month, agreeing to accept 5% of the sale price when there is no equity available to holders of the first or second liens.

          The new policy “is based on the assumption that it is in the best interest of all parties involved to accept a short sale, as opposed to proceeding to a foreclosure,” Francisco said. “We believed that the previous policies set an arbitrary amount that did not take into account the savings derived from proceeding with a short sale.”

          B of A expects the change to increase the number of short sales, he said, and even though it is releasing the liens, it reserves the right to pursue deficiency judgments against borrowers.

          With foreclosure moratoriums being lifted in the past month, bankers are looking for ways to deal with an anticipated flood of distressed properties and are trying to determine which borrowers will get loan modifications and which will go into foreclosure.

          Experts on short sales say they have been difficult to negotiate with lenders that are often reluctant to accept discounted payoffs when a home is sold for less than the balance due on the mortgage. But losses on foreclosures can be as much as 30% higher than on short sales, and housing prices are still falling, so servicers are slowly starting to change their policies, experts said.

          One critical issue is second liens, particularly home equity lines of credit; these lenders are even more loath to permit a short sale, knowing that the primary lien will likely receive almost all the sale price, leaving little or nothing for holders of secondary notes.

          Raffi Tal, chief operating officer at IShortSale Inc. in Woodland Hills, Calif., said holders of second liens are often offered payoffs of $1,000 to $3,000 in short sales, and many such deals are held up because the lenders refuse to accept these payoffs.

          “The banks are holding short sales hostage,” Tal said. “They don’t care that a year from now they will have to take over the property and sell it for 30% less when they could have sold the property in a short sale in 30 to 90 days.”

  4. scott

    A dumb question, but why does anyone – the homeowner, the bank, the Realtor – bother with listing short sales? As I understand Short Sales (like today’s property) almost never close until after they become bank owned REO. Any rational buyer would wait for it to go REO (even if you don’t get a better price it is a lot easier to deal directly with the bank). In theory I can see a Realtor having an interest, if nothing else they may get an inside track on the REO listing.

    It just seems a total waste of time on everyone’s part.

    1. AZDavidPhx

      It’s a stalling tactic being used by the banks to keep REO’s off their books while they unload their current inventory while tricking FB’s to continue making their payments rather than send jingle mail.

      The bank doesn’t want another REO to deal with and they don’t want the FB to mail in the keys so they dangle a little carrot out there to make him believe that he can salvage part of his credit rating via a short sale.

      The homeowner thinks he has a chance at escaping foreclosure so he continues to make his monthly payments like a good little obedient slave while the lender “considers” offers (for months sometimes).

      In the meantime, the bank is biding its time, but still collecting payments from the FB even though it has no intention of ever letting the guy walk; all-the-while he does not know know that he is just a patsy. He thinks that the bank is working with him, but since he is a schmuck – he doesn’t realize that they are just playing games.

      1. Geotpf

        If a property is a short sale, does that mean the buyer is still making payments or not? I thought that, at least sometimes, the owner is no longer making payments in that situation-in which case it might be the home owner playing games, not the bank.

        1. Walter

          This is possible. Still better for the bank to have you house sitting and paying the utilities while the downward spiral is spinning.

        2. AZDavidPhx

          Sure, I would guess that that situation is possible.

          I tend to think of the typical short sale chump as someone who is looking to do some damage control their credit “score”… Otherwise, they would just mail the keys back to the bank and call it a day.

          So it would seem to me that people who try to go this route would also find it in their best interest to keep making their payments so that they don’t have additional delinquencies on their report after the short sale is over.

          That would be my thinking if I were in the shoes of a banker.

          1. Geotpf

            I’ve looked at short sales from the perspective of the owner looking to extend the foreclosure procedure so he can get a year’s worth of free rent. They can look like they are “doing something” to the bank.

            Why leave until the sheriff is on your doorstep?

          2. AZDavidPhx

            I’m not so sure that listing a short sale will have much of an effect on stalling the foreclosure. What ultimately matters is whether or not payments stop arriving.

            If you stop making your payments – you will receive a notice of default even if your home is listed as a short sale. I would think that they lender will begin the foreclosure process regardless.

            If you do stop making your payments then it might convince the bank to approve a short sale offer, but then your year of free rent is over and your credit history shows that you stopped making payments.

          3. USCTrojanCPA

            What a waste. A have a friend who stopped paying back in Oct and an NOD has not even been issued on the property. He has no intention of wasting his money by making any payments and is going to ride the free rent grave train to the bitter end. At least he is being smart and saving thousands of dollars a month into a rainy day fund.

      2. Walter

        For the agent, if the deal happens, you make some money. If the deal goes nowhere, you get some advertising from having the listing. Key is don’t waste too much time on the short sales. Pop it in the MLS, pop up a sign, submit the best offer you get to the bank and move on.

      3. Blueberry Pie

        “he continues to make his monthly payments like a good little obedient slave ”

        Didn’t the “homeowner” sign a contract saying he’d make those payments?

          1. Blueberry Pie

            Your obedient slave comment just made it sound like the homeowner is doing something they don’t want to do. But they chose to buy that house. It may have been a bad decision, but they did it of their own freewill.

          2. AZDavidPhx

            Some slaves will choose to work because they fear being beaten or killed. Suppose you give one of these slaves the option to be a slave for Master A, Master B, or Master C and the slave picks Master B and signs a contract stating so. So what? A slave is a slave, no? Just because you let him pick his master doesn’t mean he is not a slave…

            We are all just slaves to different masters with different consequences. I don’t fear being beaten or killed for refusing to go to work – but I sure don’t like the sound of going homeless. My shelter is my master.

            I did use the ‘obedient slave’ term, tongue-in-cheek by the way.

          3. Chris

            “We are all just slaves to different masters with different consequences.”

            Yep, I for one am a slave to my daughter’s meal/clothes/education (I
            m sure a lot of folks are in similar situation)…but well worth the consequence 🙂

    2. thrifty

      The short sale mechanism is the opportunity to sell at a higher price than an REO sale is likely to yield. Not offering a short sale could be viewed as not representing the best interests of the bank’s shareholders.
      The bank is particularly unlikely to lower the price if the house has pmi (private mortgage insurance) since an REO sale below the insured amount causes the insurance to kick in, providing a floor to the sales price. So if you’re the bank and you know the REO worst case scenario, why not try for the best price you can get?

    3. SD Kate

      After being told repeatedly by my lender (Chase) that they won’t do any principle reductions in a work out, and being told repeatedly to short sell, I asked them if they’d accept a short sale offer for what the last two houses in my area had sold for, which was about half of what I owe. I never got a straight answer, just a lot of double speak, which to me meant “No.”

      Due to my pending divorce and other issues I didn’t see any use in going through the short sale charade. I came to the same conclusion about it being a waste of time.

  5. IrvineRenter

    Here is a nice education piece for all those worried about the FEDs printing money will inevitably lead to high inflation:

    How does the Fed ‘mop up’ extra cash?

    The basic mechanism for adding or removing cash from the banking system is the Fed’s purchase and sale of Treasuries on the open market through the trading desk at the New York Fed. The decision to buy or sell Treasuries is made by the Federal Open Market Committee every six weeks.

    If the Fed buys Treasuries, it pays cash to the banks that hold them. That cash then is available for lending, which helps increase economic activity. It also increases the supply of money in the system.

    When the Fed reserves that transaction — selling Treasuries in exchange for cash — the Treasury bond goes back to the bank, and the cash paid by the bank comes out of the system.

    1. Nostromo

      I know I’m fighting a losing battle here, but it used to be that “Feds” referred to federal law enforcement agencies (FBI, DEA, ATF, etc.) and “Fed” referred to the US central bank. Given the stark contrast between the two different types of activity, I think a dichotomy still makes sense.

    1. MalibuRenter

      Bubbles are a regular feature of housing markets. There will be new bubbles, maybe India, maybe Brazil, maybe somewhere else.

      There will not be a bubble in the US of similar magnitude to the one now popping, at least not for many decades. Go to to see this for the US.

      One thing which might happen over the next few years, is that policymakers and urban planners will realize the massive losses which their restrictive planning, “smart growth” (a horrible misnomer), and permit delays have caused.

      While I would like to have many of the worst planning laws reformed, I think what should happen instead is to have financing be responsive to bubbles. In a bubble area, if prices start to depart too much from rents or incomes, the down payments would have to get progressively larger. That would reduce the size of the bubble, and also reduce the damage done to the financial system when it deflates.

  6. AZDavidPhx

    I must say that I am extremely disappointed that they did not include photos of the “WORK-OUT STUDIO”.

    When I read that, I was all excited to go find the photo inject my humor into it.


    1. ockurt

      Yeah, I would have liked to see that as well for a few laughs.

      If serious modifications were done to the garage, this could hurt its value since parking is at a premium around this area.

      1. ignorantoutsider.

        2 stories, one floor. Interesting concept. I think I’m just going to work on my second six-pack and improve my skylight view.

  7. MalibuRenter

    Unemployment does matter. When you do a regression on LA unemployment vs LA case shiller index, you get a correlation of 50%.

    Unemployment has about as good a correlation with the case shiller index for LA as mortgage interest rates.

    My forecast was for an additional 13% drop from peak if LA unemployment hit 9%, and an 18% drop if LA unemployment hit 12%.

    CS unempl

    1. IrvineRenter

      Unemployment does matter, but the impact is difficult to measure accurately because the impact is indirect. Unemployment creates defaults and foreclosures, and it takes potential buyers out of the buyer pool, so it does upset the balance of supply and demand. However, unless this translates into lower aggregate rent or income, it does not impact the underlying fundamentals in a measurable way. The indirect connection is probably why the correlation exists, but also why it is not more strongly correlated with actual pricing. Plus, unemployment impacts consumer confidence which makes people less likely to buy a home even if they can afford it.

      1. MalibuRenter

        There is another indirect way unemployment influences prices: migration. When unemployment in an area is high relative to other places, people leave, especially skilled people and recent college graduates.

        This is one of the most difficult concepts for people in CA to grasp. The majority of recently built areas in the desert and central valleys will have as their primary appeal that they are cheap places to live. Not just versus coastal CA, they will be cheap vs most of the US. Merced, Bakersfield, Riverside, and Coachella will be attracting very different residents in the next 10 years. They will also be losing many of the residents which they wanted.

        It takes population movements which are both large and persistent to keep vacancy rates high in an area for years. Instead, the more typical result is prices and rents keep falling. Because housing is durable, if it’s occupied and maintained with even moderate skill and care, it takes many decades for housing units to disppear. This is the case even when home prices are below replacement construction cost.

        1. IrvineRenter

          It will be interesting to see the impact of migration on the Inland Empire. I was involved with the Valley Economic Development Corporation, the non-profit organization trying to encourage businesses to relocate to Hemet and San Jacinto. The main selling point of the area, even in 2006-2007, was that they had the lowest housing costs in Southern California. I could see in a few years, this could be a real asset for the region. There are many, many McMansions out there that will be available for less than construction costs. Businesses may wish to relocate there because employees will be able to afford opulent houses for very low prices. The increased business activity and employment would help hold back the tide of out-migration from some of these areas.

          1. MalibuRenter

            For an informative and depressing read, check out


            “People continue to live in many big American cities, because in those cities housing costs less
            than new construction. While cities may lose their productive edge, their houses remain and population falls only when housing depreciates. This paper presents a simple durable housing model of urban decline with several implications which document: (1) urban growth rates are leptokurtotic — cities grow more quickly than they decline, (2) city growth rates are highly persistent, especially amount declining cities, (3) positive shocks increase population more than they increase housing prices, (4) negative shocks decrease housing prices more than they decrease population, (5) the relationship between changes in housing prices and changes in population is strongly concave, and (6) declining cities attract individuals with low levels of human capital.”

          2. HydroCabron

            I don’t want to get into a game of “I did this, so
            I must defend it,” but I live in downtown Denver, CO, and, though the leptokurtoticity makes sense to me, the one thing which comes to mind is that the energy costs for heating, grocery shopping, and commuting are somewhat lower: pretty much everything I need to eat can be had on foot, and the light rail commute is far less than the cost of gasoline + depreciation on my vehicle.

            So I take advantage of the lower cost of living downtown, as compared with a comparable apartment in the suburbs, but this is due to the unglamorous nature of downtown living: people in my income bracket overwhelmingly prefer a house in the ‘burbs.

            What interests me is the long-term effect of higher commuting costs, and less disposable income for vehicle purchases, on our urban zones. I think one can figure on a long-term force of consolidation toward urban cores. It’s getting more expensive to own and drive a car. This won’t force everyone toward the urban center, but it will be interesting to see if some urban deterioration is reversed.

          3. MalibuRenter

            If you can get cheap housing in an area which manages to have good schools and low crime, you have a good chance of success.

            That also tells you something about what type of businesses you want to attract.

            One of the more interesting experiments I have seen is a city which is paying college tuition for residents who graduate from high school there. That produces a strong incentive for parents of good students to move there.

            If you have poor schools and low crime, you might be able to build a business or industrial center, but people won’t want to live there (think the better parts of downtown LA).

  8. Soylent Green Is People.

    Forgive the crude remark, but there’s a very old joke about how two bored kids who decide to buy a certain “female hygiene” product because when you use them “you can go to the beach, or horseback riding, or water skiing…” because you could do pretty much anything with the product. The Realtor must have thought the same thing when he put “LOCATION, LOCATION + VALUE AND FUN!!!! et al.

    1. Geotpf

      I actually like the term “turnkey”. Likewise, I like the term “fixer”. Both are descriptive of the property’s condition. Not having either in a description is also (usually) useful-that is, that should mean there are some repairs, but minor stuff. Turnkey means you can, well, turn the key and move in without doing squat. Fixer to me means there are holes in the walls, the roof needs replacing immediately, and there’s no sink or toliet. Neither means the sink leaks and it needs carpet and paint. Now, I don’t like “just needs your TLC” as opposed to “fixer” for some reason. Fixer to me means “stuff needs fixing”; TLC means you have to pet it softly and luv it and squeeze it and hug it or something.

      1. AVRenter

        “TLC means you have to pet it softly and luv it and squeeze it and hug it or something.”

        Like this?

        That’s how I feel about all of Irvine. Tommy rulz.

  9. Mitoman

    It is true when economy recovers, housing won’t. But if housing is keep going down, how can economy recover?

    1. IrvineRenter

      The economy recovers because as the financial burden of providing shelter decreases, disposable income increases. The increase in disposable income circulates through the economy and conditions improve.

      One of the main reasons this bubble was able to get so large is because the natural constriction of spending caused by the loss of disposable income was circumvented by mortgage equity withdrawal. If this element of the Ponzi scheme had not been in place, when prices went up, disposible income would have gone down, and the economy would have shown signs of distress much earlier. However, since MEW enabled even more spending, disposable income went up dramatically, and the economy prospered, albeit through a Ponzi Scheme. The aftermath we are experiencing now is an incredible debt hangover, and the only cure is foreclosure and massive bank write downs. Until that occurs, the economy will not improve. We cannot re-inflate our way out of this mess–which seems to be everyone’s idea of the proper solution.

      1. david


        Do you have an opinion regarding the impact of the administration’s mortgage mod plan, i.e. interest write downs to 2% for 5+ years (and maybe also BR cramdowns if Senate goes along), plus the 4.5-5% refi plan, on potential economic recovery and on course of housing market corrections?


        1. IrvineRenter

          The refis have the potential to be a great economic stimulus for existing homeowners who did not HELOC themselves into oblivion. They can lower their monthly payments and free up additional disposable income. The low rates may save some of those on the margins; the rest need to go through foreclosure. It will do very little to impact market pricing unless those rates can be sustained for many years.

      2. freedomCM

        IR (or maliburenter),

        What is your prediction for household income for Irvine/OC/SoCal?

        Based on UE and higher paying FIRE jobs in particular lost over the past 18 months, it seems to me that it will have to drop over the next few years, no?

        How will this affect your predictions on the economy and housing prices?

  10. Major Schadenfreude

    “Total mortgage equity withdrawal is $110,000”

    110 Grand for signing a paper and paying a little rent!

    Why isn’t this person in jail?

    I can’t believe how much I despise our leaders who allowed this to happen.

    1. AZDavidPhx

      Why should people in our leadership push to fix a system that is not broken? It has worked very well for the majority of themselves… They are not going to suffer the effects of the 110K MEW as they and their family have already gotten theirs.

      No harm, no foul.

  11. Marian

    Case-Shiller index shows that in January 2009 L.A. area was on average rolled back to September-Octomber 2003.

  12. Dean

    I think the Schadenfreude party is coming to an end. There are signs of a pretty strong recovery in the bottom end of the market. Like, multiple offers over asking for properties in the $350,000 range that are in good condition. It won’t help the giant McMansions for a while, but that is what a market bottom looks like.

  13. randi

    yes there are many factors apart from economy that are affecting this house trading, many social factors are affecting its course

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