High-end home prices are falling in Orange County

An Irvine home owner loses more than 25% on his multi-million dollar Irvine property.

Irvine Home Address … 12 MONTIA Irvine, CA 92620

Resale Home Price …… $1,650,000

Have you ever thrown a fistful of glitter in the air?

Have you ever looked fear in the face

And said “I just don’t care”

It’s only half past the point of no return

The tip of the iceberg

The sun before the burn

The thunder before the lightning

The breath before the phrase

Have you ever felt this way?

Pink — Glitter In The Air

In recent posts I established that Orange County home prices too high for incomes or rents, and Orange County home sales are falling with prices to follow.

Sellers of pricier O.C. homes up discounts

January 26th, 2011, 8:30 am — posted by Jon Lansner

Orange County’s high end takes the heaviest discounting, according to a slightly different view of the Orange County real estate market from HousingTracker.net.

This website tracks trends in asking prices from brokers’ MLS system of homes for sale. In addition, HousingTracker breaks down its data into a pair of neat markers — the 25th and 75th percentiles that let us see how the market’s upper crust and more modest abodes are faring.

From the January report we see …

  • At the 25th percentile — the median of the lower half of the price spectrum of local homes for sale — the selling price was $294,950; that is down 1% vs. the previous month and down 1.7% vs. a year ago. Over two years, there’s been an 1.8% dip in prices set by sellers of more affordable local homes. This is the 5th consecutive month-to-month cut in asking prices for these more “affordable” homes.
  • At the 75th percentile — the median of the upper half of the price spectrum of local homes for sale — the selling price was $640,873; that is down 1.1% vs. the previous month and off 11.5% vs. a year ago. Over two years, there’s been an 11.9% tumble in prices asked for higher-end housing. This is the 7th consecutive month-to-month cut in asking prices for these less “affordable” homes.
  • The gap between these two price points was 117% this month vs. 118% the previous months and 142% a year earlier. The gap peaked at 167% in June and July 2009.
  • The overall Orange County median listing price, by this math, was $418,975 for January — that is off 1.1% vs. the previous month and off 6.6% vs. a year ago. Over two years, there’s been an 3% decline.

Realtor Aaron Zapata of Prudential California Realty commented: “I call this the sandwiching effect. The upper end is being pressed down by lack of demand, while the lower end is climbing because of great demand. The difference between the high and low end gets smaller.”

I recently explored the question With people leaving Orange County, who will buy our overpriced homes? Right now, nobody is, so prices keep falling, inventory keeps building, and sales slowly limp along.

HousingTracker.net data and charts

Orange County's data can be found here. The trend at the high end is distinctly downward.

As I demonstrated in yesterday's post, the pressure has been building at the high end due to low sales rates and excessive inventory.

It was inevitable that high end prices would continue to go down. If inventory continues to rise, prices will likely fall.

We are seeing the same buildup of inventory here in Irvine where much of OC's high end resides.

What will happen to pricing and volume here?

I believe new home sales will continue to do well, although the price increases and sales volumes will not meet the Irvine Company's expectations. The dreamers still clinging to bubble values will continue to see erosion of their perceived value. Asking prices will keep falling and the bubble clearance sale will finally get started.

Losing more than 25% after owning in Irvine for more than 5 years

Buying a high-end property in a prestigious neighborhood does not ensure prices cannot go down. The laws of supply and demand in the housing market do not bend to the will of high-end home owners.

This property is not suffering from any malady. It is a huge home in one of Irvine's most exclusive neighborhoods. The back yard is a fantasy resort pool, and the interior is immaculate. The only problem with this home is the price tag attached. This high-end home sale will lose someone half a million dollars. Apparently, even the high end properties are subject to the laws of supply and demand.

Banks know from experience in Irvine that if they force an expensive property to go to auction, the auction price is about half of peak asking price (How to Lose $2,650,000 in Irvine Real Estate). Since the auction is all cash, it gives some indication of what these properties are worth without the lender air that inflated high end properties.

To get an idea what I mean, remember back to a bygone era when loans over $1,000,000 simply didn't exist. Okay, perhaps a few were around, but for the most part, if you saw a neighborhood where transactions were occurring over $1,000,000, you knew that significant savings or ported equity made up the difference. People didn't gain access to those neighborhoods through borrowing alone. People had to save money to be one of the chosen ones.

Fast forward to the housing bubble when stupid loans of every kind where given out to anyone who wanted one. The neighborhood of $1,000,000 homes is accessible to anyone with a high income or a convincing liar loan application. The influx of new buyers sends prices skyward, and by 2006, those formerly $1,000,000 neighborhoods are all listed for more than $2,000,000.

With the credit crunch in August of 2007, credit for jumbo loans dried up. Very few loans have been underwritten in the last three and a half years because no government program insures them. With proper risk pricing and its associated higher interest rate, buyers can't afford a big mortgage. With big mortgages gone, the support for high end prices was removed with them.

Bottom line is that the air has been abruptly removed from the high end of the market, but it has been allowed to slowly gliding downward in a controlled descent.

The owners of today's featured property paid $2,100,000. They used a $1,680,000 first mortgage, a $420,000 HELOC, and a $0 down payment (it is possible they were merely approved for the HELOC and actually put money down.)

On 4/3/2007 they refinanced with a $1,720,000 first mortgage and a $212,000 HELOC. The smaller HELOC and lower combined balance suggests these owners had put money down. However, the larger first mortgage suggests they took out some money in the refinance. No matter the case, having $1,932,000 in debt gets hard to maintain. The stopped paying the mortgage back in May of 2010.

Foreclosure Record

Recording Date: 12/16/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 09/15/2010

Document Type: Notice of Default

The bank is assessing its options. If it forces a foreclosure, they will take a big loss. If they try to negotiate a short sale, they will dance with the sellers for months as the sellers hide assets and claim poverty. The threat of foreclosure will loom over the negotiation, but if the borrowers are already resigned to their fate, the bank has limited leverage.

Irvine Home Address … 12 MONTIA Irvine, CA 92620

Resale Home Price … $1,650,000

Home Purchase Price … $2,100,000

Home Purchase Date …. 10/6/05

Net Gain (Loss) ………. $(549,000)

Percent Change ………. -26.1%

Annual Appreciation … -4.4%

Cost of Ownership


$1,650,000 ………. Asking Price

$330,000 ………. 20% Down Conventional

4.78% …………… Mortgage Interest Rate

$1,320,000 ………. 30-Year Mortgage

$333,143 ………. Income Requirement

$6,910 ………. Monthly Mortgage Payment

$1430 ………. Property Tax

$283 ………. Special Taxes and Levies (Mello Roos)

$275 ………. Homeowners Insurance

$190 ………. Homeowners Association Fees


$9,088 ………. Monthly Cash Outlays

-$1516 ………. Tax Savings (% of Interest and Property Tax)

-$1652 ………. Equity Hidden in Payment

$601 ………. Lost Income to Down Payment (net of taxes)

$206 ………. Maintenance and Replacement Reserves


$6,728 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$16,500 ………. Furnishing and Move In @1%

$16,500 ………. Closing Costs @1%

$13,200 ………… Interest Points @1% of Loan

$330,000 ………. Down Payment


$376,200 ………. Total Cash Costs

$103,100 ………… Emergency Cash Reserves


$479,300 ………. Total Savings Needed

Property Details for 12 MONTIA Irvine, CA 92620


Beds:: 5

Baths:: 5

Sq. Ft.:: 4350


Lot Size:: 10,000 Sq. Ft.

Property Type:: Residential, Single Family

Style:: Two Level, Other

Year Built:: 2000

Community:: Northwood

County:: Orange

MLS#:: S630641

Source:: CARETS


Magnificent And Dramatic Arbor Crest Estate, Resort Like Living, Ideal For Executive Buyers. Fabulous Backyard w/ Boulderscape Design Pool, Spa, Waterfall & Slide, Oversized Bar, Palapa, Built-in BBQ And Refrigerator. The House Features 5 Bedrooms-4.5 Baths, Fully Loaded With Top Of The Line Kitchen Appliances(Sub-Zero. .. ), Center Island & Large Eating Area, Travertine Floors Throughout Downstairs, Surround Sound, Soaring Ceilings & Plenty Of Windows and much much more. Custom Builtins Library/Office And One Bedroom W/ Full Bath Downstairs. Four Bedrooms Upstairs Plus A Bonus Room W/ Quality Carpeting, Extensive Wrought Iron Staircase, Water Filter System etc. .. Professional Interior Designer Touch And Ideal for Entertaining. No Need To Preview.

79 thoughts on “High-end home prices are falling in Orange County

  1. AZDavidPhx

    Nice try, IrvineRenter but you failed to consider the 2% mortgage rates that are on their way which are going to bolster prices in premium areas and keep the delusion going. After that, 1% interest rates, and then they wll finally bottom out at .000001% interest rates and remain there until the end of time. Those days of 6% to 9% interest rates are in the past and are not relevant in today’s society that has seen vast innovation and advances in money mechanics. I would like to see you and the blog get with the times.

    Thank you.

    1. Feral

      FED will print money until Dow 15K and home prices surge so homeowners feel confident and start spending, banks liquidate inventory at better price point. Inflation? No SS raise, govt says no inflation. Savers & fixed income retirees may suffer, but they don’t buy houses or shop much. Go shake your angry fist at a freight train, it’ll have the same result. Higher/hidden taxes are coming to CA to bail out Unions so they’ll be few/no govt layoffs, keep the growing underclass content and voting properly with WIC, free breakfast and lunch, subsidised housing and healthcare, etc. Just my humble opinion.

      1. Walter

        I wish I could flat out discount what you are saying, but there is a chance that this is how things will play out.

        I am in the process to moving some investments around so I should do OK weather you predictions happen or not.

      2. lee in irvine

        “No SS raise, govt says no inflation. Savers & fixed income retirees may suffer, but they don’t buy houses or shop much.”

        But they vote in droves … and the Fed is unwillingly being pulled into the circle of politicks by their own actions.

        1. Feral

          In CA this demographic is dying off or moving out, replaced by a growing underclass who relies on some form of govt assistance. Few CA jobs being created will support middle class existence. Who was elected…Brown, Boxer, Harris.

          I sympathise with savers…it’s like a dice table where one puts down $100 cash to buy chips, play the pass line, and loses. Most of the crowd signs credit vouchers, play the don’t pass, win again! Pit boss cheers the don’ts; when the table runs low on chips a guy named Ben brings out a fresh bucketload; the back room can stamp out as many chips as needed to keep this game going. The cocktail waitress shoots you a look of sympathy while ignoring you, quickly serving drinks to the rowdy crowd who handsomely tip her with Ben’s new chips. She has kids to feed.

    2. lee in irvine

      “and then they will finally bottom out at .000001% interest rates”

      Guess what comes after .000001% mortgage rates?

      “A massive mortgage write-down by the banks — a Jubilee of biblical proportions — that provide much-needed equity to upside-down homeowners.” ~ David Rosenberg

    3. JDSoCal

      I’d suggest you look at a chart of CBOE trends. Rates are going up, regardless of the Fed’s stupid policies. Why buy T-bonds at 4.5%, that pay off in increasingly debased currency, with countries like Brazil offering 11%? Not to mention, stocks and commodities are rallying. Treasuries will have to rise in yield or eventually only Bernanke will be buying them, and you know what that means – bond meltdown, and rates explode.

      No, rates can’t stay low forever, regardless of how badly The Bernank wants to steal from the fixed-income class to subsidize the stupid underwater homebuyer class. The market won’t allow it.

      1. awgee

        Because the people and institutions that buy T-bonds do not hold on to them and could care less if the currency is debased in the long term. The bond vigilantes are front running the Fed at POMO, and as long as they can profit from a risk free trade, interest rates aren’t going anywhere.

        1. JDSoCal

          in, as I said, go read a chart of TBT since August. You’re entitled to your own opinions, not your own facts.

          The smart money shorts treasuries.

  2. octal77

    Exhibit “A” – Shady Canyon

    Prices have been in a downward spiral for 3 years. Discounts of 50% on some properties. Empty spec homes. As noted in the article, upper end is pushing down the pancake stack. Only subject left
    for debate is *when* the bottom will come in. Any ideas?

    1. AZDavidPhx

      It’s a good thing that all those failed specs were bought by hard working savers with cash heavy down payments and no leverage was involved!

      1. octal77

        Irvine foreclosures are alive and well — even in pricy Shady Canyon. I used to make the implicit assumption that it was impossible for anyone in Shady to foreclose. After all, if someone could buy such an expensive property, they must have lots of money.

        “In the OC it seems everyone has a champagne
        appetite and a soda pop income” – Unknown

        1. lee in irvine

          “After all, if someone could buy such an expensive property, they must have lots of money.”

          Ha, Ha, Ha … isn’t that funny.

          I saw a kid who sold Fords for a living go from Corona to Anaheim Hills to Shady Canyon from 1998 to 2004. BTW, this blog did a nice expose on his (former) home when it went to foreclosure.

          1. tenmagnet

            So what happened to the foreclosed home?
            10:1 another multi-millionaire stepped in and bought the Shady Canyon home.
            Last time I checked the lots alone in Shady are selling for $2M

          2. AZDavidPhx

            It just means that all the pretenders are being pushed out so that all the real money can now find a way in.

          3. lee in irvine

            Maybe a millionaire did buy that prop.

            Check this out … these are the only two (per Redfin) sales in SC the last month:

            97 CANYON Crk Irvine, CA 92603
            Sep 10, 2010 Listed (Active) $5,398,000
            Jan 05, 2011 Sold (MLS) (Closed) $4,300,000

            63 CANYON Crk Irvine, CA 92603
            Dec 22, 2009 Sold (Public Records) $4,295,984 REO
            Dec 28, 2009 Listed (Active) 4,500,000
            Dec 31, 2010 Sold (MLS) $3,500,000
            (Ultra Fail)

            Looks to me like pricing in Shady is rolling over.

          4. lee in irvine

            There’s actually one more that sold in Shady (per Redfin):

            Mark Langston’s house

            56 GOLDEN EAGLE Irvine, CA 92603
            Sep 23, 2010 Listed (Active) $5,995,000
            Dec 30, 2010 Sold (Public Records) $5,350,000

          5. tenmagnet

            Prices have come down in some cases, I’m not disputing that.
            My point is that the bottom has not fallen out nor do I think it will.
            Let’s be clear, are you saying prices for homes in Shady Canyon will break the $2M threshold?

          6. Planet Reality

            Lee thanks for spending the time to prove tenmagnets point with data.

            Oh no It’s the end of the world $5M homes are now selling for $3.5M, whatever will Lee do? I know spend some time posting data the proves the point, and is basically irrelevant to 99.99% working stiffs.

          7. lee in irvine

            Oh no It’s the end of the world $5M homes are now selling for $3.5M, whatever will Lee do?

            LoL … 1.5 million … You’re funny.

            Oh Hey, check out Redfin … the difference between the listing price and selling price is wider now than anytime since the bubble went POP.

            $652 listing per sq feet
            $458 selling per sq feet

          8. AZDavidPhx

            PR –

            I seem to recall your “bearish” assertion in the past that prices were going to remain flat.

            5M dropping to 3.5M is not flat pricing. You can mock Lee all you want – why can’t market find more millionaires to keep the prices afloat over in Shady Canyon?

          9. tenmagnet

            I don’t recall you or anyone giving a buyer any credit let alone one who steps up to the plate and drops $3.5M
            You called a guy “sucker” a few months back when he posted that he bought a larger place because due to his expanding family.

          10. Observer

            The market’s on fire!!!

            1,021 days later, 3 different listing agents, and an original list price of $11.679 million, the house finally sells.

          11. AZDavidPhx

            Yes, the “I had to buy a 3M upgrade house because I made some babies” is hogwash. I don’t buy it. What is more likely is “I really want a bigger house than Dick – well you know, I did just make a few babies – YES, I’ll do it for the children!”

          12. irvine_home_owner

            “YES, I’ll do it for the children!”

            One day, you may understand how important kids become to a parent.

            And if you don’t… then Darwinism worked. 😀

          13. tenmagnet

            The guy that posted and got attacked by Dave was being sincere about needing more space for his growing family.
            Dave uses the children as a convenient excuse to justify blasting anyone that buys.

          14. AZDavidPhx

            Tenmagnet –

            I never knew you were so sensitive about people being ATTACKED! Your buddy PR is regularly popping off on IrvineRenter and I am pretty sure that you have never had a problem with that.

            Oh but that evil AZ monster called some guy a sucker. GASP IN HORROR EVERYONE! IT INVOLVES CHILDREN!

          15. skek

            Ten, man, you my boy but you’re wrong on this one. Lots in Shady are closer to a million — and that’s for the pick of the inventory (i.e., view lots, larger than half an acre). Check out 23 Tree Fern, the last to close. Three quarters of an acre, premium view, closing price of 1.1 million. The asking prices reflect the owners’ trying to maintain their self-respect, not a realistic market price. Shady lots will break below $1 million before this is all over. The tract homes in Shady will get below $2 million, and the customs will bottom out about $400-450 psf. That’s well below replacement value. Shady is getting creamed.

          16. awgee

            Covenant Hills now has a 1/4 acre lot listed at $379,000. Original selling price of CVH lots was over $1mil up to $2.5mil. The high end is getting destroyed.

          17. chipotle

            There’s a bank owned lot in Covenant Hills — right across from the sales center — that was listed at 296k. It’s in escrow now. Was never on the MLS. There are two more at just over 300k. You can buy brand new customs in there for less than construction costs (sub $300 psf). The land is essentially free. There’s a decent chance we end up in Covenant Hills — if only I can get comfortable with Capo Unified schools.

      2. irvine_home_owner

        “It’s a good thing that all those failed specs were bought by hard working savers with cash heavy down payments and no leverage was involved!”

        Highly anecdotal but you might be interested in this poll:


        I’ve communicated with a number of people who have bought recently in Irvine and the majority of them have used money they have been saving for years (and not from equity on a prior home). One person had been saving for almost 10 years before he put 40% down (could have put 100%).

        So, yes, like Santa Claus and the Tooth Fairy, there are people who can save money in Irvine.

        1. AZDavidPhx

          Irvine HO,

          That’s not a very scientific poll. First of all, the language that you use is very biased.

          Option 1 “Our hard-earned savings”. This is clearly the answer you are wanting people to select. It is also ambiguous but it appeals to people’s pride making it an attractive selection.

          Option 2 the “AZDave answer” is obviously the option you want folks to vote against. On a forum that is full of frothing at the mouth AZDavidPhx haters, I can’t help but assume that my name attached to one of the options made it a less attractive selection.

          1. irvine_home_owner


            “That’s not a very scientific poll.”

            Uh… do you know what “highly anecdotal” means?

            And don’t let your head get too big… the majority of the posters on that forum have no idea who you are. The ones who do, are on another forum.

            I’m still waiting for your evidence (doesn’t have to be “very scientific”) to prove that all the high downs and all-cash transactions are sourced from equity flips.

            BTW: If, like IR contends, the majority of buyers in the New Home Collection are NOT move-up buyers… meaning they are first-time buyers — they can’t have owned a previous home for equity could they?

          2. AZDavidPhx

            Most people on the forums don’t know who I am? Then why bother attaching my name to a selection in the poll? Just to make your buddy Graphrix giggle?

          3. irvine_home_owner

            Actually… just to make me giggle. Plus you know you like it.

            And sorry to say, Graphrix is not active on TalkIrvine either.

        2. AZDavidPhx

          Also, you are acting as though I stated that Irvine had zero savers. I have always said that I do not believe that there are enough to make up the slack and keep your bubble prices up. If you found a guy who saved up 200K from his lemonade stand then great. You have proven that Irvine has more than zero savers. Unfortunately, the question as to whether or not Irvine has enough of these folks to keep bubble prices in place is not answered.

          1. irvine_home_owner

            It’s been answered… you just refuse to see it.

            Data will set you free.

            Here’s a question for the rest of the audience:

            The majority consensus is that prices have not dropped as sharply in Irvine due to government intervention. Yet, prices have dropped quite sharply in other areas (that had the same government intervention). So if there was no government intervention, would places like Riverside and Las Vegas gone negative?

            To wit, based on The MoreShadowInventoryARMResetRatesRising Theory, if there are more drops to come for Irvine (which I somewhat agree with)… what does that mean for other cities who are seemingly at bottom?

          2. Frak

            So a “hard-earned” 3.5% qualifies? Yeah, in this market the way its shifted over the last 10 years, I can imagine that the massive influx of people in the 0-5% down bracket would skew the old ratio of equity buyers v. savings buyers. It really doesn’t take much to save that. Let the credit cards wrack up a bit, skimp a bit, conveniently forget a bit that dad did give you a $10k to get your over the 3.5 hump…

            BOOM! I’m a hard-earning, hard-saving son of a gun!

          3. irvine_home_owner


            If you read the link, the poll was for the people who put 20% or more down, it even says it on the poll:

            “The majority was 20% or more… so if you can share… where did that moolah come from?”

            Since you seem to have arrived late to the party, historically, Irvine down payments average 35-40% down, with many being all-cash.

            In a city where the prices are a still bubbly, $10k isn’t even close to 3.5%, imagine how much you need to get from dad for 40%.

          4. Frak

            Fair enough. My job is to read carefully, so I actively try not to read carefully when not being paid to. It wears on you.

            (BTW the $10K was not the DP, it was what the hypthetical dad gave to supplement the savings for the 3.5 DP–back when I was going down that dead end)

            Still, it’d be fascinating to do the same study without the biased wording. Even not having any idea who AZDave is, I would feel dirty picking that one, because I just feel like the pollster disapproves. Plus it kind of reads like @ss-Dave, and I’m don’t want to be like @ss-Dave. You follow me?

            Also, it would be all too likely that sub 20%-ers posted anyhow. Who doesn’t want to chime in? And why shouldn’t I get a vote? No one’s really asking me how much I put down. So why not!

            The problem with listing “hard-earned savings” as an option we’ve covered. But it should also be noted that people’s equity is often thought of and dealt with that way (see e.g. this whole bloody website), and it would certainly be classified like that for purposes of your self-selecting survey to the extent that some savings was mixed with the equity. Any mix at all, and I’m going to choose “hard-earned” savings. BY GUM!

            Plus the venue and the self-selection is problematic. Rather like me getting on my soapbox in a Utah townsquare and yelling “who here is going to vote Republican?” I’m going to get 99.9% “me” because the Democrats either aren’t there or aren’t in the mood to participate in the one sided shout out.

            That’s the problem with saying “hey this is anecdotal but…” or “this isn’t scientific, but….” Anything that comes after the “but” should probably not be stated at all. Your study is a step up from me saying “hey I just totally made this up, but the vast majority in Irvine is capable of socking away $30,000 to $100,000 per year. No seriously, I asked a few Irvinites I know, partners at a law firm, and they said they could. I indicated I would be disappointed with them if they told me otherwise.” But only one step.

            Hey, now that I’ve gone through that exercise, I can see why you do these studies. It’s very fun! I’ll have to think of how I can leverage it to my advantage.


          5. EconE

            I started the same kind of poll!

            Then I called all my friends and told them how to vote so that I could point out my bullshit statistics to everybody else!

  3. AZDavidPhx

    I can report that premium areas in my neck of the woods are beginning to show significant price cuts again after a year of relatively flat prices. Double dip has hit AZ – no doubt about it.

    In my own zipcode, they have been holding inventory steady at about 630 housing units. For most of last year they were selling at about 30 per month then jumped to about 50 as the tax credit expired and has averaged about 12 to 15 per month ever since. I find it just amazing how the inventory pretty much always stays the same despite huge jumps up and down in sales numbers at a time when foreclosures are exceeding record breaking numbers. Oh that “so called” shadow inventory is just a big myth.

    1. Planet Reality

      David, is your Scottsdale dream home now $250K? How close are you to purchasing? Hope it works out for you soon.

      1. AZDavidPhx


        Hey PR, thanks for your most sincere well wishes. I am waiting for interest rates to hit 2% and then I will be ready to jump.

        1. Planet Reality

          That was sincere. I don’t hold any negative BS emotional thoughts towards you. I would love to hear that you bought your $250K dream home in Scottsdale and hope it happens soon.

          You need your strawman picture. I never said mortgage rates would hit 2%. I do expect the 10 year t bill to hit record lows again, maybe 2%. I expect the 30 year fixed to drop below 4%.

          Right now the 5/1 ARM is at 3.4%, but thankfully we all know nobody in austere Orange County would use such a product.

          1. AZDavidPhx

            I know it was sincere – it tugged at my heart strings. Hug?

            I have no BS emotional thoughts of you either. You’re a standup guy and not a trouser stain whatsoever. Don’t listen to those folks who think that you are a douchebag – they know nothing. As you know, I have said several times on here that I want to be like you in every way when I grow up and I sincerely mean that.

          2. Planet Reality

            I sense you are having a bad day. May tomorrow be better, and please forgive her, him, or it so that you may move on.

  4. Pwned

    Same thing in LA. What used to cost close to $2 million now costs around $1.2 million, but with the changes in jumbo standards what does it matter? 20% down on a $1.2 million loan still means a jumbo loan and all the documentation requirements/higher interest rate that go along with it. There simply aren’t enough buyers who can qualify, so right now we’re in standoff mode until prices fall or lending standards go away again. Which do you think will happen first?

    1. octal77

      Even if lending standards go away with the dodo bird, problem is still *not* solved.

      Irregardless of lending standards outcome, buyers will still have to pass what I call the “Rich Uncle Test”. That is, even if a Rich Uncle *gave* you a property free and clear, could you afford it?

      I believe, in a majority of cases, especially in pricey areas such as Irvine, the answer is NO.

      Why? Because of holding costs such as property tax, insurance, maintenance and such. In Irvine
      I have calculated those costs to be 3%-5% of the property value / per year. Thus, a $1mm property really costs 30-50k/year to operate. Do these costs seem high? Remember that just property tax
      is about 1.25% of value. Add in insurance (especially liability) and *realistic* maintenance costs and you quickly come up to these numbers.

      1. Walter

        If you own the property free and clear, you can pay the tax and HOA and forget everything else if you can’t afford it. Leaky roof, but a few buckets, etc.

        In this case, you can skate by for a long time on 1% – 2% a year.

      2. Pwned

        I know lots of people who could afford in that scenario, but the reality is, none of them will be given a home. So they’re tempted by these “discounted” prices without running the numbers on the reality that they’d need at least $300k in the bank plus real documented income. Even with that, if they’re contractors/self-employed, they can forget about getting a jumbo loan.

    1. AZDavidPhx

      That’s the trade off for that large “eating area” as the “r”ealtor refers to it.

      Me caveman! Big eating area good! GRUNT

  5. tenmagnet

    Quality residence- check
    Premium area- check
    Bought at a discount- check
    By all accounts, today’s buyer got themselves a good deal

        1. gepetoh

          Ah, I see, between today’s price vs. 2005 price… Well, I’m guessing the bloke who bought it at $2.1M though he was getting a pretty good deal too, until… it started to drop. But the word “discount” can only be relative within this connotation. Meaning, it needs to be used in the context of “relative to what?”.

          It could very well be that the current price of $1.65M is a discount, IF the buyer can now sell it for a net profit. Or it could be a bust if the price goes down another 10% in the near future. Who knows? Popular opinion here is that that’s no discount at all.

          So, Quality Residence? check. Premium Area? check. Discounted? we’ll see. And maybe your last sentence should say, “By MY accounts, today’s buyer got themselves a good deal”.

          1. awgee

            Maybe IR should keep on writing as he writes. Maybe he has been right more than 99% of the people who give him suggestions. And maybe all his writing is by HIS accounts and anyone with a brain realizes that.

          2. tenmagnet

            You’re certainly welcome to your own opinion.
            Everything’s subject to interpretation.
            Today’s buyer feels like they got a good deal $450K off what was previously paid in ’05.
            It may be of no concern to them even if the market were to drop another 10%
            Popular opinion here may think that $750K for this place is a good deal.
            The reality is quite different.
            I guess time will tell.

          3. wacky tobacky

            Hahaaa, 2005 rollbacks are “good deals”. That’s a good one! How much could you rent this for, chap? What’s it really “worth”? If you want to divorce yourself from fundamentals, then let’s just say the house is worth 100 million dollars.

            What is this, pre-housing bust days again? You bulls are HIGH-larious.

        2. IrvineRenter

          Only time will tell if this was a good deal or not. Sometimes, a 25% discount is great, but if prices were double what they should be, a 25% discount is still overpaying. We won’t know for a couple of years if this was a good buy or not. I suspect this buyer will be happy 10 years from now.

          1. AZDavidPhx

            Why will they be happy 10 years from now? I am envisioning a whole bunch of super stoked Japenese coming off the end of their lost decade.

          2. irvine_home_owner

            As an aside… can that really happen to the US?

            I always see references to how we are going to become like Japan’s lost decade but is their economy really comparable to ours?

            Is that like one of those “Super High Interest Rates” or “The Gov Will Never Be Able To Interfere” bogeymen?

          3. flyovercountry

            If you look at stock market value, home values, or inflation adjusted income, aren’t we about at the end of our own lost decade right now?

          4. Laura Louzader

            Actually, the Japanese economy is NOT comparable to ours.

            They’re better off in an important way, which is that their population tends to have more savings, thus much more resilience in the face of economic adversity.

            We, on the other hand, are drowning in so much personal debt that we are super-dependent on “growth” and asset inflation just to eat and pay our bills.

            How could we ever think that this was a good way for most people to live?

          5. IR_fan

            they are actually much worse off in an even important way, demographics.

            Aging population with extremely low birth rate and no immigration to speak of.

            That country is a slow grind to death unless they change their immigration policies/attitude.

    1. Geotpf

      That is, IMHO, an amazingly ugly and goofy home. It looks like a duplex with the two mirror image garages. Why would you want two two car garages anyways-one four car garage seems to me to be much superior. Plus, the front door is literaly in the middle of a driveway the size of a full court basketball court. E-Z maintenance I guess if your entire front yard isn’t yard at all but concrete driveway (there is a strip of yard along the long portion of the driveway according to the overhead map, but meh).

      1. awgee

        It is a standard Toll Brothers model and Toll Brothers has had no trouble selling them across the country. Maybe you could hire out as a consultant to those who spend more than a million on their homes. I am sure your opinion would be much desired.

  6. awgee

    What sold for $2,445,000 in 2006 just sold this week for $1,069,500, or -56%, and prices are still falling.

    You can check it out by doing a search for “Comp Killer – 1 Taiga” on The Coto Housing Blog or by just scrolling down the page a few posts.

  7. Mike Nolls

    There was just some news about Irvine being one of the hottest housing markets in demand this year. A lot of it is due to the new infrastructure being brought in by the great park and such. This home sure seems to be a heck of a deal for the buyer, but, who’s to say the property is even “worth” that price?? How far has the bubble inflated it? Either way Irvine is one of the more stable markets so it seems wise.

  8. harry martine

    You always show a variation of the famous “American Gothic” picture and it is a perfect symbol for the American myth and home ownership.

    Allegedly, the man in the original picture was an Iowa dentist and the lady is his sister. The couple was supposed to represent American pioneer spirit of self reliance and overcoming hardship to create a new life.

    Of course, being a dentist that poor man and his sister probably couldn’t survive a day on the frontier. It was just pure myth like the poor suckers whole believed in home ownership and that rigged housing asset bubbles never decline.

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