Southern California median home price falls, sales hit three-year low

The median home price declined on a year-over-year basis in February for the first time since October of 2009. Home sales hit a three-year low.

Irvine Home Address … 38 WILLOWGROVE Irvine, CA 92604

Resale Home Price …… $534,900

It's not

What you thought

When you first began it

You got

What you want

Now you can hardly stand it though

Prepare a list of what you need

Before you sign away the deed

'Cause it's not going to stop

No, it's not going to stop

Aimee Mann — Wise Up

Many buyers purchased for appreciation, and they got the property they wanted, but now that they are underwater, they can hardly see it through. Many walk away.

They make a list of what they need before they give back the deed because they know the pressure on prices is not going to stop.

Wise up! Record low sales, high rates of foreclosure and falling prices are not good signs for the real estate market.

Southland February Home Sales At 3-year Low; Investor Interest High

March 15, 2011

La Jolla, CA—Southern California’s housing market remained sluggish in February despite relatively strong demand from investors and others paying cash for homes. Prices appeared fairly flat as many potential home buyers stayed on the sidelines and waited – whether for a sign values have bottomed, job security has improved or credit has loosened, a real estate information service reported.

How do they know what motivates buyers? Aren't those statements really just bullshit? Dataquick has consistently cheerleaded for the realtor community, and it comes through in their press releases where they always have some positive spin they put on the data.

Last month 14,369 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was down 0.6 percent from 14,458 in January, and down 6.4 percent from 15,359 in February 2010, according to DataQuick Information Systems of San Diego.

A small change in sales – up or down – between January and February is normal for the season. On average, sales have risen 0.6 percent between those two months since 1988, when DataQuick’s statistics begin.

In other words, rather than showing normal seasonal strength coming off a January low, the market actually deteriorated. Is this spin true “A small change in sales – up or down – between January and February is normal for the season?” Well, the OC Register did some digging, and according to them, “This early year decline is a bit of a rarity: It’s only the 9th time since 1988 that homebuying activity was lower in February in January.” 9 times out of 23 seems rather rare.

See those huge down spikes on the chart below? Those are January sales numbers.

See those huge up spikes back to the normal range? Those are February's typical gains.

The total number of homes sold last month was the lowest for a February since 2008, when 10,777 sold, and the second-lowest since 1995, when 12,459 sold. Last month’s sales fell 19.5 percent short of the Southland’s average February sales tally – 17,848 – since 1988.

We have more houses than we did in 1988. We have more people living in Southern California that we did in 1988. How is it that sales are not at least in proportion to the increase in the number of homes or the number of people? I think we all know the answer, but it is worth noting that sales rates are very low by any standard measure.

The 847 newly built homes sold in the region last month marked the second-lowest level on record for a February, behind 842 sales in February 2009. Builders continue to struggle to compete with prices on resale homes, especially distressed properties.

Irvine is different, right? New home sales continue to outperform, right?

Last month’s distressed sales – the combination of sales of foreclosed homes and “short sales” – accounted for well over half of the resale market.

Whenever the percentage of distressed sales exceeds 40%, prices generally fall.

Foreclosure resales – properties foreclosed on in the prior 12 months – made up 37.1 percent of resales last month, up from 36.8 percent in January but down from 42.4 percent a year ago. Over the past year foreclosure resales hit a low of 32.8 percent last June but since then they’ve trended higher. Foreclosure resales peaked at 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 19.8 percent of Southland resales last month. That was up from an estimated 19.7 percent in January, 18.4 percent a year earlier, and 12.0 percent two years ago.

The abundance of distressed homes for sale continues to attract unusually high levels of investor and cash-only buyers.

People portray this as some kind of investor conspiracy trying to squeeze out the little guy. The reality is that investors are stepping into the void left behind by owner occupants who could not sustain ownership. If there were an owner occupant capable of sustaining ownership, their bids for properties would almost certainly be higher than an investor's bid. Investors do not crowd out owner occupants. To the contrary, as the economy improves, it will be owner occupants that bid up prices and crowd out investors.

Absentee buyers – mostly investors and some second-home purchasers – bought a record 26.1 percent of the Southland homes sold in February, paying a median $198,000. Since 2000, absentee buyers have purchased a monthly average of 16.2 percent of all homes sold. (Absentee data go back to 2000.)

Buyers who paid cash accounted for a record 31.7 percent of February home sales, paying a median $200,000. That was up from 30.4 in January and 30.1 percent a year earlier. The February cash level was the highest for any month in DataQuick’s statistics back to 1988. The 10-year monthly average for the percentage of Southland homes purchased with cash is 13.1 percent. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.

“The January and February sales data can be interesting, but we always caution that historically they’ve been a poor barometer for the rest of the year. What the past two months do tell us is that lots of people have bet, often with cash, that housing at today’s prices will prove a solid investment,” said John Walsh, DataQuick president.

“This spring we’ll see an infusion into the market of more traditional buyers, who aren’t necessarily purchasing with an investor mindset. If the stars line up right – low prices, low mortgage rates, available credit, higher job growth and higher consumer confidence – we could see sales shoot back up to more normal levels. There’s pent-up demand out there. Lots of people have been waiting for the right time to buy. But they’ve got to feel more confident in their jobs, they’ve got to qualify for a loan and, for some, they need to be convinced prices are at or near bottom. One group will still be stuck on the sidelines, though: Those who owe significantly more on their mortgages than their homes are worth.”

Did you recover from that kool aid overdose?

The median price paid for a Southland home last month was $275,000, up 1.9 percent from $270,000 in January, and unchanged from $275,000 in February 2010. In January this year, the median fell slightly (-0.6%) from a year earlier, marking the first year-over-year decline since October 2009.

Notice that they buried a key piece of information in the middle of the article as if it wasn't important. I used this as a headline because it is important news.

The median’s low point for the current real estate cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007.

Wow! the median in Southern California declined more than 50% from peak to trough — assuming you believe that was the trough.

The peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially inland foreclosures.

Do they have any more excuses for the market's poor performance?

At the county level last month, the overall median sale price fell on a year-over-year basis in four counties and was unchanged in two. Declines from a year ago were logged in Orange (-1.7 percent), Riverside (-1.0 percent), San Diego (-4.3 percent), and Ventura (-1.4 percent) counties, while the median was the same as a year ago in Los Angeles and San Bernardino counties.

The median paid for the largest home-type category – resale single-family detached houses – fell year-over-year last month in Orange (-3.1 percent), San Diego (-3.1 percent) and Ventura (-9.6 percent) counties. The other three counties recorded annual gains ranging from 2.6 percent in Los Angeles and Riverside counties to 3.6 percent in San Bernardino County.

The beaten down markets are bottoming and starting to recover while the previously immune markets are beginning to falter.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 32.2 percent of all mortgages used to purchase homes in February. That was the lowest level since August 2008, when 26.8 percent of purchase loans were FHA. Last month’s FHA level was down from 33.2 percent in January and 36.8 percent in February 2010. Two years ago FHA loans made up 36.9 percent of the purchase loan market, while three years ago it was just 6.5 percent.

Last month 18.1 percent of all sales were for $500,000 or more, down from a revised 18.3 percent in January and down from 18.5 percent a year earlier. The low point for $500,000-plus sales was in January 2009, when only 13.6 percent of sales crossed that threshold. Over the past decade, a monthly average of 26.8 percent of homes sold for $500,000 or more.

Viewed differently, Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 34.6 percent of total sales last month. That was up from 33.4 percent in January and up from 32.7 percent a year ago. Over the last decade, those higher-end areas contributed a monthly average of 37.1 percent of regional sales. Their contribution to overall sales hit a low of 26.2 percent in January 2009.

High-end sales still suffer from tight credit policies. Adjustable-rate mortgages (ARMs) and so-called jumbo home loans have been relatively difficult to get ever since August 2007, when the credit crunch hit.

And none of that is going to change. When you hear pundits describe this situation, they make it sound like a temporary overreaction. Happy days will not be here again soon.

Last month ARMs represented 7.8 percent of Southland purchase loans, up from 7.0 percent in January and 4.1 percent a year ago. Last month’s figure was the highest since August 2008, when it was 10.5 percent. Over the past decade, a monthly average of about 38 percent of purchase loans were ARMs.

It is good to know that only 7.8% of buyers are foolish enough to take out an adjustable rate mortgage at the bottom of the interest rate cycle. It's amazing that the market typically has 38% of its loans as ARMs. That will change as interest rates begin they cyclic climb.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 15.6 percent of last month’s purchase lending, up from 15.2 percent in January and 14.8 percent a year earlier. However, in the months leading up to the credit crisis that struck in August 2007, jumbos accounted for 40 percent of the market.

Jumbo loans will not be 40% of the market any time soon. Since these loans are not government backed, the interest rates are about 3/4 of a point higher. That translates into a significant loss of affordability once jumbo financing is required.

Last month the percentage of Southland homes that was flipped – bought and re-sold on the open market within a six-month period – was 3.2 percent. That was up from a “flipping” rate of 3.1 percent in January but down from 3.4 percent a year earlier. Flipping varied last month from as little as 2.4 percent in Ventura County to as much as 3.8 percent in San Diego County.

DataQuick Information Systems monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,174 last month, up from $1,128 in January and down from $1,180 in February 2010. Adjusted for inflation, current payments are 48.1 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 57.4 percent below the current cycle’s peak in July 2007.

Now we are seeing real payments based on real incomes. During both housing bubbles, toxic financing became common, and payments became detached from reality.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

Sales Volume Median Price
All homes Feb-10 Feb-11 %Chng Feb-10 Feb-11 %Chng
Los Angeles 5,034 4,736 -5.90% $315,000 $315,000 0.00%
Orange 1,986 1,903 -4.20% $417,000 $410,000 -1.70%
Riverside 3,199 2,842 -11.20% $197,000 $195,000 -1.00%
San Bernardino 2,095 1,974 -5.80% $150,000 $150,000 0.00%
San Diego 2,465 2,330 -5.50% $322,000 $308,000 -4.30%
Ventura 580 584 0.70% $350,000 $345,000 -1.40%
SoCal 15,359 14,369 -6.40% $275,000 $275,000 0.00%

Source: Media calls: Andrew LePage (916) 456-7157

Copyright 2011 DataQuick Information Systems. All rights reserved.

Irvine Shadow Inventory

realtors have been consistently denying the existence of shadow inventory. It's always rather surprising to me to see people deny the obvious. Did they think the shadow inventory would never surface or never be identifiable?

Todays' featured property was first profiled on 7/30/2008. Back then, an asking price of $569,000 was one of those ridiculous short sale prices well below market. Today, that would represent a $70,000 profit from today's asking price — plus the lender has eaten two years worth of lost payments. Today's featured property was purchased by the bank as REO on 6/11/2009. What have they been doing with this property for the last two years? If that's how fast their renovation crews work, they need better help.

The former owners paid $745,000 on 3/2/2006 using a $633,250 first mortgage, and a $111,750 down payment — now gone. They refinanced on 6/25/2007 with an option ARM. They obtained a $78,000 HELOC, but it is unclear if they used it to withdraw their down payment. If they didn't, I bet they wish they did.

This house was in shadow inventory for the last two years. Perhaps properties like this are picked up on a report somewhere, but it was not for sale on the MLS, and it was not rented out. It sat there empty. It makes more sense for the property to sit empty rather than sell it and lower prices — at least that's what the banks believe.

Expect to see more properties like this, particularly if lenders believe there is some demand to sell into. It's these properties coupled with the ongoing distress still hanging over the market that will prevent any meaningful appreciation for the foreseeable future.

It's more than an abstract idea. You will see it happen house by house here at the IHB.

Irvine Home Address … 38 WILLOWGROVE Irvine, CA 92604

Resale Home Price … $499,900

Home Purchase Price … $745,000

Home Purchase Date …. 3/2/06

Net Gain (Loss) ………. $(275,094)

Percent Change ………. -36.9%

Annual Appreciation … -7.5%

Cost of Ownership


$499,900 ………. Asking Price

$17,497 ………. 3.5% Down FHA Financing

4.82% …………… Mortgage Interest Rate

$482,404 ………. 30-Year Mortgage

$101,398 ………. Income Requirement

$2,537 ………. Monthly Mortgage Payment

$433 ………. Property Tax

$150 ………. Special Taxes and Levies (Mello Roos)

$83 ………. Homeowners Insurance

$139 ………. Homeowners Association Fees


$3,342 ………. Monthly Cash Outlays

-$415 ………. Tax Savings (% of Interest and Property Tax)

-$599 ………. Equity Hidden in Payment

$32 ………. Lost Income to Down Payment (net of taxes)

$83 ………. Maintenance and Replacement Reserves


$2,444 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$4,999 ………. Furnishing and Move In @1%

$4,999 ………. Closing Costs @1%

$4,824 ………… Interest Points @1% of Loan

$17,497 ………. Down Payment


$32,319 ………. Total Cash Costs

$37,400 ………… Emergency Cash Reserves


$69,719 ………. Total Savings Needed

Property Details for 38 WILLOWGROVE Irvine, CA 92604


Beds: 4

Baths: 3

Sq. Ft.: 2040


Lot Size: –

Property Type: Residential, Condominium

Style: Two Level, Mediterranean

Year Built: 1978

Community: Woodbridge

County: Orange

MLS#: S651660

Source: SoCalMLS

Status: Active

On Redfin: 1 day



Follow up story

Remember the attorney advising his clients to break in and squat in their old homes?

He is being reprimanded by the State Bar.

Discipline Case Filed Against Lawyer Who Advised Clients to Break Into Their Foreclosed Homes

Posted Mar 14, 2011 5:13 PM CDT

By Stephanie Francis Ward

Updated: A California lawyer who advised clients to break into their foreclosed homes while he argued in state court that the foreclosures were illegal faces from the State Bar of California discipline for his remarks, the attorney regulatory agency announced today.

The complaint against Michael T. Pines, filed in the State Bar Court, seeks to lift his law license. According to a press release the state bar issued, Pines in February was arrested for threatening the occupants of a house that used to belong to his clients, and the following day was cited for trespassing on the property. Four days later, according to the release, he was cited for violating a temporary restraining order at the site. According to the state bar, Pines told his clients that he may break into the property again.

And in October, according to the release, Pines notified Newport Beach, Calif., police that he and a client were going to take possession of a house that the client lost in foreclosure.

“To remove a lawyer from active practice on an interim basis before formal charges are filed is a drastic remedy,” James Towery, the state bar’s chief trial counsel, stated in today’s release. “That remedy is justified by the established misconduct of Michael T. Pines. He has shown complete disrespect for the law, the courts and especially the best interests of his clients. Removing Mr. Pines from active practice is an important step in our mission of public protection.”

Pines’ alleged actions have been widely noted. In January, the he told a Ventura County judge he’d hire a locksmith himself to get a husband and wife he represents back into their home. Pines admitted to breaking into homes at least half a dozen times so his clients could live in them while he defended their foreclosure proceedings. Also, the Ventura County judge criticized Pines for skipping a contempt hearing, and filing federal and state court lawsuits that he later abandoned. And it was reported that Pines himself has at least six properties in foreclosure, after working as a real estate broker specializing in distressed investments.

Updated March 15 to correct a reference to Michael T. Pines.

51 thoughts on “Southern California median home price falls, sales hit three-year low

  1. winstongator

    This is why I liked the google real estate maps. They would show homes that were distressed or in foreclosure, and also for sale (you could turn the buttons on or off). I guess they trolled court proceedings to find LP’s and NOD’s (I don’t know what they did in my area because those are harder to find). You could also get the view of a neighborhood from people who lived in it – knowing that a house had been foreclosed but not on market, a home had been vacant (owners relocated). You’d hope a buyer’s agent would find that stuff out for you.

    How much local control does a bank have with listing foreclosures? I don’t see the massive delay in this part of NC. Many of the loans are held by smaller local banks and were small builders that went under. Where I see the bigger losses are not in the poor sales prices, but the 3+ years of unpaid interest. I guess when the securing capital on that is a savings account paying 0.25%, lost interest is not a huge deal.

    1. Misstrial

      I really liked the “real estate” search option on Google maps and used this feature almost daily.

      I suspect that this feature was discontinued because we aren’t supposed to know the immense numbers of foreclosures out there.

      Not politically expedient, particularly when we are supposedly in a “recovery.”


  2. Mr. Haney

    On a purely visceral level, $410,000 for the “median” priced home (even in idyllic OC) strikes me as ridiculously high.

    Furthermore, thanks for the update on attorney Pines. Please keep us posted (although, frankly, I think his 15 minutes are up).

    1. IrvineRenter

      “And it was reported that Pines himself has at least six properties in foreclosure, after working as a real estate broker specializing in distressed investments.”

      This guy is quite a piece of work, isn’t he?

      I agree with your assessment of prices. Interest rates below 5% have really warped what people can finance, and it is translating to higher prices. None of it feels right to people with a sense of what real estate markets were like before the 00s.

    2. honcho

      I also enjoyed the Pines update since he has somewhat dropped off the radar. Pines will join a long list of these foreclosure defense attorneys who have lost their ability to practice law (but who have enriched themselves in the process).

      For what it’s worth, the court that was dealing with him up in Simi Valley held him in contempt (and issued a pretty scathing written opinion). The court did let the prior owner off the hook, this time, but did issue a very strong warning for them not to attempt to break in to the home again. The court also required Pines to give the written opinion to the prior owner (I can’t imagine there is anything quite like handing your client a court opinion that states you royally screwed up and your client is lucky not to be in jail or fined a significant amount of money as a result of your “advice.”).

  3. AbroadThankGod

    I posted this comment a couple of weeks ago. Somehow it was the one day that PR didn’t stop by and cheerlead. So let’s try again now. At this point, these links are a bit old — and the facts have swung even further away from PR’s orbit:

    I’m sure that using actual facts and information is hopeless, but I would just like to point Planet Realty to a couple of links:

    So, Mr. Realty, your two big points for months have been 1) The best time to buy in Irvine was spring 2009. Everyone here missed the boat, and 2) Interest rates will continue dropping and get down near 2%.

    Ladies and Gentlemen, the clear and unassailable debunking of Planet Realty. Do not waste your time reading his comments; they are simply useless and baseless.

    Thanks for playing…

    PS – I believe I saw some garbage from PR about how SFRs are still above 2009, at least in Irvine. Really? Playing that game now? When that fails to be true then he can point to certain areas like Turtle Rock. And when that fails to be true he can cherry pick house by house…

    I guess the bigger point here isn’t that PR will ever recognize his failures. But the rest of us certainly can and do.

    1. tenmagnet

      Here’s what you forgot to include in that post.
      FCBs, all cash, multiple offers, bidding wars and down payments north of 30% along with new supply courtesy of TIC are all still very much in motion.

      1. Frak

        Yeah! Don’t forget to list all the stuff that apparently isn’t stopping the downward slide…

        1. tenmagnet

          Yeah, apparently not.
          The new product being launched this coming weekend is in the range of $360 sq./foot.
          You guys should hurry and notify all potential buyers about these huge declines so TIC can adjust their pricing to accurately reflect what you think it’s worth rather than what the actual market says.

          1. bigmoneysalsa

            “The new product being launched this coming weekend is in the range of $360 sq./foot.”

            So what? Maybe the could have gotten $460 sq./foot a few years ago. Maybe they’ll only get $260 sq./foot a few years from now. Despite what you seem to think no one is arguing about where prices are right now. We’re trying to figure out where prices are likely to go in the future.

          2. tenmagnet

            It seems as though my focus is on the here and now and yours is on the future.
            Please enlighten me with your future of Irvine housing forecast or reference a forecast that you’ve made in the past.

          3. bigmoneysalsa

            There’s nothing wrong with being focused on the here and now. All I’m saying is that your stated facts about the here and now don’t disprove the theory that prices are currently declining and will continue to decline. If you want a forecast, I’d say that prices in Irvine will decline sufficiently in the next few years that most people who buy now will regret not having waited.

          4. tenmagnet

            Fair enough, I acknowledge your point.
            The other side to your statement is that future prices do not decline significantly enough so that those who bought now or previously end up regretting it.

          5. bigmoneysalsa

            Correct. I assume that if prices stay flat or only go down 5% most of todays buyers will not regret their purchase, and my forecast will have been wrong.

          6. Planet Reality

            Maybe they could have gotten $460 per sq ft? Why are you speculating on the past? Fact is these areas in Irvine did not fall 25% in price and have seen increases over the past 24 months from TIC.

          7. bigmoneysalsa

            Hey ten,
            Pardon my ignorance, but where are the new developments opening this weekend? Is it stonegate?

          8. bigmoneysalsa

            “Fact is these areas in Irvine did not fall 25% in price”

            Really now?

            38 Gray Dove in Portala sold in late 2007 for $448/sf
            77 Canal in Woodbury sold in mid 2005 for $441/sf
            179 Rhapsody in Woodbury sold in late 2007 for $453/sf
            11 Costa Brava in Woodbury sold in late 2007 for $465/sf
            3 Nature in Woodbury sold in late 2007 early $447/sf
            78 Great Lawn
            51 Rising Sun
            80 Loganberry
            84 Loganberry
            91 Alhambra

            I could go on and on and on. And remember, the peak was mid 2006. The fact is that if you go back and look at the sales records for Woodbury and Portola you can find entire neighboorhoods that have traded in the $400+ /sf range or likely would have at the peak. Don’t take my word for it; the data is all publicly available. If I dug a little more I’m sure I could find paired sales of similar units showing 25% declines. Maybe I’ll take a look on Redfin tonight.

            TIC realizes that prices have declined, they are pricing accordingly, and as a result they are moving product. Good for them for finally acknowledging what (to most) is obvious.

      2. bigmoneysalsa

        I wouldn’t say “forgot to include” so much as “didn’t include because they’re irrelevant.” All of those things have been around since 2007, and none of them prevented the already significant declines in Irvine prices that have taken place so far. Why exactly should we think they are going to stop any further declines going forward?

    2. irvine_home_owner

      I tried to Google it but how many times did PR say rates would drop to 2%?

      I find more comments of people criticizing him for it. I recall something about him saying rates would go low but I can’t find the alleged numerous instances where he called out 2% repeatedly.

      1. AZDavidPhx

        Astute Observation by Planet Reality
        2010-12-14 10:19 AM
        Nothing has changed, rates will break record lows

        Astute Observation by ochomehunter
        2010-12-14 10:25 AM
        I agree with PR on future interest rates.

        I also expect rates to go below 2% at some point in the future.

        Astute Observation by Planet Reality
        2010-12-14 10:39 AM
        100% agree, and will add that upscale premium areas of the US will feel very little pain while the majority of the US will decline in quality of life. This is simply continuing the path of capitalism for the past 200+ years.

        This Irvine transaction says it all.

        1. irvine_home_owner

          So wait… he didn’t specifically make that 2% prediction? So far you’ve only shown me that he agreed with someone else’s comment of which part of it was 2% rates?

          Hmm… I’m not a lawyer but I think I would need to actually see the smoking gun. And I’m not saying it doesn’t exist… just that I’m not sure he was harping on 2% rates like everyone else here says he was.

          BTW: Haven’t rates broken record lows?

          1. AZDavidPhx

            he didn’t specifically make that 2% prediction?

            No, he only said he agreed 100% and the only thing that he wanted to change with ochomehunter’s original statement was that the high end would experience very little pain and continue the 200 year old tradition of capitalism. If he took exception with the 2% then I would think that he would have included something in his editorial.

            Haven’t rates broken record lows?

            How have mortgage rates done since PR agreed 100% with the prediction made by ochomehunter but did not originate from himself?

            Historical Mortgage Rate Data

            You searched for: 30 year FRM, 15 year FRM, 1 year ARM
            Time Period: December, 2010 – April, 2011

            30 year FRM
            15 year FRM
            1 year ARM

            12/3/2010 4.46 3.81 3.25
            12/10/2010 4.61 3.96 3.27
            12/17/2010 4.83 4.17 3.35
            12/24/2010 4.81 4.15 3.40
            12/31/2010 4.86 4.20 3.26
            1/7/2011 4.77 4.13 3.24
            1/14/2011 4.71 4.08 3.23
            1/21/2011 4.74 4.05 3.25
            1/28/2011 4.80 4.09 3.26
            2/4/2011 4.81 4.08 3.26
            2/11/2011 5.05 4.29 3.35
            2/18/2011 5.00 4.27 3.39
            2/25/2011 4.95 4.22 3.40
            3/4/2011 4.87 4.15 3.23
            3/11/2011 4.88 4.15 3.21

            I am not seeing any breathtaking record breaking lows. There is still plenty of time for PR to become right. I don’t think it looks promising but stranger things have happened.

          2. Planet Reality

            IHO, thanks for representing me as my lawyer. You are exactly right.

            You know how I know I’m going to be right? You are endlessly posting this non sense in long drawn out post.

      2. AZDavidPhx

        PR has not been repeatedly calling for 2%. I have just been on him about how well his “prediction” has been working out as I was getting sick and tired of the relentless cheerleaders on the blog last year that were constantly talking up PR’s ability to predict interest rates so I asked him to get his prediction in at the end of last year so it would be on the record for all to see.

        PR (and his boyfriends) are free to admit that he blew the call at any time and stop pumping his ability to call the interest rates.

        1. irvine_home_owner

          So basically, everyone calling PR out on predicting 2% rates are just acting on your comments?

          Basically heresay?


          1. AZDavidPhx

            Heresay? Maybe if PR did not say it on a public forum. I am just copy/pasting what he said. Anyone is free to go back and look it up themselves and come to their own conclusion. If other people did that and decided to dog PR about it, that is their call.

          2. irvine_home_owner

            If you ever get in trouble with the law, please don’t defend yourself:

            AZDave: “Maybe if PR did not say it on a public forum.”

            Me: “he didn’t specifically make that 2% prediction?”

            AZDave: “No”

            AZDave: “PR has not been repeatedly calling for 2%.”

            Conjecture is not #winning.

          3. AZDavidPhx

            Love the clever editing there, Irvine HO – you should work in reality TV. If you say that you predict that the Cubs are going to win and I say that I agree 100% then I am not at all predicting that the Cubs are going to win. Brilliant work, Perry Mason.

          4. irvine_home_owner

            “I am just copy/pasting what he said. Anyone is free to go back and look it up themselves and come to their own conclusion.”

            Internet jujutsu.

        1. irvine_home_owner

          “… if the fed rate is held to zero for the next 10 years.”

          So AZDave is being a bit premature? Let’s revisit this in 2020 and hope the Fed has held up their part of the “prediction”.


  4. Vincenzo

    Is the Great Inflation coming this year?

    Gas is going into the $5 direction.
    Food prices are up 4% in February.

    Investing into housing seems to be a sensible decision during inflation.

    1. CapitalismWorks

      Not if you discretionary income is being crowded out by non-discretionary expenses.

      All inflation is not created equal. The divergence between headline and core underscores this fact.

  5. home seeker

    The house is listed at $499,900 on Redfin. And the HOA is ($264 + $73). Please correct the info.

  6. James Kent

    Looking at the historical home prices it seems to me most of the homes I see post on this blog at $550,000 should probably be about $350,000 once their bubble premium is removed.

    I wonder who in their right mind is buying now? You are almost assured a minimum of a 20% loss.


    1. headHigh

      Irvanoids have such big hearts. By overpaying for housing, they are doing their part to help the FIRE industry and underwater homeowners. They are not out of their mind; they are just very generous people.

  7. tacoshark

    If the math works, then it may make sense to buy in the face of a 20% drop. If your options are rent for 3-5 years at $2500/mo, or lose $100k in equity over the same time period,I think I’d chose to lose equity as its not real dollars until you sell vs. the rent goes straight into the toilet.

    1. lmor


      Your logic is flawed, it assumes that if you buy that all of your mortgage payments are going towards building equity, and are recoverable.

      The same house that will cost you $2500/mo in rent is likely to cost you $3500/mo in mortgage payments to own if not more. For the first 3-5 years more than $2500 of that mortgage payment is going to interest – which is really just the cost for you to rent your house from the bank who is the real owner (and goes right into the toilet likewise)

      So in your scenario of a home that drops 20% – not only are you out your $100k in equity (probably your entire downpayment) but also the $2500+ a month in interest payments. If you rented instead and waited to buy, then you are only out the monthly payments and you save the $100k.

      Even if you consider the interest is tax deductible vs rent not being deductible it still doesn’t make sense, the tax savings is generally just a wash with property tax. There is no possible way to twist the numbers to make it make sense from a financial point of view to buy a house if you knew for a fact that the value was going to drop 20%.

  8. SanJoseRenter


    Your post makes no sense.

    Both renters and homeloaners have to pay monthly. The former rent, the latter property taxes, maintenance, insurance, mortgage payment, HoAs, etc.

    With 5x DTI, the former pays half the latter, and can move if a job relocation is needed.

    How is that “straight into the toilet?”

  9. BD

    FYI gang and newbies… you have heard me say this before – ANYTHING that requires borrowed money to buy will get destroyed with inflation.

    Example – buy your 1M dollar house today with 5% borrowed money and sell it a decade later to a person who has to buy with 9% borrowed money. Yikes… you have owned for a decade and will loose 30%+!!! $300K to purchase price after owning and paying…. unfortunately in the first decade of ownership in a 30 year fixed mortgage you have only paid about 18% additional in your equity. So with 20% down (200K) AND another 150K in paid for equity you break even after commission sales!!! Ohhhh and it wasn’t a burden to your family to be house poor and live one spouses job loss away from default.

    Oh sure… just do it… obviously rates aren’t going to rise, and downpayment requirements aren’t going to rise, and mortgage interest deductions aren’t going lower and conforming loan limits wont go back to 417K (because the rest of the US wants to subsidize stupid CA borrowers of course)….

    Just model best and worst case situation over the next decade! Remember it’s not the price you buy at! It’s the price you sell at that matters!!!!


  10. BD

    Wow… can you imagine what happens to prices over the next decade if we get sustained rate increases and higher taxes with stagnant wages?? Just rent until you can buy for what it costs to rent!!!! I’m in a gorgeous ocean front condo for 2700 a month but to own it is 4000+ why do it???? Oh… and there is no mortgage interest deduction if you make any real money. AMT takes that away… so do some math.


  11. Jon

    Irvine Renter…..your math is bad again today.

    Your example shows FHA financing which requires FHA mortgage insurance. Financed FHA upfront mortgage insurance would make the total loan amount $486,744. Monthly mortgage insurance that you omitted from your example would be $361.80/month making the total mortgage payment including escrow impounds for taxes, insurance and HOA dues $3725.80. Income to qualify at standard FHA DTI ratios is a minimum of $144,244/year.

    Under your heading of “Cash Acquisition Demands” you have left out the required tax adjustments, initial homeowners insurance and escrow impounds that would add approximately $5575 to the total (based upon taxes paid annually).

    Your estimate of $83/month for “Maintenance and Replacement Reserves” is incredibly low for a $500,000 home…….$83/month wouldn’t even cover lawn maintenance and pest control.

  12. curmudgeonman

    “If there were an owner-occupant capable of sustaining ownership, their bids for properties would almost certainly be higher than an investor’s bid.”
    Don’t forget that the servicer won’t allow the owner-occupant to bid, they won’t accept the offer. That would effectively be the same as principal forgiveness or the FHA loan recast strategy the banks have repeatedly said would exacerbate the borrower’s “moral hazard.” But I agree, that if the owner-occupant were allowed to bid, the bid would likely be much higher than the investors’s and perhaps even higher than the servicer-determined fair market value.

    1. IrvineRenter

      I wasn’t referring to the current occupant who is about to become a former owner. I was referring to a new buyer who intends to become an owner occupant who previously had no connection to the property.

      All things being equal, someone bidding as an owner occupant will always outbid an investor.

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