OC resale home prices DOWN more than 10% YOY, sales over 25% BELOW average

The Orange County resale home sales market enjoyed its seventh consecutive month of increasing affordability. The lack of a move-up market has depressed sales more than 25% below the long-term average.

Irvine Home Address … 11 VERNAL Spg Irvine, CA 92603

Resale Home Price …… $4,895,000

Are you ready to crawl out?

Are you ready to take my hand and see?

Are you ready to crawl out?

From within the slow bleed?

Thousand Foot Krutch — Slow Bleed

The story of the housing market over the next few years will be a slow bleed. Prices won't likely crash hard as lenders have learned to control the price descent by slowly releasing product. They know if they release too fast, prices will crash, so they slowly bleed the market drop by drop. This slow bleed will go on until the inventory of distressed properties is cleared from the system. At current rates, that will take a very long time.

O.C. home prices at 7-month low

September 25th, 2011, 12:01 am — posted by Jon Lansner

DataQuick’s first glance at September and Orange County homebuying trends shows pricing at a 7-month low — suggesting that a summertime price bump may have lost steam.

For the 22 business days ending Sept. 8 – the latest numbers — Orange County’s real estate market saw …

  • Median selling price for all residences of $417,500 – that is off 6.2% vs. a year ago. Last full month that was lower was February 2011 at $410,000.
  • Total Orange County sales of 2,683 residences closed in the latest period — that is up 6.8% vs. a year ago.
  • Note: 16 of 83 Orange County ZIPs had both rising sales and prices in the period. Is your ZIP one of those neighborhoods? To see, CLICK HERE!

Here’s the breakdown of recent activity by key category; included is how the latest results compare to the average monthly sales pace from 1988 through 2010:

Slice Price Price vs. year ago Sales Sales vs. year ago Sales vs. ’88-’10 avg.
Houses $470,000 -11.3% 1,784 +8.6% -21.0%
Condos $269,500 -10.2% 749 +4.5% -13.0%
New $583,000 +12.2% 150 -2.0% -71.5%
All O.C. $417,500 -6.2% 2,683 +6.8% -26.4%

Take a careful look at the chart above. Note the price change on resale houses and condos are both down over 10%. Only new home sales — numbers which can be easily gamed by incentive programs — shows any strength at all in the market. And since the actual sales volumes of new homes is declining, the price gains are largely an illusion.

Also note the rate of sales versus the long-term average (1988-2010). Sales of all housing types is down well below their historic norms. It is particularly bad in sales of both new and resale detached houses. This is explained by the lack of a move up market due to the utter collapse of low end pricing. Nobody at the bottom of the housing ladder has any money to purchase a move-up home.

And more analysis ….

  • $417,500 median selling price is 35% below June 2007′s peak of $645,000.
  • Current price is 7.2% below 2010′s peak (May and July) of $450,000; 2% above end of 2010′s median ($410,000.)
  • The most recent median is 13% above the cyclical low hit in January 2009 at $370,000 — so the median has recouped 17% of the $275,000 price drop from the peak.

While it's true that the median does not show the double dip that both the hedonic and the $/SF measures show, the median is more susceptible to changes in the mix than either of those measures.

Basically, when the bottom dropped out of the market, the only thing that was selling was low-priced homes. With the complete seizure of the high end of the market, a radical change in mix caused the median to decline more rapidly than actual home values. Therefore, the increase in the median since then is more reflective of a change in sales mix than an actual increase in sales prices of individual homes.

  • Compared to cyclical low, single-family house median is 12% higher ($418,250 in January 2009); condo median is 7% higher ($252,000 in March 2009.) Builder prices for new homes are 38% above June 2009′s $424,000 bottom.

Does anyone believe builders are selling the same houses for 38% more than they were in 2009? Do you see how the change in mix effects the numbers?

  • The median selling price of a single-family home is 36% less than their peak pricing (June ’07). Condos sell 43% below their peak in March 2006. Builder prices for new homes are 33% below their February ’05 top.

Those are some sobering numbers. Most of that drop is due to a return to sane lending standards and the commensurate decline in loan balances.

  • Single-family homes were 74% more expensive than condos in this period vs. 77% a year ago. From 1988-2010, the average house/condo gap was 57%.

This disparity portends a continuing decline in high-end pricing. Prices at the high end are generally pushed up from below as move-up buyers take their accumulated equity and increase buying power to bid up prices in the next rung of the housing ladder. With the collapse of low end pricing, what is ordinarily a price push is turning into a price pull — to the downside. Without a move up market, high end prices are floating in air with little real demand to support them.

The chart from Global Decision displays how during the price rally, condos rose more rapidly than SFRs, so prices were pushed up from below. Now with the decline at the low end, the price push has reversed and a price pull has taken its place.

As the lack of a move up market squelches demand, the substitution effect will also pull demand away from higher priced properties as each successive rung on the property ladder falls to more affordable levels.

  • Builder’s new homes sales were 6% of all residences sold in the period vs. 6% a year ago. From 1988-2010, builders did 14% of the Orange County homeselling.

Despite the fanfare regarding the Irvine Company's new home products, sales continue to be very weak. Given the price points they are wishing for, sales should continue to be very weak indefinitely.

Delusions at the high end

Wealthy home owners seem to live in their own world. For them, the price crash never happened, and no matter how much they paid, they believe a great fool is waiting in the wings to pay them substantially more when they want to sell. For some, this has proven to be true.

The owners of today's featured property paid $3,350,000 on what was a distressed sale back in April. Did they really buy this for 40% under its “real” value back in April? If they pull off a $1,251,300 profit on a Shady Canyon flip in less than six months, I will be very impressed.

Personally, I don't give them much chance. Where was their take-out buyer willing to pay so much more back in April? If so, was this a flop?

What do you think? Will they sell this for a profit in this market environment?


This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707



Irvine House Address … 11 VERNAL Spg Irvine, CA 92603

Resale House Price …… $4,895,000

Beds: 5

Baths: 7

Sq. Ft.: 7577


Property Type: Residential, Single Family

Style: Two Level, Spanish

View: Mountain

Year Built: 2004

Community: Turtle Rock

County: Orange

MLS#: U11003897

Source: SoCalMLS

On Redfin: 14 days


With a private and expansive corner lot, this beautifully customized estate reflects Hacienda-style Spanish Revival architecture and is located within the exclusive residential golf preserve of Shady Canyon. The home was recently expanded and completely remodeled, opening up the living space and providing a soft contemporary flair to the custom home sized estate with 7,577 square feet. The well-designed additions created a full theater room, family room, and two additional bedrooms. The one of a kind home now features an incredible outdoor kitchen, dining area, and covered logia adjacent to a spectacular new yard complete with a pool, fire pit, custom lighting and water features, and pool bathroom.


Proprietary IHB commentary and analysis

Resale Home Price …… $4,895,000

House Purchase Price … $3,350,000

House Purchase Date …. 4/21/2011

Net Gain (Loss) ………. $1,251,300

Percent Change ………. 37.4%

Annual Appreciation … 78.3%

Cost of Home Ownership


$4,895,000 ………. Asking Price

$979,000 ………. 20% Down Conventional

4.10% …………… Mortgage Interest Rate

$3,916,000 ………. 30-Year Mortgage

$982,420 ………. Income Requirement

$18,922 ………. Monthly Mortgage Payment

$4242 ………. Property Tax (@1.04%)

$585 ………. Special Taxes and Levies (Mello Roos)

$1020 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$610 ………. Homeowners Association Fees


$25,379 ………. Monthly Cash Outlays

-$2145 ………. Tax Savings (% of Interest and Property Tax)

-$5542 ………. Equity Hidden in Payment (Amortization)

$1414 ………. Lost Income to Down Payment (net of taxes)

$632 ………. Maintenance and Replacement Reserves


$19,738 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$48,950 ………. Furnishing and Move In @1%

$48,950 ………. Closing Costs @1%

$39,160 ………… Interest Points @1% of Loan

$979,000 ………. Down Payment


$1,116,060 ………. Total Cash Costs

$302,500 ………… Emergency Cash Reserves


$1,418,560 ………. Total Savings Needed


28 thoughts on “OC resale home prices DOWN more than 10% YOY, sales over 25% BELOW average

  1. Gavrilo Princip

    The decor inside is so gauche it almost defies belief. One room is SoHo modern with safari touches, another looks like the Easter Bunny exploded in it. Horrid.

    1. octal77

      I have toured this house.

      My theory: The builder got a big discount from interior designer(s) on a warehouse(s) full of junk.

      IMO, both the seller (price) and the designer(s) (decor) are all delusional.

      BTW, this is not the only home in Shady that sports really weird decor.

  2. Laura Louzader

    Agree, the decor is horrible, and what’s worse, they made it STRUCTURAL.

    I’d want to deduct $1.5M from the original distress sale price of $3.35M just to gut the place and start over. All the paneling in the entry and most of the rooms, the screaming modern kitchen and uncomfortable “cutting edge” bath fixtures, the ugly pool deck, would all have to go and then you’d have to build it out to make it look the way you want.

    1. Alan

      When you read “water features, and pool bathroom” and then see the photo of those water features, did anyone else immediately think oops, pool bathroom?

  3. SoOCOwner

    I’m glad I’m not the only one who felt the decor was in bad taste. And to think the owner paid a designer a small fortune to destroy the house. Actually, it looks like a different designer was hired to do each room without any coordination whatsoever.

  4. Planet Reality

    Prices are still clearly above January 2009 in those charts.

    Down payments still high in Irvine.

    Price per sq ft for single family homes in Irvine is $335.

    Only a few months away from 2012.

    Weren’t down payments supposed to evaporate by now?

    Wasn’t price per sq ft supposed to be $200-250 by now?

    What about interest rates, when will they be at 7%, year 2023?

    1. IrvineRenter

      “Weren’t down payments supposed to evaporate by now?

      Wasn’t price per sq ft supposed to be $200-250 by now?

      What about interest rates, when will they be at 7%, year 2023?”

      Making straw man arguments and attributing statements to me or readers that nobody ever made does nothing to enhance your credibility or make the value of your depreciating 2009 purchase go up.

      1. Planet Reality

        Nobody ever said:

        Prices were down year over year in 2010
        Interest rates were headed up
        20% Down payments would disappear in Irvine
        Price per sq ft would be below $300

        Surely you jest, since you said all of those things and the peanut gallery was even more exteme

        Extremely wrong

        1. Planet Reality

          Oh and I’m being nice leaving out inventory

          Wow that really sky rocketed just as you foolishly predicted over and over again

          Right now single family homes in Irvine: $335 per sq ft – deal with it, time enough to accept reality

        2. awgee

          Even by your own post, you admit to misrepresenting what was said. Do you really think that people can not see your exaggerations and lies?

          You were right about interest rates. We were wrong. We admit it. But, that does not make any of your other mistaken forecasts any more correct. Including interest rates and prices in the same post or sentence does not make you any more right. You were wrong. You still are wrong. And you will continue to be wrong.

          You were right about interest rates. We got it.

          We also got that you are wrong about everything else.

    2. wheresthebeef

      PR, I guess it depends where you get your info. As was posted by gepetoh yesterday:

      “That’s peculiar… according to Zillow Irvine has dipped from $566K in 1Q09 to $532K in 2Q11.”

      Are we talking median, average, price/sqft, only sold homes, or just just select top tier neighborhoods? I have a feeling prices won’t be increasing in the “slow” season for the next several months. Time will tell…

  5. zubs

    My Chinese friends just bought a house in Portola Springs for 640,000. A 2200 sqft townhouse. They didn’t ask me for advice about the buy or I would have warned them about the garbage dump nearby.

    But they really have too much money in China. The people there don’t believe in their government and need to insure they can keep their money so they invest overseas in Australia, Canada and Irvine.

    A lot of the FCB money from China is an insurance policy in case their government goes all communist on them and declares the money in the bank belongs to all Chinese people.

    1. zubs

      This is also why Chinese try to get foreign visas. If the shit hits the fan in the motherland, they will have an insurance policy to gtfo and live comfortably in a new country.

      Sure they love living in China, but it’s nice to have a plan B.

      Irvine is Plan B

      1. newbie2008

        relocating as a plan B is with all the weathy — even Americans. Notice that many are opening shop in China and other countries and having houses in those countries?

        Some also have dual citizenship (2 passports). The USA does not recognize dual citizenship with China.

        Irvine as plan B is a good reflection on the quality of Irvine.

          1. zubs

            Yes there are ways around that. China needs to be actively looking for dual citizenships or green card holders because I know a few people who have it and they got it through bribery.

  6. Gemina13

    Oh, ye gods. This is why hipsters should not be allowed to take design courses. It looks like someone swallowed a Copenhagen store and an IKEA warehouse, and then vomited it all back up inside a pseudo-Tuscan stucco box.

    I agree with Laura, except that I’d put the discount at $2M to burn the damn thing to the ground, leave one wall standing, get a homestead loan, and rebuild as necessary. I’m sure something could be made of that property . . . like an orphanage . . .

  7. HenryE

    You guys are all missing the point of the decor in that house. It’s for the children (snark). I would have had a blast growing up in that house. It’s straight out of a Tim Burton movie. However, any adult who actually lives in it for a while might need psychotherapy. Or maybe the owner was a psychiatrist.

  8. Jen

    Did Santa miss your house the past few years?? Why are you all so negative and catty? I never bother looking at home photos in this blog but your descriptions got me curious. What could be so vile???
    Well, nothing, I found out. That house was so fun to look at and clearly an interesting twist on existing styles. I loved it. LOVED IT
    So much fun, that house.

    Bunnies and fruit decor aren’t all the rage anymore. It’s okay to update from your 1974 hunter green lazyboys.

  9. Steve Moyer

    The thing poor PR can’t figure out is that these current (though still declining) values are based 100% on these historically low interest rates being projected out to infinity.

    It is only a matter of time until the final, mother of all bubbles bursts (bonds) and interest rates go to 18-20% +, without Fed control (market participants will drive the carriage). Anyone who buys now will be looking at another 50-70% haircut.

    At that time, buyers will prosper. You’ll need cash.

    1. irvine_home_owner

      “interest rates go to 18-20%”

      Is that a prediction? What year will this happen?

      I’m still waiting for the 8%+ rates predicted back in 2008.

  10. Steve Moyer

    It’s an inevitability, and always a component of bonds bubbles. When? It’s a ticking time bomb. But there is no dispute people are projecting current low interest rates forever, as The NAR continues to say “Never a better time to buy, with interest rates so low!” It’s the potent director fallacy at work, live and in color.

Comments are closed.