Category Archives: News

Welcome to the Irvine Housing Blog

Welcome to the Jungle — Guns n’ Roses

The Irvine Housing Blog is being featured in the print edition of the Irvine World News this weekend. For any new visitors that found us from this article, I like to say welcome.

The Irvine Housing Blog is a blog devoted to real estate in Irvine, California. As such, we analyze local and national issues that impact prices in our housing market. Since its inception in September of 2006, we have been bearish on real estate in Irvine. The reasons for our bearishness can be found in great detail in the analysis posts found both in the sidebar and on the analysis tab above. These posts are organized into the book, The Great Housing Bubble. We are not a bubble blog, and though we are often referred to as part of that community, we will only be bearish as long as prices are elevated above fundamental valuations and market conditions point to continued deterioration in prices. At some point, we will turn bullish.

In early 2007, we published a series of predictions for Irvine median house prices. The red line in the chart above is the original prediction, and the green line represents what happened through April of this year. As you can see, we have a reasonable record with respect to forecasting future median home prices.

We are a vibrant community of more than 3,000 daily visitors. Our forums have over 1,500 members and over 78,000 posts. Many Irvine residents come to our forums looking for information on Irvine housing, discussions about the economy, politics, or just to hang out and be part of the community. The forums are free to join, and everyone is welcome to participate.

In a typical post, we examine a property for sale in Irvine in our own irreverent, snarky style. There is usually a featured song for everyone’s entertainment, a preamble with discussion or analysis of market issues often with a tie-in to the featured song. After there is a presentation of the featured property with two pictures (if available,) and a breakdown of the asking price, the income requirement and downpayment requirement based on traditional financing, the monthly equity burn (the amount the buyer will lose each month assuming prices drop 10% a year for the next 2 years), the original purchase price, the date of purchase, and the address with a link to the listing on Redfin. Below the fold, there is more detailed property information from Redfin and the MLS including the property description. The quality of the writing on MLS listings is often horrendous, and we will ridicule this descriptions just for the fun of it. Then we go in to detail on the mortgage debt on the property showing how much each of the parties to the transaction is going to lose in the eventual sale. The stories the property records reveal are often quite illuminating and instructive — instructive on what not to do.

If you are new to the site, we encourage you to look around, and please join in the fun by adding your own “astute observation” to the post below. Welcome.

For those of you who are regulars to the site, go check out the article in the Irvine World News print edition. We will also be featured in the OC Register on Wednesday. As a reminder, out IHB get together and book signing will be this Wednesday, November 12, at 6:30 PM at JT Schmids at the District. Everyone is welcome to attend.

It has been almost 7 months since our last call for lurkers to come out of the shadows. For all you readers out there who have never posted before, please say
hello. We know you are out there. This is another chance to break the
ice…

{book}

Welcome to the jungle
We got fun ‘n’ games
We got everything you want
Honey we know the names
We are the people that can find
Whatever you may need
If you got the money honey
We got your disease


In the jungle
Welcome to the jungle
Watch it bring you to your shun knees, knees
I wanna watch you bleed

Welcome to the jungle
We take it day by day
If you want it you’re gonna bleed
But it’s the price you pay
And you’re a very sexy girl
That’s very hard to please
You can taste the bright lights
But you won’t get them for free
In the jungle
Welcome to the jungle
Feel my, my, my serpentine
I, I wanna hear you scream

Welcome to the jungle
It gets worse here everyday
Ya learn ta live like an animal
In the jungle where we play
If you got a hunger for what you see
You’ll take it eventually
You can have anything you want
But you better not take it from me

Welcome to the Jungle — Guns n’ Rose

The White House

Hail to the Chief — James Sanderson

First, I would like to call everyone’s attention to a post over at the Great Loan Blog: The Great Housing Bubble Book.

Today we are featuring two properties: one right here in Irvine, and the other is a very desirable address in Washington DC.

14811 Groveview Ln Kitchen

Asking Price: $500,000IrvineRenter

Income Requirement: $125,000

Downpayment Needed: $100,000

Monthly Equity Burn: $4,166

Purchase Price: $655,000

Purchase Date: 6/29/2005

Address: 14811 Groveview Ln, Irvine, CA 92604

Beds: 3
Baths: 2
Sq. Ft.: 1,112
$/Sq. Ft.: $450
Lot Size: 4,966

Sq. Ft.
Property Type: Single Family Residence
Style: Bungalow, Contemporary/Modern
Year Built: 1971
Stories: 1 Level
Area: El Camino Real
County: Orange
MLS#: S552866
Source: SoCalMLS
Status: Active
On Redfin: 2 days

Turkey

LOVELY SINGLE LEVEL FAMILY POOL HOME. NO MELLO ROOS, NO ASSOCIATION
DUES. WALK TO A DISTINGUISHED ELEMENTARY SCHOOL, BLUE RIBBON MIDDLE
SCHOOL, IRVINE HIGH SCHOOL AND NEARBY COMMUNITY PARK WITH BASKETBALL
COURT. THIS REMODELLED HOME SHOWS WELL. REMODELLED BEDROOMS, BATHROOMS
AND KITCHEN WITH NEWER CABINETS AND STAINLESS STEEL APPLIANCES.
PARQUET/PERGO FLOORING THRU-OUT. CENTRAL AIRCONDITIONING & HEATING.
FENCED FRONT & BACKYARD. LIGHT & BRIGHT HOME, A TURN KEY. FACES
SOUTH EAST.

ALL CAPS.

Can someone tell me what that is on the front of the stove?

THRU-OUT? Does it really take that many more letters to spell it correctly?

lite-brite

The owner of this property has a significant amount of his own money in the transaction. When the house was purchased on 6/29/2005, the owner used a $524,000 first mortgage and a $131,000 downpayment. He opened a HELOC on 4/21/2006 for $63,400, but it is unclear whether or not he took out the money. If he didn’t, he probably wishes he had. Since the current asking price is less than the outstanding amount of the first mortgage, this is a short sale. If this house sells for its asking price, the total loss will be $185,000 after a 6% commission. The owner’s downpayment is gone, and so is his credit. Bummer…

This house is marked at 23.6% off its purchase price in 2005.

.

We are not a political blog, and we have done a relatively good job
of staying out of the fray leading up to the election. If people want
to express opinions about who should be president, and if they want to
waste their time trying to convince others on the internet, there are
plenty of places to do that. Over the weekend, we had a discussion of the politics of housing. The next president is going to have to deal with this issue even if “dealing with it” means doing nothing at all.

Today is Election Day. To ignore this momentous occasion would be
irresponsible. I would like to hear people’s predictions, any
interesting stories about voting, and any commentary on what the next
Administration and Congress either should or should not do about
housing. This is our one day to have a free-ranging political
discussion. Go for it…

whitehouse_front

Asking Price: 270 electoral votesIrvineRenter

Income Requirement: $400,000

Downpayment Needed: $1,552,000,000

Purchase Price: 286 electoral votes, 62,040,610 popular votes

Purchase Date: 11/2/2004

Address: 1600 Pennsylvania Ave NW, Washington, DC 20500

Open Thread 11-1-2008

Dazed and Confused — Led Zeppelin

The election is coming up in a few days. Has all the bull$hit being thrown around left you dazed and confused? I got a call from Robo-Bill Clinton today. I felt so special. I am planning to sit down with my California General Election voter information guide this weekend and make up my mind on how I plan to vote on the various initiatives. Since the topic of the weekend is politics, I thought it would be good to explore some of the politics of the housing bubble.

There are many ideas floating around the blogosphere regarding what can and should be done about the housing crisis. I have received a couple of emails recently from people with ideas on changes to our current system. One is from a local realtor named Shevy Akason who is championing legislation that would help the flagging housing market and get it on more solid ground (His blog is here). This isn’t a bailout, and although I think there are some issues, it is a proposal worth examining:

The proposed bill adds provisions to the current IRS code that allows for SEP IRA deductions outlined in IRS Publication 560 to be expanded to cover HEA (Home Equity Accounts). The bill will allow prospective homeowners to put money into a designated HEA (Home equity account). This money must be used for the down payment or closing costs on a primary residence. In addition, this legislation will allow current homeowners that have less than 50% equity to place money into an HEA account designated for homes they purchased after January 1, 2000 and before Jan 1, 2009 or 180 days after this legislation takes affect, whichever is later. Finally, it allows current homeowners that participate in this program and remain current on their mortgage to go back as far as 2000 and claim an income tax deduction on any money paid toward the principle of their home including their original down payment. To participate in this program homeowner must be in or re-finance into a fully amortized fixed rate 1st mortgage. The legislation should take affect immediately upon passing and be limited to 360 days with options for extensions.

Above is merely the summary. The PDF contains more information. It is an interesting proposal. Personally, I like the idea of a tax advantaged savings account for downpayments. However, I don’t believe expanding our subsidization of real estate through the tax code is a good idea. We already oversubsidize real estate with the home mortgage interest deduction. Encouraging debt in this way is part of the problem. I do like how the proposal encourages saving and paying down mortgage debt. I do think this program would not do much for those on the margins who are likely to go into foreclosure. The problem these people have is too much debt and too little income. To qualify for the program as outlined, people would need to refinance into a fixed-rate mortgage. I like that idea, but very few marginal borrowers can afford to do this, and those who are distressed are underwater and could not obtain fixed-rate financing even if they could afford it. Basically, this proposal would help those who need it least.

The proposal is not a fix for the foreclosure crisis. There is no fix. It does address the problem of saving for a house and the use of exotic financing, and I like that.

I also received an email from MalibuRenter:

As I was looking at your model of the cost of
buying vs renting, I realized the potential of a simple policy change: make the
standard deduction much larger. For example, instead of the current
$10,200, go to $20,000 for a married couple. About 75% of all home
mortgages are for $300k or less (see http://www.federalreserve.gov/pubs/bulletin/2008/pdf/hmda07draft.pdf , page 53). For someone with a new $300k loan at 6.5% and no other
itemized deductions, they would no longer have to itemize. For people with
a few other itemized deductions like income taxes and property taxes, they
still might take the higher standard deduction with a $200-$250k
loan. That would mean more than half of all mortgageholders would have no
reason to itemize.

This has some nice implications. 1. For
anyone whose itemized deductions including mortgage interest fits under the new
limit, they are no worse off. Usually, they will be better off. Many
more people with modest incomes will not have to keep records or have to
understand the code in order to itemize. It is a way to both reduce and
simplify taxes for people with modest incomes. 2. Paying off your loan
earlier, or starting to pay faster, would not lower your income tax deductions
for people under the $20,000 standard deduction. 3. There would be more
incentive to refinance to lower interest loans, because the Federal Govt would
subsidize less of the interest cost, frequently they would subsidize none of
it. 4. There would be less marginal incentive toward larger
homes, higher loan to value ratios, home equity loans, and cashout refis.
5. In general, homes would be financed with less leverage.

I like the idea. The following was my response:

This would also make interest-only loans less appetizing because you
would get less bang for the buck. It would certainly be more
politically feasible than trying to eliminate the HMID. I wonder, would this create a tipping point where you would have
incentive to jack up your mortgage. Once you crossed the threshold, the
larger your deduction the better. I suppose you could always lower the
cap as well. You could make the window of opportunity to benefit from
the HMID so small that only a small band of middle to upper income
homeowners get any benefit. Also, for our new Democratic president and Congress, raising the
personal exemption lowers the taxes on the most needy and trickles its
way up to the middle class. They would like that.

The Home Mortgage Interest Deduction is a direct government
subsidy of ownership that encourages excessive debt loads. It would be
very difficult to get rid of politically, but since excessive debt was
the primary cause of the house price collapse and huge lender losses,
it is something that should be examined.

{book}

I
have my own proposals for preventing the next housing bubble. The
following is the last chapter of my book The Great Housing Bubble:

When
the new administration comes into office this January, the housing
crisis will be one of the most important issues facing the new
President. There will be many ideas floating around. Some of them good;
most of them bad.

What do you think of these ideas? What do you think should be done?

Been Dazed and Confused for so long it’s not true.
Wanted a woman, never bargained for you.
Lots of people talk and few of them know,
soul of a woman was created below.

You hurt and abuse tellin’ all of your lies.
Run around sweet baby, Lord how they hypnotize.
Sweet little baby, I don’t know where you’ve been.
Gonna love you baby, here I come again.

Every day I work so hard, bringin’ home my hard earned pay
Try to love you baby, but you push me away.
Don’t know where you’re goin’, only know just where you’ve been,
Sweet little baby, I want you again.

Been dazed and confused for so long, it’s not true.
Wanted a woman, never bargained for you.
Take it easy baby, let them say what they will.
Will your tongue wag so much when I send you the bill?

Dazed and Confused — Led Zeppelin

The Great Housing Bubble

It has been a year-and-a-half of foreplay here on the Irvine Housing Blog. It has been a long time coming, but the book, The Great Housing Bubble, is finally here.

And yes, the mystery of my identity is gone.

The book is available for download as an ebook, or as a paperback on Amazon.com.

I am pleased to announce we will be having an Irvine Housing Blog party and book signing at 6:30 on Wednesday, November 12, 2008, at JT Schmids at the District. This is your chance to meet the people behind the screen names.

You have plenty of time to order and receive a copy of the book from Amazon. I will also have a large but limited number of books available at the signing. These will be available for a $15 “donation” to the IHB. You are under no pressure or obligation to buy a book or have it signed. All who wish to be a part of the IHB community and meet others in the community are encouraged to attend.

I hope to see you all there.

{book}

Its been such a long time
I think I should be goin, yeah
And time doesnt wait for me, it keeps on rollin
Sail on, on a distant highway
Ive got to keep on chasin a dream
Ive gotta be on my way
Wish there was something I could say.

Well Im takin my time, Im just movin on
Youll forget about me after Ive been gone
And I take what I find, I dont want no more
Its just outside of your front door.

Its been such a long time. its been such a long time.

Foreplay/Long Time — Boston

BTW, We have a private room, and although this is publically announced, it is a private party. Agitators will be asked to leave.