Home Sales Data thru 9-11-2007

Median sale price

Sales volume

ZIP

code

Prev. 4 weeks

% change

from ’06

Prev. 4 weeks

% change

from ’06

92602

$690,000

-6.8%

-53.1%

92603

$730,000

-21.5%

-31.3%

92604

$615,000

-7.2%

10.0%

92606

$750,000

-1.3%

-33.3%

92612

$627,000

-5.4%

13.8%

92614

$660,000

10.0%

-48.4%

92618

$557,500

-8.5%

-33.3%

92620

$821,000

-1.3%

-5.8%

Those are not the most bullish numbers I have ever seen. They are perhaps the most anemic sales numbers we have seen to date.

Despite the slow sales, declining prices and ballooning inventory, Turtle Ridge (92603) still has a huge number of WTF asking prices.

Paved Paradise

They paved paradise and put up a parkin’ lot

With a pink hotel, a boutique, and a swingin’ hot spot

Don’t it always seem to go

That you don’t know what you got till it’s gone

They paved paradise and put up a parking lot

They took all the trees, and put em in a tree museum

And they charged the people a dollar and a half to see them

Don’t it always seem to go

That you don’t know what you got till it’s gone

They paved paradise, and put up a parking lot

Big Yellow Taxi — Counting Crows

Link to Music Video

Isn’t this the story of Irvine? Haven’t we planned, designed and paved over the whole valley?

Works for me, but then again, that is my job.

There is nothing special about today’s property. I just thought it had the ugliest picture I have seen on the MLS in a while, so I thought I would share it here.

Just a suggestion for the photographer: perhaps you could select the angle that shows the front door and some grass and foliage rather than the garage door, water stains, an antenna and power lines.

In case you are interested:

5052 Dutcher Ave, Irvine, CA 92604

Price: $625,000

Beds: 4

Baths: 2

Sq. Ft.: 1,480

$/Sq. Ft.: $422

Lot Size: 5,543 sq. ft.

Type: Single Family Residence

Style: Other

Year Built: 1971

Stories: One Level

Area: El Camino Real

County: Orange

MLS#: P588169

Status: Active

On Redfin: 63 days

Lowest 4 bedroom house in Irvine!!! One level with large well maintained yard. 4th bedroom was converted from dining room with city permit. Brand new airconditioner/heater just installed, all windows replaced a year ago. Just need new carpet/paint per your taste.

Lowest 4 bedroom in Irvine? Is it below sea level? Oh, they mean the price is low… {smacks forehead}

Judging by the picture, I thought they were having some drainage problems.

New Century Condo – 2005 Flip Update 1

This post first appeared on March 17, 2007. The owners lowered their price to breakeven and left it there for about 6 months. Now it appears they are becoming more motivated to sell. The price has been reduced to $550,000. Unfortunately, that is still too much money for this apartment condo.

New Asking Price: $550,000

Old Asking Price: $610,000

Purchase Price: $565,000
Purchase Date: 5/26/2005

Address: 1 MONTGOMERY 46, Irvine, CA 92604

Beds: 3
Baths: 2.5
Sq. Ft.*: 1,639
Year Built: 1977
Stories: 2
$/Sq. Ft.*: $381
MLS: I700005
Status: Active on market

Craigslist, Redfin, Zillow.

This property is located in the triangular area between the 5, Walnut and Yale. It is very near the 5 (in other words, it is noisy.) It was purchased on May 26, 2005 for $565,000. There is a first mortgage from New Century for $452,000 and a second from New Century for $113,000. This is a 100% financed property. The current owner is asking $610,000. If sold at the current asking price and assuming 6% in selling costs, the sellers are looking at a profit of around $7,500. This leaves them a bit of negotiating room to break even. It looks like they might need it: Zillow thinks it is only worth $603,830. Do you think they will get it? Or, perhaps, New Century will have to eat another one?

P.S. I originally wrote this post on 3/15/2007 and the asking price was $625,000. When I posted it on 3/17/2007, the price had been reduced to $610,000. Are the owners becoming more motivated?

Speed of Sound

An ode to all of us waiting our turn to own a house in Irvine…

How long before I get in?

Before it starts, before I begin?

How long before you decide?

Before I know what it feels like?

Where To, where do I go?

If you never try, then you’ll never know.

How long do I have to climb,

Up on the side of this mountain of mine?

Look up, I look up at night,

Planets are moving at the speed of light.

Climb up, up in the trees,

every chance that you get,

is a chance you seize.

How long am I gonna stand,

with my head stuck under the sand?

I’ll start before I can stop,

before I see things the right way up.

All that noise, and all that sound,

All those places I got found.

And birds go flying at the speed of sound,

to show you how it all began.

Birds came flying from the underground,

if you could see it then you’d understand?

Speed of Sound — Coldplay

Link to Music Video

Nearly every line of that song has meaning for those of us watching the deflation of the housing bubble from the sidelines. How long before you get in?

Well, if you are an entry level buyer, today’s property is a market entry point. These are basically glorified apartments, but they typically represent the lowest priced properties in the marketplace. At $450,000 it provides a great example of how crazy our prices are.

Asking Price: $450,000

Income Requirement: $112,500

Downpayment Needed: $90,000

Purchase Price: $452,000

Purchase Date: 7/16/2004

Address: 17 Elderglen #15, Irvine, CA 92604

Beds: 3

Baths: 1.5

Sq. Ft.: 1,220

$/Sq. Ft.: $369

Lot Size: –

Type: Condominium

Style: Townhouse

Year Built: 1978

Stories: Two Levels

View(s): Park or Green Belt

Area: Woodbridge

County: Orange

MLS#: S503013

Status: Active

On Redfin: 14 days

From Redfin, “Great opportunity in desirable Community of Woodbridge. This home features laminate floors throughout the main living area, living room fireplace, kitchen with newer kitchen cabinets and counters, eating area in kitchen and large laundry area which doubles as a pantry. Master bedroom has huge mirriored closet. Large enclosed patio with storage area, and direct access to your own carport. Newer water heater, newer heater and A/C unit.”

Direct access to your own carport? WTF? Is there another kind of access to a carport? Easy access to an insecure roof structure separated from your ~~apartment~~ condo where you can park your one car. Yea, that’s a plus.

If you are making over $100K, is this your dream home?

This is a pretty deep Rollback in Woodbridge: a 2004 loser. I don’t know which is more insane, the current asking price, or the fact that someone paid more than that in 2004?

I would estimate you could rent this for $1,800 based on the third bedroom; nothing more because the lack of a second bath. With a gross rent multiplier of 160, this place is worth about $288,000. This would put it within reach of someone making $72,000 a year, which is below the median.

If this seller gets their $450,000 asking price and pays a 6% commission, they stand to lose $29,000. Doesn’t sound like a lot, but then again, this was a “sure thing” back in 2004. They should be figuring out how to spend their $100,000 in profit, not selling at a loss.

The Market Bottom

To everything (turn, turn, turn)

There is a season (turn, turn, turn)

And a time for every purpose, under heaven

A time to be born, a time to die

A time to plant, a time to reap

A time to kill, a time to heal

A time to laugh, a time to weep

A time to build up,a time to break down

A time to dance, a time to mourn

A time to cast away stones, a time to gather stones together

A time of love, a time of hate

A time of war, a time of peace

A time you may embrace, a time to refrain from embracing

A time to gain, a time to lose

A time to rend, a time to sew

A time to love, a time to hate

A time for peace, I swear its not too late

To everything (turn, turn, turn)

There is a season (turn, turn, turn)

And a time for every purpose, under heaven

Turn, Turn, Turn — Pete Seeger / The Byrds / Bible (Ecclesiastes 3, verses 1–8)

Link to Music Video

Recent Concert Video

Like the change of seasons, real estate markets move in cycles. During the last cycle, the real estate market peaked in 1990, and the market bottomed in 1997. The primary reason the bottom formed was because incomes and rents finally caught up to housing prices.

They say a picture is worth a thousand words. These two images posted in our forums by Bubblegum speak volumes. These images are both from 1997. The first appears to be from a condo development in Orange. The actual pricing is not important: the relationship between the cost of a rental and the cost of ownership is very important. This is why the bottom formed.

The next time someone tries to convince you the cost of ownership is near the cost of rental, remember the simple calculation above. If someone has to apply rental increase rates, inflation rates, appreciation rates, tax benefits and other complicated nonsense to make the numbers work, the numbers really don't work. (Notice the simple numbers above work without the tax benefits figured in.)

As a rule, the use of advanced math to justify a house purchase is mental masturbation designed to make someone feel good about an emotional decision they already made. When the calculation above works, it will be time to buy, and not until then.

Since I began writing on this blog, I have stated I will buy when the cost of ownership equals the cost of rental. An advertisement like this — when it reflects reality — would motivate me to buy. How about you?

It has been suggested as prices drop people will perceive a bargain and start buying. This is true. This is where all the knife catchers come from. There are simply not enough of these people to support the market, particularly a market dominated by foreclosures like ours is going to be shortly.

Why aren't there enough knife catchers to support the market? Knife catchers are not buying because of the numbers, they are buying because of their emotions. Everyone is not going to get emotional at the same price point; thus, no support zone will form at any particular price point.

However, everyone who can do math will see when it is cheaper to own than to rent, and many rational people will act at the same time and at the same price levels. The collective actions of you, me and other like-minded individuals responding to these market conditions provides the market activity and transaction volume necessary to form a market bottom. It will not form before then.

So how much were properties in Irvine going for in 1997?

For all of you number crunchers out there that want to find the bottom of our current bubble, start with the pricing in 1997, and add 4% per year for inflation and wage growth (although wage growth has only been 3% per year.) Since I really like quick multipliers to simplify the math, below is a table to help:

1997 1.00

1998 1.04

1999 1.08

2000 1.12

2001 1.17

2002 1.22

2003 1.27

2004 1.32

2005 1.37

2006 1.42

2007 1.48

2008 1.54

2009 1.60

2010 1.67

2011 1.73

2012 1.80

2013 1.87

2014 1.95

2015 2.03

2016 2.11

2017 2.19

From this table you can see how much more a 1997 house should cost projected into the future. In 2007, a house purchased in 1997 should be 48% (1.48 times) higher. Pricing will intersect these values at some point, and when it does, we will be at the bottom.

I created the chart above in March for the post: Predictions for the Irvine Housing Market. I thought I was being somewhat aggressive in my predictions of such large quarterly losses. Such large declines are unprecedented. If the credit market is as challenging as it appears, the drop to fundamental valuations may be faster and more violent than anyone could have guessed. We will see.

In the end, the bottom will form because it will be less expensive to own than to rent, and everyone who watched houses depreciate from the peak will find the motivation to buy. We might overshoot fundamental valuations based on rental equivalent (which seems to be where the credit crunch may take us) and drop down to levels where properties produce a positive cashflow for investors. That chart is really ugly…

From How Bad Could Bad Get?