February is historically a bad month for real estate prices. The deals that close in February were negotiated in December and January, which are usually the weakest months of the year for real estate. And since this last fall and winter were particularly bad, the drop in February is not surprising.
First-time homebuyer presentation 6:30 Wednesday March 7
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Bottom for 2012?
Shevy tells me the low interest rates and relatively affordable prices are motivating many buyers. Shevy and his team have been very busy since the first of the year. With the declining inventory we witnessed in January — an extraordinarily unusual occurrence — conditions are ripe for a spring rally. If lenders release more product — which they should — I expect to see sales volumes up considerably this year from the recent moribund rate. Since prices are only now reaching the affordability of rental parity, I don’t anticipate a rally in prices, but we will get a bump off recent lows. Who knows, perhaps Calculated Risk is right and the housing market may bottom?
Look at the nosedive in that last data point. The last time the median was $431,000 was mid 2003.
Median home price measurements are often quite volatile (take a look at Turtle Rock or Turtle Ridge above). Median home prices says something about how much people are spending on properties in the market, but it doesn’t reveal the value they get for their money. For that reason I prefer to look at the $/SF measure.
Buyers in Irvine have been getting more house for the money for quite some time. As the high end continues to crumble the quality of what buyers obtain will continue to improve. With low interest rates, the high wage earners who tend to buy in Irvine will buy many $600,000 to $750,000 homes. These are still within reach using GSE-approved or FHA financing with less than 20% down. The jumbo market, which still requires a minimum 20% down, is effectively dead. The collapse of pricing at the bottom of the market means few buyers have the equity for a move-up, and despite contentions to the contrary, few people have saved $200,000 or more from their wages to buy a $1,000,000 house. For those who do have 20% to put down, prices in Irvine have not been this payment-affordable since the 1990s.
The situation is improving for FHA buyers as well, although upcoming increases in FHA insurance premiums are going to make affordability even more problematic for FHA borrowers.
I am not surprised the condos near the airport or in Orangetree would fall below rental parity. I am surprised Woodbury has become so affordable.
The pressures on rents is abating somewhat, but rents are still rising. The Irvine Company is about to complete several thousand more apartments, so perhaps this will keep rent increases to a minimum. But right now, MLS rents (which is what I measure) are going up.
The Orange County median has not taken out the 2009 lows yet, but it is very close to it.
The last year has been a steady decline.
Rents are still rising, but the rate of increase has slowed.
The full report will be posted on the blog in a couple of weeks. If you want to see it sooner, please sign up for our monthly newsletter and be among the first to know what’s really going on in Orange County real estate
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Upcoming Supply
I plan on a more detailed analysis in an upcoming post, but there is still a great deal of distressed inventory due to hit the market. Ponder these numbers:
In Irvine today, there are 583 active listings. If you check Foreclosure Radar, there are 609 properties with either a Notice of Default or a Notice of Trustee Sale, and almost none of these properties are currently listed. Shadow inventory statistics suggest that for each of the 609 properties with a notice, there are three or four delinquent mortgage squatters who haven’t been served yet. The upcoming supply of distressed inventory is enormous.
Ladera Ranch Overview
Median home price is $400,000. Based on a rental parity value of $614,670, this market is under valued.
Monthly payment affordability has been worsening over the last 6 month(s). Momentum suggests worsening affordability.
Resale prices have been falling for 6 month(s). Price momentum suggests falling prices over the next three months.
Resale prices that are falling generally causes payment affordability to increase.
Rents have been rising for 12 month(s). Price momentum suggests rising rents over the next three months.
Rents that are rising generally causes payment affordability to decrease.
Proprietary OC Housing News home purchase analysis 
8 AZARA Ln Ladera Ranch, CA 92694
$399,000 …….. Asking Price
$638,000 ………. Purchase Price
6/24/2005 ………. Purchase Date
($239,000) ………. Gross Gain (Loss)
($51,040) ………… Commissions and Costs at 8%
============================================
($290,040) ………. Net Gain (Loss)
============================================
-37.5% ………. Gross Percent Change
-45.5% ………. Net Percent Change
-6.9% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$399,000 …….. Asking Price
$13,965 ………… 3.5% Down FHA Financing
3.93% …………. Mortgage Interest Rate
30 ……………… Number of Years
$385,035 …….. Mortgage
$129,847 ………. Income Requirement
$1,823 ………… Monthly Mortgage Payment
$346 ………… Property Tax at 1.04%
$283 ………… Mello Roos & Special Taxes
$100 ………… Homeowners Insurance at 0.3%
$443 ………… Private Mortgage Insurance
$360 ………… Homeowners Association Fees
============================================
$3,354 ………. Monthly Cash Outlays
($281) ………. Tax Savings
($562) ………. Equity Hidden in Payment
$19 ………….. Lost Income to Down Payment
$70 ………….. Maintenance and Replacement Reserves
============================================
$2,600 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$5,490 ………… Furnishing and Move In at 1% + $1,500
$5,490 ………… Closing Costs at 1% + $1,500
$3,850 ………… Interest Points
$13,965 ………… Down Payment
============================================
$28,795 ………. Total Cash Costs
$39,800 ………. Emergency Cash Reserves
============================================
$68,595 ………. Total Savings Needed
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599……
sales@ochousingnews.com…..
We're sorry, but we couldn't find MLS # S689452 in our database. This property may be a new listing or possibly taken off the market. Please check back again.
Competing Listings
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$374,800 18 RED LEAF Ln |
0.04 miles 3 bd / 2.5 ba 2,147 Sq. Ft. |
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$639,900 50 LA SALLE Ln |
0.32 miles 4 bd / 2.75 ba 2,461 Sq. Ft. |
|
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$470,000 3 STEETON Ln |
0.52 miles 3 bd / 2.5 ba 1,800 Sq. Ft. |
|
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$630,000 1 DUFFIELD Ln |
0.54 miles 4 bd / 2.5 ba 2,400 Sq. Ft. |
|
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$489,900 7 TWIN FLOWER St |
0.54 miles 3 bd / 2.5 ba 2,200 Sq. Ft. |
|
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$565,000 24 DUSKYWING Ct |
0.59 miles 4 bd / 3.5 ba 2,303 Sq. Ft. |
|
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$619,900 21 REGENTS Park |
0.96 miles 4 bd / 3 ba 2,500 Sq. Ft. |
|
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$499,000 27 TISBURY |
1.05 miles 3 bd / 2.5 ba 2,000 Sq. Ft. |
|
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$589,000 26561 LA QUILLA Ln |
1.27 miles 3 bd / 2.25 ba 2,300 Sq. Ft. |
|
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$585,000 41 RESTON Way |
1.36 miles 3 bd / 2.75 ba 2,228 Sq. Ft. |
Wouldn't you be embarrassed to overpay by $100,000? Only fools buy houses without knowing neighborhood values. Don't be a fool. Don't suffer the pain of an underwater mortgage. The surest way to lose your house is to overpay for it. Our reports identify overvalued and undervalued neighborhoods. Use it to broaden or narrow your search area. Savvy buyers work with us to find bargains. We've saved thousands from financial ruin. Let us save you too. If you want peace of mind while shopping for your next home, sign up for our monthly market newsletter.
22 Responses to “Irvine median home price hits 9-year low”
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‘’Equity is the single most important predictor of default behavior’’– Laurie Goodman; Amherst Securities
tic…tic…tic…
Foreclosures Spike in January: Is the Backlog Clearing?
By: Carrie Bay 03/06/2012
Data through the end of January shows significant movement in both foreclosure starts and sales, and it has some market watchers saying the lull in foreclosure activity seen over the past year-and-a-half may very well be coming to an end.
Lender Processing Services’ (LPS) latest market report says foreclosure starts jumped 28 percent between December and January, and foreclosure sales soared 29 percent.
“While one month of data does not necessarily indicate a trend, this surge could suggest the backlogged foreclosure pipeline is beginning to move,” LPS said in its report.
The January data also shows that the percentage of repeat foreclosures hit a new all-time high, with 47 percent of all foreclosure starts during the month involving a mortgage that had been delinquent before, cured, and then fell back into foreclosure again.
LPS reports that the biggest pickups in foreclosure activity occurred in states where the foreclosure process is presided over by the courts. The company found that foreclosure starts in judicial states increased almost two times as much as in non-judicial states during the first month of 2012.
The January study shows foreclosure sales in non-judicial states continue to outpace those in judicial states by about three-to-one, but LPS says the surge in foreclosure sales is having a significant impact on pipeline ratios. The company assesses each individual states pipeline ratio as the number of 90-plus day delinquencies and the number of foreclosures divided by the number of foreclosure sales for the month. The ratio for judicial states has been cut from its February 2011 high of 147 months down to 63 months as of January 2012.
LPS says new problem loan rates are still relatively low nationally at 1.4 percent, but pockets of trouble exist. The top five states for new seriously delinquent loans in January were Nevada, Florida, Mississippi, Arizona, and Georgia.
At 7.97 percent, the national delinquency rate is down over 25 percent from its peak of 10.97 percent in January of 2010, according to LPS. However, the industry’s foreclosure inventory – calculated as the percentage of loans in the process of foreclosure that have not yet reached the final stage of foreclosure sale – remains near historic highs.
Foreclosure inventory registered a reading of 4.15 percent of all active loans as of the end of January. To put that number into perspective, the foreclosure inventory was 0.48 percent in December 2005.
Nationally, LPS says over 40 percent of loans in foreclosure are more than 2 years past due.
The company’s latest report also includes an assessment of the administration’s proposal to launch a mass refinance program for borrowers with non-government backed loans. LPS says implementation will be key should the initiative actually take form. LPS estimates 27.6 million borrowers would be eligible, but only 6.8 million are “probable” to receive a refinance under the program.
©2012 DS News. All Rights Reserved.
unfortunately for those touting bottom/recovery, the ‘following’ fact has yet to be priced-in….
47 percent of all foreclosure starts during the month involving a mortgage that had been delinquent before, cured, and then fell back into foreclosure again”.
47 percent of all foreclosure starts during the month involving a mortgage that had been delinquent before, cured, and then fell back into foreclosure again
That’s because the banks are not reducing mortgage balances when they allow loan mods. They are only reducing the mortgage rate for a period of time, and/or extending the period to repay the mortgage … then adding a bunch of fees and missed payments at the end … this expands the total payoff.
What percentage of the modification is backed by the govt or back stopped by to ensure that the banks come out ahead if FC eventually occurs. With the modification, a true risk assessment can be submitted, so the loan backer can’t claim a defective loan.
Irvine homes are at a 9-year low and continue to decline, while at the same time, mortgage rates are at a lifetime low, affordability is at a multi-year high, rental parity has actually reversed. Yet …
drip
drip
drip
drip
The market can read between the bullshit and manipulated affordability and rental parity … it’s phony and unsustainable.
yep, there is no point factoring-in the rental parity element to quantify ‘buy now’ math because current rents are being supported by govt transfers that are finite.
Oracle: How are “current rents are being supported by govt transfers that are finite.”
Personally, I have a very hard time believing that rents of over $2/sf are sustainable. And certainly not increases, as I’m not hearing of many people who are getting fat raises this year.
Anyone else hearing of people getting fat raises allowing rents more than $2/sf?
Rents can go up even if wages don’t. People may chose to settle for less. It’s also how house prices go up even if wages don’t. It’s a natural response to short-term supply shortages. Of course, when supply comes back to market, the pressures go the other way. We have been witnessing that with home prices for 6 years now. We will likely see a moderation in rental rate increases as more houses are converted to rentals.
unemployment beni’s, extended unemployment beni’s, sec8 subsidies, disability beni’s, govt/state pensions etc, other misc subsidies and the TAX CUTS.
BTW, all of which will be facing cut-backs in the coming months/yrs.
Don’t forget the 2-3 years of additional savings from not paying a mortgage prior to their current rental.
IR, do you factor in taxes and HOA when you calculate “affordability?” I know you include this in your detailed analysis of houses, but I mean in your general statements about neighborhoods?
In some areas — particularly in Ladera Ranch, which you analyze today — taxes and HOA can be quite a big chunk of the cost of living there. It’s pretty easy in Ladera to have a monthly tax/HOA bite that is 25% or more of the mortgage. When you compare renting to owning, that’s a significant difference, and it certainly affects my considerations of neighborhoods. This is also the case in parts of RSM and Aliso, for sure. (I’ve seen RSM properties with a list price of 550-600 k$ but a tax bite of $12,000 a year. Forking out $1,000 a month in taxes sure takes a lot of the shine off of ownership.)
One way I tend to look at this is to compare rent to the mortgage interest, taxes, HOA and maintenance costs — essentially everything but the principal part of the mortgage. That compares, as you put it, the cost of renting the home to the cost of renting the money plus the ongoing costs of maintaining the property (meaning all the money you pay that you’ll never see again, the equivalent of rent).
“The jumbo market, which still requires a minimum 20% down, is effectively dead.”
Although this is undoubtedly a true statement, I would just point out that for those persons that have relatively high incomes (and thus are able to afford, from a cash-flow basis, higher-end purchase prices), some of the lenders are now willing and able to do non-conforming loans with 10% down instead of the standard 20% down. I’ve seen recent solicitations from Citibank and BNY Mellon to this effect.
I would love to see statistics on how $1MM$1.5MM houses are purchased. All cash vs mortgage. And of the mortgages, what are the down payments, credit scores, debt-to-income ratios…
“some of the lenders are now willing and able to do non-conforming loans with 10% down instead of the standard 20% down. I’ve seen recent solicitations from Citibank and BNY Mellon to this effect.”
I haven’t seen any jumbo lender willing to do this yet. The risk is too great. If these programs become available, it will open up the $800,000 to $1.2M market to high wage earners with stellar credit scores. The market above that is still dead.
Ugh…I’ve hit Greece burn out….
Fewest O.C. homes for sale since 2005
http://lansner.ocregister.com/2012/03/06/fewest-o-c-homes-for-sale-since-2005/159423/
“Turn back the clocks to August 2005 to find a lower inventory. At the very beginning of the year, the active listing inventory stood at 8,114 homes. It was a good beginning compared to 2011 with nearly 1,900 fewer listings on the market. There was a subtle sense that something was different right after bringing in the New Year. Since then, the market has shed 925 homes and now stands at 7,189, 33% fewer than last year. To shed homes during this time of year is totally unprecedented during this downturn. It is much more of what we would see during a hot, appreciating market, reminiscent of 2004 and 2005.”
—
Steve Thomas’ market time is now below 3 months at 2.97. This is about 25% lower than it was in Spring 2009, just prior to the sustained bounce in prices that led to a 25 month deathgrip at 500k for OC SFR’s.
Well, that’s just incredible muchacho, barely 7000 homes for sale in OC. Hopefully, the tax credits will come back to fuel another “sustained bounce in prices” and we can all put our anti-gravity boots back on and ride HELOC’s to the moon. Lolllllll
Here’s my take, based on observations on the ground:
(1) Nice entry-level SFRs, anything under 500 k$, is selling well. This is no frenzy, however, because stuff in bad shape or in iffy locations is simply sitting there. Buyers are snapping up good deals, but marginal deals are sitting unsold.
(2) Similar but less so in the above 500 k$ market. If it’s very nice, great location, and priced pretty reasonably, it sells quick. If not…it just hangs on and on.
(3) This leads to a remarkable division: top-quality sales are moving very quickly, but lesser quality, which you’d expect to move slower than the best, but still faster than they have been if this is truly a broad up-market, are just as dead as they were in 2011.
(4) I don’t think the lack of inventory is coming from the demand side. Not that many houses are actually selling. What is happening is that lots of sellers are pulling stuff off the market, or not putting it on in the first place. It’s the supply that has crapped out.
So why has the supply gone to heck? I see a few people putting their houses back on the market now, when they’d pulled them off last year, or earlier, and the prices are still pretty delusional, e.g. 10-15% above market rates. Only the very best of these will sell, I think, and only after a painful (to the hopeful seller) price reduction. I bet a lot of these vanish again in May and June.
My WAG is that sellers are listening to the drumbeat in media and government circles talking up the economic recovery which is finally for sure this time cross our hearts taking hold this spring, they say. Plenty of people are therefore calling the bottom of the real-estate slump, and my guess is that sellers are listening hopefully to this, and thinking if they hold off just one more year they can finally sell the house for the 600 k$ they feel it’s really worth — just look at all that travertine! the backsplash! plantation shutters, even in the downstairs crapper! geez! — instead of the 540 k$ it would fetch today.
How will it all play out is anybody’s guess, of course. Personally, I think the spring rally will fizzle early, as buyers who came out of the woodwork retreat in the face of abysmal selection. Not that many people are really happy getting a bargain but on a dump they don’t like that much. The big unknown is the behaviour of banks. I don’t see any serious jump of REO/short this spring, so either they don’t care about hitting the peak buying season — the dump will come later — or they, too, are holding out another year.
In my mind, the initial chart shows a problem with the “rental parity” formula/calculation. When you add in:
1. TIC currently owns at least 39,000 apartments, thereby controling rents in the county,
2. They have begun an aggressive ad campaing, “Rental-Living.com”, and an e-mail solicitation to all MLS members offering $600 referral fees
That pretty much says, they have undisclosed vacancy’s.
Add to that, they have nearly 10,000 additional apartment units under some stage of construction, and the answer has to be “a market in flux with downward prices in both for-sale and rental properties, without some gigantic influx in jobs.
“the answer has to be “a market in flux with downward prices in both for-sale and rental properties, without some gigantic influx in jobs.”
That scenario is entirely possible. TIC could decide to hold a large number of empty apartments off the market to hold up rents and resale prices too. Of course, that makes me wonder why they bothered to build these units unless they were going to rent them out. The rental supply they are adding certainly isn’t going to help the rental parity equation.
They’re big. They can easily afford to hold down rents to where it totally sucks the oxygen out of the RE market and still make a fat profit. Why should they care if they’re only making $100/month/unit? On their size scale, that is, first, still a lot of money overall, and, second, not as risky as it would be a for a small operator, because their massive capital flow can easily absorb the occasional bump (three-month vacancy while a tenant is evicted or damage is fixed).