Does Irvine feel wealthy?

NEW -> Contingent Buyer Assistance Program
G

garfangle_IHB

New member
<p>After IR started posting the income-equivalent needed to support the mortgage costs (ex-HOA/M-R) in a rational world for what are typical Irvine housing properties, it got me thinking: Did these past few years of housing appreciation and the tremendous building of expensive, new communities make residents feel richer than they were in reality? Looking at Irvine's demographic profile, the median household earns $80K+ per year, yet to justify the increased housing prices most residents would've needed to make well over $100K and in many cases (ex-Shady Canyon) $150K+, but of course they didn't. The demographics of Irvine did not appreciably change much from 2000 to 2007. One could understand a dramatic spike up in home prices if it accompanied a similar spike in personal income or new migration of the truly wealthy happened.</p>

<p>This lack of demographic change is why it is inevitable that Irvine home prices must fall sharply, because most residents don't have the cash flow to support the inflated prices. Only for a few years could Irvine get away with it as documented by IR and others (economist Robert Shiller, et al) due to lax lending standards and teaser, option ARM financing.</p>

<p>IR, this is to you: what do you think will happen when builders realize that they can no longer price the new community developments (VoC, WE, OH) at bubble prices? Will they leave the communities half finished to stop throwing good money after bad and will TIC be merciful and renegotiate its land prices (see your earlier post) to make it more palatable for the builders to lower their prices commensurately?</p>
 
I think you will see the builders in non-Irvine Company tracts lead the pricing dramatically downward. The Irvine Company will be dragged kicking and screaming into the reality of the new housing market. I would not be surprised to see a 6 month or longer period where there is no new house construction on the Ranch while the Irvine Company comes to grips with reality (When I think about it, we have seen this already.)





Keep in mind that the Irvine Company could not care less about the builders. The builders are only there to help the Irvine Company sell land. If they fail to fulfill that function, they are of no use to the Irvine Company. TIC will let them go bankrupt or just go away. It matters not to them.





We have already noted that builders are selling for less than the resale market. This is typical of housing downturns. The prices of new homes bottomed 4 years in advance of the bottom resale market in the 90s, although volume was not very good. The only thing standing between the builders and the bottom is their land basis. When they finally take the 90% impairments they need to adjust their pricing to the new reality, they will be able to build and sell again. In fact, if they lower their prices enough, they should be able to generate substantial volume -- at the expense of the resale market.





You will probably see new home prices bottom in 2009 or 2010. You will know when the builders have hit bottom when the sales volume picks up to a level capable of sustaining their businesses. New home prices will bottom at a higher price point than resales will, and resales will bottom much later.
 
to answer your original question: yes, irvine is wealthy.





<img alt="" src="http://www.homebuyersguideusa.com/siteSpecific/images/hbg/topImage.jpg" />





see that house? see that house? that house costs more than your house.


3 car garage? duuuh, wealthy person's house.


balcony with french door? duuh, wealthy person's house.


tower-like front entrance? hah, tricked ya... this actually isn't a house at all. it's a castle!





is irvine wealthy? i think i just answered that.
 
<p>Irvine is a facade of wealth. One cannot attribute to it the ardent facade of wealth and pretentiousness exhibited by Newport and Corona Del mar, but rather a runner-up smuggness that only comes with a silver medal. To many Irvine residents, it is enough to be on the winner's podium.</p>

<p>The silver medal mentality even extends to non-homeowners. It is remarkable howw many people in my appartment complex in Woodbridge Meadows have new BMWs, $50,000 SUVs (i.e. loaded Toyota Sequioas with bling), Mercedes, and even Porches. Must be a real kicker with the ladies: "Hey babe, want to jump in my porche and head back to my undersized 2 bedroom appartment?" Of course they're not fooling anyone but themselves. At the end of the month when they're balancing their checkbook and paying the bills, they're last to know the truth.</p>

<p>I belive Anthrax got it right in 1987 with the song "Imitation of Life":</p>

<p>There's nothing I hate more, than all these plastic people


With all their plastic promises, and all their plastic deals


They just can't be themselves, and live their own lives out


They're just an imitation of what life's all about





Because of me you are who you are


So sign your name, and you'll go far


I'm your friend, I think you should


So sign your name, it's for your own good


How many times have you heard this today?</p>

<p>Some bogus piss-on saying "Let's do lunch babe"


For them this bullshit, it's their whole life


Cut through their bullshit with a knife


Imitation of Life</p>

<p>Whatever happened to the guy I knew


A media creation, a monster grew


Our story had an unhappy end


But this could change, I still call him friend





Take my advice, listen to me


A great opportunity, can't you see


I only want what's best for you


The deal of a lifetime, what more can I do


How many times have you heard this today?





Some stupid sucker says "It's great, we luv ya babe"


For them this bullshit, it's their whole life


Cut through their bullshit with a knife


Imitation of life</p>
 
Someone in my complex in Northpark drives a dirty older Ford Focus with a Ron Paul for President bumper sticker.





Was refreshing.
 
It feels asiany :)





all kidding aside there are pretenders and there are some people with wealth. I do believe after doing many loans for people in orange county and seeing there balance sheets, I'd say Irvine is in better shape than other areas, especially south OC. You may not want to correlate the savings/spending habits of asians vs caucasians, but I do. If you look at south OC it is disproportionately white compared to Irvine.
 
I know several people that live in Irvine Co apartments that make $250K to $500K per year. They can certainly afford a $50,000 car and not have it be a facade.



As for the $80,000 median income versus what we see every day.....I would be interested to see what the median income is in some of the newer neighborhoods....Woodbridge, Turtle Ridge, etc. I think that the new homebuyer in Irvine probably makes a lot more on average than $80,000. The median has to be brought down by people who have been in their house for 5 plus years and can well afford their payments.



Don't mistake this post for me being a housing bull. Despite the crazy financing of the last few years, I still just can't think the buyer of the typical $800K to $900K house in Irvine is making $80,000 per year.
 
Gosh, I live in a mediocre place and drive a mediocre car. I don't even live in Irvine, but rather Tustin. I'm glad I don't drive a crummy car though. And I have nothing against others driving luxury cars. I even have a friend who only pays with $100 dollar bills. But I guess that's good for him. If you guys are sick of how plastic Irvine is, get out of the bubble and go hang out in Costa Mesa or Tustin. Better yet, roll up your windows, lock your doors, and cruise through Santa Ana. ha ha.
 
I did just read that post....right after I posted mine of course. I still think that is a minority of people in Irvine. lendingmaestro is up to his ears in that stuff right now because that is who is calling.....those are the people that need to re-fi. If you don't have an exploding mortgage, now is not a good time to refi (if you need a jumbo).
 
I think that the facade of wealth extends throughout this country, not isolated to Irvine...





There are a lot of Irvine residents who live here because they enjoy the infrastructure (bike trails, parks, libraries, etc), schools, and proximity to work. If that makes a city feel "wealthy", then I guess the answer is yes.





But I don't think that anyone can make a judgment on a city just because their neighbors choose to live in an apartment but drive nice cars. In fact, given the overall direction of the market, wouldn't that be a better financial decision than buying an expensive house and driving a mediocre car?





-OCR
 
<p>Asians pay cash for houses. That's why you see so many asians in Irvine, because they can afford it and it's why prices won't drop.</p>

<p> </p>
 
Yup, they pay cash and they don't care one whit if they are buying a depreciating asset. Anybody who is smart enough to accumulate that much cash is too stupid to wait until home prices decrease.
 
"I'd say Irvine is in better shape than other areas, especially south OC. "





lm - Great point - it's one that has become increasingly glaring to me by following what South OC prices are doing, and seeing the number of sellers who are underwater (a pretty high percentage). It's unbelievable to see how fast things are deteriorating.
 
I agree with Oak CreekRenter - I have several friends in LA that make between 100-200K that do not own because it doesnt make sense to pay these outrageous prices for homes. They work hard for their money and given the amount of time they spend commuting, it would make sense to me to drive a nice car since they spend two to three hours in it on a daily basis.





So to judge someone who has a nice car and lives in an apt makes absolutely no sense to me. There probably are a good amount of people that drive nice cars that live in apts that probably cant afford the lifestyle they are trying to portray, but to judge everyone because of that would seem ignorant to me.
 
Everyone in here knows that just because the MSRP of a BMW/Mercedes is high doesn't mean the transaction price is high, right?





A few years back when Mercedes was selling the 1st gen M-Class, the special lease price was so low, you could get one for cheaper than an Explorer! They were that unpopular.





Luxury brands have a reputation to uphold, so most of their incentive money is in lease support. You'd be surprised how cheap some of the less popular European models actually are (Mercedes R-Class, BMW Z4, Audi A3, Volvo S40, etc)...





-OCR
 
<p>"I agree with Oak CreekRenter - I have several friends in LA that make between 100-200K that do not own because it doesnt make sense to pay these outrageous prices for homes. They work hard for their money and given the amount of time they spend commuting, it would make sense to me to drive a nice car since they spend two to three hours in it on a daily basis.





So to judge someone who has a nice car and lives in an apt makes absolutely no sense to me. There probably are a good amount of people that drive nice cars that live in apts that probably cant afford the lifestyle they are trying to portray, but to judge everyone because of that would seem ignorant to me."</p>

<p>I'm not trying to judge everyone, just almost everyone. There are always exceptions.</p>

<p>-POITG</p>

<p> </p>
 
I agree with OCR. If your FICO is high, it's not hard to service a 48 month lease on a luxury car with 10k miles per year and a $3-4k cap reduction. Not very smart, but not that hard, either.
 
<em>"Asians pay cash for houses. That's why you see so many asians in Irvine, because they can afford it and it's why prices won't drop."</em>





LOL





That's why the Japanese market has only dropped about 65% from its peak.
 
I don't think the Japanese pay cash for their homes in Japan...they rely on mortgages, if they buy at all. Most Japanese rent (less than 50% home ownership...). For that matter, they don't buy homes with cash in America either...





If I'm not mistaken, one lesson I've learned on this board is that "Asians" mean 1st generation Korean or Chinese...





Lord knows this Asian isn't paying cash...





-OCR
 
You must log in or register to reply here.
Back
Top