Irvine is not rich

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Garfangle -- for some who has said they have never been to Irvine before (you said it in another post), you certainly have a lot of opinions on Irvine to drop on all of us who actually live in and contribute to making this wonderful city what it is. I have never seen anybody on this board trying to draw any comparisons to Irvine and the places you reference. We are what we are, and they are what they are. Yes, we all acknowledge that Irvine costs too much...and yes, the cost will come down. But please garfangle, at least have the courtesy to get on a plane and come out to visit here before you try to define and categorize us all with statistics. That stuff you see on "The OC", or "Laguna the real OC" is not Irvine, and never will be. But you don't know that, because you have never been here, have you?
 
<p>CK,</p>

<p>I think having an opinion is what makes community message boards lively, and I'm glad you have one too. Anyway, I get all my data from official statistics and reporting, so it's not like I'm making it up to push an agenda. As i said earlier, I admire Irvine and the people who make it one of the most liveable cities in the nation, I just think, like the original owner of this blog that the euphoric times of these past few years will not end well for those caught up in it and may in fact bring the responsible folk down with them. As, to me visiting Irvine, I may visit in the near future, I just don't when. In the mean time, I hope IrvineRenter keeps this blog going because it is certainly one of the most interesting blogs out there.</p>
 
I just wrote a post for tomorrow on the main blog with the income statistics for Irvine. This will be a good debate to carry over there.





A lot of what everyone is debating is in the absence of good data. Some say people in Irvine are rich, some do not. Tomorrow's post will frame the debate in context of real numbers.





FYI,





<p><a href="http://factfinder.census.gov/servlet/DTTable?_bm=y&-state=dt&-context=dt&-ds_name=ACS_2006_EST_G00_&-mt_name=ACS_2006_EST_G2000_B19001&-tree_id=306&-_caller=geoselect&-geo_id=16000US0636770&-search_results=01000US&-format=&-_lang=en" linkindex="10" set="yes">B19001. HOUSEHOLD INCOME IN THE PAST 12 MONTHS (IN 2006 INFLATION-ADJUSTED DOLLARS) - Universe: HOUSEHOLDS</a>


Data Set: 2006 American Community Survey


Survey: 2006 American Community Survey</p>

<p>Estimate — Percentage — Cummulative — House Price Limit — Downpayment</p>

<p>Total: 63,646


Less than $10,000 ——– 4,633 — 7.3% — 7.3% —- $40,000 —- $8,000


$10,000 to $14,999 —— 2,015 — 3.2% — 10.4% — $60,000 —- $12,000


$15,000 to $19,999 —— 1,159 — 1.8% — 12.3% — $80,000 —- $16,000


$20,000 to $24,999 —— 1,973 — 3.1% — 15.4% — $100,000 — $20,000


$25,000 to $29,999 —— 1,233 — 1.9% — 17.3% — $120,000 — $24,000


$30,000 to $34,999 —— 1,069 — 1.7% — 19.0% — $140,000 — $28,000


$35,000 to $39,999 —— 2,021 — 3.2% — 22.2% — $160,000 — $32,000


$40,000 to $44,999 —— 2,071 — 3.3% — 25.4% — $180,000 — $36,000


$45,000 to $49,999 —— 2,353 — 3.7% — 29.1% — $200,000 — $40,000


$50,000 to $59,999 —— 3,108 — 4.9% — 34.0% — $240,000 — $48,000


$60,000 to $74,999 —— 6,169 — 9.7% — 43.7% — $300,000 — $60,000


$75,000 to $99,999 —— 8,666 — 13.6% — 57.3% — $400,000 — $80,000


$100,000 to $124,999 — 7,924 — 12.5% — 69.8% — $500,000 — $100,000


$125,000 to $149,999 — 5,279 — 8.3% — 78.0% — $600,000 — $120,000


$150,000 to $199,999 — 6,495 — 10.2% — 88.3% — $800,000 — $160,000


$200,000 or more ——– 7,478 — 11.7% — 100.0% — $-</p>

<p>Irvine’s median income is approximately $85,000:</p>

<p>$85,000 * 4 = $340,000 house with a $68,000 downpayment.</p>
 
<p>I don't know how other cities compare, and rich is subjective ... but if nearly one-third of families gross above $125,000, with more than one-tenth grossing over $200,000, then Irvine doesn't seem too poor to me.</p>
 
<p>Many people have more than $160,000 downpayment (or equity) as well.</p>

<p> </p>

<p> </p>

<p> </p>
 
<p>IR,</p>

<p>I'll ask you one point as a resident who may know such a thing: Would you say that TIC made out the most during this bubble period because Donald Bren could raise land prices several-fold as builders competed to get TIC's business? Whereas in 2000 home values were mostly in the mid-$300K, with housing prices appreciating to the mid-$600K and higher I assume Bren and Co. captured the bulk of that surplus because the land TIC had was already paid for long ago. You made a remark in an earlier post that TIC in its most recent developments priced its land value at $4.5 million an acre. I am sure if you looked at TIC's books in 2000 prior to the bubble that it was only valued at a fraction of that. Agree?</p>
 
Yes, They were making considerably less in 2000, probably 80% to 90% less. They also captured all of those profits.





The only reason the Irvine Company doesn't just build with California Pacific Homes (TIC's builder) is that they can sell more units and more land by bringing in other builders. Building houses is just another way for them to sell land. This is also why they haven't concerned themselves too much with the suffering of the builders on the ranch. They could not care less if they put those builders into bankruptcy. They only care about selling the land for maximum dollar.





They will capitulate to the market in time. The control the ask, but not the bid. If people can't pay those prices, sales will stop, and they will be forced to lower prices to generate revenue.
 
<em>"Many people have more than $160,000 downpayment (or equity) as well."</em>





That may be true today, but with so many people having the vast majority of their assets in Southern California real estate, much of this phantom wealth will disappear. The ones with real money are those with cash, cash equivalents, or other asset classes. Those with real estate wealth have fantasies, but much of their equity is about to vanish.
 
<p>IR -</p>

<p>Sorry, I'm totally naive when it comes to this .... but projects like OH are being postponed to 2009 ... is this is choice of TIC to postpone? And, how does this postponement affect the builders? Are they sitting on land that they've already paid for/acquired?</p>
 
I love numbers as much as the next guy, but it really seems quite simple. Irvine is a upper middle class family oriented town. If it is important that are defined as "rich", you would like Beverly Hills better. If you can't get over that Irvine is not going to be as cheap as Austin, then you would be happier there. That way I will not have nearly as much trouble parking one of my two Honda's at Target or Costco. No lifestyle of the rich and famous here.
 
<em>"They will capitulate to the market in time. The control the ask, but not the bid. If people can't pay those prices, sales will stop, and they will be forced to lower prices to generate revenue."</em>





And here I thought it was the addition of flags, sign twirlers, and bright red balloons exclaiming "NEW HOMES" that were going to sell homes on The Ranch. At least, that's what you would think given that that is the sum and substance of their response to date.
 
TIC is choosing to postpone, but they are really being forced to by a lack of sales in their current developments. The builders are hating life out there. They have product they can't move because TIC will not let them lower the price.





I don't know the specifics on their land purchases. Typically, the builders would have paid cash for the land, and they would be eating significant carrying costs. TIC may be allowing them to take down the land in small chunks so that the builders are not out-of-pocket a great deal in land charges. TIC would be willing to do this to have better control of the final purchase price.
 
<em>"TIC may be allowing them to take down the land in small chunks so that the builders are not out-of-pocket a great deal in land charges."</em>





FWIW, that's what one of the Richmond American sales people told me. TIC releases the land to them phase by phase, and will only release new land when all (most?) of the current phase is sold out.
 
<p>"Those with real estate wealth have fantasies, but much of their equity is about to vanish."</p>

<p>Is your analysis of tomorrow forward-looking, i.e., speculation, or is it aligned with hard, verifiable numbers?</p>
 
I think if you read the blog, you will see what Irvine Renter has shown to date regarding equity evaporation. If one bought in 2001 or before, I suspect that one would not lose money in the slowdown. IR has demonstrated that some who bought in 2005 and 2006 have lost appreciation/paper gains. Foreclosures will only make it worse. There was a foreclosure in a neighborhood near mine, that comp'ed at 04 - 05 level.





But here's the thing: if you think differently, go with it. No one can make decisions for you. No one can keep you from acting on your beliefs.
 
<em>"Is your analysis of tomorrow forward-looking, i.e., speculation, or is it aligned with hard, verifiable numbers?"</em>





Tomorrow has no analysis, just the facts and figures. The meat of the post is in the thread above.





The speculation implied in the post is the impact on prices that will result from the credit crunch and returning to valuations at 4 times earnings.
 
<p>That's great - I look forward to it.</p>

<p>(I only ask because your chart does not contemplate a down payment/equity larger than $160,000).</p>

<p> </p>
 
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