What's going into escrow - Irvine and maybe some Tustin too

NEW -> Contingent Buyer Assistance Program
actually, a $100k income even here in irvine, where the median household income is twice the national avg, is still something special. i pulled some data from the us census. these are 2006 so roughly at the peak of the mkt which means all those mortgage brokers, realtors, title agents, etc. still have their peak incomes included here.







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INCOME AND BENEFITS (IN 2006 INFLATION-ADJUSTED DOLLARS)









#

%





Total households

63,646







Less than $10,000

4,633

7.3%





$10,000 to $14,999

2,015

3.2%





$15,000 to $24,999

3,132

4.9%





$25,000 to $34,999

2,302

3.6%





$35,000 to $49,999

6,445

10.1%





$50,000 to $74,999

9,277

14.6%





$75,000 to $99,999

8,666

13.6%





$100,000 to $149,999

13,203

20.7%





$150,000 to $199,999

6,495

10.2%





$200,000 or more

7,478

11.7%





Median household income (dollars)

84,270












while it's true that the largest chunk of households fall in the 100-150 range, notice that there are just as many people who live near poverty as there are who make the necessary income required to purchase even a $700k home. yet everyone really has 20 friends that have income in top range of this chart. so then some of the following must be true:


- the census is wrong


- we all know the same people, or we're possibly related -- stop hitting on those girls in the chat room, fellas!


- people tend to exaggerate their incomes


- people bought and are still buying homes way above their means





its probably a mix of the latter three. we should keep in mind that most of us here are educated, working professionals and are at least in the top half or higher of the scale. our peers and coworkers are also likely to fall in the same demographics. so we should be careful about making assumptions about the mkt based on anecdotal evidence about ourselves and people we know. because this small group of intellectually-curious real estate hobbyists and our peers are obviously not the norm, and not even the norm among home buyers.
 
<p>acpme - I think you proved my point for me. 42% of the households make more than $100K right? In other words, 4 out of every 10 people you see are likely to be a part of household making $100K or more. </p>

<p>If it's almost have the population, how can it be something special or unique? If 42% of the people here had Ferrari's, would Ferrari's really be so special? I sure don't feel like I have "arrived" because my household makes more than $100K considering 4 out of every 10 commuters I pass on the way to work also make that much. I amazed that people talk about households making over $100K with such reverance considering that almost half the people around them do the same. </p>

<p>If a household earning $100K is pretty close to the median income, they should be happy with a median home, which is probably a 3/2.5 condo...</p>
 
<p>IR, that's the trap of home ownership. It's easy to compare rent to your payment. The other stuff, is the gotcha for first time buyers. PMI, HOA, a little repair here, a touch up there, it's the death of a thousand cuts. </p>

<p>On the surface, when places that rent in the low-mid $2000s range are priced in the mid-400s range, rent looks close to the payment. That's the trap. It's like looking from the surface of the ocean at the edge of the Puako reef on the Big Island. The water is crystal clear, the reef is gorgeous and and looks like it's 20 or 30 feet down. Then you jump in and realize the reef is 120 feet down. That's if you're lucky. If you're like most, you start near shore and follow the reef out from where it is 20 feet down and come to edge and look at your depth gauge and realize you're 100+ down and the tank gauge reads empty.</p>
 
<p>We are spinning wheels on this issue. And we probably we can agree to completely disagree. It has nothing to do with bearish or bullish. It is about how you view things - like I can never understand why anyone will spend $5000 on a LV or Hermes Bag, or buy a E500 AMG station wagon! IR will probably never understand why I am willing to pay extra thousands to not to live in a rental. </p>

<p>Some of you probably lived or owned houses in other states. At least it is my personal experiences that it is not likley that your net cost of owning a nice house in a top notch school district will be less or equal to renting one. Rentals often are min in those areas. I am not talking OC, I am talking areas like Dallas, or Houston which I have extensive knowlege ( looked for months, and made offers, and entered contracts). Sure you can go to MLS and give me an example of a 2500 sq ft for $150K, but I can assure you that is not where you want to plant your family. By the way, house in Dallas and Houston appreciates 3% to 5% a year only with some years flat. So no bubble there. The "semi-pointless" math is similar, but bigger size homes. </p>

<p>My point to you: you are likely to rent in Dallas or Houston too with that "rule". </p>
 
We have to start mixing theories with practice. Although I like the charts that I see on this website, the majority will act based on reasons and perceptions. IMO, I think the median home value will be 500k within 6 months. I think that the median will be 450k within a year, and 400k within 2-3 years. At that point, will be back in 2003 prices. At 300k for a condo and 450k for a house, I know for certain that there will be many buyers who didn't make a purchase in 04, 05, 06, 07, and 08 - that's a long time to wait for someone who is capable of buying. When you've gotton married and started a family, 5 years of waiting to buy is quite some time. Current rent is around $1500-$2000/month. When an average mortage will be $2000-$3000/month, people will definitely choose to own over rent for REAL FUNDAMENTAL REASONS - not mere speculations. I think that the short term minimum will be 450K in a year. The long term minimum will be 400k in 2-3 years. Btw, I'm calling that the bottom too. It could go lower, but not by much. Most people do not make decisions based on exact calculations. Most will "sense" what's good.
 
As acpme mentioned, this was in 2006 when things were still going pretty well. Since we have a disproportionate number of people locally who are/were in real estate- and finance-related industries, it will be interesting to see if the salary outlook changes.





I also think you have to consider who the people are at the higher end of the salary scale. These are most likely very experienced professionals who have been in their respective industries for a long time and theoretically have owned homes for a while. Are these really the types of people who are most likely to be buying and selling the bulk of houses?





Take a look at the percentage of people in the $50,000-$99,000 range - that's 28.2% of the population. I would guess that these would make up most of the first-time buyer pool in a more normal market (along with some people just above the $100k threshold). BTW, it's pretty difficult to pull down $100k+ when you're young, so I assume the vast majority of these people are already married and/or part of a dual income household.





If this large a percentage of the population either was fished out during the boom and are either stuck in their homes with huge mortgages, or can't yet afford housing with normal lending standards, isn't that an issue?
 
<p>January OC median was $535K for the 22 days ending January 23rd, down 13% yoy. Condo median was $390K, resale SFRs $595K.</p>

<p>All three sales catagories Resale SFR, Condo and New still show 40% plus sales decreases YOY.</p>

<p>From June '07 peak it's down 17%.</p>

<p> </p>
 
<p>Yup. Condos will go for 350k in 6 months and bottom at 300k. SFR's will be 500k in 6 months and bottom at 450k.</p>

<p>With a condo going for 300k, the mortage will be $1800. I know someone who will buy TODAY if she could get a decent condo for 300k.</p>

<p>With an SFR going for 450k, the mortgage will be $2700. I know another guy who will also buy TODAY if he could get a decent house for 450K.</p>

<p>So yes, I definitely know REAL PEOPLE who would buy without hesitation at those prices. That's why I think the bottom median will be 400k in 2-3 years.</p>

<p>I also would assume that many people on this blog will buy a condo if it costs less than 2k a month. Many would also buy a house if it costs less than 3k a month.</p>

<p>With peak of 645k and a bottom of 400k, that's a 38% drop!! End of story.</p>
 
hs - You may have forgotten the 390k number is the median for the entire county. The majority of those selling for less are in older or less desirable areas (gang-riddled parts of San Juan, anyone?) or are really apartments - so why would you pay the same or more money to step "down" into a place like that when you're renting something nicer?





Of course, "better" areas will still hold a premium and will be more expensive, thus higher mortgage payments.
 
as for income levels, there's more behind those numbers if you think about it. its not 4 out of every 10 commuters you pass that make $100k. that's for a total household. the median income per worker is $46k.





some more historical perspective...


median household income in 2000: 72k


and we all know what's happened with the median home prices since then...





so median incomes for irvine families has gone up 11% but their cost of housing has doubled. a DINK family might make a decent income and be able to afford a starter condo. but then you're assuming these couples will both always have to work. how do they afford to move into a median home (a condo should not represent a median home in a suburban town with irvine's demographics), have children one day, and have a chance at raising those children themselves? already 49% of irvine parents with children under 6 are both working full time. in other words, people are working harder than they used to, with less to show for it.





i want to echo IR's sentiment that the numbers thrown around are often far too optimistic. the 30% DTI thrown around these days is a perfect example. it used to be that roughly 28% was the MAX, not the norm. you couldn't even get a loan with those sort of numbers. people talk about 20-25% down pymts like that's extraordinary, in recent yrs it has been unfortunately. 25% down used to be the NORM. sure you might be able to get the numbers to work so the median income family can make it into a home, but whats the bigger picture? compared to just half a generation ago, it now takes the work of two people to buy less home, have less equity in their homes, have less savings but more credit card debt, and spend less time with their kids. that's not progress.





i'll stop here because now i'm just getting too broad and sounding too much like a democratic presidential nominee
 
<em>"in other words, people are working harder than they used to with less to show for it."</em>





You are correct. Two other factors to consider:





<strong>Negative U.S. savings rate.</strong> We personally are savers, but I don't see any reason to believe that people in my generation are bucking the national trend. I know plenty of people making good money, but hardly any have the savings to buy a home. The ones who did seem to have done so either a) with significant help from parents or b) with little/no down and are stuck in their homes for the foreseeable future.





<strong>More expenses.</strong> Most of us are carrying student loan debt; some much worse than others. Cost of living is also much higher relative to incomes than previous generations. I think some people underestimate how much people this age are paying out each month, even before discretionary spending kicks in.
 
<p>acpme, I'm not arguing about affordability. It sucks, I agree We make almost $200K per year, live in a 1600sf condo, and can't comfortably afford that much bigger of a home. My wife took 15 months off to be with our first son after he was born and that was very tough on us financially. I would think that on my salary, my wife should be able to stay at home with the kids if she chose to, and we could still live comfortably in a 2200-2400sf SFR. Just not the case... </p>

<p>Here is what I said:</p>

<p>"In other words, 4 out of every 10 people you see are likely to be a part of household making $100K or more". </p>

<p>Are you trying to say this is not true? Households making north of a hundy just aren't all that special in Irvine... That's middle class around here. North of $150K is probably upper middle class. That's downright shameful but it's reality.</p>

<p>Everyone elects to live here. They have free will. For households that make $100K and feel they should somehow be able to afford a nice 2400sf detached home with a big yard in a decent part of Irvine, I say start looking at other areas of CA or other states. Homes will become more affordable, but will probably never get that cheap. Yes it sucks, no argument there, but it's probably the case.</p>

<p>And BTW, we have two young kids and live fairly comfortably in a 3/2.5 1600sf condo. It's worth a smidge more than the Irvine median price-wise, so I'd consider it fairly representative of a median Irvine home. No house that either my wife or I grew up in was much larger than 1800sf. I want bigger, but if we never were able to afford such a home for some reason, it wouldn't be all that bad to live here long-term. We have a small yard. It's a detached condo, so we have our own four walls. In other words, be careful how much you poo poo the notion of people living in condos. A family of three would probably be pretty comfortable long-term in my median "condo". I know lots of families in my development, with 1-2 kids, that aren't all that interested in a move-up house. 1600-1700sf in a decent neighborhood is perfectly fine for them... </p>
 
ipoplaya -- i don't want to get into a war of words with you. this is a discussion and nothing more. if someone has a differing opinion here theres no need to assume its an attack. i will admit that housing is emotional and personal, so i'm not trying to offend anyone's form of housing. just simply giving my opinion from the viewpoint of someone who admittedly lives in a small, overpriced box himself.





having said that, i'm not poo pooing the notion of people living in condos. in fact, it sounds like we live in the same type of detached condo but maybe different neighborhoods. like yourself, i am comfortable in my home at the moment, can afford to live there, and will/can stay here for up to a decade with no problems. and like yourself, at some point i would like to move up to a bigger home when i have a bigger family. but i think our difference lies in the fact that you consider this a median home whereas in my mind, these are a notch above starter homes, comparable to a small townhome. that is not meant to be offensive. <strong>appropriate homes for the appropriate level of income is my point</strong>.





there is a 3/2.5 1500sf detached condo on my street selling for $519k. this house could easily drop to $450k in the near future. despite that, a family that wants to live in this home (comfortably, not talking about the edge of affordability) is in the top 20% of households. top 20% = barely a starter home? that doesnt mean these aren't nice homes and i'm crapping on them, but that people who are <strong>affording </strong>these homes right now, such as yourself, should be deserving of something better.





as for the supposed irvine premium that's often used to justify home prices here, it obviously exists to some extent relative to neighboring cities, but if income levels can't support living here, who are going to buy all these homes? as much as we'd like to believe it, irvine is not a small exclusive enclave. its not like malibu, where people make their money in the heart of LA but choose to live in malibu. irvine is a the core of the oc economy where hundreds of thousands live, and millions work and play. if people can't make enough income in irvine (and parts of newport beach) to support living here, they likely won't find a higher paying job in oc. the alternative is, like you said, to move out of the state. and that's what we're seeing, unfortunately. but even then the income levels and housing prices don't jive, and by a lot! in other words, it HAS to become that cheap.
 
<p>Where exactly are the median valued homes? I was looking at the charts and some of the cities I saw with values around the median are:</p>

<p>Fountain Valley, Mission Viejo, Laguna Hills, Huntington Beach, Irvine, Westminster, Orange, and Garden Grove.</p>

<p>Personally, I wouldn't mind living in Fountain Valley, Huntington Beach, or Irvine.</p>

<p>So I think the median value is indicative of a decent OC city.</p>

<p>I agree that today's prices are still too high.</p>

<p>But 300k for condo or 450k for a house in 2-3 years sound very reasonable.</p>

<p>400k for a condo and 600k for a house is still too high right now.</p>

<p> </p>
 
<p>"but i think our difference lies in the fact that you consider this a median home whereas in my mind, these are a notch above starter homes, comparable to a small townhome"</p>

<p>I think the market considers my home a median home. With a market value of $575K or so, it is probably right about the 50th percentile of median in Irvine. Personally, I too think of it as a big starter home. I "started" there in 2001... 2-bedroom places, in the 1200sf range, are more likely a truer Irvine starter home.</p>

<p>I think that to a degree people trade the "deserving better" of more square footage, bigger yard, nicer home, etc. for better schools, better weather, shorter commute, etc. With our family income we do feel like we deserve a much bigger house, and I could get it if I moved to Rancho Santa Margartia, Corona, etc. but then we would have less deserving commutes, education, etc.</p>
 
<em> - we all know the same people, or we're possibly related -- stop hitting on those girls in the chat room, fellas!





</em>That is the best line of this entire thread! Thank gawd I didn't take a sip of water, otherwise I would be at bestbuy getting my laptop fixed right now.
 
I was looking at everyone's rent calculations, and It seemed everyone was leaving out the killer: Mello roos. From what little I know....it appears it isn't ta deductable, and a lot of places its 400 bucks a month!



I was just calculating how much it'd be to rent a really nice apartment vs. buying a good sized detached condo, and it definitely didn't seem cheaper when you add that in.
 
1.5% includes mello roos...base tax is 1% to 1.1% in Irvine. In the city of Laguna Niguel, the total tax is 1.02% with mello Roos.
 
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