Will this Fall be brutal?

NEW -> Contingent Buyer Assistance Program
[quote author="Roo" date=1213699904]

I don't think 80% off is possible, but I would not be surprised if you can find 50% off.

</blockquote>


Ok, I'll buy that. There are definitely some homes on the market right now that were listed at WTF prices for so long, and are now starting to get relisted at reasonable prices (compared to everything else on the market).



Obviously the rock solid stuff might be a little less then 50% off peak, and the crap might be more then 50% off peak, but in general i'm in agreement.
 
[quote author="no_vaseline" date=1213700049]Uh folks, we have another information gap.



<a href="http://www.cityofirvine.org/about/demographics.asp">http://www.cityofirvine.org/about/demographics.asp</a>



Income:

Median Family Income $85,624</blockquote>


The city also lists average rent as $1660. Does that sound right to you? (They also list New Century Financial Corp. as one of the major employers, so maybe this data is a little out of date?)



To be fair, our family income is within 13% of the median and our rent is within 6.25% of the average rent so I guess our numbers support this data. It's just difficult for me to believe we are the median, because we are a single-income family and we feel like we are living in poverty. I suppose we don't have it that bad at all. Must be some kind of weird "inverse-wealth effect" that makes it feel like poverty just because we are crammed into this tiny condo vs. the large home we've been told we deserve by the NAR (and friends and relatives and the media and...)
 
[quote author="WaitingToBuyByAndBy" date=1213719257][quote author="no_vaseline" date=1213700049]Uh folks, we have another information gap.



<a href="http://www.cityofirvine.org/about/demographics.asp">http://www.cityofirvine.org/about/demographics.asp</a>



Income:

Median Family Income $85,624</blockquote>


The city also lists average rent as $1660. Does that sound right to you? (They also list New Century Financial Corp. as one of the major employers, so maybe this data is a little out of date?)



To be fair, our family income is within 13% of the median and our rent is within 6.25% of the average rent so I guess our numbers support this data. It's just difficult for me to believe we are the median, because we are a single-income family and we feel like we are living in poverty. I suppose we don't have it that bad at all. Must be some kind of weird "inverse-wealth effect" that makes it feel like poverty just because we are crammed into this tiny condo vs. the large home we've been told we deserve by the NAR (and friends and relatives and the media and...)</blockquote>


Being surrounded by so much wealth can also make you feel poor. $85K isn't too shabby for a median. It wasn't that long ago (or I'm just getting old) that 2,500+sq/ft houses were where the upper middle class lived, not the medians.
 
Coastal California prices normally bottom at *four* times income, presumably due to relative desirability, so Irvine's income would suggest a median price of 340,000.
 
It is my observation that people will leverage themselves right up to the point where somebody will tell them "stop, no more." The NAR and Crew kept saying "Just borrow more! You can afford this!" I suspect you'll see that change going forward.



Historically, you can't fade the metrics. A little more 17b magic, with some comments inserted:



Median Income in Irvine: $86,000

Housing Allocation (30% gross income/12 months): $2150



This is in pretax dollars, so lets make the payment post tax just for fun?



Post tax dollars (25% tax rate) = 1,612.50.



So far, so good. How much mortgage can you buy with this income?



n=360

%/yr=7% (which is what you are reasonably looking at today)

FV=0

PMT=$2150

PV = 323,161.27.



Even with the countywide 20% correction, what can you buy if you're an average household in Irvine? Nothing.



This is all people can afford. The reason prices went higher is the 'exotic' financing. They teach undergrad business major students how to do this sort of crap analysis as Sophmores. If this is all you can finance, this becomes the hard cap on prices because it's all you can afford to pay PLUS it's the max the bank will lend you.



Before somebody brings up that I've broken Graphs Law of Affordiblity, I haven't. This is all some ordinary household can borrow. Period. Even if you're all cash (because you are a trust fund baby or hit the lottery or whatever) you shouldn't pay any more than this because of the oppourtunity costs related to what you could do with the cash.



I don't know what the average SF of an irvine home is, but if it's 2000 sf, all you can finance is $160 a foot. Consider that as the correction continues to accelerate. Have you seen the foreclosure stats? This isn't getting better.
 
Nice quickie analysis.



I'd also like to add that this is an upper bound. During the correction the prices will fall BELOW this number. That's why I said you'll see such low numbers. Again, its an estimate.



I'd also like to add that I very much agree with the opportunity costs. While I have a large reserve of cash, the opportunity of putting it in an under performing or even a flat asset is huge. Not to mention, all the taxes, fees, upkeep and headache associated with it. Worth your money? Well that the question isn' it?



good luck

-bix
 
Ditto, No_Vas



The rising cost of fuel ALONE is crushing people. How long can it last? Until the credit cards are maxed out. I just got my electric billl and it was almost 100 bucks for a 800 sq ft one bedroom. Yikes!



Health insurance is increasing, food prices are increasing, utilities, tuition, need I go on? People will do whatever it takes to maintain their current lifestyle until they are forced to change.
 
The median family income is 103,000 according to the census. A lot of families live in apartments, so I think its safe to say the median family income for people buying houses is even <I>higher</I>.



450-500 median price at the bottom.
 
[quote author="25w100k+" date=1213753658]The median family income is 103,000 according to the census. A lot of families live in apartments, so I think its safe to say the median family income for people buying houses is even <I>higher</I>.



450-500 median price at the bottom.</blockquote>


Agreed that median family income for people buying houses is higher. But if you look back at the historical trend, the graphs are absed on the median income, not just of those buying homes.



$485,000 is the May median OC home (homes & condos) price per Data Quick. I am pretty sure, the median will drop below $400k. I think this is squewed because more lower price homes are selling which drops the median by more than the real prices are dropping. Anyhow, IMO the median will drop in the high $300.
 
[quote author="25w100k+" date=1213753658]The median family income is 103,000 according to the census. A lot of families live in apartments, so I think its safe to say the median family income for people buying houses is even <I>higher</I>.



450-500 median price at the bottom.</blockquote>


As someone who looks at income all day, every day, going back years, I can assure you that the median income is NOT $103,000.



The census doesn't look at W2's, 1099's, and 1040's. :) My personal data from the front lines put the median for OC around $60-70K or so. For a household.



Oh, and that's the median for HOMEOWNERS. Since I ONLY deal with HOMEOWNERS. :)



I have said it before, and I will say it again, six figure household incomes are extremely rare, even in the land of gold here.



And I would LOVE it if 450-500K was the median at the bottom. It would mean I could do more business. But as a realist, I know that's not going to happen. :(
 
[quote author="Masterofdamoney" date=1213758601]

As someone who looks at income all day, every day, going back years, I can assure you that the median income is NOT $103,000.



The census doesn't look at W2, 1099's, and 1040's. :) My personal data from the front lines put the median for OC around $60-70K or so. For a household.



Oh, and that's the median for HOMEOWNERS. Since I ONLY deal with HOMEOWNERS. :)



I have said it before, and I will say it again, six figure household incomes are extremely rare, even in the land of gold here.



And I would LOVE it if 450-500K was the median at the bottom. It would mean I could do more business. But as a realist, I know that's not going to happen. :(</blockquote>


What are you talking about?

W2 is your employment form. 1099 and 1040s are for independent contractors. So the census only looks at people who don't make any money?



Are attempting to say is that the census doesn't include Independent Contractors? Perhaps, but it probably also doesn't include dividends that many Irvine business owners would receive.



6 figure incomes are rare? That would be quite the ego trip as i'm a smidgen shy of one, but thats a ridiculous claim. I bet 75% of the people on this forum (that live in Irvine) are either at six figures or a few thousand short.
 
[quote author="25w100k+ date=1213767363]6 figure incomes are rare? That would be quite the ego trip as i'm a smidgen shy of one, but thats a ridiculous claim. I bet 75% of the people on this forum (that live in Irvine) are either at six figures or a few thousand short.</blockquote>


Wow, do you really think what you are saying? I do believe people on this forum make more money than average since they are interested in finance, housing, and economics. But by no mean most people make over $100k. You might not realize it, but at 25 making $100k is good very good and most people don't make that. You probably work with a lot of people making good money so your perspective might be impacted.
 
[quote author="25w100k+" date=1213767363][quote author="Masterofdamoney" date=1213758601]

As someone who looks at income all day, every day, going back years, I can assure you that the median income is NOT $103,000.



The census doesn't look at W2, 1099's, and 1040's. :) My personal data from the front lines put the median for OC around $60-70K or so. For a household.



Oh, and that's the median for HOMEOWNERS. Since I ONLY deal with HOMEOWNERS. :)



I have said it before, and I will say it again, six figure household incomes are extremely rare, even in the land of gold here.



And I would LOVE it if 450-500K was the median at the bottom. It would mean I could do more business. But as a realist, I know that's not going to happen. :(</blockquote>


What are you talking about?

W2 is your employment form. 1099 and 1040s are for independent contractors. So the census only looks at people who don't make any money?



Are attempting to say is that the census doesn't include Independent Contractors? Perhaps, but it probably also doesn't include dividends that many Irvine business owners would receive.



6 figure incomes are rare? That would be quite the ego trip as i'm a smidgen shy of one, but thats a ridiculous claim. I bet 75% of the people on this forum (that live in Irvine) are either at six figures or a few thousand short.</blockquote>


What I am saying is that I look at peoples actual, hard income #'s to determine if they can obtain financing.



It is very rare to see HOUSEHOLD incomes in the 6-figure range. No matter how rich people tell you they are, or how rich you THINK people are, the numbers don't lie.



How is census data obtained again, with respects to income? :)



And there may be quite a few people on here who make good money... the people of IHB are NOT the general public of OC. If they were, we wouldn't be in this mess. :)
 
Has anyone seen this <a href="http://www.ocregister.com/ocregister/news/local/data/salariesincomefinances/article_2044448.php?appS">OC Deputy Salaries</a>? Wow, there's a few who have made over $100K in 07 just from overtime. A few making over $200K, a large portion from overtime. I can't believe they actually list the names of these deputies and their incomes... anyone know of any of these people?
 
Back on topic - yes, it will be brutal. Wall Street is selling the banks HARD. That means that real estate is going to keep falling.
 
[quote author="25w100k+" date=1213692369][quote author="Roo" date=1213687308]

I am not sure you understand why prices are rapidly falling. Demand would still be high if all the bubble factors were still in place. However, speculation and easy financing are no longer there causing the big downswing we are witnessing. There is nothing that can keep all the homes falling a lot lower than they have ever been. You might think a lot of people would start buying homes if they were 25% cheaper tomorrow, but it couldn't happen because people can't qualify for homes. There are way too many homes on the market (and coming to the market) than the potential pool of credible buyers. Interest rate will only make things worst as they will increase foreclosure driving prices even lower.



The bigger the bubble, the more it will burst. Meaning that prices won't just come down where they should be, but much lower. The market is always overreacting and this time won't be any different.

</blockquote>


I understand what you are saying, but theres a big disparity with whats happening in the subprime market and the higher end Irvine. Believe me, I have no incentive to be a bull. I have a fat downpayment fund, a nice job, and no property to my name.



I've been watching the foreclosures and preforclusres in Irvine. They just <I>arn't</I> happening in the high end. The condos are getting killed, and the shacks in quail hill and turtle ridge are going to eat it hard. But the high end premium homes are going to slide down, not crash.



Look at the houses closing on IPO's site alone! The majority of people buying those houses are not going to be affected by tigther lending standards or a few increases on their ARM.



I'm hoping and praying that after the summer, we'll see widespread 'panic' and a lot more bargains. But 'panic' for me, means NP, quail hill, and turtle rock finally hitting 300 a sq.ft and older homes maybe around 280. So yes, thats probably about 40% off peak.



But 80% off? 100 dollars a sqft? That'd be nice. So would winning the lottery...







[quote author="newbie2008" date=1213690492]



A buying frenzy may come, but I doubt it.

Pricing by next rents with a 120 x monthly multiplier and the price must drop like a rock.

Prince by medium household income $85,000 * 0.30 / 12 for housing payment give $450k to 500k. plus $150k down payment 600 to $650k for the medium house.



The question comes up as to the average rents. I hear that it was increasing at the start of the year, but has gone down the last two months. I've seen one Turtle Rock house/condo go from $3400 asking to $3000 asking for 2000 sf with no takers. When you factor in the HOA est. 250 that's included in the rent 2500 x 120. A higher multiplier than is justified if housing prices are dramatically increasing to off set a negative cash flow.



Or am I missing something.

Newbie</blockquote>


Yeah, I think you are missing something. (no offense). The 120 multiplier has <I>never</I> been valid in Irvine. Irvine rents have always held up well. And the median household income is around 100,000 not 85,000.</blockquote>


The $85,000 medium household income is from govt data (irvine city). However there were lots of household under 20,000 (from huntington beach city site with $85,000 medium household income), so they are not looking into regular purchases (likely govt. subs. housing). People with their own business can have a very low reported income, so will also drag the official medium HI down. From Yahoo real estate, it looks like more forecloures in Turtle Ridge area than 2 months ago. Had some vacant houses in that area last month for sale and/or for rent.



What were the monthly rent multiplier before the kool-aid started? I would expect that the yearly rents could be greater than the mortage, tax and HOA when house price are declining rapidly or expected to decline rapidly.

newbie2008
 
[quote author="25w100k+" date=1213767363][quote author="Masterofdamoney" date=1213758601]

As someone who looks at income all day, every day, going back years, I can assure you that the median income is NOT $103,000.



The census doesn't look at W2, 1099's, and 1040's. :) My personal data from the front lines put the median for OC around $60-70K or so. For a household.



Oh, and that's the median for HOMEOWNERS. Since I ONLY deal with HOMEOWNERS. :)



I have said it before, and I will say it again, six figure household incomes are extremely rare, even in the land of gold here.



And I would LOVE it if 450-500K was the median at the bottom. It would mean I could do more business. But as a realist, I know that's not going to happen. :(</blockquote>


What are you talking about?

W2 is your employment form. 1099 and 1040s are for independent contractors. So the census only looks at people who don't make any money?



Are attempting to say is that the census doesn't include Independent Contractors? Perhaps, but it probably also doesn't include dividends that many Irvine business owners would receive.



6 figure incomes are rare? That would be quite the ego trip as i'm a smidgen shy of one, but thats a ridiculous claim. I bet 75% of the people on this forum (that live in Irvine) are either at six figures or a few thousand short.</blockquote>


What is he talking about? What are <strong>YOU</strong> talking about?
<p>

A W2 is a Wage and Tax Statement which you receive from your employer to document your income, tax paid, etc.


Maybe you are thinking of a W4, Employee's Withholding Allowance Certificate, which you fill out when you are first employed or your exemption status changes.


1099s document many forms of income, not just income earned by independent contractors. 1099Rs document retirement income, 1099 Misc's document earned income for independent contractors and many other sources. There are 1099Cs, 1099-As, 1099-LTCs, etc.


And a form 1040 is an Individual Income Tax Return which the vast majority of taxpayers use to file their tax return. It is not just for independent contractors. W2 employees may also use form 1040s.


Why in the world would you imply that someone does not know what they are talking about when you yourself do not have a clue? Not only is your knowledge of tax forms incomplete. It is just plain wrong and ignorant.


Incomes from tax returns tend to be under reported.


Incomes from voluntary questionnaires tend to be over reported.
 
<blockquote>As someone who looks at income all day, every day, going back years, I can assure you that the median income is NOT $103,000. The census doesn?t look at W2?s, 1099?s, and 1040?s. My personal data from the front lines put the median for OC around $60-70K or so. For a household. </blockquote>
$60k - $70k? That surprised me. I'm not questioning the numbers since it's your line of work and you would know better than I. I'm just saying that I am surprised by those numbers. I really would have thought the range would have been higher.
 
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