Will this Fall be brutal?

NEW -> Contingent Buyer Assistance Program
[quote author="skek" date=1213777005]I thought the same thing, CalGal. I don't doubt the source, but I'm surprised at the numbers for a variety of reasons (and not just the "everyone I know makes more..." reason, although that's part of it).</blockquote>


But remember, neither of you live in Irvine. :)
 
1. Gawddamnit no_vas! Why do you think I created graph's axiom? For this very reason, when you start talking income it goes back and forth with anecdotal evidence with no solution on consensus in sight.



2. The census gets their data from a form that is mailed out to random people, who fill it out with whatever answer they feel is right. You can't tell me people exaggerate their income and you can't tell me people are not stupid enough to put down their net income vs. gross income.



From the census on household income...



Total households 63,646





Less than $10,000 4,633





$10,000 to $14,999 2,015





$15,000 to $24,999 3,132





$25,000 to $34,999 2,302





$35,000 to $49,999 6,445





$50,000 to $74,999 9,277





$75,000 to $99,999 8,666





$100,000 to $149,999 13,203





$150,000 to $199,999 6,495





$200,000 or more 7,478





Median household income (dollars)





$84,270





Mean household income (dollars)





$105,969



With earnings





$55,293





Mean earnings (dollars)





$109,790





With Social Security





$9,047





Mean Social Security income (dollars)





$13,814





With retirement income





$5,945





Mean retirement income (dollars)





$22,110



Median (not medium) is the middle of a string of numbers, mean is the average. With the numbers I have provided 35,842 households, over half of the households in Irvine, make more than $75k. 42% of Irvine makes over $100k. Also, those with earnings, excluding social security income or retirement income, the average is $109,790.



So, a lot of people in Irvine have an income of $100k or more.



In 2006...



SELECTED MONTHLY OWNER COSTS AS A PERCENTAGE OF HOUSEHOLD INCOME



Housing unit with a mortgage 30,820





Less than 20.0 percent 6,778





20.0 to 24.9 percent 5,402





25.0 to 29.9 percent 3,716





30.0 to 34.9 percent 2,650

<strong>

35.0 percent or more 12,093</strong><----- This means that 39% of people with a mortgage in Irvine spend way too much of their income on their mortgage. It was only 20% of people with a mortgage spent too much of their income on their mortgage in 2000. That is where the census confirms we have a problem.



And yes, everyone I know who lives in Irvine makes $100k or more a year. I also know of someone who makes a $1mil+ a year. Does that mean everyone who lives in Irvine can afford to live there? Obviously no, otherwise there would be zero foreclosures in Irvine and we all know that is a fantasy only held by a bull on Lansner's blog.
 
[quote author="CalGal" date=1213776621]

$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.</blockquote>


Keep in mind that the numbers the census reports are <B>household</B> and <b>family</B>



Household is anybody in the house. Family is all related members in the house. (Including the teenage son, 23 year old daughter, etc.)
 
<blockquote>But remember, neither of you live in Irvine. </blockquote>
Agree - but my circle of friends are still in Irvine and I know they are in a higher range. I will also agree that people will state a higher income. Just today I received my yearly Social Security statement with my earnings from past years. I could have sworn I made more money in a particular year. I went back to my taxes, and sure enough I was wrong. I had convinced myself that I made more money that year. :-)



Thanks for all your posts.
 
Who knows if it means anything at all, but in the past couple days I've seen a few WTF listings pop on to the market. Perhaps some owners are getting bold and think they can get above 2004 prices? It seemed like for a few weeks that all that was on the market was either an REO, short sale or long-time equity owner.
 
[quote author="graphrix" date=1213779287]1. Gawddamnit no_vas! Why do you think I created graph's axiom? For this very reason, when you start talking income it goes back and forth with anecdotal evidence with no solution on consensus in sight. </blockquote>


Which is why I?m not disputing the income. I?m simply showing the upper limits of what you can lend on in a ?normal? environment. ?Normal? = verifying income, no SISA style underwriting.



Again, <em>I?m simply pointing out where the upper limit of lending is to prove how far we must travel down. </em>



[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>


For the sake of argument, I'll give you the 103,000. That?s 17K different. Here?s the calcs:



103,000 x 30%/12 = $2575 a month.



2575 @ 25% tax rate makes $1,931 available for rent. Lets stop here for a second.



$1,931 a month for rents doesn?t jive with the census data for stated rents. I would submit the income number @ $103,000 is too high because this number I should be pretty close to the census calculated rental number.



But just for fun, assume it is correct, and I?ve screwed up something here, or the census is inaccurate or something. So, without further ado, here comes the HP 17B II.



N = 360

I = 7%

PMT = $2,575

FV = 0

PV = 387,041.99



With a 20% down payment of 77,408.40 that gives you an upper limit of 464,450.39.



What can somebody buy in Irvine for $465K? Nothing.



We can quibble about 87k or 103K all day and it really doesn?t matter, because what is important is what you can qualify for in underwriting. Go look at that OCR auction photo tour. Look at some of the shitboxes that sold for $500K+ to people who were mowing lawns. That guy doesn?t qualify for a Discover card, yet he can get a mortgage because lenders weren?t doing underwriting. And that was the same everywhere, Irvine included.
 
[quote author="graphrix" date=1213779287]And yes, everyone I know who lives in Irvine makes $100k or more a year. I also know of someone who makes a $1mil+ a year. Does that mean everyone who lives in Irvine can afford to live there? Obviously no, otherwise there would be zero foreclosures in Irvine and we all know that is a fantasy only held by a bull on Lansner's blog.</blockquote>


May I ask who?



[quote author="caliguy2699" date=1213779287]Perhaps some owners are getting bold and think they can get above 2004 prices?</blockquote>


I think this is funny...asking 2004 prices (4 years ago) is now being bold! Made me laugh...less than 1 year ago I believe IR was profiling 2004 and 2005 rollbacks, now it is insane to think you can get 2004 prices!
 
I like simple explanations. Luckily Lansner has provided a simple explanation. <a href="http://lansner.freedomblogging.com/2008/06/16/ocs-home-pain-1-lost-every-3-minutes/">OC's Home Pain, $1 lost every 3 minutes for the past 11 months.</a>



May's OC median SFR was $537,000, in April it was $555,000. That is $1 lost every two and half minutes which means the pace of loss is still accelerating.



Thankfully, that's only $20/hour. Unfortunately, the house works 24 hours a day, 365 days a year.



If the homes continue to consume $1 every 2.5 minutes, it's eating equity at a $200,000 a year rate.
 
Income schmincome.



Good grief people. Irivine home prices are overvalued compared to Irvine rents. Just like they are in Beverly Hills, Moreno Valley, Phoenix, Las Vegas, etc, etc. Prices will keep falling until it's cheaper to buy then rent.



I agree though that his fall and next year will be brutal because we're finally starting to see the psychology shift. Anyone see the front cover of The Register this morning? Seems that the idea of massively declining prices is starting to sink it.
 
<blockquote>What can somebody buy in Irvine for $465K? Nothing.</blockquote>


Actually, I just counted five listings in my zip in Irvine for less than that. There were many more if I could have included Tustin Ranch. They may not be many people's idea of an ideal home, but if you have to live in Irvine with max price of $465K, it can be done.



Clearly, I don't have enough to do. I found 186 listings for Irvine on Redfin for $465K or less. The least expensive at $234,900K for a 1/1 condo in Northwood. At 3x income, one would need an income of $78,300 to afford. So with no downpayment, an old 1/1 condo is basically median housing.



I have no point here. I just thought the numbers were interesting. I also thought I might never see a home in Irvine fall below $500K, or SFRs come below $700K, but it's happening.
 
[quote author="EvaLSeraphim" date=1213791331]<blockquote>What can somebody buy in Irvine for $465K? Nothing.</blockquote>


Actually, I just counted five listings in my zip in Irvine for less than that. There were many more if I could have included Tustin Ranch. They may not be many people's idea of an ideal home, but if you have to live in Irvine with max price of $465K, it can be done.



Clearly, I don't have enough to do.</blockquote>


Acting as my personal hyperbole police could turn into a full time job.
 
Actually, the problem is that I'm talking about OC, and he's talking about IRVINE.



FYI I believe the last census form I filled out used CHECK BOXES for income (ie. 25-35 check here, 35-45 check here, etc.).



Irvine is going to be higher than the median, since there are a lot of areas in the OC that just aren't as nice.



I would suspect Irvine ALONE to be around 85-90K for median household income.



I am going to also GUARANTEE right now that LAST YEAR the median income went DOWN in Irvine. AND that the median income will PLUMMET this year. :)



That whole 7 of 10 Irvine jobs related to real estate thing kinda smokes it.
 
[quote author="Masterofdamoney" date=1213793598]Actually, the problem is that I'm talking about OC, and he's talking about IRVINE.



FYI I believe the last census form I filled out used CHECK BOXES for income (ie. 25-35 check here, 35-45 check here, etc.).



Irvine is going to be higher than the median, since there are a lot of areas in the OC that just aren't as nice.



I would suspect Irvine ALONE to be around 85-90K for median household income.



I am going to also GUARANTEE right now that LAST YEAR the median income went DOWN in Irvine. AND that the median income will PLUMMET this year. :)



That whole 7 of 10 Irvine jobs related to real estate thing kinda smokes it.</blockquote>


Oh MODM, as one sales agent told me, "You forgot about the new Kaiser hospital. All the doctors want to live here to be close to the hospital." ;-)
 
[quote author="Masterofdamoney" date=1213793598]



That whole 7 of 10 Irvine jobs related to real estate thing kinda smokes it.</blockquote>




:bug:



wow, that'll be a bitter pill to swallow in the next year or two when the whole city's adjusting to a MUCH smaller tax base.



bix
 
[quote author="no_vaseline" date=1213793293][quote author="EvaLSeraphim" date=1213791331]<blockquote>What can somebody buy in Irvine for $465K? Nothing.</blockquote>


Actually, I just counted five listings in my zip in Irvine for less than that. There were many more if I could have included Tustin Ranch. They may not be many people's idea of an ideal home, but if you have to live in Irvine with max price of $465K, it can be done.



Clearly, I don't have enough to do.</blockquote>


Acting as my personal hyperbole police could turn into a full time job.</blockquote>


Sorry. :red: Your comment made me really curious, so I looked.
 
[quote author="Roo" date=1213783559][quote author="graphrix" date=1213779287]And yes, everyone I know who lives in Irvine makes $100k or more a year. I also know of someone who makes a $1mil+ a year. Does that mean everyone who lives in Irvine can afford to live there? Obviously no, otherwise there would be zero foreclosures in Irvine and we all know that is a fantasy only held by a bull on Lansner's blog.</blockquote>


May I ask who?



[quote author="caliguy2699" date=1213779287]Perhaps some owners are getting bold and think they can get above 2004 prices?</blockquote>


I think this is funny...asking 2004 prices (4 years ago) is now being bold! Made me laugh...less than 1 year ago I believe IR was profiling 2004 and 2005 rollbacks, now it is insane to think you can get 2004 prices!</blockquote>


You're right - it is bizarre. I think I'm getting used to 2003 rollbacks and prices barely above '03. '02 rollbacks aren't even as eye-popping as they used to be. One can get jaded by following South OC ;)
 
[quote author="no_vaseline" date=1213783385]

We can quibble about 87k or 103K all day and it really doesn?t matter, because what is important is what you can qualify for in underwriting. Go look at that OCR auction photo tour. Look at some of the shitboxes that sold for $500K+ to people who were mowing lawns. That guy doesn?t qualify for a Discover card, yet he can get a mortgage because lenders weren?t doing underwriting. And that was the same everywhere, Irvine included.</blockquote>


I get most of what your saying. I agree, housing will come down. 400 median seems reasonable.

I think the census for rents might be thrown off though. There are a lot of poor UCI kids living in apartments that are funded by their parents, or who spend the majority of their income on rent.



[quote author="Masterofdamoney" date=1213758601]



My personal data from the front lines put the median for OC around $60-70K or so.

</blockquote>




[quote author="Masterofdamoney" date=1213793598]

I would suspect Irvine ALONE to be around 85-90K for median household income.

</blockquote>
err.....
 
[quote author="EvaLSeraphim" date=1213828082][quote author="no_vaseline" date=1213793293][quote author="EvaLSeraphim" date=1213791331]<blockquote>What can somebody buy in Irvine for $465K? Nothing.</blockquote>


Actually, I just counted five listings in my zip in Irvine for less than that. There were many more if I could have included Tustin Ranch. They may not be many people's idea of an ideal home, but if you have to live in Irvine with max price of $465K, it can be done.



Clearly, I don't have enough to do.</blockquote>


Acting as my personal hyperbole police could turn into a full time job.</blockquote>


Sorry. :red: Your comment made me really curious, so I looked.</blockquote>


It's cool. Believe it or not, I appreciate it when somebody points out I've moved the line past where the truth ends and the bullshit begins. I already hit the thanks button, but let me do it again.



Thank you!
 
[quote author="25w100k+" date=1213838736]I get most of what your saying. I agree, housing will come down. 400 median seems reasonable. </blockquote>


I'm glad you're confortable with it. Frankly, I'm not confortable with it one bit. But this is my best guess as to where the market should be.



I remember sitting in an MBA class in like '98 and we got fair market for the NASDAQ at like 980 using 15x earnings. If I remember right, it was trading at about 2300 or so at the time. I piped up about how (when it corrected) it was going to destroy people because the run up was being caused by too much dumb money chasing too few stocks. I remember being soundly shouted down by 6 or 8 other students with the standard "This is a new economy. The metrics don't matter. Stocks like these won't ever go down! Who needs earnings?" I shut up and sold my portfolio about two weeks later.



We know how that ended.



<blockquote>

I think the census for rents might be thrown off though.



There are a lot of poor UCI kids living in apartments that are funded by their parents, or who spend the majority of their income on rent.</blockquote>


I hear this one bantered around, I don't know if it has legs or not. Most of the UCI students I know live somewhere else and commute or live in the dorms. College students need cheap substandard houses, not IRC super premium rentals. Further, do college students usually fill out census forms?
 
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