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Magazine finds O.C. a prime housing-bust lesson
May 25th, 2008, 2:00 pm · 38 Comments · posted by Jeff Collins
Money magazine’s latest cover story about real estate market lessons for the rest of the nation focuses on, in good part, Orange County. “The L.A. story,” the magazine wrote, “is likely to be your story too.” But half of the cases used to illustrate what’s happening in Southern California are from O.C. Here are some excerpts:
Near the end of the 241 lies Ladera Ranch, a nine-year-old (and still growing) planned community of 25,000. Nestled into the foothills, the place is a visual metaphor for the American dream, California division, in which the residents of the postmodern townhouses at the lower elevations aspire to the gated $4 million spreads at the top. Yet there’s a whiff in the air - not of smoke - but of despondency. According to Foreclosure Radar, a Web service that searches public records, more than 100 homes in Ladera Ranch are in “pre-foreclosure,” which starts when a bank sends the homeowner a first notice of default. Another 100 are in the hands of the lender or being sold at auction.
There are a lot of Laderas all over greater Los Angeles, the magazine reports. Then it recounts the tale of Judy and Stuart Manley, who paid $350,000 in 2006 for their Ladera Ranch condo and now are trying to sell so they can buy a bigger place:
“We thought we’d be able to sell pretty quickly because this is a sought-after area,” says Stuart Manley, a Ladera Ranch resident who had hoped to unload his townhouse for about $469,000. “But shortly after we went on the market, it was foreclosure, foreclosure, foreclosure.”
The article also cites Mission Viejo couple Matt and Alison Conrad to represent renters who are in no hurry to buy:
They considered buying a couple of years ago but decided to wait the market out after they saw that the only single-family house in their area under $600,000 was a 1970s fixer-upper. Now Conrad, a C.P.A., checks online-discount brokerage Redfin every day for bargains. But unfortunately for the sellers in Ladera, the Conrads are in no rush despite price declines. “I’d still be paying a third more than my rent to live in a similar house,” Conrad notes.
For more on how the national media depicts the O.C. housing market, see Another Pimco trader sells O.C. home to rent. To read the full Money story, see California screaming: Tales from the housing bust
May 25th, 2008 at 4:40 pm
Okay well, THE OC is just fine if you don’t count Santa Ana, Anaheim, or now Ladera Ranch. Damn those gettos are really messing up THE OC’s Medium Home Price. Haha
Oops, is Ladera Ranch a getto? Must be.
Move along nothing to see here!
THE OC’s Housing Implosion continues……………..
May 25th, 2008 at 5:51 pm
The word “nestled” in the article is classic realtorspeak!
May 25th, 2008 at 5:53 pm
And the prices need to come down another 33% from today’s price to get to rental parity, assuming that interest rates stay the same.
And it’s headed that way. So, if you’re in one of those pseudo ‘desireable areas’ (aka Villages of Columbus or Coto) you might be upset to find out that the top of your market rates for rentals is 3500 bucks a month…………
What’s 3500 x 160? Answer = less than what you paid!
May 25th, 2008 at 6:56 pm
Typical vulture-speak from no-vaseline. People who own homes don’t expect to profit on rents. You sound like one seriously jealous mofo.
May 25th, 2008 at 6:57 pm
And $3,500 gets you little more than the studio no_vaseline lives in.
May 25th, 2008 at 7:09 pm
Hahaha! Got to LAUGH at the uberbears who think they are going to do away with replacement costs and comparable sales methods of ascertaining value and impose investor methods instead. Good luck with that! Ordinary homeowners aren’t “cashflow investors”. Never were, never will be.
May 25th, 2008 at 7:18 pm
It figures that someone whose entire mindset depends upon ignoring rent vs. buy math doesn’t know what market rental rates are. $3500/mo rents you a nice house anywhere in OC, or a small one in Newport Beach.
May 25th, 2008 at 7:45 pm
Humor, Buy Houses Now!. Buy Houses Now!, humor.
May 25th, 2008 at 7:48 pm
Uh, $560.000 (160 x $3.500) does get you a cute little house in a good neighborhoood. It DOES NOT entitle you to your heart’s desire.
May 25th, 2008 at 7:51 pm
Thoughtful –
No one said (or even implied) homeowners are cash flow investors. The point is that residents are no longer willing to pay a ridiculous premium to be “renting from the bank” rather than renting from a landlord. Only suckers pay 1/3 more to “own” a home than rent it.
May 25th, 2008 at 8:28 pm
$1750 rents you a nice little 3/2 in Orange (about two blocks from Villa Park). I know because I live in one. For me to own this place would cost me over $5K a month last time I did the math using 30 year financing. This is not the only one in this area at that price. My home is exceptionally cute because my wife is an excelent gardener and my landlord allows us to pretty much do what we like with the place.
But, you can obviously do simple math, so sonsidering $560K is fair value, strap up and enjoy the ride down to that magic number sweetie. Just don’t lose it and turn out like these folks:
http://www.irvinehousingblog.com/forums/viewthread/2302/
May 25th, 2008 at 9:18 pm
Hello boys and girls…in my community, 2350 s.f. rents for $3600. Hate to tell you, but that same s.f. on the coast…just what do you think it is going for? You can rent a nice apartment in newport for $2700 per month.
May 25th, 2008 at 9:24 pm
So the condo market in Newport bottom is agreed at $432K. For, as you say, a nice one. The ordinary will be much lower.
Believe it or not, not everyone wants to live in Newport.
May 25th, 2008 at 9:37 pm
I love it…so I use the Bible of RE these days, redfin, and go to my little zip of 92692…and there are 5 total foreclosures listed as bank owned. Half of the city of MV, and 5 listed on redfin…the Bible of RE these days. One bank wants $341 per foot.
Here is the best part…i searched the Bible a bit more and checked out sales over the past 3 months…it says 124 or so…sounds about right Avg. sales price is $297 with a couple of problem children in there like $1 or $33 per foot. Probably the better estimate is about 320-340 per foot on average.
And thank you Ladera Ranch…your mello roos has made Pacific Hills seem like a bargain at today’s prices.
May 25th, 2008 at 9:38 pm
Wish that was a condo vase…but it is just an apartment for the coastal comparison. 1300 s.f. for $2700…yummy.
May 25th, 2008 at 9:41 pm
Did I mention that you cannot see the water from this apartment? Well, you cannot.
May 25th, 2008 at 9:47 pm
Mulli/Thoughtless/Jim Troll:
So is Newport Beach same as Orange County?
May 25th, 2008 at 9:51 pm
Mulli/Thoughtless/Jim Troll:
So do you consider Newport Beach same as Orange County?
May 25th, 2008 at 10:30 pm
Mulli,
Why the desperation in your tone?
If it was all good you should be relaxing in your pool.
May 25th, 2008 at 10:37 pm
So here is some cragislist action for you all…
http://orangecounty.craigslist.org/apa/646309179.html
How nice for this owner to have the tenant pay the association dues…that is completely asinine.
There is a lot of junk out there…but the decent properties, more so than not, command $1.85-2+ per foot on the rental scale.
May 25th, 2008 at 11:00 pm
Out of curiosity I googled the median rent in Newport Beach. It’s around $1300-1500 depending on the source. I’m sure there are people paying $2700 for an apartment, but that’s hardly typical when per your own example you can get a detached house for that.
All of this is a distraction from the basic rent vs. buy calculation that says when you can rent a house for 1/3 of what you can buy it for, you should rent it.
May 25th, 2008 at 11:09 pm
Mulligan…..
What’s up in Pacific Hills?
Craig’s List has 5 rentals in the last month……. most less than your $3600 figure. There’s a 2600 footer for 34 hun on the page for a few days.
That’s a lot of loser renters coming into the ‘hood.
Might be time to leave town:)
For your sake I hope these aren’t some of those rentals we’ve been reading of. Desperate owners, unable to sell and looking for some rental money before the sheriff arrives.
Saw a similar pattern in Ladera last year.
May 26th, 2008 at 5:15 am
All tr oll all day.
May 26th, 2008 at 8:12 am
“Desperate owners, unable to sell and looking for some rental money before the sheriff arrives.”
A good friend of mine is being forced out of her rental, the owner’s haven’t made their house payments for months. She has always paid her rent on time.
We’ll see if she gets her substantial deposit back any time soon, though maybe she will, the owners have been upfront about the fact that they can’t afford the house.
At least she wasn’t suprised.
May 26th, 2008 at 8:32 am
Hmmm, you make a point there pdu…it might be time to head for the hills! Actually, my exact floor plan is rented for 3650 down the street…I think if the home is nice, well appointed, and updated, you will command top dollar…just like anything else.
Most of the new complexes in NB are commanding above $2 per foot for rent on 2BR…and there is the dilemma. For a family, 2BR just do not work. You have to have 3BR if you want to keep your organizational sanity.
If I am a tenant, I am researching my fanny off to ensure that my owner is not in default. Just crazy times…
May 26th, 2008 at 8:50 am
who is this troll you speak of jakester…
May 26th, 2008 at 9:00 am
It is pretty simple…it’s more expensive to buy and the house prices are declining so get a 2 year lease minimum (I have at $1.33/sqft) and wait out the market until the prices are at 160 GRM (which in my case, works out to $225/sqft for a detached condo in AV). Currently these homes are at around $320/sqft but not one has sold in months. If you were to see one of these detached condos and told that the asking price was 500K you’d laugh. I know I have. But with inflation and upward drift of rent, you’d probably meet somewhere in the middle before all is said and done…or at around $250/sqft which is about $375K for a starter detached condo with zero lot line. Perhaps a bit more for views/upgrades etc. So I expect about another 15-20% down on prices for these units in the next year and half. I know the RE shills on this blog who work holiday weekends proping up the market will claim that I am envious or entitled or whatever but they can just Eat me.
May 26th, 2008 at 9:24 am
What a liar. Plenty of properties are moving in Aliso. Scroll down to the comps on this recently sold condo:
http://www.trulia.com/homes/California/Aliso_Viejo/sold/383922-190-Las-Flores-CA-Aliso-Viejo-92656
I desperately want/hope the uberbears hold out for 160 GRM. Pretty please, that would make my year.
May 26th, 2008 at 10:14 am
Thoughtful:”People who own homes don’t expect to profit on rents.”
Are you kidding me?
How many RE investors do you personally know?
A market that is fueled only by people that buy to live in is not a deep sellers market by any stretch of the imagination.
And RE investors that are willing to bet that cash on only the return of appreciation and not cashflow - well let’s just say I know for a fact they could do better putting their money elsewhere - in today’s market for a while.
Of course, you could have meant something different than what you wrote.
May 26th, 2008 at 10:17 am
Thoughtful-
At $282/sq ft, and selling being $80K below listing, is that the “positive” point you are trying to make?
This home
Sales price: $500,000
Compared to Aliso Viejo
Avg. listing price: $569,396 -12%
Avg. sales price: $490,011 +2%
Avg. price/sqft: $282
May 26th, 2008 at 10:24 am
I’ve said it before, when homes were $150K, maybe individual families were not RE investors. But when prices went to $500K, they all became RE investors whether they wanted to or not. That is because at that level everyone competes with RE investors in the market, even if they don’t want to.
So if I am going to spend what amounts to 50%-70% of my take home on owning, vs. 30% of my take on on renting, I will be forced to see when that level of payments becomes affordable.
That will occur when 2 things happen:
1) My pay doubles
2) RE prices rise
The latter occurred, so buyers were willing to take the risk, because, if they lost their jobs, they could easily sell their home.
Now, only option 1 would need to happen. Not that it won’t, with inflation rearing its ugly head, but it will probably take several years of being in the bottom of this market for wages to rise enough to offset the current cost of homes.
Translation? Prices will continue to fall and sales won’t recover to a healthy level until people can afford the payments.
So get your bosses to double your pay, and this market will recover overnight.
Pretty easily done, eh?
May 26th, 2008 at 11:48 am
Renters,
Thank you for your renter mentality. You pay the mortgages on our properties while we take the tax write-off. Eventually, housing inventories will dwindle, pushing prices and rents up again, and we will reap the benefits of an equity gain.
Stay with Lansner and your bunker mentality because without you our net worth is in jeopardy.
May 26th, 2008 at 12:31 pm
I wonder why so many that anticipate such a quick turnaround are not focusing on jobs?
In order to sustain the current pricing, you need a strong, high paid labor pool.
That means high paying jobs in the pipeline.
All forecasts we’re seeing on our sector are not looking good. I believe my firm is in the high end for percentage growth. Our sales have seen double-digit increases YOY for the last 4 but our predictions for employment growth have been strangled by CA labor laws and cost of living demands. Originally ay 14%, we have since amended our hiring forecasts to about half.
I don’t see the support for current pricing - we just don’t see it - not here.
The risks of hiring are greater when the economy is looming on a recession - there are many costs associated with hiring - and laying off - of workers. To put it simply, there are recurring penalties a firm must pay when they lay people off - it costs more to pay the ones you keep afterwards. Not to mention the money lost on training and support staff.
May 26th, 2008 at 1:54 pm
media is bias…..
btw “blackbox”…get real life…..don’t joke around getto…maybe ur next…or ur in getto!!!
May 26th, 2008 at 6:54 pm
Did you know Ladera Ranch in Spanglish means WHITE TRASH GHETTO THAT LOOKS LIKE A CHEAP DISNEYLAND MINING TOWN
May 27th, 2008 at 1:22 am
I bet I could find a bank owned home two to four houses down from Muliganville’s house. But, I like his comments, and I don’t want to see what happens after his head explodes. You know what house I am talking about Marty, don’t you.
May 28th, 2008 at 11:30 am
Call it what it is Fraudera Ranch! It some fake Truman Show kind of town. No Thanks. Enjoy paing that lifestyle fee when you finally sell.
May 29th, 2008 at 3:28 pm
I am finding it harder and harder tom feel sorry for people living in luxury homes w/ bmw, wifi, x-box, stouffers etc. while I live homeless in G.G. w/ nothin but trouble.