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Irvine Housing Blog

Irvine Housing Blog

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California home sales fall 6.1%, prices fall 2.4%

Posted: 19 May 2011 03:30 AM PDT

Home sales and prices fell on a year-over-year basis in California. More shockingly, sales fell from March to April during the prime selling season.

Irvine Home Address ... 76 LAKEPINES Irvine, CA 92620
Resale Home Price ......  $199,900

It don't matter, he's dope
He knows that, but he's broke
He's so stagnant that he knows
When he goes back to his mobile home

Eminem --- Lose Yourself

I was bearish at the top of the real estate bubble when few others were. I maintained my bearish views locally while others celebrated the false bottom of March 2009. For nearly two years thereafter, my detractors would stop by and try to educate me on my foolish ways. Some of them are still at it.


As I watched Las Vegas's housing market continue to decline while the government engineered bottom was put in place in other markets, and I became very bullish on Las Vegas, not because real estate prices will be going up there, but because the cashflow is outstanding. I am bullish for reasons independent of resale price appreciation.

The double dip is confirming what me and other housing bears were saying about the nature of markets. For as powerful as the government and federal reserve are, they are powerless against the forces of a multi-trillion dollar housing market.

There have been surprises along the way. In one of my earliest posts back in March of 2007, I predicted there would be some form of government intervention, but I didn't think we would see the federal reserve buying mortgage paper, nor did I foresee the government takeover of the GSEs. It's the surprises that make the evolving story more interesting.

Housing markets exhibit seasonality. Most housing analysts assumed we would have a spring rally of some sort with increasing sales and prices. Even the most bearish analysts have been surprised by the failed spring rally this year. The lack of spring activity is a very good reason to be bearish, and with prices locally above rental parity, there is little reason to be bullish.

California home sales and prices fell in April

A weak home shopping season leaves sales in California down 6.1% and the median price down 2.4% from April 2010.

By Alejandro Lazo, Los Angeles Times -- May 17, 2011

California housing sales and prices dipped in April as a weak spring home shopping season took hold in Southern California and the Bay Area.

Typically, sales rise during the spring as many families try to move during the summer school recess. But this year, continued high unemployment and the absence of last year's federal tax credit for buyers are dampening demand.

The decline in sales is very surprising -- in a bad way. The main reasons are as he describes.

Sales fell statewide to 35,202 in April, a 3.3% decrease from March and 6.1% drop from April 2010, according to real estate research firm DataQuick of San Diego.

"What's clear now is that 2011 is off to a slow start," DataQuick President John Walsh said in a news release. "But it's a little soon to write off the rest of the year."

Prices are falling, demand is low, unemployment is high, prices are still inflated, wages are stagnant, and government props are being removed from the market. What reason is there for optimism about pricing or volume in 2011 in California? I don't think it's too early to write off the rest of the year. If sales and prices typically fall during the fall and winter, and with the conforming limit going down this October, I see many reasons to write off the remainder of 2011.

From DataQuick News:

California April Home Sales

May 16, 2011

An estimated 35,202 new and resale houses and condos were sold statewide last month. That was down 3.3 percent from 36,417 in March, and down 6.1 percent from 37,481 for April 2010. California sales for the month of April have varied from a low of 27,625 in 1995 to a high of 71,638 in 2004, while the average is 44,359. DataQuick's statistics go back to 1988.

Current sales are 20% below average.

The median price paid for a home last month was $249,000, unchanged from March, and down 2.4 percent from $255,000 for April a year ago. The year-over-year decrease was the seventh in a row after 11 months of increases. The bottom of the current cycle was $221,000 in April 2009, while the peak was at $484,000 in early 2007.

The bear rally ended when the tax cuts expired, and prices have been falling every since.

Distressed property sales made up about 54 percent of California’s resale market last month.

Distressed sales are what push prices lower. With over half the market being distressed, and with a large shadow inventory waiting to be sold, house prices will likely go lower.

Of the existing homes sold in April, 36.6 percent were properties that had been foreclosed on during the past year. That was down from 39.1 percent in March and down from 38.1 percent in April a year ago. The all-time high was 58.5 percent in February 2009.

The amend-extend-pretend dance began in 2008, so the foreclosure pipeline peaked several months thereafter as the pipeline flow was reduced to a level that didn't crush prices.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 17.6 percent of resales last month. That was up from and estimated 17.2 percent in March but down from 17.7 percent a year earlier. Two years ago short sales made up 11.8 percent of the resale market.

Lenders made a conscious decision to resolve more properties through the short-sale process. It has been a failure as REO sales are still double short sales.

The typical mortgage payment that home buyers committed themselves to paying last month was $1,050. That was the same as in March, and down from $1,108 in April 2010. Adjusted for inflation, last month's mortgage payment was 52.7 percent below the spring 1989 peak of the prior real estate cycle. It was 61.7 percent below the current cycle's peak in June 2006.

The nearly vertical red line below in 2003 and 2004 corresponds to the influx of Option ARMs with low teaser rates which allowed borrowers to dramatically increase their mortgage balances and bid up prices. Current loan balances are 61.7% lower than the peak in 2006. It shouldn't be too surprising such an occurrence would cause prices to drop.

San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

Indicators of market distress continue to move in different directions. Foreclosure activity has declined somewhat but remains high by historical standards. Financing with multiple mortgages is low, down payment sizes are stable, cash and non-owner occupied buying has eased a bit this spring but remains relatively high, DataQuick reported.

Media calls: Andrew LePage (916)456-7157 or

Perhaps down payments are stable in California over the last two years, but that stability is at very low levels reflecting the dominance of FHA financing in the market.

No payments since 2008

The peak buyer of today's featured property paid $332,000 using 100% financing. Her notice of default is dated from 2008 meaning she has been squatting for at least two and a half years.

Foreclosure Record
Recording Date: 06/08/2010 
Document Type: Notice of Sale   

Foreclosure Record
Recording Date: 04/03/2009 
Document Type: Notice of Sale   

Foreclosure Record
Recording Date: 12/31/2008 
Document Type: Notice of Default

Irvine House Address ...  76 LAKEPINES Irvine, CA 92620   

Resale House Price ...... $199,900

House Purchase Price … $332,000
House Purchase Date .... 7/12/2005

Net Gain (Loss) .......... ($144,094)
Percent Change .......... -43.4%
Annual Appreciation … -8.4%

Cost of House Ownership
$199,900 .......... Asking Price
$6,997 .......... 3.5% Down FHA Financing
4.59% ............... Mortgage Interest Rate
$192,904 .......... 30-Year Mortgage
$42,332 .......... Income Requirement 

$0,988 .......... Monthly Mortgage Payment 
$173 .......... Property Tax (@1.04%)
$0 .......... Special Taxes and Levies (Mello Roos)
$42 .......... Homeowners Insurance (@ 0.25%)
$222 .......... Private Mortgage Insurance
$290 .......... Homeowners Association Fees
$1,714 .......... Monthly Cash Outlays

$0 .......... Tax Savings (% of Interest and Property Tax)
-$250 .......... Equity Hidden in Payment (Amortization)
$12 .......... Lost Income to Down Payment (net of taxes)
$45 .......... Maintenance and Replacement Reserves
$1,522 .......... Monthly Cost of Ownership 

Cash Acquisition Demands
$1,999 .......... Furnishing and Move In @1%
$1,999 .......... Closing Costs @1%
$1,929 ............ Interest Points @1% of Loan
$6,997 .......... Down Payment
$12,924 .......... Total Cash Costs
$23,300 ............ Emergency Cash Reserves
$36,224 .......... Total Savings Needed

Property Details for 76 LAKEPINES Irvine, CA 92620
Beds:  1
Baths:  1
Sq. Ft.:  932
Property Type: Residential, Single Family
Style: Two Level
View: Creek/Stream
Year Built:  1977
Community:  Northwood
County:  Orange
MLS#:  P658271
Source:  SoCalMLS
Status:  Active
Nice 1 Bdrm Loft Townhome With Beautiful Water Views. Granite Counter Top in Kitchen. Stand Alone Fireplace in the Living Room; Breakfast Bar and Separate Dining Area. Assigned Carport Parking. Walk-In Master Bdroom Closet. Spacious Back Patio. Private Full-Size Washer/Dryer Hookups. 

real estate home sales


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