20 year rollback (1989)

IrvineRenter_IHB

IrvineRenter_IHB

New member
I long believed we would see a property rolling back to price levels seen at the top of the previous bubble that peaked in 1990. Sure enough, Zovall has spotted one. It isn't in Irvine, but Corona isn't that far away.



<a href="http://www.redfin.com/CA/Corona/1545-Border-Ave-92882/unit-G/home/6307877">1545 Border Unit G Corona, CA 92882 </a>



It is a small condo, which is what I would expect to see roll back to those prices, but it isn't a fixer or a total POS. It is just a sign of how far out of whack prices got in the late 80s and how ridiculous the housing bubble really was.



This property sold for $287,500 at the peak almost exactly 3 years ago. Now it is selling for $89,100. <strong>That is a 69% drop in three years.</strong>



Date Event Price Appreciation Source

May 27, 2009 Listed $89,100 -- SoCalMLS #P688976

May 12, 2009 Sold $71,927 -37.4%/yr Public Records

May 26, 2006 Sold $287,500 25.0%/yr Public Records

Dec 11, 2002 Sold $133,000 28.1%/yr Public Records

Nov 03, 2000 Sold $79,000 17.7%/yr Public Records

Feb 26, 1999 Sold $60,000 -4.2%/yr Public Records

Oct 01, 1989 Sold $90,000 -- Public Records



BTW, with prices that low just over the hill, the substitution effect is going to put tremendous pressure on OC real estate prices. There is a historic price premium for OC, but this premium is many times its historic relationship. Either prices in Riverside County have to rise a great deal, or prices here must fall. I don't think Riverside County's prices are going up any time soon.
 
More of the same....



<a href="http://latimesblogs.latimes.com/laland/2009/06/1989-all-over-again.html">http://latimesblogs.latimes.com/laland/2009/06/1989-all-over-again.html</a>
 
Rather than get a thread merge, I'm gonna repost here and get the other one deleted.



<a href="http://www.latimes.com/business/la-fi-cheaphomes10-2009jun10,0,4802553.story?page=1">http://www.latimes.com/business/la-fi-cheaphomes10-2009jun10,0,4802553.story?page=1</a>



My aunt bought a home in Lancaster in 1986 for about $85K. Imagine for a minute paying your mortgage off, only to find out your home is worth less now than in 1986. She had planned to sell soon and move to Arroyo Grande. I don?t think she?ll be doing that now.



<blockquote>To return to the past, take a stroll down Mulberry Avenue in Lancaster. John A. Beatrice, 55, bought his spacious two-story Spanish-style house there brand-new for $120,000 in 1989. It was a price he could comfortably afford, and he planned on staying through retirement, so he wasn't worried about price swings.



"I always knew real estate goes like this," said the aerospace engineer, moving his hand in an undulating motion like bell curves on a graph.





But he never imagined his neighborhood would drop off the charts. <strong>In April, a slightly larger home two doors away sold for $66,500. That's just over half the $130,000 it went for new in 1992</strong>. In 2005, that house sold for $330,000.

</blockquote>


And a warning to cash flow investors who are running around snatching up properties - your market isn't stable, and today?s cash flow positive is tomorrows knife catcher.



<blockquote>The retro prices are attracting a new wave of speculators. In April, investors bought nearly 1 in 5 homes purchased in Southern California, according to DataQuick. That figure is around 30% in some inland communities.



Mohammed Hafeez, 52, a Culver City electrician, has bought four houses in Lancaster since January.



Hafeez said he paid $49,000 for the least expensive house and $70,000 for the priciest of his investments. He's now renting them for $1,000 to $1,300 a month, and all four houses are occupied and generating positive cash flow, he said.



Still, he's holding off on more purchases. Rents are falling along with home prices as investors like him snap up foreclosures and turn them into rentals.



"I don't know how much or how far down it will go," he said.



He has reason to worry. Another tsunami of foreclosures is threatening to swamp an already saturated market. In Palmdale and Lancaster, 903 homes were sold in April, but according to ForeclosureRadar, more than 7,500 are in some stage of foreclosure.</blockquote>


Still, what are we talking about here if you want to be an owner/occupant? $500 a month @ $60K? That?s a car payment!



My point is - until the marginal areas stabilize, there is no hope for anywhere else higher in the more desirable food chain if price stability is a criteria.
 
<img src="http://www.latimes.com/media/graphic/2009-06/47418622.gif" alt="" />



That's right, not adjusting for inflation, the median home price in 93591 is 44.2% less than it was twenty years ago. We are talking about a 1975 rollback or something, for the whole zip code.
 
Doesn't matter how cheap it is if there aren't any<strong> J.O.B.S.</strong>



Just look at Barstow. All you end up with is people on disability and welfare, and maybe a few down on their luck SS only retirees.





All that IE, high desert, etc area where they built in the past ten years is so far from any jobs (now that the circle jerk of house construction is done) that they are <strong>all the new Barstow</strong>, IMHO...
 
Front page of the LA Times today:

<img src="http://www.latimes.com/includes/sectionfronts/A1-pe-front.jpg" alt="" />



<a href="http://www.latimes.com/business/la-fi-cheaphomes10-2009jun10,0,4802553.story">Some home prices crater to '80s level</a>
 
[quote author="freedomCM" date=1244684615]Doesn't matter how cheap it is if there aren't any<strong> J.O.B.S.</strong>



Just look at Barstow. All you end up with is people on disability and welfare, and maybe a few down on their luck SS only retirees.





All that IE, high desert, etc area where they built in the past ten years is so far from any jobs (now that the circle jerk of house construction is done) that they are <strong>all the new Barstow</strong>, IMHO...</blockquote>


My niece lives out there and she says it's really hard to find a rental because there is so much competition with the section eighters. The rents are just outrageous. Her credit stinks, so this probably limits her choices, but still $1,200 for a two bedroom? She did get her landlord to lower it to $1,000 this year, but this is a second house on the landlord's property. Before that she was paying $900 for a dinky two bedroom behind the owner's house, but it was further from Quartz Hill, where she needed to go everyday for the kids.



I think if you were to even considering buying investment properties out there, you would want to consider going section 8. The gov helps with rehab money, pays part of the rent, etc....
 
[quote author="stepping_up" date=1244756187][quote author="freedomCM" date=1244684615]Doesn't matter how cheap it is if there aren't any<strong> J.O.B.S.</strong>



Just look at Barstow. All you end up with is people on disability and welfare, and maybe a few down on their luck SS only retirees.





All that IE, high desert, etc area where they built in the past ten years is so far from any jobs (now that the circle jerk of house construction is done) that they are <strong>all the new Barstow</strong>, IMHO...</blockquote>


My niece lives out there and she says it's really hard to find a rental because there is so much competition with the section eighters. The rents are just outrageous. Her credit stinks, so this probably limits her choices, but still $1,200 for a two bedroom? She did get her landlord to lower it to $1,000 this year, but this is a second house on the landlord's property. Before that she was paying $900 for a dinky two bedroom behind the owner's house, but it was further from Quartz Hill, where she needed to go everyday for the kids.



I think if you were to even considering buying investment properties out there, you would want to consider going section 8. The gov helps with rehab money, pays part of the rent, etc....</blockquote>


It makes sense to me to accept section 8 tenants on any low end property, if you can't find standard tenants at a higher rate on the open market.
 
Part of what pushes down the price on the Corona condo IR posted on is the HOA dues of $330/month. At current interest rates, the P&I on $89,000 would be about $450/month. Add in property taxes, and the homeowner is paying almost as much on fees and taxes as on the mortgage. Or, to put it another way, the HOA dues are like slapping another $65,000 onto the price of the condo.
 
[quote author="FairEconomist" date=1244845636]Part of what pushes down the price on the Corona condo IR posted on is the HOA dues of $330/month. At current interest rates, the P&I on $89,000 would be about $450/month. Add in property taxes, and the homeowner is paying almost as much on fees and taxes as on the mortgage. Or, to put it another way, the HOA dues are like slapping another $65,000 onto the price of the condo.</blockquote>


Exactly. And at $154,000, you can afford a small, older traditional house in Corona, probably on a lot size that you would spend two million for in Irvine.



Condos in Riverside County are complete duds considering the large amount of inexpensive houses available.
 
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