Posted: 26 Mar 2011 03:30 AM PDT
We are preparing for some exciting upgrades here at the IHB. Today, I'll talk about some of these changes and why we are making them.
Irvine Home Address ... 51 STOWE Irvine, CA 92620
Life is always moving forward. It's time for us to turn the page and embark on a new era at the IHB. But first, a look at one of the reasons we are looking to enhance the IHB experience.
Critics say Realtors' monthly report overly optimistic
By John W. Schoen Senior producer -- March 25, 2011
It's time to take this task away from the NAr and create some bloated and inefficient government bureaucracy to collect and disseminate this data instead. I would rather deal with the problems of government waste than realtor duplicity.
It's only a concern for those interested in the truth. Accuracy is not as important to realtors as creating a false sense of urgency.
Not that big a deal? They grossly overstate housing sales numbers to manipulate buyers for purely self-serving reasons, and this is not big deal? I'm sure it's not... to them.
The desire to lie. realtors feel the need to puff the market with bogus statistics. The rest is merely the mechanics of the deception.
Offering excuses only hides the reality that the NAr knew their methods would inflate the numbers, and they chose to deceive the American people because the numbers were not what they wanted them to be.
Data is important, isn't it?
It's a shame the NAr has gone down the path it has. Few reliable sources of real estate analysis and information exist, and few signs the NAr is going to become one of them. That leaves a void. Uncharted waters buyers must navigate without a reliable guide. It's a void we seek to fill here at the IHB.
We are in the process of assembling our own private database of housing and related economic statistics. Over the next several weeks as I have time to digest the new information, I plan on a number of new analysis posts to truly illuminate the activity in our local housing market.
I have no agenda to spin the data. Let's see what is really going on. I want to be accurate. People can make their own decisions and draw their own conclusions from accurate data. If approached without the built-in bias of a realtor, data analysis can be revealing rather than deceiving.
I will still have a dog in this hunt. I do run a business that makes money from real estate transactions. I am subject to the same biases as any other human being. I sell real estate, but I am not a realtor. The truth needs no salesman. I will present data as accurately as I can. If reality motivates you to buy or rent, the IHB can help you. I have no desire to manipulate data in order to make a quick buck. This is a part-time hobby for me, not my livelihood.
What about the OC Register?
I recently gave the OC Register grief because The OC Register Says California had no real estate bubble. It's a legitimate beef when a supposedly impartial newspaper starts permitting realtors to revise history with self-serving bullshit.
I probably would have overlooked that silly article in the past. I was once on the cover of the OC Register. I think much of their reporting is very good, particularly Marilyn Kalfus who I think does outstanding work.
Did you see their recent blogger anniversary series?
I wasn't noteworthy enough to make their list. ~~ sniffle, sniffle ~~ Perhaps they forgot about me? Their readers haven't. Note September 2010 when IHB stood atop the list.
I don't know how compete.com does their traffic counts, so I can't comment on the accuracy of their data.
How is the IHB unique?
When I started writing for the IHB in February of 2007, I had a simple message: don't buy, prices are going to crash. It was an important news story to a population gripped with the insanity of a financial mania. The message stood out, and the blog readership quickly grew.
I put a great deal of time and effort into writing a series of analysis posts which became the basis for my book, The Great Housing Bubble. It was my the equivalent of a doctoral thesis in real estate economics. My credibility on real estate is evidenced by the book, the daily writing here, and the fact that I predicted a market decline, and explained why it was going to happen. I could have been lucky.
in order to stay relevant and change with the times, I need to provide you a compelling reason to come back. I hope you enjoy my writing and my cartoons, but coming back for a good laugh isn't all I have to contribute. With this new data, I can provide a unique view into the workings of our local housing market.
Data analysis is core strength
I have some skill in data analysis, and with the collective wisdom of the blog that shines through the astute observations, we will come up with some compelling ways to look at data. Many of the silly arguments that dust up in the comments can be put to rest with data.
For instance, are heavy-cash buyers supporting house prices in Irvine? With data, we can answer this question. I am getting the median home price and the median loan amount history back to 1988. We will be able to trace exactly how down payments have fluctuated over time. We can correlate changes in the down payment with changes in price. If down payments go up when prices go down, then heavy cash buyers are indeed keeping prices up.
I have no idea what the truth is. I haven't looked at the data. This tempest in a teapot has been whirling in the comments for months. Wouldn't it be great to know the truth?
How many homes did the Irvine Company really sell?
Do you remember the recent news article where the Irvine Company claimed they sold 1,200 homes? Well, they didn't actually sell that many homes, they "signed 1,234 buyers" whatever that means. According to DataQuick, there were 643 new homes sold in Irvine in 2010.
The blue line above is the raw data, and the red line is the trailing twelve months as a moving average. The smoothing effect of the moving average reveals the underlying trends in new home sales.
I didn't realize they sold so few new homes after the 2001 recession. The bubble rally years of 2002-2004 were not as lucrative for new home sales as I would have thought. It looks like late 2004 through 2005 was a very profitable period for them. They sold a lot of houses at peak prices. From July 2004 to December 2006, they sold 2,455 homes.
The utter collapse of sales in 2008 is apparent. After recording two sales in January of 2009, there were zero sales in February and March of that year. In all of 2009, there were 90 new homes sold in Irvine. The average since 1988 is 52.5 homes per month.
The good news is that the trend is decidedly up. It's hard to go below zero.
What data is coming?
That is probably a follow-up post all to itself. I am getting data down to the zip code level for most items. For the MLS data, we are grouping builder codes into neighborhoods to overcome the clumsy village codes in the local MLS. Knowing the median price in Northwood is not as useful as seeing the difference between Northwood Pointe, Northwood I and Northwood II. Granularity of data is important for it to be meaningful.
I have closed sales, asking prices, rents, sizes, ages, and a number of other data points all broken down by zip code, village, and neighborhood. We will be able to identify high-equity neighborhoods and high-debt neighborhoods. We will be able to rank villages and neighborhoods desirability as measured by median and $/SF for both resales and rentals. Which do you think is more desirable, Turtle Rock or Turtle Ridge? The numbers will tell us.
Where is the data coming from?
I am getting data from three sources:
No NAr nonsense data or projections. I am using raw MLS data which is subject to its own errors. The information I am getting from Dataquick is one level removed from the raw data, but Dataquick's reputation for accuracy is good, certainly better than the NAr.
I also discovered a great source of public data at the St Louis Fed. They call the system FRED for Federal Reserve Economic Data. They go to the various government agencies, compile their data, and put it in a consistent format so data analysts like me can use it. If you are in to data, this site is a treasure.
How will Shevy get involved?
I didn't handle the announcement of the brokerage well. I thought the shock value would be interesting and positive. I was wrong. Unfortunately, that put Shevy in a difficult circumstance to share is perspective on the market. We are going to change that.
Shevy has been working daily with IHB clients since 2009. Our sidebar has testimonials from IHB clients on the quality of his work, and his sales volumes have been fantastic. In other words, he has satisfied a lot of IHB clients.
We have asked Shevy to start writing posts we will air on Sundays. He may not write every Sunday, but he will share his experiences working with clients. It's a perspective on the market I don't have.
Do you like the Shevy graphic? I was inspired by the common interpretation of Raphael's The School of Athens: "these two central figures gesture along different dimensions: Plato vertically, upward along the picture-plane, into the beautiful vault above; Aristotle on the horizontal plane at right-angles to the picture-plane (hence in strong foreshortening), initiating a powerful flow of space toward viewers. It is popularly thought that their gestures indicate central aspects of their philosophies, Plato's his Theory of Forms, Aristotle's his empiricist views, with an emphasis on concrete particulars."
i believe Shevy will contribute much to the IHB conversation.
That Mille Fleurs you're waiting for has a squatter in it
The myth of Irvine's high end immunity continues to prove wrong. The reality of squatting to boost prices is inescapable.
Today's featured property isn't supposed to exist. All the heavy-cash buyers with stable finances are allegedly holding all of Irvine's prime properties. Apparently, there are still a few posers out there.
This property was purchased on 5/3/2005 for $1,247,000. The owners used a $935,200 first mortgage, a $186,750 second mortgage, and a $125,050 down payment. I thought this would be a tale of woe from a peak buyer. Nope. These owners got some HELOC booty.
On 2/6/2007 they refinanced with a $1,218,750 first mortgage and a $225,000 HELOC. The total property debt is $1,473,750, and they managed to extract $351,800 -- unless you don't believe they maxed out the HELOC. In that case, they only got out $126,800, which recoups their down payment.
They quit paying about two years ago.
During the next recession, if I fall on hard times, I hope I am allowed to squat in a Mille Fleurs. As for the buyer waiting to pay for the house, too bad.
Irvine House Address ... 51 STOWE Irvine, CA 92620
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