OC Housing Still Has 20-25% Downside

[dontfollowtheherd]

At least.

There are ten times as many homes on the market now as there were a year ago and that’s not including those who pulled out hoping for a better entry point this Spring. Most of the existing homes have been sitting for at least six months with many of them well over a year. There are a number of high-rise condos going up everywhere and the ones on Jamboree in Irvine near UCI have had big reductions already. They are planning up to 4500 homes in the “Legacy” “infill/re-use” project right down the street where the Tustin base was:

http://www.buildernewsmag.com/viewnews.pl?id=228

“The Tustin Legacy development will include 9.3 million square feet of office, commercial and retail space, and up to 4,500 homes. These will be integrated with learning and recreational uses to realize the long-term potential of the site.”

And if this isn’t enough there are another 3,500 homes yet to be built by Lennar in the Great Park (former El Toro base) alone. There have been articles in the Register and Times about more companies moving out of commercial spaces because of the high rent factor. There are hundreds of buildings for lease signs all over O.C. Now they have another new development in Tustin/Irvine giving the Newport-Mesa competition and more potential for cannibalization from city to city.

Add to this the Newport Coast expansion (where they sold one or two homes in October and November) with their mega-million dollar boxes sitting empty and you have more than enough homes to last five to ten years at the current rate. At least the high-rise condos in the Anaheim-Orange area were priced in the mid 400’s so they sold many of them. Rent and lease signs have sprouted up everywhere in South O.C.and they still can’t find tenants. With a 9% affordability index the O.C. south is seeing a huge migration into north county and other more affordable areas. With many loans due for another reset it should get very interesting by the time the tax man comes.

[hipmatt]

I’d say 20-25 % is nice, more like 40-50%.

[IrvineRenter]

I agree. Right now in Irvine it would take a 55% reduction in price to bring rents in line with payments. 40%-50% declines are not unrealistic.

[NeetaT]

I hope so!!!!!

[Anonymous]

Don’t forget Portola Springs and Orchard Hills in Irvine. Not at big as the bases, but still big.

http://www.irvineranch.com/villages/

SCHB

[dontfollowtheherd]

hipmatt,

That’s where the “at least” comes in – after hearing David Lereah on KNX 1070 yesterday finally admit THE OC has another 15-20% drop still in it I’m going with 70-80% lol. All kidding aside the motnhly sales are so meager – I’m talking twos and threes in some cities that it is going to get real ugly real soon. With today’s market take on no interest rate decline it will only hasten the demise of many speculators and those who over stepped their finance abilities. A guy I know told me a few days ago that he lost his A$$ trying to flip some houses. He’s dumping and so are others right behind him.

[bigmoneysalsa]

Don’t call it that.

Seriously though, another major thing that Orange County has working against it is the real estate job market. New Century, Option One, Ameriquest, First American, are all headquartered here. I work here in Irvine and as you drive around it seems like two thirds of the offices hold real estate related companies of some sort. A lot of good paying jobs are about to go away. I actually am looking forward to renegotiating my lease later this year.

[PerryChase]

At the very least! OC is about 1 year behind SD in my view. 2007 should be interesting to watch.

[guitar187]

A quick note on the real estate comment. There is currently over 1 million square feet of empty office previously leased by mortgage companies in Orange County.

[dontfollowtheherd]

Downsizing even more is a given and these companies, especially Countrywide can do it in a heartbeat. Many companies have been training their staff on handling foreclosures for some time. It’s finally at that point. They don’t want it but most lenders are going to end up being the largest homeowners by default unless they can give away these loans at 50-60 cents on the dollar. Better to recoup some money now than carry them for years and tie up their own interest-earning capital.

[dontfollowtheherd]

guitar,

Drive around close to the airport and you’ll see more commercial construction going on. Much of this and hundreds of top-dollar homes are under a flight path expected to practically double in the next 5 years. No wonder the smart money in N.B. has been trying to get out of Dodge before their quality of life drops dramatically. What good is coastal living if you can’t enjoy it because of the 757’s etc. that are on top of you day and night? No thanks. My quiet moutain home with a meandering stream in front suits me just fine. Now if I can just retire soon and get up their for good I’m set.

[anxvariety]

guitar187, can you source this? I don’t doubt it.. just would like to read more..

A quick note on the real estate comment. There is currently over 1 million square feet of empty office previously leased by mortgage companies in Orange County.

[anxvariety]

dontfollowtheherd, you’ve got what I’m looking for.. care to share some advice? [email protected] email me and I’ll ask you a question…

[Chris Scoreboard Johnston]

Chris Johnston

It is amazing how few people up here think RE prices will do anything but rise. I think the general tone from the OC that I get, is that the correction has about run it’s course. Ironically, the median has not even gone YOY negative yet, so this logic escapes me. However, prices are about 10% off their highs by my research.

I have other business interests that have been involved in some of the Mortgage company sub-leasing activities, so I can confirm that number. I still suspect Ameriquest will put even more space back on the market than they already have. Fortunately for them, LA Fitness is moving their corporate office, taking a bunch of Ameriquest’s (Argent Mortgage) space at Jamboree Center. When you drive around the Irvine/Newport area by the airport, it almost looks like Jurassic Park, with all the cranes you can see on both sides of the 405. There was nowhere near this amount of building in the late 80’s early 90’s. Alot of product is about to hit the street.

A 20% drop from here seems to be almost certain to me, this year should be very interesting. It is amazing the crap in Newport Beach that is out there for sale for close to 2 Million.

[picpoule]

One property in Laguna Beach caught my attention because it was marketed at a private auction, starting bid at $795,000. SFR, 1200 sq. ft. with fantastic ocean view. Seller got no bids that were acceptable to him. Now it’s listed on the MLS for $1,199,000.

[Author]

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