Posted: 29 Apr 2011 03:29 AM PDT
Most stories on the Irvine Company are planted in the media as advertisements disguised as news. Today we learn how to properly read and interpret these stories.
Irvine Home Address ... 203 BRIARWOOD Irvine, CA 92604
When the National Association of realtors issues a press release, they always spin the data like a Pollyanna. Their rosy projections are intended to cajole buyers into action whether or not that action is good for the buyer. Their actions are completely self serving.
realtors have bullshit and spin down to a formula. Barry Ritholtz, a blogger who is as disdainful of the NAr as I am, has decoded the pattern of self-serving nonsense realtors serve up with every press release.
By Barry Ritholtz - April 20th, 2011, 2:19PM
Barry is right on, as usual. With his preamble, let's take a detailed look at how the Irvine Company operates.
The specifics of data, spin and bullshit
For greater clarity, we need to define some terms before we analyze an Irvine Company press release.
Data: Factual statements that present statistics or some measurable phenomenon. Presenting data is ostensibly the reason for a real estate press release. However, the real intention is to spin the data or otherwise manipulate the interpretation.
Spin: The offered interpretation of data that forwards the agenda of the organization issuing the press release. Spin is usually a plausible interpretation that is most often taken out of context, knowingly, by the authors.
Bullshit: An interpretation of data that is either not factual, or the data itself is not factual, or an interpretation that is not plausible based on the data. Bullshit is an obvious lie an organization passes off to a gullible public in hopes that nobody catches on.
The color coding of text above will be used to help decipher the nonsense that follows.
For THE ORANGE COUNTY REGISTER
This false statement falls under the category of repeating a lie long enough that people come to believe it. Back in February, I reported that the Irvine Company opens two new developments with 2,600 houses, and later I asked How large is the Irvine land premium?
The truth is from January 2010 to February 2011, the Irvine Company closed on 642 home sales, not the 1,350 number they keep repeating.
Four to eight sales per month? That is terrible. Nice spin sandwiched between some negative data points.
If sales don't pick up, they will either slow production, or they will start offering incentives to close deals. I doubt they would lower prices, particularly after creating their own bottom by selling under market properties in 2009. They will maintain prices by providing necessary incentives until that doesn't work any more.
This time we got spin as bookends on data. When did manufacturing become a well paying job? How many factory workers are buying $800,000 Irvine homes? Fifty percent of good paying real estate and mortgage jobs have left Irvine over the last several years.
The facts presented above are very good reasons to live in Irvine. Notice the author had to punch-up the facts with spin.
The fact at the beginning of the sentence is meaningless, and the bullshit that follows it is silly.
That point was a mixture of fact, spin, and ass-kissing bullshit.
The reason new home supply is tight in Irvine is because the Irvine Company is a monopoly that controls the production of all new homes in Irvine. It has nothing to do with location. Also, there is no new home competition in Irvine, and there is very little competition in Orange County. Rancho Mission Viejo is waiting to see what the Irvine Company does, and the small builders are not active on infill sites because prices are not stable and sales volumes are low. The Irvine Company is proud of their new floorplans, but competitors are not building bubble era designs.
BTW, I find it interesting that they acknowledged a housing bubble in their press release.
It's difficult to sort through the facts, spin and bullshit above. First, the existing inventory is not tight. The months on the market continues to rise as inventory is growing faster than sales. I like how he spun the data with qualifying words.
The manipulation of the vacancy data is spin that borders on bullshit. Vacancies are elevated over historic norms everywhere because we overbuilt homes during the bubble. We have a glut of empty homes in most communities. Many of these homes are held in shadow inventory which is not under control. He notes foreclosures and defaults are rising, but they he lapses into total bullshit about it being low and temporary.
At least the press release finishes well.
This is another strength of the Irvine Company. They do deliver a top-notch product.
The Irvine Company has done a nice job with the new floorplans. Although, the idea that floorplans can be fresh or innovative is on par with the idea that finance can innovate. Floorplans change over time, but they don't advance. The good floorplans of the 70s are just as useful and desirable today as they were when they were the innovation of their time.
Focusing on the details of the floorplan is a great thing. It becomes much easier to do when you are selling a small fraction of what you used to sell.
The spinmeisters at the Irvine Company are going to have to raise their game. The standard of bullshit they were able to pass off in the past will not longer get past the scrutiny of me and the IHB. It's obvious the Orange County Register, who is desperate for advertising money, is not going to tell the truth.
So what is really going to happen?
Jon Prior -- Monday, April 25th, 2011, 12:31 pm
I see this price gap in Las Vegas in particular. It is so inexpensive to own a home in Las Vegas that many people are opting to buy new rather than save 25% and buy a resale simply because they can easily afford the new home. New homes sell for near rental parity there even though you can find a comparable product less than 5 years old selling for 25% less. Unfortunately, as resale prices continue to decline, this gap is getting stretched, and the substitution effect is taking sales from the builders. Those circumstances won't change in Las Vegas any time soon.
The reality for new home sales isn't good.
A flip gone bad
Today's featured property was originally purchased by a Ponzi in 2003. She HELOCed and refinanced herself into oblivion terminating with an Option ARM in 2006. She quit paying in mid 2009, and was promptly foreclosed on.
At the foreclosure auction in January of 2010, the property was purchased for $258,000. After overpaying at auction, the flippers plowed more money into the property and put is for sale.
Property History for 203 BRIARWOOD
It looks like they managed to get the property in escrow just as the tax credit was expiring. Then it fell out of escrow.
It's never a good thing when a property falls out of escrow, but when it falls out at the top of the market, it turns out even worse for the flipper.
They relisted the property almost a year ago, and they have been chasing the market down ever since.
Greed kept them in the hunt past the prime selling season, and by the time they realized they needed to cut their price to get out of the property, it was too late. Now they are looking at a $30,000 loss after their renovation and carrying costs.
So much for easy money in real estate.
Irvine House Address ... 203 BRIARWOOD Irvine, CA 92604
Have a great weekend,
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