The Weir Properties Orange County Real Estate Blog

Rents going up

Analyst: Rents to rise 4.5% for years

June 20, 2011|By Property of The OC Register

The folks at John Burns Real Estate Consulting in Irvine have some bad news for renters: The landlord has pricing power!

'We believe the apartment business is set to explode, with steadily rising rents and occupancy that will justify new construction.'

JBREC forecast shows rents growing 4.5% annual on average through 2015. The report notes that 'Wall Street and pension fund consensus, at least for apartments in good locations in coastal cities, seems to be that 25%-plus rent growth over the next three years can easily occur.'

Why are landlords in a good spot? Growing household formation and homeownership skittshness. Your landlords best new customer will be, 'young adults, who have either moved back in with their parents or taken on roommates.' Also, weak job. 'The uncertain environment is enough to convince consumers that renting is safer than taking on a mortgage.'


There's a New Bayfront on the Market

Gross to sell his empty land

Pimco founder Bill Gross bought a $23 million house on Newport Beach's Harbor Island in 2009, and tore it down (via CNBC).

Now, Gross is selling the empty lot for $26.5 million. The lot has 112 feet of Newport Harborfront property and was formerly owned by philathropist Elizabeth Colyear Vincent.

Before he tore it down, the gorgeous Georgian estate had 11,000 square feet, nine bedrooms, and 12 bathrooms.

Read more:


Time to Buy

Why It's Time To Buy

The Clouds Haven't Quite Parted, But the Long-Term Case for Home Ownership Is Looking Stronger

Back in June 2006, when the housing market peaked, the prospect of a five-year national housing bust seemed unimaginable to most people. And yet here we are, with the latest Standard & Poor's Case-Shiller index showing that prices hit new bear-market lows, falling back to 2002 levels nationally and to 1990s levels in some battered regions.

Despite all the gloom, however, there are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody's Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer's market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.

Such conditions might not last long. Moody's Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then. Home building is at a virtual standstill, so the supply overhang isn't likely to get much worse. Meanwhile, demographic indicators such as 'household formation'—the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.

The upshot: 'While we might not see rapid growth in the next couple of years, there are a tremendous number of positive signs that could lead to a rebound,' says Anthony Sanders, a real-estate finance professor at George Mason University.

The short-term outlook isn't encouraging. Job growth remains weak, foreclosure sales are making up more of the market, and economists are predicting that home prices will fall more in the coming months.

But the long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes—a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.

So what might the next five years look like? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over.

Here is a glimmer of what the future may hold: While overall home prices fell by 7.5% in April over the same period a year earlier, according to CoreLogic, a Santa Ana, Calif., provider of real-estate data and analytics, if you exclude distressed sales, prices were off just 0.5%. So if you are in a market that isn't battered by foreclosures, you may be close to a bottom already.

'The regular marketplace is hanging tough,' says CoreLogic chief economist Mark Fleming.

Here is a look at five key factors that will govern local markets over the next several years:


Household formation fell during the economic downturn as a weak economy led some people to stay in school, double up with roommates or move in with family members. According to Moody's Analytics, the number of new households renting or owning a home dropped to 578,000 in 2008 from nearly 2 million in 2005, just before the peak of the housing boom.

But household formation increased to nearly 950,000 last year, says Moody's, and should average 1.2 million over the next decade. 

That, combined with increased obsolescence and higher demand for second homes, should begin sopping up excess inventory in much of the country over the next two years, Moody's says.

'Whatever the excess supply of housing is, it is shrinking pretty fast,' says Thomas Lawler, an independent housing economist.

Some of the uptick in household formation is likely to come from the leading edge of the echo baby boomers, who have been waiting for the economy to recover before striking out on their own, says William Frey, a demographer with the Brookings Institution. That is likely to fuel an increase in demand for both rental apartments and starter homes.

The portion of people moving across the country has fallen to the lowest level since World War II, he adds. That is a sign that many people have put their lives on hold because of the weak economy.

'When things do pick up, there will be this pent-up demand for everything involved with starting a household,' Mr. Frey says.

Of course, when prices in healthier regions begin to rise, many would-be sellers who have sat on the sidelines could begin putting homes on the market, muting the price gains at first, says Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School. Even so, she expects home prices to stabilize and begin to strengthen over the next two or three years.


There also are some powerful demographic cross-currents worth considering. The first baby boomers turned 65 in January, an age when demand for new homes falls and many begin to think about downsizing. 'The baby-boom generation pushed prices up as they got older,' says Dowell Myers, a professor of urban planning and demography at the University of Southern California. But in the coming years, 'boomers will start flooding the market on the supply side' with larger homes, while fueling new demand for smaller properties with more services and amenities.


Rising home prices made renting cheaper than buying in many parts of the country. But that dynamic has begun to change: Housing affordability, as measured by the ratio of median home prices to median household incomes, has fallen below pre-housing bubble levels in just over two-thirds of the country, according to an analysis of more than 380 metro areas by Moody's Analytics.

Renting is still cheaper than buying in most markets, but rising rents and falling house prices mean that, in some areas, this won't be the case for long. Buying a home is already cheaper than renting in Chicago, Cleveland, Detroit and Orlando, Fla., according to Moody's Analytics. In other markets, including Dallas, Las Vegas and Sacramento, Cailf., the equation is likely to soon turn in favor of homeownership if current trends persist, the firm says.

In Ann Arbor, Mich., where home prices fell 11.2% between 2007 and 2010, according to Fiserv Case-Shiller, housing affordability has risen well above historical levels, according to Moody's Analytics.

That is good news for home buyers such as Steven Upton, a 42-year-old photographer, who in June will...

Irvine Terrace 'What's in a Name'

A boat's in a name, at Irvine Terrace

Courtesy of John Blaich Daily Pilot

When the subdivision Irvine Terrace was created at Corona Del Mar, the developers decided to name the new streets after famous yachts based at Newport Harbor.

We have prepared the following list of street names with the names and and descriptions of the yachts and their owners. Thus, the present residents of Irvine Terrace can learn whether they are living on a 'Sailboat' or a 'Power Boat' street.

Street Owner

Altura Drive - 48-foot Schooner North Baker

Angelita Drive - 50-foot Sloop John Earle Wells

Bayadere Terrace - 51-foot Yawl James. H. Nicholsen

Bonnie Doone Terrace - 66-foot Schooner Dr. Irving E. Laby

Chubasco Drive - 67-foot Yawl Don Haskel

Dolphin Terrace - 81-foot Cruiser Arthur Letts, Jr.

Evita Drive - 43-foot Ketch L. Courter

Galatea Terrace - 68-foot Yawl Jascha Heifetz

K-Thanga Drive - 92-foot Cruiser Donald K. Washburn

Kewamee Drive - 63-foot Steel Ketch William W. Valentine

Malabar Drive - 41-foot Schooner A.G. Maddock

Marapata Drive - 98-foot Schooner Col. Max Wyman

Patolita Drive - 81-foot Cutter Charles D. Winan

Ramona Drive - 109-foot Steel Schooner Margaret Fleming

Sabrina Terrace - 58-foot Yawl William R. Cabeen

Santana Drive - 55-foot Yawl Humphrey Bogart

Santanella Terrace - (not available)

Sea Drift Drive - 84-foot Steel Schooner Lyman H. Farwell

Serenade Terrace - 62-foot Cutter Jascha Heifetz

Tahuna Terrace - 48-foot Ketch H.J. Bryan

Zahma Drive - 94-foot Ketch A.H. Andrews


This traditional yawl was based in Newport Harbor from 1935 to 1938. She was owned by the famous violinist Jascha Heifetz, who moored the yacht fore and aft off his leased home near the Harbor entrance at 212 E. Balboa Blvd. Galatea was also kept in the mooring area off the Newport Harbor Yacht Club. Heifetz was a member of the Newport Harbor Yacht Club and the Catalina Island Yacht Club at Avalon.

Galatea was designed by A. Nyrgen and built in Stockholm, Sweden in 1899. Her dimensions are 68 feet overall, 44 feet length on the waterline, 12 feet, 5 inches in beam with a draft of 9 feet. She was steered with a long, beautifully-carved tiller. There was also extensive wood carving on the teak bulkheads below. Heifetz enjoyed the rhythm and quiet of sailing. He frequently sailed to Avalon, Catalina. There was a very large insurance policy on his fingers that did not allow him to pull on lines of make them fast. However, he frequently and enthusiastically helped with the rigging in a limited way.

In 1955, when Irvine Terrace in Corona Del Mar was subdivided, one of the streets was named after Heifetz's yacht. In 1998, an oil painting of Galatea was presented to the Newport Harbor Nautical Museum and is shown periodically. The oil painting was created by muralist Richard W. DeRosset of San Diego. He is a very versatile marine artist and has done many commissions for private collectors, museums, and commercial clients. DeRosset has done three revious paintings of famous yachts for the Newport Harbor Nautical Museum.

EDITOR'S NOTE: John Blaich is a Corona del Mar resident who, about once a month, will write histories of interesting boats that graced Newport Harbor.