Aren't You Ashamed?

How do owners react when REOs devastate the comps? How about listing their houses at WTF asking prices and hoping for the best. They really should be ashamed of themselves.

Today’s property is one of two recent listings on the same street as last week’s distressed property. The only difference is a doubling of the asking price. WTF?

35 Crimson Rose inside

Asking Price: $2,195,000

Address: 35 Crimson Rose, Irvine, CA 92603

We are scheduled to have an IHB Block Party on Monday, March 9, 2009, at J.T. Schmids at the District. Come out and meet with everyone from the IHB.

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Shame — Evelyn King

It’s a shame
Ooh, I wouldn’t want to live with the pain
Gonna stay forever
Oh, it’s a shame
Shame

Sellers in Turtle Ridge obviously have no shame. They should. Some of their asking prices are embarrasing. We are in the depths of a global economic recession rivaling the Great Depression, asset prices of all kind are dropping, the stock market is trading at 1996 levels, unemployment is rising, and yet, despite all these problems, houses in Turtle Ridge have continued to appreciate. WTF

WTF?

Last week I profiled 46 Crimson Rose, Irvine, CA 92603 asking $1,215,000. This is a house on the same street as the two we have today. The house at 46 Crimson Rose can’t sell at $1.2 million, so surely asking over $2,000,000 isn’t going to work. Well, the neighbors think asking $2M+ will work just fine. The vacant property at 48 Crimson Rose, Irvine, CA 92603 is asking $2,295,000. Are you kidding?

Perhaps these listings were on the market for a while and the distressed listing just came on the market and is making them look bad. Nope. The distressed property has been on the market over 60 days, and these two new listings just came on the market this week. Both of these homeowners, both of whom are supporting empty houses, just listed these properties for a million dollars more than their neighbor.WTF

WTF?

I cannot even imagine the thought process these people must have gone through. The both must know their neighbor has been for sale for over 60 days at $1.2 million. Perhaps they just pretend the short sale isn’t there. They must reason it isn’t part of the “real” market. And surely their houses are much superior to that other one. I can’t get my mind around it. For that reason, it is a WTF award winner.

{adsense-ir}

35 Crimson Rose inside

Asking Price: $2,195,000IrvineRenter

Income Requirement: $548,750

Downpayment Needed: $439,000

Monthly Equity Burn: $18,291

Purchase Price: unknown, approximately $1,950,000

Purchase Date: 3/17/2006

Address: 35 Crimson Rose, Irvine, CA 92603

Beds: 5
Baths: 6
Sq. Ft.: 3,100
$/Sq. Ft.: $708
Lot Size: 5,891

Sq. Ft.

Property Type: Single Family Residence
Style: Tuscan
Year Built: 2005
Stories: 2
View: Catalina Island, City Lights, City, Coastline, Harbor, Mountain, Ocean, Panoramic, Has View
Area: Turtle Ridge
County: Orange
MLS#: U9001013
Source: SoCalMLS
Status: Active
On Redfin: 2 days

1 OF A KIND! Former Model w/approx $500K in ‘Top of the Line’ designer
& builder upgrades. Located in prestigious Summit @ Turtle Ridge,
this property boasts phenomenal panoramic views from ocean, coastline
& city lights to mountains. Abundance of decorator features
including wood, travertine & stone floors throughout, beamed
ceilings,wrought iron accented front entry doors, gates & stair
rail, decorative chandeliers, casita with full size wine refrigerator
& storage area, closet organizers + lots of built-ins &
bathroom upgrades. Flexible floorplan has 3 bedrooms on main
level,(including casita) each with own bath,designer gourmet kitchen
with 2nd laundry area. Upstairs includes Master Suite with picturesque
views from bedroom & bath area, 5th Bedroom with own bath,+
convenient spacious laundry room. Summit @ Turtle Ridge is a
guard-gated community with world class amenities including community
parks, playgrounds, resort-like pools, fitness center and walking
trails.

Oh, the upgrades must make it worth so much. I get it now… not.

Located in prestigious Summit @ Turtle Ridge. I think he means the pretentious Summit at Turtle Ridge.

{adsense-ir}

This property has all the signs of a pure speculative flip. The owner set up a corporation to buy the property. There is a $1,575,000 first mortgage, and the rest was a downpayment. The corporation would get to write off the interest over $1,000,000 whereas an individual cannot. Plus, there may be some additional liability and credit protections if the owner did not have to personally guarantee the loan. In any case, the property does not appear to be lived in, so this flipper has been bleeding cash since he bought it in early 2006. Perhaps he lived in it for a while and has since moved. I don’t know.

If this property sells for its asking price, the owner will make money on his flip. Of course, for that to happen, someone with more money than brains is going to have to put down a lot of cash to buy this place, and this property will have to have appreciated in value while every other property in the United States has not. WTF

This seller isn’t the really greedy one. The owner of 48 Crimson Rose, Irvine, CA 92603 is asking $2,295,000. He thinks he is going to make $500,000.

WTF are these people thinking?

{book7}

Shame
Burning, you keep my whole body yearning
You got me so confused
It’s a shame
Sometimes I think I’m going insane
But still I want to stay

Wrapped in your arms
Is where I want to be
I want to be, want to be
Wrapped in your arms
That’s my high, my high
Only love can be to blame
If we lose our love
It’s a shame
Ooh, I wouldn’t want to live with the pain
Gonna stay forever
Oh, it’s a shame
Shame

Shame — Evelyn King

74 thoughts on “Aren't You Ashamed?

  1. awgee

    I do not think they have to purchase under a corporate veil in order to deduct more than the interest on $1mil of loan. I think they just have to consider it business property, (as opposed to a personal residence), and treat it as such for all tax purposes.

    1. IrvineRenter

      Thank you for the clarification. So people with multiple properties are not subject to any limitations on mortgage interest deductions if they call them business properties? I have to wonder how many people with multiple properties applied for mortgages on each of them as their primary residence then turned around and told the IRS they are all business properties.

      1. awgee

        Well, to start with, the IRS really doesn’t give a hoot what you tell the bank or if you lie to the bank. The IRS cares if you lie to the IRS.

        So, It is not just a matter of calling them business properties. They have to be treated as business properties for all tax purposes, ie. you can not count any time you resided in the home as business property. If you never live in a home, the IRS will most likely consider it business property no matter what you call it, so that you may not take advantage of the cap gains exclusion on sale of a personal residence.

        My guess is that the purchaser uses a corporation to insulate themselves somewhat from liability. It is a myth that there are tax advantages to incorporating. Incorporating is a tax disadvantage, except S-corp which should not much effect one way or the other if executed properly.

        The interest paid on business property is reported on one’s sched C, not a sched A, therefore the deduction is limited only by the general limitations of business losses if there are any. Does that make sense? I am not always sure I am explaining tax junk well, because I know what I am thinking, but the communication is another story.

        1. Party Pooper

          “Well, to start with, the IRS really doesn’t give a hoot what you tell the bank or if you lie to the bank. The IRS cares if you lie to the IRS.”

          Not entirely true.

          A client of ours used a stated mortgage to buy a home, stating $X as income, while filing taxes on much less income.

          The IRS doing an audit of our client found the mortgage dox as research & gave the client 2 choices: admit to income tax fraud, pay taxes, & jail for 20 years OR admit to mortgage fraud & jail for 30 years. He chose the income tax fraud & hoped to get out early. He’s still there as of right now & his wife runs their business. They’ve been audited 2 more times since he went away, but she’s been reporting every bit & the IRS haven’t been able to do anything.

          My point is that the IRS won’t audit people for suspicioin of mortgage fraud, but if they already suspect income tax fraud, then they will research any public records.

          1. zubs

            So let’s say I state I make $100,000 / year on my new mortgage refinance application to lower my mortgage interest rate, and I only really make $68,000 / year.

            If the IRS audits me, they will probably find out that I stated my income is 100,000 to the lender, while I filed at 68,000.

            How likely will I go to jail?

          2. nowwaat

            It’s too hard to say since you did not actually cheat on income tax. As far as stating income on a mortgage application, the only thing I can say is that millions and millions of people inflated their income. Are they all going to jail? Actually, many of them are now regarded as victims.

          3. Party Pooper

            you’re guilty of mortgage fraud. if you think the IRS won’t forward that info to the FBI for VERY EASY prosecution (since you cannot claim in a court of law that you simultaneously made $100K and only $68K), then you have never met any person from the IRS. I’m not saying they are all jerks, but they certainly do not play around with any illegal activity.

            Of course, this assumes that the IRS would be auditing you in the first place.

          4. zubs

            I didn’t do this, but I know someone about to do this, and I just wanted to warn them about the possibilty of jail time should they be audited.

            The person told me that with a 68,000 income, the mortgage would probably not get approved, but with 100,000 it would get approved, thus income lie.

            In fact, he told me his mortgage broker told him to lie on the income….I’m guessing the mortgage broker makes a transaction fee, but I’m wondering how she is able to fake his W2….

          5. camsavem

            Unless of course you are running or been selected to for public office. Then you can commit all the fraud you want.

          6. Mike7

            My father always told me: there are 3 people you never mess with.

            1. IRS
            2. Cops
            3. Judges

            These 3 type of people you must take seriously.

          7. Party Pooper

            copy and paste. seriously, that’s what they do, since stated loans are gone now without 50%+ down.

            In practical terms, the likelihood of your friend getting independently audited is directly linked to certain triggers:

            1. Owns own small business. This is the #1 trigger. The IRS has over a dozen statistical models that they use to determine if you’re likely cheating. (One example, is the digits used. Statistically, lower #s are far more likely to be represented than larger #s. Randomly write down a bunch of numbers, & add them up. Statistically speaking, your sum should include more 0,1,2 than 9,8,7. But people when making up numbers are more likely to use largers numbers. Like listing prices on homes, for example, tend to be $495,900.)

            2. Itemized deductions. (The IRS has never, to my knowledge, randomly audtied a w-2 wage earner who takes the standard deduction, except for waiters/waitresses if when reporting tip income do not report up to the federal/state minimum wage.)

            3. Tipped off. (Your friend cannot control this. If she is going to commit any kind of fraud, she needs to keep that to herself.)

            These are 3 most likely triggers.

          8. t

            and the person that makes your dinner.
            You don’t want to think about what can get added to your meal if your habitually nasty to the cook/serving staff.

  2. Texas Triffid Ranch

    Sadly, I’m very familiar with this mindset. I recently had dinner with a very old friend who started a bookstore in Portland, Oregon with a mutual acquaintance. To get the store off the ground, the acquaintance borrowed $20,000 from her parents, which was just barely enough, with other savings, to get it going.

    Well, part of the business plan was that if things were bad for the first few years, the acquaintance would get a side job to take care of her expenses, as the store wouldn’t be able to pay her bills. (My friend is married to a wonderful gentleman who already owned and paid off his house when they got together, so she was surviving solely off his income and putting her share of the business equity back into the store.) Naturally, when crunch came to shove, the acquaintance absolutely refused to do so, repeatedly whining that she’d put in $20k to get the store going. Last year, the store was $87k in debt, and my friend was told by her bank that they’d be willing to refinance her loan, thereby allowing her to pay off her distributors, if she got rid of her business partner. My friend did the honorable thing and paid her off completely, which was about $4k in remaining equity. Faced with the reality of the situation, and not wanting to accept that she’d be responsible for the total debt and tax liability if the store went bankrupt, the acquaintance still threw a tantrum. After all, “I put in $20k!”

    I think we’re going to be seeing a lot of this similar behavior in real estate for a while, and it’s the exact same behavior as with other ridiculous speculation bubbles, such as comics or Billy Beer. How dare anyone suggest offering the house at market rates? They paid $2 million for it, and that’s what they’re sticking with.

    (By the way, IrvineRenter, thank you for the offer on the open house party. I really wish I could get out there to meet you face-to-face, but there’s always next time.)

  3. Lee in Irvine

    The mind is powerful thinking tool, but it can lead you astray, and into a bounty of fooling thinking. IR gives us a great example of this behavior in the property listing above.

    90% of non distressed sellers still have no idea WTF is going on. This recalibration in the economy is happening so fast, they don’t get it. I think most of them were completely blindsided by this collapse in our debt dependent economy.

    Re-adapting to new spending habits, and a lifestyle providing fewer luxuries is not something that comes easy for your typical south Orange County family.

    1. IrvineRenter

      “Re-adapting to new spending habits, and a lifestyle providing fewer luxuries is not something that comes easy for your typical south Orange County family.”

      Right now, I don’t think many of these people believe they have to adjust. I believe they think that as soon as this recession is over, they will be able to regain their home values, bubble incomes and lifestyles. The housing ATM will get turned back on, and the credit card companies will be extending new lines of credit to rebuild another Ponzi Scheme. The shock of the new reality will take 3-5 years to be accepted by most of the populace here. Most people’s perception will be that the recession never really ended because they will not regain their pre-recession quality of life.

      1. mav

        I expect the crash to be catastrophic in California if it isn’t nationally. Unemployment in CA is already over 10% and we are not even halfway through the deleveraging process. CA is insolvent with no hope of getting back to solvency. I believe a localized depression in California is now near 100% certainty. The social problems will be on par with the Great Depression in CA. It will be impossible for the employed CA tax payers to subsidize both the state deficit and the impoverished.

        The only solution is bankruptcy, an overwhelming deluge of bankruptcies, and a decline in the American standard of living.

        http://market-ticker.denninger.net/archives/851-The-Inescapable-Math-on-Mortgages.html

          1. mav

            Thanks IR, I’m looking forward to getting back to reality without mass consumer credit, even though it may be chaotic over the next 5 years. I can’t understand why anyone would buy a home over the next few years given the leverage required. Perhaps by 2012 maybe it will make sense again.

        1. Party Pooper

          I completely agree with you. Several people have told me that if it really gets ugly, they expect there to be a rash of foreigners to pay these WTF prices (my description, they say it’s FMV) & save CA. My retort is always that the rest of the world is in no better shape than the US as a whole & in no condition to save anyone, even themselves.

          Doesn’t anyone pay attention to world news in this state anymore? I get that the majority of californians have no clue about the rest of the nation, but I never knew how completely insular our people were to the world as a whole. It’s like they think that california is the only place in existence anywhere.

        2. Perspective

          Is it just me, or are many comments becoming exceedingly bearish on housing and the economy? The link Mav posted describes a “Mad Max” America coming within days.

          You can only plan and prepare for the worst case scenario, if the worst case scenario involves a remotely recognizable civilization. If it doesn’t, then what’s the point of preparing? I can prepare for a day when my strong balance sheet actually means something and my future is brighter because of it (as opposed to the past decade where your fancy car and home meant everything). However, if the economy devolves into a 1930s (or worse) depression, only sheltering and feeding my family will matter.

          So at some point, I have to ask, if reading daily “end of the world” reports is really adding value to my life? I can’t do much with the info, and it only greatly worsens my life (emotions, feelings, etc.) today.

          1. Party Pooper

            It’s not “end of the world”.

            It is “end of leveraging yourself to completely unsustainable levels”.

          2. mav

            I agree with you.
            My point is to recognize the situation, then focus on what matters in your life.
            Don’t be greedy, understand that there will be a new normal for the American standard of living. Just prepare and enjoy your family life and health if you are so fortunate.
            Unfortunately more than half the world already lives at a level below where America will likely baseline. I don’t view this as end of the world type material. It is just the new economic reality after deleveraging / unwinding.

          3. IrvineRenter

            “Is it just me, or are many comments becoming exceedingly bearish on housing and the economy?”

            I have noticed that too. Some of that is to be expected as we are at the worst of the economic calamity right now. The price of every asset relative to cash is crashing (deflation), so people are bound to be pessimistic. I would look at it as a contrarian indicator of improvement ahead. No, house prices are not going to appreciate any time soon, but the economy should at least stop getting much worse.

          4. Major Schadenfreude

            “I would look at it as a contrarian indicator of improvement ahead.”

            Except this time it is different, so the pessimistic expectations may be justified.

            (Or is my statement another contrarian indicator?)

          5. QualityPicks

            If I had a dollar for every time I read “this must be the bottom because everybody is so negative” I would be rich.

            I believe a lot of people don’t understand what being pessimistic is. IrvineRenter is not being negative or pessimistic. He plugs in his numbers on his formulas and comes up with what the normal value of homes should be relative to incomes. Then he realizes there is still much to drop. This is not being pessimistic, he is being a realist. So, if you are making an informed decision, you are not being negative.

            Being pessimistic means you plug in your numbers and they tell you home prices have reached a balance with incomes, however you still think prices will just keep dropping forever because we are now in an unstoppable death spiral that will never end until we reach $0.

            I have watched not only tons of people, but tons of businesses use unhealthy amounts of leverage for very long. What makes me mad is that the government is bailing out all these businesses and many people in so many ways, that most still don’t see what they are doing wrong. Kind of like going to Vegas, losing all of your retirement savings, then you go cry to your dad how if he lends you $10k you can make up all your losses.

            We are in for an extended period of de-leveraging, and thus pain for those that don’t understand or those that just end up being a true victim.

            If you think that the market is at a bottom, because everybody is so negative even though your model and logic tells you there is much more to drop, then YOU ARE BEING AN OPTIMIST 🙂 Can you understand that?

        3. Major Schadenfreude

          “It will be impossible for the employed CA tax payers to subsidize both the state deficit and the impoverished.”

          The Golden State used to be divided between north and south. Then it became divided between east and west. The new division will soon be between government workers and non-government workers.

          CALPers invested in commoditities in July and the pension fund got hammered. Should tax payers make up the difference?

          The new economy will require governments throughout the nation to scale down and realign compensation to match the private sector. One way or another, the Golden State will realize that the ten people driving to work on the empty freeways on Martin Luther King’s Day can not possibly generate enough income tax to support the bloated, over-compensated government work force.

          1. nefron

            For that to happen we as a society have to take responsibility for ourselves instead of expecting our government to save us from everything. You need bodies to run all of those government programs our populace demands.

    2. Mike7

      For some crazy reason I’m actually excited about the economic recession the US as well as the world in in right now. I’ve always been the type of guy that doesn’t like the idea of interest. I don’t believe in it. I don’t trust it. I don’t like paying interest and am not going to depend on it to fuel my retirement. I worked as a financial advisor for a few years in my life and one of our selling points was the percentage of interest you “might” get on your investment. But I never truly felt confident in selling this idea. This whole idea of interest making people a profit was one of the main contributing factors in the current recession. Maybe it will change the way people think. Maybe we needed it to happen. Maybe now Americans will wake up an stop buying things they cant afford.

        1. Chuck

          Funny that you mention this concept of “interest”. I’ve wondered if the financial advisors are going to change their models, since they always have some assumption that you fund your portfolio each year and get a compounding of a “conservative” 5% to 8% return to reach your financial goals. There is no way, in the short term at least, I can see anyone beleiving this.

          There will also probably be a whole new crop of “financial advisors” popping up if/when the stock market seems to stabilize telling people that they need to “buy now or be priced out forever!” Hmmm, where have I heard that before?

    1. awgee

      I think it is a closet. They are very popular in Turtle Ridge and are referred to as “wine tasting rooms.”

      1. AZDavidPhx

        I am wondering how long it is going to take for crap like this to become socially toxic; mutating the owners into pariahs.

        I’m just guessing that most people’s unemployed / foreclosed / bankrupt friends are probably not going to be very interested in hearing about someone’s brand new wine closet.

        1. AVRenter

          I tell my wife the same thing. How long before it’s completely passé? Will everyone hate it because it symbolizes their financial ruin? Will they snicker at you because you’re still stuck in it? Will they hate you if you buy it with cash at rock bottom prices?

          I predict in a couple years the new phrase will be, “Ew, that’s so Bubble.” What are all these 1200sqft condos going to do when their $10k kitchen with granite etc. has the appeal of 70’s linoleum?

          1. Chris M

            I still want some Granite counters some day. I think it is an objectively superior surface, and it will always look better than the 100sqft of cheap Formica that I currently have.

          2. Mike7

            I bought a house in westpark in 1989, I remodeled it in 07 and added granite. I like it, it looks nice but it needs to be maintained. Cleaned and sealed every 12 months depending on how much you use it.

          3. nefron

            My rental has granite counters and I absolutely hate them. You can’t tell where they’re dirty because you can’t see the dirt, so either you’re always cleaning the whole thing to make sure it’s clean or you’re putting your hand or a plate on something sticky.

            If I EVER buy a place, and it has granite countertops, I’m taking them out and replacing them with tile. And then I might pound the granite into little pieces to vent my frustration over the whole bubble lifestyle.

          4. AVRenter

            There’s definitely a difference in quality and appearance of granite. It’s rare to see nice stone in most condos and average homes. I think the cheapy shit people were buying from Ted’s Granite Emporium is going to looks severely dated. Like the stuff in the place I’m renting. Time will expose all the cheap crap.

            If not granite, then what? I don’t know but I sure like quartz.
            http://www.caesarstoneus.com/

          5. tonyE

            We got Caesarstone on our kitchen and den cabinets.

            Costs quite a bit, but wears and looks better than Granite and marble. Also, since it’s quartz it has all of the thermal qualities of granite with less maintenance.

      2. tonyE

        Aargh… I can only afford to drink beer and Two Buck Chuck in my “wine tasting closet”.

        But I live in TR, not TRidge.

        I though the folks in TRidge drank Kool Aid in their wine tasting closets…. ;-D

  4. GavriloPrincip

    Both properties just hit the MLS as leases as well. 48 Crimson Rose is for lease for $7350/month, and 35 Crimson Rose is for lease for $6750 per month. Also, I notice both WTF properties are listed by the same broker.

    Whatever happened to 30 Crimson Rose, that IR profiled when it went back to the bank (for $1.4m) in early 2008? Did the bank ever try to re-sell it?

    1. Party Pooper

      I always blame the REA for these listings. After all, the owners wouldn’t be able to list these if they didn’t have some Realturd enabling them.

      1. IrvineRenter

        In this particular instance, it is difficult to separate the two. If you know what I mean…

  5. Kelja

    The WTF mentality is pervasive. I have friends who own a house in Del Mar. They both were (are) in the mortgage business – they make much less today than just a few years ago. The house is draining them – more than $11K a month in mortgage payment so it’s for sale.

    For $4,000,000 (nice round number). House nearby, a foreclosure, went for about a third of that. But my friends are adamant. If they can’t get their price, they say they will stay and wait out the temporary downdraft in pricing.

    Why bother putting on the market, I think to myself. They are desperately clinging to the illusion.

    1. AZDavidPhx

      they say they will stay and wait out the temporary downdraft in pricing.

      That’s that spirit! On a long enough time scale, anything is temporary! Yes sir!

      Keep that glass half full, MmHmm!

    2. Mike7

      If I make a mistake, I’ll take the hit, learn from it and move on. I seems like some people don’t want to admit the screwed up. 11k a month is a lot of money to me. I would own 4-5 properties if I had money like that to burn.

  6. maliburenter

    I’m curious. For those of you who’ve talked with friend and relatives who own shares of a stock that has gone way down, do you hear similar things? For example, “My BofA stock is worth $22 and I’m not selling it until it gets back to that price”

    During the dot com bust, I owned some Yahoo stock that I put a sell order on at $103. It was at about $100 that day. It never got back to $103. I sold it at $30. It wasn’t that I had done fundamental analysis and believed $103 was the right number. It was just slightly above a current volatile trading price. Then, prices kept dropping.

    1. awgee

      Yeah, I think we have all done that. Hopefully, we have learned a few lessons, but probably not.

    2. nowwaat

      Done that “mistake” too. I’m riding it all the way to the bottom – just like I did during the dot com bust. I tried to apply the previous lesson but got sucked in anyways. At the time, a housing bubble was created to make-up for the losses in the stock equities. Now both are down and unlikely to recover any time soon. How painful that was/is. It will probably be a few years to get back where we were in 2007 in the stock market, probably much longer for OC housing.

      1. Party Pooper

        “It will probably be a few years to get back where we were in 2007 in the stock market, ”

        I disagree. I’ve believed that the stock market has been overpriced for years, propped up by high levels of margin, low feds rate (which encouraged investing & corporate stock buybacks-thereby increasing the price/share), and MBS & CDOs that never should have made $$$$ in the first place.

        In 2006, I read an article that summarized it perfectly for me (I have no idea where it is now), and said that if these assumptions were correct that the DIJA ahould be around 6500. That’s when I got out of the stock market & put it all in some treasuries and CDs. I missed the highs in 2007, & got a LOT of ribbing from friends/family when I told them to leave, too.

        But I still think I was right, even if the market goes back up instead of down another 1000 +/- points.

        & I’m not about to start investing now. I believe any recovery in the stock market will be similar to the housing market. an L curve, not an S or U curve.

        1. nowwaat

          Certainly, 2006 stock prices are much better than today’s 1996 prices. The P/E ratios in 2007 were not too inflated (as compared to the dot com bust), but profits may still have been propped up by spending borrowed money. Now, the profits will be a lot less, and to many companies, the struggle is to stay in business (GE comes to mind). So, where stock prices will be is anyone’s guess. Who know? Throwing fed money at the problem may end up re-inflating everything including stocks and diluting savings?

          1. Party Pooper

            I think it’s far more likely that every large company will be quasi-nationalized than re-inflating towards 2007 levels.

            The average J6P is already tired of all the bailouts. No, that’s not enough to stop the bailouts from coming (they are necessary if you are hell bent on preventing a minimally steep recession), but it is enough to keep the government demanding some kind of share program like it has with Citi & AIG. Which will definitely keep stocks from re-inflating because investors do not like to invest in companies that are first dutiful to Uncle Sam before their shareholders.

            To believe that stock prices will rise on their own sometime soon, one has to believe that we are basically done with mortgage defaults & ready to start appreciating again. Far too much of our national economy is tied to the mortgage industry (whether directly, indirectly, or emotional spending). Personally, I don’t think we are anywhere close. 12% of all mortgage loans are in default/delinquent right now. 20% of all home owners are underwater. These statistics are nationally, not just CA.

            I just don’t see stocks re-inflating. It’s possible I’m sure, just not likely.

            If you want an even more bearish opinion than mine, there is an argument out there that we have been in 1 very long bull market starting in 1982. This was the time of the death of pensions & wide acceptance of 401(k)s that started the average J6P investing in the stock market. Of course, average back then J6P were 30-40 year olds, who are now 55-65 & are/should be shifting money to bonds/CDs.

          2. nowwaat

            Well, sure, economic fundamentals can be ignored for a while but cannot be ignored forever. I have been amazed as I watch, for the last 20 years, how the U.S. can accumulate such huge trade deficits, and still be so prosperous. I’m just glad I have a little money set aside, despite big losses especially in my IRA. I was hoping to use the money as a down payment on a primary residence, but we decided to wait a while after seeing 1) a couple friends getting laid off, and 2) how slow it is at work.

    3. Chris M

      Well, I still have my 350 shares of AMD. They cost me $3,000, and I’m not selling them until they’re back up to that point! Or they go bankrupt. But what would I do with the measly $800 that they’re currently worth? I might as well leave it alone and hope it goes back up. This is not quite the same as a real estate “investment”, where there is an ongoing debt burden to service. It’s more like buying 800 scratch-off lottery tickets. 🙂

  7. george8

    You never know. Some money laudry scheme might work by buying both houses with cash as part of coruption payment?

    Corrupt officials in China are having great time with billions of bail out funds passing through thier hands.

  8. .

    That sure is one tiny lot for two million dollars with a lovey view of roof tops. At least 48 Crimson Rose has a decent sized yard.

  9. camsavem

    When it comes to monumental changes in group mindset they dont come easily, nor is there one explaination for the phenomanom.

    I bought my house in Oct of 2000, lost my job in 01 and sold my house to start my business. By the time my business was making money I was priced out. don’t get me wrong, I “could” have bought a house but I knew that I “could not” afford it at 2004 prices.

    So to say I was a little bitter at the extravagent lifestyles and endless real estate chatter is to put it Midly. I was the one person in the group saying “High home prices are not good for economy, for every extra dollar in inflated prices someone pays for debt service is a dollar they cant use to buy goods and services”.

    Not only was I the only one saying it in North Tustin, but I was the only one ANYONE was hearing that from. In other words, you hear something enough times and it becomes fact.

    I believe most people just flat out don’t believe that it is as bad as it really is. I believe they still cling to the fact that real estate does go up, prosperity is right around the corner you just have to hang on.

    They will continue to cling to this false truth until the President, Congress, Banks, Neighbors etc. all say those days are gone for ever.

  10. Jeff H

    Maybe the sellers are all in it together. The 46 Crimson guy talked to the owner of the other two and asked him to put a WTF price on his two (which he is only using as a write off for now). Then, 46 Crimson can tell prospective buyers that his is offered at a $1M discount to others in the neighborhood. LOL!

    P.S. “Don’t mind that REO down the street. It is not as high up on the hill as mine.”

  11. Party Pooper

    That’s definitely not true.

    Appraisers must use foreclosures/short sales as comps if they’ve sold within 45 days & can make adjustments to a non-distressed asset’s value, but CANNOT ignore them completely.

    Your friend should check out some mortgage websites.

  12. oc bear

    My guess is that both owners are stalling for time.

    March 2008
    Bank: Why aren’t you paying us?
    Owner: We’ve just got some temporary difficulties.

    March 2009
    Bank: You are in default
    Owner: Hey we just put the house on the market. I’m sure it will sell — Its in Turtle Ridge! Look at our asking price! You’ll get your money.

    March 2010
    Bank: Wish We’d foreclosed in 2008
    New Owner: Glad you didn’t.

  13. Walter

    In a normal market, this policy makes some sense. They are not arms length transactions, and are a small part of the overall market.

    These days, this policy of excluding distressed sales ignores a massive amount of the market and thus should be reconsidered.

    And while appraisers may be required to include them, agents in setting listing prices are not. Although WTF listing prices lead to wasted time for all involved.

    1. IrvineRenter

      The median is lower than one might expect right now because a disproportionate number of sales have been happening at the low end. When more mid- to high-priced products begin to sell, the median may actually go up even though prices of individual properties are still declining.

    1. NoThereThere

      Redfin is missing a transaction for 53 Hidden Trail. The bank took it back in November for $2,094,878.

      Looks like the same guy currently owns 59 Hidden Trail, and used to own 51 Hidden Trail. Wonder if it’s hard seeing your mistakes stare back at you every day?

      From what I can tell, 41 Hidden Trail’s owner has equity to knock down their price below 53 Hidden Trail, if they choose.

  14. bill

    From NY Times, um, I don’t feel to sympathetic to this guy?

    Chadi Moussa lives in a house valued at more than $1 million in Dublin, Calif., in the desirable East Bay area. Unfortunately, he owes nearly twice that much on his mortgage. Mr. Moussa, who runs a used luxury car dealership, is by any definition a troubled homeowner.

    But when he looked at President Obama’s housing rescue plan, he saw nothing for him because his mortgage was too high.

    “You give $25 billion to a bank, at least they should help people stay in their homes,” Mr Moussa said. “But once you get to big loans, nobody’s doing anything about it.”

    For Mr. Moussa, the road toward foreclosure has been precipitous. He bought his home in 2005 for $2.24 million, with a down payment of more than $500,000, and monthly payments of $4,000 for the first year. But as California real estate prices plummeted, his house’s value fell to about $1.1 million, he said. Then his income dropped by half.

    After he defaulted on his mortgage five months ago, Mr. Moussa said he asked his lender, Countrywide Financial, to change the term of his loan to 40 years and to lower the interest to 4 percent until the car business revived.

    “Two days ago I got the answer that at this point they can’t do anything,” he said.

    Mr. Moussa now has monthly mortgage payments of $8,700 and a home that may never recover its equity. The stress has eroded his marriage, and his wife and daughter are now with her family in Beirut.

    His frustration was evident in his voice. “I can make $5,000 payments per month. Why not do that for me for a couple years? Why take it away, sell it” for a huge loss, he asked. “In my area, half the houses are in foreclosure or short sales. And some of them have been stripped down, everything torn out.”

  15. Major Schadenfreude

    “His frustration was evident in his voice. “I can make $5,000 payments per month. Why not do that for me for a couple years? Why take it away, sell it” for a huge loss, he asked. “In my area, half the houses are in foreclosure or short sales. And some of them have been stripped down, everything torn out.”

    I have to agree with him. Let him stay there for 5K per month. In the meantime, the bank should be free to sell it if it sees fit.

  16. newbie2008

    IR, What time on Monday 9th is the block party?

    The scares word for central banks? Deflation
    1. Paying federal debt for more valuable money.
    2. Consumers waiting for the price to drop before buying. Less non-essential spending.
    3. Large contraction of the economy.
    4. Losing control of interest rates. Who ever heard of negative interest?
    5. People with cash have more control.
    6. Central banks response– print more money.

    On the WTF pricing, are the owners being relocated by a job change and new company “buying the house” at prior appraisal?

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