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Any Way The Wind Blows

Aug 7th, 2007 by IrvineRenter 

Bohemian RhapsodyIs this the real life? Is this just fantasy?
Caught in a landslide, No escape from reality
Open your eyes, Look up to the skies and see,
I'm just a poor boy, I need no sympathy
Because I'm easy come, easy go, Little high, little low
Any way the wind blows doesn't really matter to me, to me

Bohemian Rhapsody -- Queen

Link to Music Video

Despite the obvious headwind facing the housing market, there are always those who think it is about to turn around. Today's property is a highly-leveraged knife-catcher who is risking their credit plus a few dollars to gamble in the residential housing commodity market.

43 Windchime Front 43 Windchime Kitchen

Asking Price: $739,500IrvineRenter

Purchase Price: $685,000

Purchase Date: 4/26/2007

Address: 43 Windchime, Irvine, CA 92603

1st Loan $548,000
2nd Mtg. $68,400
Downpayment $68,600

Beds: 4
Baths: 2.5
Sq. Ft.: 1,500
$/Sq. Ft.: $493Knife Catcher Award
Lot Size: -
Year Built: 2004
Stories: 2
Type: Condominium
View: Hills, Mountain, Trees/Woods, Other
County: Orange
Neighborhood: Quail Hill
MLS#: S493857
Status: Active
On Redfin: 44 days

From Redfin, "LARGEST DETACHED SAGE PLAN 4 w/ 4BR (1BR--now a den--DOWN); UNCOMMON PRIVACY W/ HILLS VIEWS FROM ALL BR'S!18 inlaid ceramic tile flring down Upgraded carpeting; Plantation Shttrs; Gourmet Kitchen w/ white-on-white appliances:LR W/ custom lited ceiling fan!Formal DR w/ custom liting & doors out to prof. landscaped bkyd (NO HOME BEHIND!)OPULENT MASTER W/ WALK-IN CLST; CUSTOM PAINT!ATT. 2 GARAGES; WALK TO ALDERWD BASICS+ ELEM; NR ASSN. COMMONS FACILITIES! AMENITIES!"

I have a difficult time reading through the schizophrenic use of capital letters, slashes and unusual abbreviations. Also, I question the validity of marketing this as a 4 bedroom.

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If they get their asking price, with a 6% commission, these flippers stand to make $10,130. My guess is they are paying less than a 6% commission. In any case, it doesn't seem like they have a very good risk/reward ratio for this trade, and it is a trade, after all. As long as people like this are trading the housing market, a normal family will never find a good deal. Of course, the crash will rid the market of flippers in a most painful manner. Also, what does it say about the health of the market when the only transactions we are seeing are flippers?

We will watch this property for an update.


Posted in House Flips

Crimson and Clover

Aug 6th, 2007 by IrvineRenter 

Crimson and Clover Now I don't hardly know her
But I think I could love her
Crimson and clover

Crimson and clover, over and over
Crimson and clover, over and over
Crimson and clover, over and over

Crimson and Clover -- Tommy James and the Shondells

Link to Video

Joan Jett's Version

If your a bear, and you have been waiting for the sign of the apocalypse, this is it. Get ready because I suspect we will see this over and over...

30 Crimson Front 30 Crimson Kitchen

Original Purchase Price: $1,722,000IrvineRenter

Original Purchase Date: 12/23/2005

Auction Sale Price: $1,400,000

Auction Sale Date: 8/1/2007

Address: 30 Crimson, Irvine, CA 92603

Beds: 4
Baths: 4.5
Sq. Ft.: 3,403
$/Sq. Ft.: $558
Lot Size: -
Year Built: 2005
Stories: 2
Type: Single Family Residence
County: Orange
Neighborhood: Turtle Ridge
MLS#: S451259
Status: Active
On Redfin: 378 days
Unsold in 90+ days

From Redfin, "* * $100K PRICE REDUCTION!!FOR THIS TURTLE RIDGE SUMMIT HOME. MAIN FLOOR MASTER SUITE W/ CUSTOM CLOSET, KITCHEN W/ CTR ISLAND, NOOK, LIMESTONE FLOOR, STAINLESS STEEL APPLIANCES. FAM. ROOM W/ WOOD FLOORS & FIREPLACE OPENS TO BACKYARD COVERED PATIO W/ BUILT-IN BBQ BAR AND BUBBLY SPA. FORMAL LR, FORMAL DR OPENS TO COURTYARD. WINE ROOM AND 1BR CASITA W/ BATH & PRIVATE ENTRANCE. CUSTOM WINDOW COVERINGS. MEDIA ROOM W/ BUILT-IN 89' TV. EACH SECONDARY BR W/ BATH SUMMIT ASSOC has POOL, SPA, PARKS, TRAILS"

I guess the big price reduction and the ALL CAPS didn't inspire many buyers...

I bet that 89' TV is cool (I suspect that is inches and not feet though.)

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If this were just a listing I was writing about, I would be wishing it a happy birthday. A full year on the market.

For any of you who don't want to break out your calculators, this is a sales price at $411 / SF in Turtle Ridge. This doesn't bode well for the argument that the high end is immune.Mushroom Cloud

This is a scenario we are going to see a lot of over the next few years: Homedebtors unable to sell because they are above the market, and unable to lower their price because they don't have the cash to buy their way out. They put the property on the market at breakeven and hope they get lucky. In the meantime, the carry costs destroy them, they stop making payments, they go into foreclosure, and in the end, their whole financial empire is obliterated in a crimson mushroom cloud.

Evict the Squatters

Someone asked me recently if we should feel sorry for people like this, as if they were victims of circumstance. No we shouldn't.

These people were victims of their own greed and ignorance. The circumstances which lead to this debacle were visible to those willing to see. Greed blinds people to the truth just like denial is blinding them now. There is an element of Shakespearian Tragedy to all of this, but at the root of every morality play is the idea that people are responsible for their own choices in life. These people are no less responsible for theirs.

The sad part, if there is one, is that these people were led to believe they could have this home in the first place. Obviously, they could not afford it, or they would still be there. A great many people in this market have set up a circumstance where they rent from the bank on temporary terms. Now, they are surprised when the bank evicts them. It was "their" house in their own minds. It was all one great illusion they set up for themselves (with some enabling from a lender.) It is a dream which has since turned into a nightmare.Squatter

In essence these people are all squatters. They are in possession of real estate they don't really own, and they are crowding out those of us who really could own. Real ownership requires an understanding of what you can and cannot afford. It requires financing terms which provide stability and security (Financially Conservative Home Financing.) Most homebuyers during the rally overlooked this simple fact. When someone is making less money than you are, and they take possession of property that is of superior quality to what you can obtain, they are crowding you out. They are squatting in your house. Would you feel bad evicting a squatter from your property? I don't think so.

Do I feel sad for these people? Sure. It is very sad when someone's dream evaporates into the ethers, but that is part of life. You deal with it, and you move on. I feel compassion for their plight, but it is tempered by the knowledge that they created their own circumstances, and in life, you have to accept the consequences of what you do whether you want to or not.

Squatters Cartoon

I would like to thank GavriloPrincip for providing the auction sales information in our forum.


Home Sales Data thru 7-30-2007

Aug 5th, 2007 by IrvineRenter 

Median sale price

Sales volume

ZIP

code

prev. 4 weeks

% change

from ’06

prev. 4 weeks

% change

from ’06

92602

$751,500

0.9%

24

-31.4%

92603

$981,250

7.4%

36

-28.0%

92604

$628,750

-3.8%

21

-22.2%

92606

$606,250

-21.8%

31

210.0%

92612

$855,000

46.2%

46

130.0%

92614

$555,000

3.3%

21

-30.0%

92618

$804,500

69.4%

18

38.5%

92620

$750,000

-20.2%

42

-42.3%

The bulls can find some confirming data points here. The action in 92612 and 92618 is very bullish. Whenever there is increasing price and increasing volume, things are looking up. Of course, this could be foreclosure sales of high-end properties (which would not be bullish), but the data shows bullish activity.

The rest of the market... not so much, particularly 92606 where a dramatic increase in sales volume at much lower prices signifies fire-sale pricing. This is very bearish.


Posted in News

Changing Loan Terms

Aug 4th, 2007 by IrvineRenter 

With the dramatic changes we have been witnessing in the lending arena, it was suggested in the forums that I link to an old analysis post which discussed the implications of what we are seeing in great detail. If you are new to this site, or if you need a refresher on what this change in loan terms is going to do to the housing market, I suggest you follow the links below.

2007-05-07 — Your Buyer’s Loan Terms – The precursor to The Anatomy of a Credit Bubble. It discusses house prices from the perspective of the future buyer of your home. It demonstrates the impact changes in loan terms will have on future buyers and how this will impact the amount your future buyer can bid for your home.


Posted in News

Blaze of Glory ** Final Update **

by IrvineRenter 

We have word that this property sold for $750,000. The realtor/seller paid a 2.5% buyers commission plus 4 months of holding costs and closing expenses. It looks like they got out with a $10,000 to $20,000 loss. It could have been much worse. They are lucky they got out when they did.

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Does anyone remember this knife-catcher? They bought in March and put the house back for sale for a quick profit. In May, they reduced the price to $769,000, and now they have reduced it again to $749,000. Rumor is that this is a realtor flip.

Glorieta KitchenGlorieta Kitchen

IrvineRenterOld Asking Price: $829,000

New Asking Price: $749,900

Purchase Price: $740,000

Purchase Date: 3/12/2007

Address: 11 Glorieta West, Irvine, CA 92620

Beds: 3
Baths: 2
Sq. Ft.*: 1,707
Lot Sq. Ft.*: 6,600Knife Catcher Award
Year Built: 1979
Stories: 1
Type: Single Family Residence
Neighborhood: Northwood
$/Sq. Ft.*: $486
MLS: S480860
Status: Active on market
On Redfin: 6 days

Redfin, Zillow

In the forum the question was raised, "I’m dying to understand why there is so much hostility to “flipping homes.”" This is why. Those who are still drinking the kool-aid believe this temporary softness in the market will be short lived, and we will soon return to annual double digit appreciation. Housing bears believe these people are falling into a bull trap.

Bubbles and Manias Conceptual Graph

Let's assume for a second the kool-aid crowd is right. If they are, potential homebuyers will not get any of the benefit of lower prices because flippers like this guy are going to come in and buy any property selling at a discount and pocket the difference. In other words, the savings that might have accrued to a homeowner is now going in to the pockets of a flipper. This behavior will continue until all the flippers get burned out of the market.

Blaze of Glory

So if the market crashes and these flippers go down in a blaze of glory, you will be the guy on the left being thanked by a desperate flipper for buying him out before he is consumed by the flames of his own greed.

**** UPDATE 1 ****

The price was just lowered, and our flipper wants out. Burn, baby, burn.

**** UPDATE 2 ****

Price reduced to $749,000.

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I wake up in the morning
And I raise my weary head
I got an old coat for a pillow
And the earth was last nights bed

Bon Jovi, Blaze of Glory


Posted in House Flips

Reunion Rollback

Aug 1st, 2007 by IrvineRenter 

Eddie MoneyI was listening to the radio
I heard a song reminded me of long ago
Back then I thought that things were never gonna change
It used to be that I never had to feel the pain
I know that things will never be the same now


I wanna go back
And do it all over again
But I can't go back I know

I Wanna Go Back -- Eddie Money

Link to Music Video

With all the rollbacks we are seeing in the market, do you think some of these homeowners would like to go back and do it all over again -- and perhaps make different choices? I imagine they are feeling the pain...

110 Reunion Front 110 Reunion Kitchen

Asking Price: $639,000IrvineRenter

Purchase Price: $622,500

Purchase Date: 11/23/2004

Address: 110 Reunion, Irvine, CA 92603

Beds: 3
Baths: 2.5
Sq. Ft.: 1,300
$/Sq. Ft.: $492
Lot Size: -
Year Built: 2005
Stories: 2Rollback
Type: Condominium
County: Orange
Neighborhood: Quail Hill
MLS#: S489036
Status: Active
On Redfin: 67 days

From Redfin, "Stylish ultra luxury detached residence in highly sought after Quail H ill development. Nestled in back of CDS - very safe & quiet! Loaded w/ model upgrades, this gorgeous residence will not stay on the market long! Great floorplan enhanced w/ hardwood flooring, recessed lighting + base & crown molding. Gourmet kitchen w/ granite countertops, splash & under cabinet lighting. Upstairs bedrooms & loft. Large master suite w/ walk-in closet & bath. Charming garden patio. Resort quality association."

Wow! Ultra luxury. Not just ordinary luxury, but ultra luxury... It must be on par with Burj Al Arab.

It won't stay on the market long -- only 67 days so far...

And, of course, another gourmet kitchen...

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This one is not technically a 2004 rollback, yet. The asking price is still above the purchase price, but with 67 days on the market, I highly suspect the final sales price (if there is one) will be under the purchase price. If they can get their asking price, they stand to lose $21,840 after a 6% commission.

86 Reunion Front 86 Reunion Kitchen

Asking Price: $679,900IrvineRenter

Purchase Price: $586,500

Purchase Date: 11/1/2004

Address: 86 Reunion, Irvine, CA 92603

Beds: 3
Baths: 2.5
Sq. Ft.: 1,300
$/Sq. Ft.: $523
Lot Size: -
Year Built: 2004
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Quail Hill
MLS#: S483874
Status: Active
On Redfin: 10 days

From Redfin, "Quality upgraded home with granite counter Tops, ceiling fans in each room, upgraded carpeting, hardwood floors throughout fist floor with 9 ft ceilings. Wood blinds, natural slate courtyard, recessed lighting, and more. Ample parking, walking distance to pools, schools, and shopping. Bright home in a very quiet surrounding. Lowest priced Sage plan 3 California Pacific Home."

fist floor?

umm... This isn't the lowest priced Sage plan 3. The unit profiled above is...

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This property is listed for a wishing price. 110 Reunion is an identical plan offered for $40,000 less. In short, they are at least $60,000 overpriced.

In a strong market, this seller might get their wishing price, but in a declining market, it is a race to the bottom. 110 Reunion is currently in the lead.


Posted in Price Rollback

2003 Rollback!

Jul 31st, 2007 by IrvineRenter 

News Flash

** AN IRVINE HOUSING BLOG NEWS FLASH **

A 2003 rollback has been sighted!

We interrupt our regularly scheduled sequence of properties in Quail Hill to bring you this special breaking story. An auction site has listed a property for sale at a price lower than its 2003 purchase price.

Is this a ploy to generate a bidding frenzy? Sure it is.

Will it sell for less than its 2003 purchase price? Who knows.

Is this auction site hoping the Irvine Housing Blog will call attention to their listing? Power To The People. Always glad to be of service...

1400 Terra Bella Front 1404 Terra Bella Inside

Asking Price: $400,000IrvineRenter

Purchase Price: $415,000

Purchase Date: 12/2/2003

Address: 1404 Terra Bella, Irvine, CA 92602

Beds: 2
Baths: 2.5
Sq. Ft.: 1,327
$/Sq. Ft.: $301
Lot Size: -
Year Built: 2001
Stories: 2Rollback
Type: Condominium
View: Mountain
County: Orange
Neighborhood: Northpark
MLS#: S494809
Status: Active
On Redfin: 30 days

From Redfin, "This is a fabulous Tuscan Villa with upgrades galore. This warm and inviting home is bright with extra windows and faces the morning sun. Ceramic tile flooring, Euro White Cabinets, Window Blinds and shutters, Neutral designer carpet with a security system can all be yours! This is a private end unit with no one above or below."

Link to Auction site The auction is today, so there is still time if you want to buy it... Not.

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The property records from my data source shows a first mortgage for $331,840 and no second. There must be more to this story for it to be going at auction.

If this sells for asking price, and the auctioneer takes a 10% commission (that is their fee), the seller will recognize a loss of $55,000 on a 2003 purchase.

What more needs to be said...

How about Jim Cramer's take on the housing market...

Jim Cramer in October 2006.

Jim Cramer in July 2007.

What a difference nine months makes...

Rollback

So long sad times
Go long bad times
We are rid of you at last

Howdy gay times
Cloudy gray times

You are now a thing of the past

Happy days are here again
The skies above are clear again
So let's sing a song of cheer again
Happy days are here again

Happy Days are Here Again - Music and Lyrics by J. Yellen and M. Ager

Youtube link Barbra Streisand - Happy Days Are Here Again

A special thanks to mk9 for posting this property in our forum.


Posted in News Price Rollback
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