Irvine Housing Blog

Home Sales Data thru 6-12-2007

Congratulations to 92614 for dipping under the $500,000 mark!

What do you see?

Letter from a Reader

Whenever I read Calculated Risk's blog, besides being impressed with a man who is much smarter than I am, I am always struck by the fact I am getting his opinion at all. Everyone has an opinion, but some opinions are better than others. The opinions at Calculated Risk should be paid for as consultancy, but he offers them up free-of-charge as a public service.

Aren't blogs great?

One of the great things about blogs is that it gives an outlet for ideas which would never have seen the light of day years ago. There are many people who saw this crash coming (see letter below), just like there were probably many people who saw the last one coming as well. In the past, there was no forum to get this information into the public realm. The National Association of Realtors through their advertising clout used to controlled the flow of information regarding the housing market: Not anymore.

I receive email from many people asking me about my opinions on the market or whatever. I thought this one was interesting, so I thought I would share it will all of you.

To keep everyone anonymous, I have edited the letter wherever you see parenthesis.
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Hi,

My wife and I really love your blog. She accurately accuses me of being a dung-sniffer with my sometimes negative views, but the housing market collapse was something we both saw coming.

We bailed out of Woodbridge in April 2004. I cant tell you how many of my Irvine friends told me then, and still tell me, that I was crazy to think that house prices could drop--level off possibly--but NEVER drop. I have even been bad-mouthed by someone that took my advice to sell a condo that they were moving up from in 2005 rather that keep it. I would have never imagined the lunacy of lenders and buyers to begin signing up for caustic loans beginning that year, further driving up prices.

I guess I don't share the same sentiments as some of your readers regarding home sellers. I don't have any charity towards the flippers and I see them as losers who happened to discover a way to make a quick buck with little risk. These are not real business men who have a lot at stake. I think the majority of them will, or would have, just walked away from any losses regardless of what promises they made. On the other hand I don't rejoice in another's misfortune even when they bring it on themselves, much like the speeding motorist getting ticketed on the roadside..unless his behavior is reckless to others.

While I am shocked that people will not educate themselves at all when it comes to the biggest investment they will ever make, and instead just listen to that NAR propaganda, I still feel sorry for them..maybe because they are stupid?

The main reason for writing you today is to point out 2 very different types of sellers. I know both of these people, they live on the same street in Woodbridge.

The first bought in 1997 and has his house listed at a 2005 price. The house is in great shape, but still it sits. Unless there is a HELOC he wont get hurt.

The other one is a guy ( with family) that moved to Irvine in 2003 for the schools. They sold their house (elsewhere) and rented in Irvine, he asked my advice back then and I told him to keep renting. He would periodically ask me the same question and I gave him the same answer..rent. One year after we moved they must have bought into the belief that trees grow to the sky and bought with no down payment..something I would have never imagined for someone who is (smart) and very conservative. I guess he found out that the $5.5k/mo payment is too much and listed it last month with an out of area agent for $60k more than he paid. Not a knife catcher, this poor guy just keeps taking bad advice from realtors and it will eventually cost him everything.

Do I offer any advice now? Heck no! Been stabbed in the back already. What would I tell them? #1 needs to drop his price $100k, dump the agent who is not spending any money on marketing, list it on the MLS, Craigslist, YouTube, WWW, and offer a 5% commission to the buyers agent. And the $100k is only if he would have done it 2 months ago. Next spring it will be >$150k.

#2...uh well. I am torn since I feel bankruptcy is a license to steal. He will take a $200-$250k hit on this place due in part to condition. The first thing he needs to do is to contact the 2nd mortgage holder and tell them he will be bringing them some short sale offers, then do all of the above with at $225k price reduction....then pray! Alternatively he can just mail in the keys.

I feel really bad for #2 and I think I could help #1, These are both good friends. What would you advise?

Once again I enjoy keeping tabs on the market down there and I really get a kick out of the wit you and your readers often post. Most of all I like the feeling of vindication I get from your blog.

Thanks

(anonymous)

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I replied:

Thank you for writing. It is comments and emails like yours that keep me going. If you didn't see it, I think you might enjoy The Reservoir of Schadenfreude, you are not alone in your frustration with advising people who refuse to see the obvious.

I think the course of action you advised these would be sellers is right on. Perhaps the only thing I might add is to tell them to come read the analysis posts on our blog to help them feel comfortable with what you are telling them. Sometimes when people read something from a disinterested third party, it carries more weight, and some people just need a bit more convincing that the market is going to crash.

Beyond that, I would just offer up your advice when asked, and avoid the topic otherwise. You can only lead a horse to water...

Birds of a Feather

Birds of a Feather Flock Together, or so the saying goes. In Woodbridge, crazy asking prices are where the birds roost -- 2 Mallard and 30 Bluejay.

Asking Price: $1,299,900

Purchase Price: $875,000

Purchase Date: 10/21/2005

Address: 2 Mallard, Irvine, CA 92604

Beds: 4
Baths: 2
Sq. Ft.: 2,077
Lot Sq. Ft.: 7,150
Year Built: 1976
Stories: 1
Type: Single Family Residence
View: Park or Green Belt
County: Orange
Neighborhood: Woodbridge
$/Sq. Ft.: $626
MLS#: S491397
Status: Active on market
On Redfin: 19 days

From Redfin, "MOST BEAUTIFUL & UPGRADED SINGLE STORY HOME EVER, COMPLETE REMODEL CUS TOM KITCHEN, BATHS, BEDROOMS, YARD, ON ONE OF WOODBRIDGES'S PREMIER STREETS, SELLER SPENT $300,000 IN IMPROVEMENTS. ONE OF A KIND LOCATION. ACROSS FROM ARBOR PARK, STEPS TO LAGOON."

Do realtor's keyboards have the caps lock jammed? And who writes this stuff:

"The most beautiful... ever?" Never ever in the history of mankind has a better home been built? Wow! I have to see this one... Not.

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$626 per square foot in Woodbridge? There are only two other homes I could find asking more than $600 / SF: a previous WTF winner Melodylane, or Out-of-Tune? and 55 Lakefront which is actually on the lake (Not that it is worth the price, but at least you can make the case). This house is not on the lake, and is, in fact, adjacent to some condos -- not a strong selling point. The renovation is well done, and the house is beautiful inside. With the improvements, perhaps this seller will get out at the $875,000 he paid for it. As for the improvements; well, I hope he has enjoyed them...

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Asking Price: $829,000

Purchase Price: $433,500

Purchase Date: 11/4/2002

Address: 30 Bluejay, Irvine, CA 92604

Beds: 3
Baths: 2
Sq. Ft.: 1,549
Year Built: 1976
Stories: 1
Type: Single Family Residence
County: Orange
Neighborhood: Woodbridge
$/Sq. Ft.: $535
MLS#: S489221
Status: Active on market
On Redfin: 34 days

From Redfin, "Newly remodeled and decorated patio home. Custom mouldings, windows, l ighting and hardwood flooring. New concrete roof, heating and air conditioning. Beautiful kitchen and master bath. Newly landscaped yard with barbeque. "

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This seller obviously did not get the memo on the state of the market. It takes a lot of denial to believe your house doubled in value since late 2002. Why would you buy this small 3/2 for $829,000 when you could go down the street to 10 Bluejay and get a large 4/3 for $839,000? Realistically, this house could sell today for $350 / SF which would put it at around $550,000. This would get the seller out with a small profit after commissions. The price will do nothing but drop from there. A year or two from now, this seller probably will be underwater.

If you were this seller, do you sell now and take a small profit, or do you hold on and wait for the market to provide your asking price? I suppose it depends on whether you want to sell in 2007 or in 2027.

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I hope you have enjoyed Woodbridge Week. Come back next week when I will profile... Oh, I don't know, I will figure it out this weekend. So many properties, so little time...

Leaves of Grass

A Promise to California

A PROMISE to California,
Or inland to the great pastoral Plains, and on to Puget sound and Oregon;
Sojourning east a while longer, soon I travel toward you, to remain,
to teach robust American love,
For I know very well that I and robust love belong among you,
inland, and along the Western sea;
For these States tend inland and toward the Western sea, and I will also.

Walt Whitman - Leaves of Grass

The dream of riches in California real estate is a Siren's Song to many with a robust love of money. Unfortunately for the rollbacks I am featuring today -- 3 Woodleaf and 28 Meadowgrass -- the lure of easy money caused them to crash on the rocks.

Asking Price: $449,900

Purchase Price: $469,000

Purchase Date: 10/24/2005

Address: 3 Woodleaf, Irvine, CA 92604

Beds: 2
Baths: 2
Sq. Ft.: 1,140
Year Built: 1982
Stories: 1
Type: Condominium

View: Trees/Woods
County: Orange
Neighborhood: Woodbridge
$/Sq. Ft.: $395
MLS#: M104975
Status: Active on market
On Redfin: 161 days
Unsold in 90+ days

From Redfin, "Upper End Unit - Tree Views - Newer Carpet, Tile Floor, Microwave & In terior Paint, Plantation Shutters - Shows Like A Model Truly Turnkey - Large Rooms - 2 Master Suites - Close To Schools, Shopping & Freeways - Lake - Pool & Spa - Very Clean & Bright - Scraped Ceilings - Mirrored Wardrobes - Storage Area -"

Tree views? So now if you have a tree out your window, you have a view? What next, air views?

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In the post, Wish Upon a Fallingstar, we showed comps for condos like this are going for $400,000 or less. This is about $50,000 overpriced if they really want to sell it. That fact aside, if they somehow manage to get their asking price, they still stand to lose $46,094 assuming a 6% commission. I am estimating this loss will be closer to $100,000 by the time they sell it. Losing $50,000 to $100,000 on a condo for which the seller paid less than $500,000 is a huge loss.

Asking Price: $710,000

Purchase Price: $730,000

Purchase Date: 4/29/2005

Address: 28 Meadowgrass, Irvine, CA 92604

Beds: 3
Baths: 2
Sq. Ft.: 1,545
Lot Sq. Ft.: 4,512
Year Built: 1977
Stories: 1
Type: Single Family Residence
County: Orange
Neighborhood: Woodbridge
$/Sq. Ft.: $460
MLS#: S486737
Status: Active on market
On Redfin: 51 days

From Redfin, "Nestled in the prestigious Woodbridge community and steps to the Stone Creek Swim Club, this home is upgraded throughout. Brazilian cherrywood floors highlight the open floor plan that includes separate dining and huge family room, breakfast nook, atrium, and step-down sitting area with cozy fireplace. Gourmet kitchen includes granite counters, recessed lighting and stainless steel appliances. Large professionally landscaped yard with slate patio, raised planters, and sculptured vegetation. "

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We saw a good comparable for this property in Woodbridge Knife-Catchers. 52 Shearwater, Irvine, CA 92604 sold on 3/29/2007 for $629,000. What chance does this seller have of getting $710? Again, even if this sells for asking price, the seller still stands to lose $62,600 after commissions. I am estimating the ultimate loss to be closer to $150,000 based on the recent comp sale.

As you can plainly see, we are rolling back all of 2005 and we are now back into 2004 pricing. Personally, I am amazed at how fast this is happening. Real estate markets usually do not collapse this quickly. Don't look at the wishing prices, pay attention to the transactions. This market is deteriorating fast.

Woodbridge Knife-Catchers

Apparently there are still people in Woodbridge who didn't read Monday's post Houses Should Not Be a Commodity. There are four knife-catchers I found while looking through the MLS listings on Redfin. There may be more.

One thing that puzzles me is the lack of pictures. You would think people trying to make a quick $100K would at least take some pictures of the properties they are peddling.

Asking Price: $535,500

Purchase Price: $500,000

Purchase Date: 12/14/2006

Address: 1 Cedarglen #29, Irvine, CA 92604

Beds: 3
Baths: 1.5
Sq. Ft.: 1,123
Year Built: 1976
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Woodbridge
$/Sq. Ft.: $477
MLS#: S470156
Status: Active on market
On Redfin: 173 days
Unsold in 90+ days

From Redfin, "EXTREME HOME MAKEOVER. End unit townhome with extra windows and easy access to parking in the heart of Woodbridge. Private corner with nice size rear yard. Laminate wood flooring throughout. Near shopping, restaurants, theaters and North Lake with it's pools, tennis and much more. Rehab includes new heat and a/c"

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I call BS on the "EXTREME HOME MAKEOVER;" unless, of course, you like the color pink...

At 173 days on the market, I don't think the renovation was as successful as this knife-catcher had hoped.

Knife Catcher #2:

Asking Price: $740,000

Purchase Price: $629,000

Purchase Date: 3/29/2007

Address: 52 Shearwater, Irvine, CA 92604

Beds: 3
Baths: 2
Sq. Ft.: 1,448
Lot Sq. Ft.: 3,994
Year Built: 1979
Stories: 1
Type: Single Family Residence
County: Orange
Neighborhood: Woodbridge
$/Sq. Ft.: $511
MLS#: S489742
Status: Active on market
On Redfin: 25 days

From Redfin, "Beautifully remodeled single story detached home located at the end of a cul-de-sac that features scraped ceilings, new sliding glass door leading to a patio area with a relaxing fountain and newly fenced private yard. New recessed lighting, new neutral paint, carpet, tile flooring, custom closet organizers, remodeled granite countertop kitchen with new appliances, updated bathrooms. Newer roof, new garage door, all new double pane tinted windows!! Lots and lots of new."

I didn't realize "new" was an object one could have lots of...

Here is another would-be commodity trader who just signed up to be a bagholder. I have to give all these knife-catchers respect for having courage; of course, I imagine that respect won't mean much to them in bankruptcy court.

Knife Catcher #3:

Asking Price: $599,900

Purchase Price: $490,100

Purchase Date: 4/30/2007

Address: 17 Seawind, Irvine, CA 92604

Beds: 2
Baths: 2
Sq. Ft.: 1,058
Year Built: 1984
Stories: 1
Type: Condominium
County: Orange
Neighborhood: Woodbridge
$/Sq. Ft.: $567
MLS#: P579402
Status: Active on market
On Redfin: 30 days

From Redfin, "Beautifully upgraded home in Woodbridge near the lake. Highly upgraded with hardwood floor thru entire house, tile floor in the bathroom, granite counter top, crown & base moulding, just painted, private spa in the backyard. Walk to lake, park, and lots lots more!!"

IMO, this is also a WTF award candidate. This buyer overpaid for what they have, and now they think they can turn around and sell it for $100,000 more. This unit does not see the lake, it isn't on a park, it is a nondescript, tiny tract home in the middle of Woodbridge -- for sale in a declining market. WTF is this seller thinking? This is a perfect example of the "buy and hope" strategy of the truly foolish speculator. This knife-catcher will really bleed.

If you don't think this seller overpaid, compare it to the listing below.

And finally, a knife catcher of a different sort -- bank real estate owned (REO):

Asking Price: $394,500

Purchase Price: $423,597

Purchase Date: 4/30/2007

Address: 87 Firwood #42, Irvine, CA 92604

Beds: 3
Baths: 2
Sq. Ft.: 1,150
Year Built: 1978
Stories: 1
Type: Condominium
County: Orange
Neighborhood: Woodbridge
$/Sq. Ft.: $343
MLS#: U7002379
Status: Active on market
On Redfin: 19 days

From Redfin, "OUTSTANDING LOCATION IN THE CITY OF IRVINE. THIS IS WOODBRIDGE! THE UN IT FEATURES THREE BEDROOMS AND TWO BATHROOMS. ASSOCIATION POOL AND SPA. OUTSTANDING SCHOOLS. CLOSE TO SHOPPING, TRANSPORTATION, ENTERTAINENT AND EMPLOYMENT. DO NOT MIS THIS ONE, THIS IS ONE OF THE BEST VALUES IN THE CITY! SUBJECT IS SOLD 'AS-IS' AND 'WHERE-IS' WITHOUT WARRANTY."

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This looks like a bank property as they tend to put the "as-is" statement in their listings. Did you notice the price? A 3/2 under $400,000 in Woodbridge. Now that is a comp killer.

It is easy to get angry over the behavior of the commodity-trading knife-catchers. If they were not a fixture of the real estate market, some family might have been able to buy one of these homes at a better price. The time to be angry at these flippers is past, for the next several years we can simply enjoy the schadenfreude as these Donald Trumps are going to get their comeuppance. I don't think any of us will be sad to see it happen.

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