Sometimes you come across a listing where something just isn't right.
Redfin Asking Price: $999,000
Zip Realty Asking Price: $1,213,000
Purchase Price: $1,300,000
Purchase Date: 10/31/2006
Address: 11 Santa Rida, Irvine, CA 92606
Beds: 5
Baths: 3
Sq. Ft.: 2,420
$/Sq. Ft.: $413
Lot Size: -
Year Built: 1997
Stories: 2
Type: Single Family Residence
County: Orange
Neighborhood: Westpark
MLS#: P582566
Status: Active
On Redfin: 33 days
From Redfin, "Rare opportunity for those Buyers with no credit. This beautiful home on a quiet cul-de-sac shows better than a model home. Mr. clean lives here, great marble flooring, too many upgrades to mention. no need to preview. "
There are two statements in this description that are setting off alarms in my head.
- Rare opportunity for those Buyers with no credit.
- no need to preview.
How does someone with no credit afford a $999,999 home? My first thought is this must be a fraud scam, but when you see a $300,001 loss based on asking price, that scenario makes no sense. Perhaps the price is a teaser to generate interest and if they find a straw buyer the purchase price will suddenly be raised $500,000?
No need to preview? Is this a realtor note trying to assure another realtor of the quality? Wouldn't a realtor want to preview it anyway (or are they that lazy?) If you were the realtor, and you had this great listing, wouldn't you want everyone to see it to generate excitement and hopefully a sale? If this is a note to a potential buyer, I would be very worried. What is it they don't want me to see? Why no pictures after 30 days? Is there something to hide?
Why the quick sale? This seller just purchased the property 8 months ago. I would consider them a flipper or knife-catcher if they were trying to sell at a profit, but they are looking at a big loss. What is going on?
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Let's assume for a moment this is a legitimate listing. If so, this seller is going to lose a huge sum of money. At current asking price minus a 6% commission, this seller will lose $ 360,940. Ouch!
I guess Mr. Clean wanted to clean out his bank account. He won't be doing any favors for the other sellers in Westpark. This is another comp killer.
Part of the bearish argument for a dramatic drop in prices is predicated on an infusion of "must sell" inventory to the housing market. Sellers won't sell at a loss unless they have no choice. This is why prices generally are sticky in a housing market decline.
Foreclosures and short sales are by their nature must-sell inventory. For this must-sell inventory to be forced onto the market people must be unable or unwilling to make the payments on their mortgage. The "unable" part will come from reseting ARMs with higher interest rates; the "unwilling" part will come from people walking away from 100% financing deals when market prices do not continue to rise.
It is this latter category of unwilling homedebtors that is unusual in this market. In previous bubbles, lenders were not so stupid as to offer 100% financing, so there were not as many people who utilized "jingle mail" as they went underwater. It is my opinion that jingle mail will be epidemic as this bubble unwinds.
Today's property is a typical short sale. The seller overpaid with 100% financing and now is going to walk away.
Asking Price: $390,000
Purchase Price: $410,000
Purchase Date: 3/20/2006
Prior Purchase or Refi: 10/17/2005 -- $405,000
Prior Purchase or Refi: 6/3/2005 -- $395,000
Address: 10 Van Buren, Irvine, CA 92620
Beds: 2
Baths: 2
Sq. Ft.: -
Lot Size: -
Year Built: 1987
Stories: 1
Type: Condominium
County: Orange
Neighborhood: Northwood
MLS#: P579283
Status: Active
On Redfin: 53 days
From Redfin, "Lower Unit w/ Front Patio. 2 Bedroom, 2 Bath CONDO. Great Opportunity for First Time Buyers. This is a SHORT-SALE. Sales Price, Terms, Conditions Subjet To Lenders approval of Short Sale. Very clean Unit includes, Range, Microwave, Dishwasher."
Did you spot the misspelled word?
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The bank is going to lose money. Depending on how much commission they pay (they don't like to pay 6%) and how much more this unit is discounted, they stand to lose between $20,000 and $80,000. I would guess it will be closer to the bigger number.
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(I GOT SPURS) JINGLE JANGLE JINGLE
Kay Kyser
- words by Frank Loesser, music by Joseph J. Lilley
I got keys that jingle, jangle, jingle
As I go ridin' merrily along
And they sing, "Oh, ain't you glad you're single"
And that song ain't so very far from wrong
Link to amateur singing Jingle Jangle Jingle
Finding a loser in the Collage complex in Northwood is like finding trees in the forest: wherever you look, you find more. Zovall has profiled this place on a number of occasions:
- Collage - Northwood - The second casualty in this complex,
- Collage - Northwood, We’ve got a WINNER! - UPDATE #3,
- Buy 1 bedroom and get a second for free (or almost)!
It is always nice to start off the week with a rollback well off its 2004 purchase price. Will we be seeing 2003 soon?
Prices are falling -- Timberrrrr...
Asking Price: $440,000
Purchase Price: $474,000
Purchase Date: 8/27/2004
Address: 1520 Timberwood, Irvine, CA 92620
Beds: 2
Baths: 1
Sq. Ft.: 1,270
$/Sq. Ft.: $346
Lot Size: -
Year Built: 2001
Stories: 3
Type: Condominium
View: Peek-A-Boo
County: Orange
Neighborhood: Northwood
MLS#: S486596
Status: Active
On Redfin: 70 days
Fixer-upper
From Redfin, "This is just a great location and beautiful complex! Your client will thank you for your hard work, their gain. Property needs TLC! Carpet and paint is all it takes. Large dog on premises"
"Your client will thank you for your hard work, their gain." What is that about? Is this a realtor talking to another realtor? Why will their client gain from buying a run down condo? Are they implying the price is so low that it is a bargain? Are they trying to find a knife catcher? If it is a true fixer-upper I suspect it needs more than just carpet and paint.
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Perhaps this was purchased as a specu-vestment. The owner either trashed the place himself or put a renter in there who trashed the place for him. Given that he utilized 100% financing, he probably doesn't care. The bank can clean up his mess. Whatever the case, if this seller gets full asking price, either he or the bank stands to lose $60,400 on a property purchased in 2004.
Keep on rollin' those prices back...
Rollin' Rollin' Rollin'
Keep movin', movin', movin',
Though they're disapprovin',
Keep them doggies movin' Rawhide!
Link to Blues Brothers performing Rawhide.
The valuation of land used for residential housing is mysterious and often misunderstood. The purpose of this post is to explain how residential land is valued. Once the forces governing land value are understood, it becomes obvious why the Irvine Company is so protective of house prices in Irvine, and why the Irvine Company wants to maximize salable density on its land holdings.
The equations which govern the valuations of large parcels are very similar those which determine the value of an individual lot; therefore, to better understand the valuation of large parcels, one should fully understand how to evaluate an individual lot.
Individual Lots
The market value of a individual lot is equal to the revenue it could generate minus the cost of creating that revenue. Sounds simple enough, but what is the potential revenue and what are the costs?
Sales revenue will largely be determined by what can be built on the lot and how much that house would sell for in the market. The dimensions of the lot, building codes, and the local zoning ordinances will all create constraints on what can be built. Most often there will be some variety in choices available to construct on a given lot. Each of these options will have a potential revenue and an estimated cost. The combination which yields the greatest profit is the product that should be built.
Imagine a 6,000 Square Foot lot that is 60' wide by 100' deep. A typical lot such as this would have a front setback of 20', side setbacks of 5', and a rear setback of 30' leaving a 50' wide by 50' deep envelope for the house foundation. This site could comfortably accommodate a 2,000 SF house (some area is lost by not making the house a perfect rectangle.) For the sake of making the calculations easy, let's say this house could sell for $1,000,000 (peak prices).
An individual speculator would be paying retail prices for house construction. This would be upwards of $150 SF. The cost of construction would be around $300,000 (2000 * 150 = $300,000.) There would be a 6% sales commission (1,000,000 * 0.06 = $60,000), plus financing costs, overhead costs, and other miscellaneous costs which will add up to about 10% of the project cost (1,000,000 * 0.1 = $100,000.)
Therefore, your revenue minus expenses would be $1,000,000 - $60,000 - $100,000 - $300,000 = $540,000. This is how much money would be available to pay for a lot at the breakeven point. Since a speculator would want to make a profit, the lot is discounted from $540,000 until an amount is reached to compensate for the risk and the headaches that go along with the project.
Perhaps the speculator would want to make $120,000 (approximately 12% of sales price) in order to do this work? If so, the speculator would be able to offer $420,000 ($540,000 - $120,000 = $420,000) for the lot. If they are the highest bidder, they get the lot, and the project is theirs. (BTW, this same basic calculation also works for tear-down projects -- often called "scrapers.")
Multiple Lots
Production homebuilders control the price of larger parcels with multiple lots because they can bid higher than individuals and still make a healthy profit (and they have the larger sums required to complete the purchase). They have a much lower construction cost than any individual because they are geared up for mass production. They have the buying power to squeeze costs down far lower than any individual working on their own or with a custom home builder. Production builders costs in today's market average around $85 SF.
A note about the numbers: Part of the process when you sell a large parcel to a production homebuilder is to come to an agreement as to the costs to complete the infrastructure of the project. In order to facilitate this negotiation, both parties often turn to a neutral third party to establish costs. In Southern California, many cost estimates are handled by Developers Research. A real cost estimate is much more detailed than what I am presenting in this post, but the numbers are reflective of a typical situation. As for the builders cost structure, this comes from my experience from sitting on both sides of the table at different points in my career and another source whom unfortunately I can't reveal because it would give away my identity.
So let's look at how a production builder would analyze a 100-lot subdivision in which they believe they can sell homes for an average of $1,000,000 per unit.
$1,000,000 Sales Price
Fixed Costs
2,000 Average Square Footage
X
$85.00 Average Cost Per SF
===================================
$170,000 Average "Box" Cost
+
$40,000 Average Per lot Infrastructure Cost
===================================
$210,000 Total Average Fixed Construction Costs
Variable Costs
* 12% Profit
* 5% Marketing
* 3% Overhead
* 5% Finance
* 3% Other
===================================
28% Variable Costs Percentage
$280,000 Variable Costs Dollars
===================================
$490,000 Total Costs (Fixed Costs + Variable Costs)
$510,000 Land Residual (Finished Lot Value)
X
100 Number of Lots
===================================
$51,000,000 Finished Lot Land Value
The production builder can pay more for each lot because of their advantage in construction costs. Noticed the very large dollar amount builders were paying for finished lots during the peak of the bubble. Lately many of the builders have been taking "impairment" write-offs. Basically, they are admitting they over paid for land, and the asset on their books is not worth what they paid for it. Later in this post, we will examine the sensitivity of land price to changes in house price, and we will see why the homebuilders have been taking such huge hits to their balance sheets.
Land Price as a Residual Value
As you may have noted above, the value of a piece of land is whatever is "left over" after all the other costs of production are subtracted from revenue. This is a key point. If revenue increases -- like in a bubble -- the value of land increases; however, it revenue decreases -- like after a bubble -- the value of land decreases. If production costs increase, the value of land decreases, and visa versa.
The value of a piece of land used for residential housing is directly tied to the revenues and costs of production homebuilders.
Density and the Value of an Acre of Land
A builder is going to bid for the land based on the number of units. They don't care if this is on a single acre or on a thousand acres: Builders pay for lots, not land. Therefore, if you are a seller of land -- like the Irvine Company -- you want to maximize salable density. In other words, you want to get the highest number of units per acre that you possibly can sell.
Once this point is understood, it becomes obvious why the Irvine Company is constantly trying to innovate with its high-density product, and why the density keeps increasing as they go along.
House Price and the Value of an Acre of Land
To fully understand why the Irvine Company is obsessed with maintaining high home prices, an understanding of how changes in home prices impact the value of land is required. Examine the above equation carefully, and notice that the variable costs are only 28% of the total.
This is another very important point: Land value is very sensitive to changes in house prices.
How sensitive? Let's take a look at an example to which we can all relate: Irvine's Woodbury.
Woodbury
Woodbury is one of the Irvine Companies newest communities. It is listed as 4,270 units. As this Village is constructed on a 1 mile square, it sits on 640 acres for a density of 6.67 dwelling units per acre (DU/AC).
Based on the equation above, we can estimate the total land value of the residential portion of the Woodbury Village:
$650,000 Sales Price
Fixed Costs
2,000 Average Square Footage
X
$85.00 Average Cost Per SF
===================================
$170,000 Average "Box" Cost
+
$40,000 Average Per lot Infrastructure Cost
===================================
$210,000 Average Fixed Construction Costs
Variable Costs
* 12% Profit
* 5% Marketing
* 3% Overhead
* 5% Finance
* 3% Other
===================================
28% Variable Costs Percentage
$182,000 Variable Costs Dollars
===================================
$392,000 Total Costs (Fixed Costs + Variable Costs)
$258,000 Land Residual (Finished Lot Value)
X
4,270 Number of Lots
===================================
$1,101,660,000 Finished Lot Land Value
$1.1 Billion dollars worth of land -- that is Billion with a "B." If the Irvine Company can build out this village for an average home sales price of $650,000, that is how much they stand to make (their land cost is almost zero).
Now lets look at another scenario: the housing bubble crash scenario:
$325,000 Sales Price (50% decline)
Fixed Costs
2,000 Average Square Footage
x
$85.00 Average Cost Per SF
===================================
$170,000 Average "Box" Cost
+
$40,000 Average Per lot Infrastructure Cost
===================================
$210,000 Average Fixed Construction Costs
Variable Costs
* 12% Profit
* 5% Marketing
* 3% Overhead
* 5% Finance
* 3% Other
===================================
28% Variable Costs Percentage
$91,000 Variable Costs Dollars
===================================
$301,000 Total Costs (Fixed Costs + Variable Costs)
$24,000 Land Residual (Finished Lot Value)
X
4270 Number of Lots
===================================
$102,480,000 Finished Lot Land Value
$102 Million dollars worth of land -- That is million with an "M."
Is that right? Does a 50% reduction in home prices really reduce the land value 90%?
Yes, it does.
Can you see why the Irvine Company is so protective of home prices?
Why is land value so sensitive to home prices?
As discussed previously, variable costs are only 28% of the home sales price. Remember, land value is a residual calculation, that means everything which isn't a cost falls to land value.
Therefore, 72% of any increase or decrease in the price of a home flows directly to land value.
In essence, this makes land an extremely leveraged commodity. If the value of a house changes by $10,000, the value of the lot it sits on changes $7,200. Multiply that times the 6.67 units per acre, and you can see how each $10,000 change in the value of a house changes the value of an acre of land in Woodbury by $48,024. Since Woodbury sits on 640 acres, the total value of Woodbury changes by $30,735,360 for each $10,000 change in the sales price of a home. (If you want to see a really mind-blowing number compute this for all the land in the Irvine Company's holdings.)
The Irvine Company will capitulate.
In the end, the Irvine Company will lose its battle to prop up the market. They don't control the market, they only control the "ask." Potential buyers determine the "bid." If the bids don't reach the ask, there is no sale (which is what is happening in Portola Springs.) If there are no sales, the Irvine Company has no revenue, and without revenue, they will cease to exist. They have more holding power than most organizations, which is why The Irvine Company has not been cutting prices and offering incentives like all the homebuilders, but the Irvine Company still must sell its holdings in order to survive. If they didn't, they could just decide all houses in Irvine must sell for $10,000,000. In 300 years when those prices may be reasonable, they will start selling homes again. Do you see the absurdity of the Irvine Company holding to peak prices forever?
Conclusion
This is my world: I work for a company that develops raw land. The people who were actively investing in land development during the bubble made more money than you can possibly imagine. The extreme sensitivity of these investments to changes in home sales price resulted in properties obtaining sales multiples of 10 times or greater in just a few years.
As an example, I did some consulting work on a property in 2003 which was purchased by a land developer as raw, unentitled land for $2.4 million dollars cash. When they received their entitlements in 2005, they sold the land in three phases to a production builder for a total of $100 million dollars (4x for the entitlements and 10x for the bubble rally.)
If you thought the bubble rally was a good time to be a homeowner or a homebuilder, you were missing out on where the real action was: land development.
Let's see: prices are up where volume is way down, prices are down where volume is way up, and 92618 is having a massive price rally. Wait a minute. Didn't we just profile 92618 last week and show many examples of lower prices? Why is the median up 41%?
Do you see how a few sales can skew the median and make it look high when prices are dropping?
Huge price reduction from $935,000 to $799,950! Short sale? Bank repo? Who cares? That is a huge price drop. At the current price, the house is selling for $254.77 per square foot. That is a new low in Irvine as far as I know.
Old Asking Price: $935,000
New Asking Price: $799,950
Purchase Price: $925,000
Purchase Date: 11/03/2006
Address: 32 Choate, Irvine, CA 92620
Beds: 5
Baths: 3
Sq. Ft.: 3,140
Lot Sq. Ft.: 5,188
Year Built: 1978
Stories: 2
Type: Single Family Residence
County: Orange
Neighborhood: Northwood
$/Sq. Ft.: $298
MLS#: F1710198
Status: Active on market
On Redfin: 27 days
Sale Price $925,000
1st Loan $740,000
2nd Mtg. $185,000
100% Financing
Lender Fremont Invs / Ln
From Redfin, "5+3+ Bonus Room, Master w/ retreat; fireplace; walk-in closet; huge bath Tiled roof Fireplace in family room Wood flooring in family room Tile floor in living room, formal dining & kitchen Landscaped backyard w/ jacuzzi."
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This must have seemed like a no-brainer: A Northwood house for less than $300/SF. As a flipper, how could you go wrong?
First, you could do nothing to improve the property and rely on your low purchase price to make your money. Second, you could take the marketing pictures with your cell phone camera so your property can look like as undesirable as possible. And third, you could completely ignore the market collapsing around you, drink some kool-aid, and believe the next selling season will bring you riches.
But why not? It is 100% financing, and you can always make the bank eat your losses, right?
The Aldea tract built was by California Pacific Homes. It is located at the corner of Valley Oak Drive and Barranca Parkway. We have featured this tract on other occasions: Aldea - Oak Creek Detached Condo and Aldea - Oak Creek Detached Condo - UPDATE #1.
There are a number of properties for sale in this neighborhood, and one distressed seller who is going to lose a lot of money.
Asking Price: $600,000
Purchase Price: $605,000
Purchase Date: 7/29/2005
Address: 9 Alevera, Irvine, CA 92618
Beds: 2
Baths: 2.5
Sq. Ft.: 1,030
$/Sq. Ft.: $583
Lot Size: -
Year Built: 2003
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S489605
Status: Active
On Redfin: 46 days
From Redfin, "California Pacific Former MODEL Plan 1.Each bedroom is a nice size sui te w/ its own full bath. UPGRADES GALORE * * * Includes 400 Sqft. Enclosed Outdoor Living Structure w/ Integrated Speaker System, Ceiling fan, Cable TV and Outomated Irrig. System. Corian Kitchen Counters, Stainless Steal GE Appliances, Walk-in Pantry, Build-in Audio System, Upgraded Flooring, Euro Style Custom Buld-ins Living Room & Both Bedrooms, Custom Paint & Wall Paper, Custom Brick Wall in Living Room * * * Resort Style Living++"
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I guess we are moving away from exclamation points to asterisks and plus signs?
At $583 SF, this is clearly in WTF price territory, but the real question I have to ask is: "WTF were you thinking when you paid almost $600 SF back in 2005?" This property is never going to sell for this price as we will see when we look at the competition, but assuming they get their asking price, and assuming a 6% commission, they stand to lose $41,000. In the real world (where prices reflect the market), this seller is probably going to lose closer to $100,000.
Here is a close comparable...
Asking Price: $569,000
Purchase Price: $280,000 ?
Purchase Date: unknown
Address: 46 Alevera, Irvine, CA 92618
Beds: 2
Baths: 2.5
Sq. Ft.: 1,050
$/Sq. Ft.: $542
Lot Size: -
Year Built: 2002
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S490707
Status: Active
On Redfin: 36 days
From Redfin, "Outstanding DETACHED HOME in Prime location of Irvine's Beautiful Oak Creek, Featuring 2 Beedrooms and 2 1/2 Baths w/ Patio and 2 car garage w/ Direct Access. This TURNKEY Property has many Upgrades of New Flooring, New Carpeting, New Paint, Gourmet Kitchen w/ New Stainless Steel Appliances and Fine Cabinetry, Plus Epoxy Finishing in Garage. Enjoy Resort-Style Amenities of Pools, Spas, Parks and Tennis. This is Truly a Home You've Been Waiting For. Near Award Winning Schools, Fwys, and Great Shopping."
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This listing has some of the worst photos I have seen in a while. Looks like a camera phone, only worse. Another Gourmet kitchen with white tile...
So here we have a property with the same floorplan which is being offered for $31,000 less, and at $542 SF, it is also overpriced.
Let's see what else you can get in this neighborhood...
Price: $629,900
68 ALEVERA
Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,300
$/Sq. Ft.: $485
Lot Size: -
Year Built: 2002
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: P579931
Status: Active
On Redfin: 41 days
PRICE REDUCTION FOR FAST SALE * * EXCELLENT QUIET INSIDE LOCATION * * IMMACULATE CONDITION * * SPACIOUS KITCHEN W/ WHITE CABINET * * SPACIOUS FORMAL DINING AREA * * ROMANTIC ARCH ENTRY * * TRUELY 3 BEDROOMS * * ALL GOOD SIZE BEDROOMS UPSTAIRS * * GOOD SIZE BACKYARD W/ COZY LANDSCAPING * * SPACIOUS MASTER BEDROOM W/ WALK-IN CLOSET * * SPACIOUS MASTER BATH W/ ROMAN TUB & SHOWER STALL * * PRICED TO SELL * * MUST SEE * *
ALL CAPS and astericks ***** GREAT !!!
Comparing this property to 9 Alevera, I get 300 SF more and an additional bedroom for $29,000. Hmmm...
Price: $649,900
59 ALEVERA ST
Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,497
$/Sq. Ft.: $434
Lot Size: -
Year Built: 2002
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S484851
Status: Active
On Redfin: 79 days
NEW PRICE REDUCTION! BEST VALUE IN THE AREA! Beautiful detached home in a quiet/secluded area. Bright and open with lots of grades. 
Gourmet kitchen features plenty of oak cabinets, walk-in pantry and recessed lighting. Three spacious bedrooms, master suite/w walk in closet. The downstains den is perfect for a home office. Award Winning Schools, Close to all freeways/tollroads, Amtrack/Metrolink, The Spectrum, UCI Campus, Dining and Entertaiment.
New price reduction! Hurray! Lots of grades (I hope they were "A"s), and a gourmet kitchen to boot.
Compared to 9 Alevera, this property gives you a 450 SF more space and an additional bedroom for $50K, and it appears this property is not finished reducing its price either.
In short, the seller at 9 Alevera is going to be a loser.
This is a strange time in our real estate market. Easy credit money is still being made available to high-income borrowers with good credit scores. As a result, what few transactions are occurring in the market are happening at the upper price points. This also explains why the median does not drop much when we all know prices of individual homes are declining.
This peculiar set of circumstances puts sellers in an awkward position: there are not enough buyers to absorb the inventory, but the few buyers who are out there are foolish enough to pay ridiculous prices. As a seller, if you hold out for your price, you might just get it, albeit like hitting the lottery. Everyone is begging and praying for the greater fool to come along.
Asking Price: $950,000
Purchase Price: $394,500
Purchase Date: 12/4/2000
Address: 28 Chadwick, Irvine, CA 92618
Beds: 5
Baths: 3.5
Sq. Ft.: 2,600
$/Sq. Ft.: $365
Lot Size: -
Year Built: 2000
Stories: 3
Type: Single Family Residence
County: Orange
Neighborhood: Oak Creek
MLS#: P531417
Status: Active
On Redfin: 332 days
Unsold in 90+ days
From Redfin, "* Spectacular Home in Cul-de-Sac Location * Private Gated Community * 5 BR 3.5 Baths (one 3rd level suite) * Very Desirable Floor Plan w Separate Family RM Adjacent to Open Kitchen w Center Island, Granite Countertop & Full Back Splash * Fireplace in Cozy Family RM * Upgraded Expensive Tile, Wood Floor & Berber Carpert * Plantation Wood Shutters * Upgraded Ceiling Fan * Beautiful Professional Landscaping * X'lnt Assoc. Amenities w low Assoc. Dues * Award Wining Schools * Don't Miss this out"
The realtor forgot to mention the relaxing drone of freeway noise...
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This listing is coming up on its birthday. At first glance this doesn't seem like a WTF price, but 332 days on the market says otherwise.
Asking Price: $1,100,000
Purchase Price: $462,000
Purchase Date: 10/27/2000
Address: 20 E Sutton, Irvine, CA 92618
Beds: 4
Baths: 2.5
Sq. Ft.: 2,700
$/Sq. Ft.: $407
Lot Size: 4,200 sq. ft.
Year Built: 2001
Stories: 2
Type: Single Family Residence
County: Orange
Neighborhood: Oak Creek
MLS#: S494519
Status: Active
On Redfin: 11 days
From Redfin, "Looks Just Like a Model Home! 4 Bedrooms + Large Office on Corner Lot. Designed to Perfection with Pottery Barn Style Wainscotting, Crown Molding, Beautiful Wood Floors, Plantation Wood Shutters, Beautiful Custom Built-ins, Designer Carpet & Paint. Large Gourmet Kitchen w/ upgraded appliances, wine refrigerator. Over $100,000 in Custom Upgrades. Professionally Landscaped w/ Fireplace, Built-in Gas Bbq. Apoxy Garage floors w/ built-ins. Can convert downstairs office to bedroom & add bedroom upstairs if needed"
Looks just like a model home... BS. Designed to perfection... BS (I guess Pottery Barn is the new black.) Over $100,000 in custom upgrades... major BS. What is up with all the capital letters? Maybe the realtor meant to change everything to ALL CAPS buy instead chose Title Case?
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Is someone ready to pay $1,100,000 for this estate / Irvine tract home? I guess if you are a seller in this market you start your pricing at WTF, lower it to OMG, and finally sell at LOL?
Asking Price: $1,050,000
Purchase Price: $515,000
Purchase Date: 10/02/2001
Address: 24 Highfield Glen, Irvine, CA 92618
Beds: 4
Baths: 3.5
Sq. Ft.: 2,800
$/Sq. Ft.: $375
Lot Size: 4,050 sq. ft.
Year Built: 2001
Stories: 2
Type: Single Family Residence
County: Orange
Neighborhood: Oak Creek
MLS#: S480792
Status: Active
On Redfin: 107 days
Unsold in 90+ days
From Redfin, "MOST UPGRADED HOME AT END OF CUL-DE-SAC IN GATED OAKCREEK COMMUNITY. 4 BEDROOMS PLUS A OFFICE AND HUGE LOFT WHICH CAN COVERT TO ANOTHER BEDRM MAIN FLOOR SUITE AND POWDER ROOM, DESIGNER'S UPGRADED MARBLE FLOOR THOUGHOUT FIRST FLOOR, WOOD SHUTTERS, KITCHEN UPGREDED GRANITE COUNTERTOPS, CENTER ISLAND WITH WINE REF. owner will give $10000 allowance for replace the grandite countertop in kitchen. same model with larger yard and add one room sold and closed for $1300000.in May."
I guess the CAPS LOCK must have broken in mid description...
Can you hear the whining, "same model with larger yard and add one room sold and closed for $1300000.in May." Where is my buyer? Boo Hoo. You can feel the temper tantrum about to start. That statement is perhaps the most feeble attempt to justify a price I have heard to date. After 107 days on the market, someone needs to alert this seller to the possibility that the price is too high; of course, I don't want to be the one to do it because then I would have to watch the temper tantrum.
In a falling market, there are always those who believe the correction is temporary. In trading it is called "buying the dip." In a market rally, it is a good strategy. In a market decline, it is a sure way to become a bagholder and lose a great deal of money. Lately, I have been feeling a certain satisfaction from finding flips like these because I know the fate that awaits them. I suppose each one helps empty my Reservoir of Schadenfreude.
Today's seller has had a visit from the Kool-Aid Man. To believe you can flip a property for a $200,000 profit in this market you either have to be crazy or intoxicated with kool aid.
Asking Price: $814,900
Purchase Price: $615,526
Purchase Date: 2/2/2007
Address: 5 Bottle Tree, Irvine, CA 92618
Beds: 4
Baths: 2.5
Sq. Ft.: 2,018
$/Sq. Ft.: $404
Lot Size: -
Year Built: 2000
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: P564630
Status: Active
On Redfin: 123 days
Unsold in 90+ days
From Redfin, "Nice open floor plan in prime Cul De Sac location of Cypress/ Oak Creek. 4 bedrooms, 2.5 baths. Open kitchen overlooks family room with fireplace and backyard. Freshly painted and and new carpet make this home a pleasure."
A concise description with no typos: I am speechless.
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I can't give this seller a WTF award as this is merely a wishing price. The $404 SF price is near enough the current market to be plausible; although, after 123 days on the market, it clearly is above the market. I will give this flipper credit for finding a good buy (you make money in real estate when you buy, when you sell you merely convert to cash), but this property needs updating, and this flipper is going to have to reduce his price to sell this place.
Since this flipper's purchase helped set the neighborhood comps at $305 SF for similar properties, the two underwater neighbors who are holding out for $400 SF can't be too pleased.
Asking Price: $959,000
Purchase Price: $960,000
Purchase Date: 3/30/2006
Address: 45 Commonwealth, Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 2,400
$/Sq. Ft.: $400
Lot Size: -
Year Built: 2001
Stories: 2
Type: Single Family Residence
View: Hills
County: Orange
Neighborhood: Oak Creek
MLS#: C101239
Status: Active
On Redfin: 25 days
From Redfin, "Premium Cul-De-Sac location home in Oak Creek. 3 large bedrooms with 4th room used as master retreat/office upgrades includes: Travertine floors, designer carpet, custom paint, crown molding, base molding, plantation shutters, stainless steel appliances call owner to show."
This makes two reasonably well-written MLS descriptions. Do you think we are shaming realtors into checking their copy?
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Another seller holding out for a breakeven price. Of course they will still lose about $58,540 after commissions, but there is a psychological aspect to trying to get out at breakeven. Too bad it probably won't happen.
They are doing better than a nearby rollback...
Asking Price: $700,000
Purchase Price: $725,000
Purchase Date: 10/7/2005
Address: 2 Pearleaf, Irvine, CA 92618
Beds: 3
Baths: 3
Sq. Ft.: 1,750
$/Sq. Ft.: $400
Lot Size: -
Year Built: 2000
Stories: 3
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S485590
Status: Active
On Redfin: 72 days
From Redfin, "Spacious 3 bd/3ba DETACHED Home w/ Private Backyard in Gated Oak Creek! Elegant Upgrades include Cherry Wood Laminate Flooring * Upgraded Carpet * Custom Built-Ins * Designer Paint * California Closests in all Bedrooms * Recessed Lighting Package * Security System & Integrated Surround Sound Speakers throughout the entire Home! Gourmet Kitchen has Granite Counters & Stainless Steel Appliances! Enjoy the beautiful Resort Style Amenties of Oak Creek!"
Two misspellings and several exclamation points: that is more like it.
I can't help thinking this seller overpaid when he bought back in 2005, but why not? Real estate only goes up, right? This property is also going to have to cut price significantly to find a buyer, but if they were to get asking price, they would lose $67,000 after a 6% commission.
You can clearly see the behavior of a commodities market at work here (and Houses Should Not Be a Commodity). First we have a "dip buyer" gambling that the recent price decline is temporary. The final two properties are your classic "weak hands" who are the first to dump their holdings as they go underwater. As the weakest holders are wiped out and forced to sell, it drives prices down further. At some point, our intrepid flipper realizes he was wrong and adds another property to the falling market: which, of course, pushes it down even more. The downward spiral becomes obvious, predictable and inevitable.
I hope you are enjoying the show.
Friends, Irviners, countrymen, lend me your ears;
I come to bury Danbury, not to praise it.
The evil that markets do lives after them;
The good is oft interred in stucco boxes;
So let it be with Irvine.
William Shakespeare -- From Julius Caesar (III, ii, 78-79)
(paraphrased by IrvineRenter)
Welcome to Oak Creek week at the Irvine Housing Blog. I will be looking at properties from this neighborhood all week. For those of you not familiar with Oak Creek, you may want to start with our Oak Creek Community Profile.
Personally, I like Oak Creek as I have rented units in two of the apartment complexes there. It will be one of the neighborhoods I strongly consider when I am ready to buy.
The prices in Oak Creek have been more resilient than in some other Irvine Villages. It has only been in the last several weeks that I have been noticing rollbacks, and pricing has just gone under the $400 SF level.
There is a cute neighborhood called Cobblestone at the intersection of Alton Parkway and Jeffrey Road in Irvine's Oak Creek neighborhood. It features small, single-family detached homes arranged in a 6 unit cluster with 2 houses on the street and 4 units behind. This neighborhood is a model of good land planning for a small-lot, detached condominium project.
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The loop street is narrower than typical Irvine local streets with pockets of green with street trees located in what ordinarily would be parking spaces. The front setbacks are very tight with houses set back 5 feet from the sidewalk on the narrow street. It all sounds rather claustrophobic, but this neighborhood doesn't feel that way. The judicious use of street trees, a slight bend in the street, and the abundance of landscaping makes this neighborhood feel more cozy than cramped.
Lets take a detailed look at what is happening in the market on this street...
Asking Price: $590,000
Purchase Price: $324,000
Purchase Date: 6/14/2002
Address: 50 Danbury Lane, Irvine, CA 92618
Beds: 2
Baths: 2.5
Sq. Ft.: 1,200
$/Sq. Ft.: $492
Lot Size: -
Year Built: 2000
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: M105109
Status: Active
On Redfin: 164 days
Unsold in 90+ days
From Redfin, "LIGHT & BRIGHT IN HIGHLY DESIRABLE COBBLESTONE, IN OAK CREEK! * EASY A CCESS TO 405 & 5 FWYS. QUIET NEIGHBORHOOD. LOW HOA'S, PINE LAMINATE & CERAMIC FLOORS TRHOUGHOUT. CUSTOM PAINT, ATTACHED GARAGE W/ OVERHEAD STORAGE & LOTS OF BUILT-INS. LARGER, MORE PRIVATE, WRAP-AROUND BACKYARD W/ NO HOMES BEHIND. WALKING DISTANCE TO ASSN. POOL, SPA, TENNIS, PARK, RESTURANTS & MUCH MORE! MOTIVATED SELLER. BRING ALL OFFERS!!! *"
Turn off the CAP LOCK, please...
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This is our low-price leader in this community. It has been on the market for 164 days, so this price is not done dropping: Bad news for our house flipping neighbor...
Asking Price: $598,000
Purchase Price: $610,000
Purchase Date: 10/10/2006
Address: 55 Danbury Lane, Irvine, CA 92618
Beds: 2
Baths: 2.5
Sq. Ft.: 1,200
$/Sq. Ft.: $498
Lot Size: -
Year Built: 2000
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S489835
Status: Active
On Redfin: 39 days
From Redfin, "Absolutely Charming Detached Home w/ 2 Master Suites + Loft and Vaulted Ceiling at Cobblestone in Oak Creek with an Stone Arch Exterior Design. Highly Upgraded includes New Polished Travertine Flooring Thruout, 4' BaseBoard Around inside of the House. New Berber Carpet and New Paint. Plantation Shutters Thruout and Crown Molding in 2 Bedrooms. New Professonal Landscaping in backyard. Close to the Gelsons' Market & Restaurants in Walking Distances."
Has "thruout" become a word now? I think "thru" has become accepted through extensive use, but I haven't seen other forms yet. No matter...
This seller is hurting. They are priced $8,000 over an identical neighboring property, and that property is overpriced. In short, they are going to bleed some more before they bury this stucco box. If they somehow manage to get their asking price, they will lose $47,880 after a 6% commission. That is a great deal of money to lose after only 8 months of ownership. When you factor in holding costs and the additional $30,000 they will need to drop the price in order to sell this property, they will really lose more like $75,000.
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Also in this cluster is one of two properties priced at borderline WTF territory which are beginning a race downward to find the market. They still have a ways to go...
Asking Price: $674,900
Purchase Price: $488,000
Purchase Date: 12/19/2003
Address: 56 Danbury Lane, Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,360
$/Sq. Ft.: $496
Lot Size: -
Year Built: 2000
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S492424
Status: Active
On Redfin: 23 days
From Redfin, "WOW!!You'll Love this Detached Stunning Sweet Home in Highly Desirable Cobblestone Community in Oak Creek. The Home Is Upgraded w/ Amazing Designer Media Niche & In The 2nd Bedroom w/ Walk-in Closet, Crown Molding w/ Custom Paint, Laminate Floors Throughout, New Carpet, Professionally Landscaped Backyard w/ Mature Palm Trees and Inside Light Switch. 2-Car Attached Garage w/ Driveway. Quiet Neighborhood, Easy Access to 405 FWY & UCI. Walking Distance to Asso. Amenities, Restaurants and shops."
You lost me at WOW!!...
Asking Price: $647,900
Purchase Price: $267,500
Purchase Date: 6/29/2000
Address: 33 Danbury Lane, Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,350
$/Sq. Ft.: $479
Lot Size: -
Year Built: 2000
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S495255
Status: Active
On Redfin: 4 days
From Redfin, "MOTIVATED SELLER - WILL LOOK AT ALL OFFERS!!! Location! Location! Loca tion! Fabulous French Country exterior. Pristine detached 3 bedroom home located in the exclusive Oak Creek Community. Features include ceramic tile flooring, newer designer carpet, custom paint, built-in media & private rear yard. Great resort amenities and walking distance to Irvine schools, parks, pools spas and sport courts."
I can't believe how consistent realtors are with the three exclamation points. Is that on the realtor test?
So what do we have in these last two Danbury properties? These are two identical floorplans across the street from each other. The first seller hits the market with an almost $500 SF asking price. This is a wishing price bordering on WTF. Then seller #2 comes along and undercuts the seller #1 by $27,000. Now both of these sellers are well above the market. They will probably be closer to $600,000 to $625,000 before they sell. They might even break under $600,000. They both have plenty of equity to reduce price -- assuming they haven't HELOCed themselves into oblivion -- so this should be an interesting race to the bottom.
They are not alone. on the street around the bend, Cherrybrook Lane, there are 2 pairs of identical houses having the same game of chicken.
Pair #1:
Price: $669,000
191 CHERRYBROOK LN
Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,357
$/Sq. Ft.: $493
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Price: $669,900
201 CHERRYBROOK LN
Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,350
$/Sq. Ft.: $496
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Pair #2:
Price: $699,000
186 CHERRYBROOK LN
Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,500
$/Sq. Ft.: $466
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Price: $699,000
180 CHERRYBROOK LN
Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,500
$/Sq. Ft.: $466
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So far, none of those sellers has blinked. We will see...
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