No-one you see, is smarter than he, And we know Flipper, lives in a world full of wonder,
Do you remember the extreme arrogance and smugness of flippers and other kool-aid intoxicated people during the bubble? Isn't everyone who buys in a bull market a genius? They were all so sure the market could only go up, and every property was a gold mine. They were all living in their private wonderland.
And we know Flipper, lives in a world full of wonder, Flying there-under, under the sea!
And of course, now they are under water, drowning in debt and sinking to the bottom. When it comes to flippers, my schadenfreude overfloweth...
Today's featured property has been profiled before. It has been on and off the market for about a year and a half. This is the third listing we have documented here. It takes a great deal of courage to flip a $2,000,000 property. Either that or a great deal of ignorance and kool aid.
Seems like a touch, touch too much You know it's much too much, much too much
I have written much on the Fundamental Valuation of Houses and the concept of rental parity. It has been my supposition from the beginning that prices were greatly detached from their fundamental valuations and were due for a crash. My prediction is for a 40% decline in Irvine's median by 2012. Today's featured property is a great case study in just how ridiculous the asking prices still are here in Irvine.
Are the high-end homes in Irvine plated with marble? The asking prices would make you think so. Today's featured property was purchased by a knife catcher at auction. No improvements have been done to the property -- no marble -- and now they want $260,000 for their efforts. Oh wait, they made no effort. They just want $260,000 just because. This is the kind of behavior that makes house prices unaffordable, and it is exactly the kind of behavior this market is going to crush out of existence.
The people who bought properties as flips in 2007 had to put their own money into the transaction. All of these people made a small fortune by starting out with a larger one.
One of the myths of the real estate bulls is the rich-foreigners-will-save-us fallacy. This myth has a hint of racism to it: foreigners must be culturally superior to have the money to come to the rescue of us poor Americans. Whenever I see this argument raised, I always link to a post done by Rich Toscano at Piggington.com called The Dumb Money. As stated in the article, "Far from being a positive fundamental, a sudden excess of foreign
participation in an asset market is indicative of ill-informed
speculative money at work. When the foreigners really start piling on,
it's always a good sign that the end of the bubble is nigh." As you might have surmised, today's featured property was a flip attempt by someone with a non-Westernized name (as was yesterday's.) The stupidity of this particular flip is breathtaking to me. It was purchased as REO for well over what the lender paid, and now it is being offered for much less. The entire loss is going to be the flipper's money.
If the property looks familiar, it is because we have featured it before: Brookside Comp Killer.
