Today's property has been featured before, but the price reduction is so significant, I thought it worthy of a new post. This property may be selling for rental parity.
One of the key concepts we have been espousing here at the Irvine Housing Blog is the idea that prices will bottom at rental parity. When a potential homebuyer can save money versus renting, it makes sense to own. A homeowner does not need appreciation for real estate to be a sound financial investment. If you are saving money versus renting, you are coming out ahead. This property can likely be owned for its rental value. If you are willing to live there long term, you will see substantial savings over renters who face subsequent rental increases. Of course, you have to want to live there, and that is the problem with this property and all apartment-like condos for that matter: They are transitory housing. These units will likely fall below rental parity. They should bottom out at prices where an investor can obtain positive cashflow as a rental. Properties like this will see $250,000 at the bottom.
Great opportunity in desirable Community of Woodbridge. This home
features laminate floors throught out the main living area, living room
fireplace, newer kitchen cabinets and counters, eat-in kitchn and large
laundry area which doubles as a pantry. Master bedroom has huge
mirrored closet. Large enclosed patio with storage and direct access to
your own carport. Newer water heater, heater and A/C unit.
throught? kitchn?
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Do you think this 3/2 could be rented for $2200? That would cover the cost at a 160 GRM. I have seen other rentals in the area at $2,500, so I don't think $2,200 is unrealistic. It looks updated inside.
When I first featured this property, I did not have access to mortgage data. Now I do. The bank is going to eat a steaming $hit sandwich on this one. The owner exercised their "put" option back in November of 2006. The Homecomings Financial Network loaned them $550,000 on this property with a $440,000 first mortgage and a $110,000 stand-alone second. WTF? How did this property ever appraise at $550,000? Can you imagine the lender losing in excess of $200,000 on such a small property? For the record, assuming the lender agrees to the short sale, assuming they get their asking price, and assuming they pay a 6% commission, the total loss will be $220,154. We get used to $200K plus losses here at the blog, but we usually don't see them on small condos. Yikes!
Is it any wonder the banks are hoping someone, anyone, will save them?
I hope you have enjoyed the week at the Irvine Housing Blog. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
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Prison gates won't open up for me On these hands and knees I'm crawlin' Oh, I reach for you Well I'm terrified of these four walls These iron bars can't hold my soul in All I need is you Come please I'm callin' And oh I scream for you Hurry I'm fallin', I'm fallin' Savin' Me -- Nickelback
Thomas Jefferson believed "Financiers, bankers and industrialists make cities the cesspools of corruption, and should be avoided." It is hard to argue with him given it is the actions of lenders that enabled the Great Housing Bubble.
Today's property illustrates why something needs to be done to prevent irrational exuberance from creating volatility in our real estate markets. The family that bought this property put 25% down, and although they started with an Option ARM, they refinanced in 2006 into a fixed-rate mortgage. They tasted the kool aid and did not find it palatable. Families like this should not get screwed based on the timing of their purchases due to life's circumstances. From the photos, it appears they have young children. They probably bought this as a family house. People should be able to do this without losing their life savings. If lenders did not enable people to overborrow, prices would rise about 4.5% a year, and people wouldn't have to worry about when they bought or sold. Housing bubbles are not created with equity; they are created with borrowed money. People blow bubbles; lenders provide the air.
Fabulous 3 Bedroom Northwood Home WITH BONUS ROOM and Master Retreat.
This well maintained home is nicely situated on a well manicured
cul-de-sac. An elegant entryway, that includes a curved staircase,
leads to the formal living room and dining room. The large front window
in the living room adds extra charm and sunshine. The kitchen is well
designed, including a breakfast bar, walk in pantry and plenty of
cabinets. A breakfast nook is convenitently located between the kitchen
and spacious family room. A large firplace adds to the beauty of the
family room, making it the perfect gathering spot. Two upstairs
bedrooms open onto the Bonus Room, making the Bonus Room a great spot
for a toy room, excersize room or library. The backyard is beautifully
landscaped including a patio, large shade trees, flowers and grass.
This home is very close to schools, shopping and freeway access. This
Northwood HOA includes 2 Tot Lots & Swimming Pool.
Anyone want to comment on the decorative tastes of the owners?
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If the sellers get their asking price (it seems about 10% too high), and if they pay a 6% commission, they stand to lose $104,494 -- over half of their $200,000 downpayment. Realistically, they are going to lose almost all of it.
Just to provide a reminder of how overpriced homes still are, this property would probably rent for about $2,800 a month. A 160 GRM puts the value at $448,000. I you look back at the sale history, this property sold for $390,000 in 2001. Prices in 2001 were inflated, but not in bubble territory yet. A value of $448,000 is about where this house should be; it is where it would be if there was not a bubble, and it is about where it will be in 3-5 years...
BTW, the featured song today wasn't written about real estate bubbles, but the lyrics offer that interpretation.
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The summer had inhaled And held its breath too long. The winter looked the same, As if it had never gone, And through an open window, Where no curtain hung, I saw you, I saw you, Coming back to me.
A transparent dream Beneath an occasional sigh... Most of the time, I just let it go by. Now I wish it hadn't begun.
We have reached a new milestone in our documentation of the price decline in the Great Housing Bubble: we have our first property closing at 40% below its previous sale price. That's right, 40% off in Irvine. The median has not declined 40% yet, but individual properties have. Will the median be far behind?
We have been watching this property for some time. It was the source for a post that first appeared on March 17, 2007, and was updated on Sep 15th, 2007. We followed up again with the post, Show Me, on January 15, 2008. It was purchased on May 26, 2005 for $565,000 with 100% financing. There was a first
mortgage from New Century for $452,000 and a second from New Century
for $113,000. Ordinarily, when a property goes up for auction, the lender will bid the property up to the value of the first mortgage, in this case $452,000. This property was purchased at auction by the trustee for a CDO (U S BANK NA, ; STRUCTURED ASSET INVESTMENT LOAN TRUST 2,) for $337,500. Think about what that means: 1. Lenders and CDO trustees are now letting properties go at auction for less than the value of the first mortgage. 2. At open auction, the highest bidder was 40% under the purchase price of this property. The flippers wouldn't even touch it. 3. If investors are losing 40% on Irvine properties now, how bad will it be for them in 2 or 3 years? 4. The neighborhood comps just got obliterated.
This last point warrants further examination. Let's say you are a homeowner who purchased at the peak, and you are still in denial about the market. In the minds of such individuals, the market is down artificially, and values will rebound soon. The reality is, the market for this property is 40% off the peak (Maybe a bit less if they can resell it for more than $337,500. They are trying.) Percentages can be a bit misleading when it comes to price declines. A 40% decline requires a 67% increase to get back to the peak. Assume for a minute we are at the bottom (which we are not,) how long will it take for this property to appreciate 67% in value?
2008
$337,500
100%
2009
$352,688
105%
2010
$368,558
109%
2011
$385,144
114%
2012
$402,475
119%
2013
$420,586
125%
2014
$439,513
130%
2015
$459,291
136%
2016
$479,959
142%
2017
$501,557
149%
2018
$524,127
155%
2019
$547,713
162%
2020
$572,360
170%
At a 5% rate of appreciation, it will take 12 years for this property to get back to the peak. Of course, if you believe 15% yearly appreciation will be returning soon, it will get their quicker, but that takes a degree of denial that will be hard to sustain in the long term. It isn't going to happen. In reality, this property will probably decline further in value because less desirable condos always do fall further, so the appreciation does not start in 2008. It probably starts in 2013 from a lower base number. How long are people going to be willing to wait for values to return? Will people be trapped in their homes for another 20 years. I hope they like them.
Very nice townhome in great area of Irvine. Very close to freeways,
shopping and schools. You must definitely see this one to appriciate
it. living room has 20ft. high ceiling, and upstairs has open balcony
with view of downstairs. all three bedrooms are upstairs, there is a
half bath downstairs for guests. Nice size patio between home and
garage.
This property is very close to the freeway. It is practically on it.
BTW, the original asking price on this property was $610,000. LOL!
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It is hard to say who is losing money on this one. New Century is already bankrupt, so either some CDO is losing or the various creditors of New Century are losing. In either case, if we assume this one is on their books at $565,000 (it is probably higher with all the fees and lost interest), and if we assume they get their $399,000 asking price and pay a 6% commission, the total loss will be $189,940. That loss is on one small condo in Irvine. Does anyone really believe the lenders are finished writing down their losses?
So how far will prices drop? Will we see 1999 prices? The aggregate of the market will not, but we may see some of the undesirable condos go for very low prices. I have a sneaking suspicion we may see a 1990 rollback before this is done. I know, that sounds crazy, but 1990 was the peak of the last bubble, and that puts it on par with 1998 or 1999 prices. A small condo bought in 1990 that wasn't particularly well cared for might be a 20-year rollback. It could happen, and we will be watching for it.
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I was dreamin' when I wrote this Forgive me if it goes astray
But when I woke up this mornin' Coulda sworn it was judgment day
The sky was all purple There were people runnin' everywhere
Tryin' 2 run from the destruction U know I didn't even care
'Cuz they say two thousand zero zero party over Oops out of time So tonight I'm gonna party like it's 1999
Wouldn't it be nice if prices really did go up forever? Wouldn't it be great if none of us had to work, and we could all just live off the appreciation of our houses? There really isn't much difference between believing in the magical kool aid of the bubble and believing in other forms of magical thinking. It is a wonderful fantasy, and believing in endless price appreciation must feel very good. I guess perpetual house price appreciation is the adult version of Santa Claus or the Tooth Fairy. If I had been able to drink the kool aid, I would have been less distressed by what I witnessed in 2004 through 2006. Ignorance really can be bliss.
How many homeowners are out there waiting for the good times to come again? I think Tom Petty put it well:
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Well the good old days may not return
And the rocks might melt, and the sea may burn
I'm learning to fly but I ain't got wings
Comin' down is the hardest thing
Well some say life will beat you down
Break your heart, steal your crown
So I started out for God knows where
But I guess Ill know when I get there
Im learning to fly around the clouds
But what goes up must come down
Corporate relocation home. Competely detached. Large wrap-around yard. View. New paint throughout. Gorgeous hardwood floors. 2 master suites plus den area. Gorgeous hardwood floors. Prestigeous guard-gated community.
Competely Prestigeous.
Three and four word sentences. I like the economy of words.
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The title history on this property is a bit unclear. Sitex still shows the 2004 purchaser as the current owner, and it does not pick up a 2007 transaction referenced in Redfin. If someone did pay $645,000 for this place in March 2007, the 2004 owner (whose outstanding debt was $619,800 after her refinance) got very lucky. Perhaps this was a corporate relocation. If so, the corporation is a bagholder, and they are going to lose at least $133,640 after a 6% commission.
I hope you have enjoyed this week at the Irvine Housing Blog. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
'Tis but thy name that is my enemy;
Thou art thyself, though not a Montague.
What's Montague? it is nor hand, nor foot,
Nor arm, nor face, nor any other part
Belonging to a man. O, be some other name!
What's in a name? that which we call a rose
By any other name would smell as sweet;
So Romeo would, were he not Romeo call'd,
Retain that dear perfection which he owes
Without that title. Romeo, doff thy name,
And for that name which is no part of thee
Take all myself.
William Shakespeare -- Romeo and Juliet, 1594
Turtle Ridge is a beautiful community, and although the houses are ridiculously overpriced, it does look like a nice place to live. I know one family who lives there, and they are exceptional people. There are undoubtedly others.
What is in a name? Does "Turtle Ridge" mean more than just a name. I suspect many who bought there believe the name carries prestige and the envy of the lower classes. Personally, I associate Turtle Ridge with pretense, nouveau riche conspicuous consumption, and the embodiment of all things housing bubble -- granite tops, stainless steel appliances, Pergo floors, stone facades, gourmet kitchens, etcetera. Do you ever wonder if the residents have giant Roman banquets to impress the world with their wealth?
This may come as a foreign concept to some, but it is possible to feel contempt for conspicuous consumption without feeling envy. I would not feel envious of watching an ancient Roman citizen consume 10 pounds of meat in a single meal. The measure of a person's character has nothing to do with the contents of their pocketbook, and being showy with money is revelatory of character -- what it reveals does not impress me. There is nothing wrong with spending money and enjoying yourself. I do. It is spending money to impress other people that is an enormous waste, particularly when there are people like me on whom it has the opposite effect. I suspect some of the more pretentious residents would convince themselves everyone who claims not to be impressed is secretly envious. There are two types of people in their world, those who are envious, and those who pretend they are not envious. So be it.
So why is it so delightful when the vainglorious fall on hard times? Why is it so pleasing to see an REO in Turtle Ridge? Probably for the same reasons so many were contemptuous of the couple in the CNN article posted in the comments yesterday. You tell me...
BANK OWNED !!! Stunning floorplan with a main floor master suite. Kitchen with center island, limestone flooring, stainless steel appliances, family room with wood flooring, media room, wine room plus a seperate Casita with private entrance and bath. Outdoor entertainment includes spa, built-in grill and a fantastic fireplace !
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Does anyone remember the fun we had with this property last summer? It was one of our most widely read posts of the year.
It appears the high end is not immune, it is just late to the party. Interesting that it took the bank 8 months to ready this property for sale. I wonder how many other empty, bank-owned properties are sitting out there waiting to be sold or rented? I can't tell for sure how much money the bank will lose on this one. The owner who was foreclosed on had a $1,000,000 first mortgage and a $935,000 HELOC on the property. You have to think the guy took out most of it, or the property would not have gone into foreclosure. If this borrower took out the full amount before walking, and if Countrywide can get their asking price and pay a 6% commission, the Countrywide stands to lose $525,940. That is a half a million dollar loss on one property in Irvine, California. Last night when I checked their REO website, they owned 4,505 properties in California.
Angelo Mozilo will take his golden parachute from Countrywide and end up on the Greek island of Lesbos having gluttonous orgies. Justice will not be served.
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Are you ready for the new sensation?
Well, here's the shot heard 'round the world.
All you backroom boys salute when her flag unfurls.
Well, guess who's back in circulation?
Now, I don't know what you may have heard
but what I need right now's the original goodtime girl.
She's a vision from coast to coast,
sea to shining sea.
Hey, sister, you're perfect host.
Show me your bright lights and your city lights, all right.
I'm talkin' 'bout the Yankee Rose.
Bright lights in your city lights, all right.
I'm talkin' 'bout it.
In retrospect, it is easy to see how many people who bought late in the bubble were chasing fool's gold. The rainbow lead to a pot of gold for many, but many others have been left chasing the rainbow and wondering where their pot of gold lies. The map was easy to follow: you took out a large loan, waited a few months, then sold the property to someone else -- the greater fool. The fool who was also chasing their fool's gold. Everyone is still weighing out their gold as the rest of us watch them sink. The gold is always just around the corner, but in reality a breakdown is just around the bend. We all know where the market is going -- down, down, down.
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I'm no clown I wont back down
I don't need you to tell me whats going down
Down down down down da down down down
Down down down down da down down down
I'm standing alone
I'm watching you all
I'm seeing you sinking
I'm standing alone
You're weighing the gold
I'm watching you sinking
Fools gold
These boots were made for walking
The marquis de sade don't wear no boots like these
Golds just around the corner
Breakdowns coming up round the bend
Sometimes you have to try to get along dear
I know the truth and I know what you're thinking
Down down down down da down down down Fools gold -- Stone Roses
Today's property demonstrates the distress of Woodbury. This property has been on the market for over a year, and the owners have managed to lower the asking price about 25%, and they still haven't sold it. We have profiled this street in Woodbury before: here, here, here and here. Today's seller is not the only failed flipper around.
'Pride of Ownership' shows from the moment you enter from your own private courtyard. Your first floor has a 'Great Room' feeling with a gourmet kitchen, casual eating area and spacious living room with fireplace. Master suite with walk-in closet, secondary bedroom plus laundry area complete the second floor. Two car tandem garage features extra storage and has direct access. Sliding 'hidden' front door screen, wood window shades, security system are just a few of the upgrades.
'Pride of Ownership' -- I am sure they are proud of the $100,000 they lost.
Do you get the impression they would have been happier if they had bought a boat?
This is probably the only kitchen in Woodbury without granite counter tops, but yet, this is a gourmet kitchen. I guess if the"gourmet" only needs about 4 square feet of white tile countertop space...
"Two car tandem garage" Always love those.
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Today's sellers put $975 down on the property, so I think we can call it 100% financing. This property has been on the market since October of 2006, and the initial asking price was $579,500. If these sellers obtain their asking price today of $449,900, their lender stands to lose $108,619, and our sellers stand to lose their $975.
I bet the lender is looking for the pot of gold too.
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Since this is April Fool's Day, I thought I might share with you the best April Fool's joke ever played on me.
When my son was a baby, my wife called to me from the other room and said she thought my son might be sick. I went into his room to see what I could do. When I got there, my wife and my mother-in-law (I think they thought this one up together) were standing over my son who was lying down on the changing table. My wife said, "Come look at this." I walked over to see my son's diaper filled with a thick, brown gelatinous mass. The first words out of my mouth were, "What did you feed him?" My wife looked at me, looked down at the gigantic glob of goo, stuck her finger in it, and put it in her mouth.
My mouth dropped open...
I couldn't believe what just happened...
OMG! Are you crazy?
Then my wife and my mother-in-law started to laugh. I stood there dumbfounded trying to figure out what was going on. Then the truth was told...
While I was not paying attention, they had made a warm batch of chocolate pudding, cleaned up my son really well, then filled a clean diaper with the chocolate pudding and positioned him over it as if he had been wearing the diaper and filled it himself. We all had a big laugh, including my son who had no idea what was going on. I remember that joke every year on April Fool's Day, and I probably will for the rest of my life.
One of the unique phenomenons of the Great Housing Bubble was the intense speculative activity, particularly the purchase of multiple properties. When speculators who purchased multiple properties implode financially, they allow multiple properties to fall into foreclosure. One of the reason we have had such a dramatic spike in foreclosures even before the bulk of the adjustable rate mortgages begin to reset is because of the collapse of speculators.
Today's properties are all owned by two men with the same last names. Some of the properties are owned jointly, and some are owned in the name of only one of the men. All of the properties are for sale for less than they paid and less than they owe on them. They can't feel good about it. When they built their financial empire, they probably thought they would be spending their fortune hanging out chillin'; Instead, they be illin'...
Beautiful home located on cul-de-sac. Concrete tile roof. Inside laundry, built-in microwave, dishwasher and ceiling fan in kitchen. Association pool, spa and clubhouse very close. Close to university!! Lender Approved Short Sale!! Lowest price in the area!
Note the restrained use of exclamation points, he only used two instead of three to end his sentences.
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This was our tycoons's first property. It was purchased in November of 2004 for $525,000. The buyers put 5% down ($26,250) and took out two loans totaling $498,500. In March of 2005, they refinanced into a 1% adjustable. At that point, they still had their downpayment in the property. In October of 2005 they refinanced again with a $500,000 first and an $85,000 HELOC. It appears as if this HELOC money was used as the downpayment to acquire property #3 today as it was purchased 10 days after the refinance, and the downpayment was $65,000. The cash-out refinancing means that between this property and property #3, our tycoons have a total of $6,250 in equity invested between them. Aren't Ponzi Schemes great?
If the sellers manage to get their current asking price, Countrywide stands to lose $110,300.
In April of 2005, just after their first refinance of property #1, our tycoons purchased property #2:
BEAUTIFUL HOME IN TURNKEY CONDITION!! 2 CAR ATTACHED GARAGE. BIG ENCLOSED PATIO, STEPS TO IRVINE BIKE TRAILS, END UNIT, MOTIVATED SELLER!!! CLOSE TO UNIVERSITY!
MOTIVATED SELLER!!! LOL! Why would this seller care? Their 5% down is long gone...
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This property was first mentioned in the post Deodar of Destruction that came out on June 12, 2007. At the time, they were asking $565,000 for this property. A 30% drop in asking price is some first-class market chasing. If they manage to find a buyer at this price and pay a 6% commission, the total loss will be $118,400. The sellers will lose $48,500 plus their carrying costs, and Countrywide will lose $69,900, assuming the sellers are current on their payments. All three of today's properties are soon to be owned by Countrywide. As if Countrywide didn't own enough homes in California already...
4 bedroom, 2 bath, plus bonus room den. Currently 5 renters, great rental income $2,700-$3,300. New kitchen is currently being installed. Great neighborhood and location. Lender approved Short Sale!!
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Five renters! I guess that is one of the reasons you want an HOA so you can police this kind of thing (I don't believe this neighborhood of El Camino Real has one). Do you think they get 5 cars in the driveway? I am guessing the circular grass dead spot in the back is remnant of a keg party, but I could be wrong. BTW, do you think these guys are current on all their payments to Countrywide, or are they skimming these people's rent?
As I mentioned above, the downpayment for this property appears to have been financed with equity extraction from property #1. Plus the first mortgage is a 1.5% negative amortization loan. If it was a 2/28, it exploded in November of last year. If they manage to get their selling price on this property and pay a 6% commission, the total loss on the property will be $143,340. Since I accounted for the loss of the $65,000 downpayment on property #1, Countrywide will only lose $78,340 on this one.
Countrywide must have really liked doing business with these gentlemen. On property #1, they lost $110,300, on property #2 they lost $69,900, and on property #3, they lost $78,340 for a total loss of $258,540. Our tycoons did lose some of their own money. They lost $6,250 between properties 1 and 3, and they lost $48,500 on property number 2. Their total loss was $54,750.
Another day, another quarter-million dollar loss in Irvine.
I hope you have enjoyed this week at the Irvine Housing Blog. I wanted to return to our roots and profile properties without all the intense analysis. More analysis posts are coming, for those of you that look forward to them, but it was nice to take a break and just enjoy the schadenfreude for a while. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
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(One) day when I was chillin' in Kentucky Fried Chicken
Just mindin' my business, eatin' food and finger lickin'
This dude walked in lookin' strange and kind of funny
Went up to the front with a menu and his money
He didn't walk straight, kind of side to side
He asked this old lady, "Yo, yo, um...is this Kentucky Fried?"
The lady said "Yeah", smiled and he smiled back
He gave a quarter and his order, small fries, Big Mac!
You be illin'
You be illin'
You be illin'
Why spend just a Night at the Roxbury when you can live there? Look at this fantastic property. It comes complete with a hose on the roof, termite damage on the porch, broken concrete, a leaning sidewalk light, an empty milk bottle on the walk, and a pair of statues that looks like a man staring down a cow. At least the grass is green. You can't beat this location. It is so close to the railroad tracks, the vibrations from the passing trains will shake the pictures off the wall, and the position at the end of a "T" intersection guarantees a strong flow of negative energy and enough flashing car lights to ensure you can't sleep at night. As the realtor noted, it is "PERFECT FOR FIRST HOME BUYERS." Yeah, perfect...
BEAUTIFUL HOUSE IN A NICE AREA. PERFECT FOR FIRST HOME BUYERS.
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You can sense the enthusiasm the realtor has for this listing. I can't blame her. How do you get too excited about an overpriced short sale that has almost no chance of earning a commission.
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The seller of this property put 5% down when it was purchased, but they refinanced in 2006 and took out an Option ARM with a 1.8% teaser rate for $548,000 and a simultaneous HELOC for $64,000. They are exercising their "put" option, and the lender is going to eat another one. If this property sells for its asking price -- which seems very unlikely -- the total loss to the lender will be $99,700 assuming they maxed out the HELOC and pay a 6% commission.
Anyone want to live here? It is Irvine, and It's a beautiful life, oh oh ooo...
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You can do what you want just seize the day
What you're doing tomorrow's gonna come your way
Don't you ever consider givin' up, you will find, oooh
It's a beautiful life, oh oh ooo
It's a beautiful life, oh oh ooo
It's a beautiful life, oh oh ooo
I just wanna be here beside you
stay until the break of dawn
Take a walk in the park when you feel down
There's so many things there
that's gonna lift you up
See the nature in bloom a laughing child
Such a dream, oooh
The list price on 78 Sorenson is down t0 $549,000, and the property is in escrow.
That's life (that's life), that's what all the people say You're ridin' high in April, shot down in May But I know I'm gonna change that tune When I'm back on top, back on top in June
I said that's life (that's life), and as funny as it may seem Some people get their kicks stompin' on a dream But I don't let it, let it get me down 'cause this fine old world, it keeps spinnin' around
I've been a puppet, a pauper, a pirate, a poet, a pawn and a king I've been up and down and over and out and I know one thing Each time I find myself flat on my face I pick myself up and get back in the race
This song speaks to our market on many levels. The first stanza speaks to the denial in the market. This years selling season was a bust, but come next June it will come roaring back -- Not. One a deeper level the message of this song is wonderful. A great many people are going to get kicked in the teeth by the market. They are just going to have to get back up and carry on because that's life.
Beds: 3 Baths: 2.5 Sq. Ft.: 1,622 $/Sq. Ft.: $370 Lot Size: - Type: Condominium Style: Contemporary/Modern Year Built: 2001 Stories: Two Levels Area: West Irvine County: Orange MLS#: S503062 Status: Active On Redfin: 64 days Act Fast! This great home is priced for a quick sale! Fantastic interior private location. Office/Den downstairs, 3-large bedrooms upstairs with spacious closet. Light & bright and spacious, durimar wood floors, blinds, recessed lighting. Close to Tustin Market Place and schools.
Act Fast! After only 60 days on the market, the bidding war will soon begin. .
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Can you imagine the conversations the couple selling this house must be having?
Honey, do you think the bank will come after us for the $151,000 they are going to lose on the mortgage?
I don't think they can in California.
Won't this hurt our credit?
So what? We could have made hundreds of thousands, and the worst we could lose is a temporary ding to our credit. I think it was worth it.
No stress, no big deal. They took a risk to their credit and passed the financial risk onto the bank. The bank is going to lose their entire second mortgage. In our forums someone told the story of their friend who was invested in a fund that provided second mortgages. How many loans like this does it take to wipe out a fund like that?
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A poster from yesterday tipped me off to this property.
Beds: 4 Baths: 2.5 Sq. Ft.: 2,201 $/Sq. Ft.: $372 Lot Size: 4,750 sq. ft. Type: Single Family Residence Style: Traditional Year Built: 1985 Stories: Two Levels Area: Woodbridge County: Orange MLS#: S493874 Status: Active On Redfin: 129 days Unsold in 90+ days * * * This is a Short Sale! Great Interior Location in Woodbridge! Remodeled kitchen with granite counter tops, cabinets and appliances. This plan offers a large family room with ceiling to floor brick fireplace. Open floor plan with vaulted ceilings in living room and master bedroom. Great size Front and Back yard. Enjoy the Lakes, Swimming Pools, Spas, Tennis Courts, and many wonderful Woodbridge Amenities with a very Low Assocciations Dues!
If they get their asking price, and there is a 6% commission, the total loss on the property would be $115,140. The sellers would lose their entire $88,500 downpayment, and the bank would lose $26,640 on the second mortgage.
Let's take another look at the real problem here...
A more dramatic decline in prices is not forecast because inventory levels have not climbed that high and the fall-out from the subprime mortgage crisis will be less severe in Orange County than other areas of the state.
Some people still don't get it. It is not subprime mortgages that are creating the problem. It is 100% financing and exotic loan terms -- two items which are common in OC. We have documented case after case of 100% financing deals going bad. This is the primary driver of lower prices in Irvine right now. As the multitude of exotic loans reset over the next few years, this will cause the next major wave of foreclosures and short sales.
Also, when you think about the financing picture, it is going to get worse before it gets any better. Credit is not going to magically get looser. Look at the losses to second mortgages we have been documenting day after day here in Irvine. Extrapolate that to every city in California, and you get a sense for how big this problem is for second mortgage holders. This will stop the origination of second mortgages, or it will make them so expensive as to render them useless.
Without second mortgages people will be required to make 20% downpayments. Look at these prices and the downpayment requirements. Who has that kind of cash saved up? Who do you know who is saving money from their salaries to make a downpayment? Where will the first time buyers come from?
Sales volume will not suddenly return to the market when very few people have the required 20% downpayment. The chain of move-ups will be disrupted until the entry level buyers save 20% downpayments and the entry level market pricing drops down to meet them.
The bulls in denial seem to believe credit conditions similar to the bubble rally will be returning soon. Lenders are experiencing unprecedented losses. Who is going to through their money into that abyss? Credit will continue to tighten until the lenders are safe. This means 20% downpayments, 28% DTI ratios, and good credit. If you don't meet those three requirements, you will not be buying a house. If you are facing a mortgage reset, and you don't meet these requirements -- which, of course, nobody does -- you will not get refinanced, and you will lose your house.
While I am on a rant, I would like to point out the most widespread delusion about financing workouts the suddenly generous lenders are promising: borrowers will not be able to keep their house and their lifestyle. The reality is that the bank will demand a dramatic reduction in personal spending and a change in lifestyle to keep a home.
A great many borrowers who are facing a reset believe they can go to the bank, and the bank will work with them to reduce the payment. True to a point, but the bank will analyze your financial situation, determine your bare minimum financial needs, and take everything else -- just like a bankruptcy. They will also ding your credit for your efforts. Borrowers can keep their houses in exchange for a decade or more of financial servitude to a lender. Enjoy the Ramen noodles.
Perhaps someday, the mainstream media and our academicians will fully comprehend the nature and scope of the problem. Until then, we will continue with our message and continue to document the results.
I guess that's life...
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Some closing words of advice and perspective from Frank Sinatra...
And now, the end is here And so I face the final curtain My friend, I'll say it clear I'll state my case, of which I'm certain I've lived a life that's full I traveled each and ev'ry highway And more, much more than this, I did it my way
Regrets, I've had a few But then again, too few to mention I did what I had to do and saw it through without exemption I planned each charted course, each careful step along the byway And more, much more than this, I did it my way
Yes, there were times, I'm sure you knew When I bit off more than I could chew But through it all, when there was doubt I ate it up and spit it out I faced it all and I stood tall and did it my way
This one went back to the bank on 2/4/2008 for $616,250.
Our house, in the middle of our street Our house, in the middle of our Our house, was our castle and our keep Our house, in the middle of our street Our house, that was where we used to sleep Our house, in the middle of our street Our house, in the middle of our street
Beds: 4 Baths: 3 Sq. Ft.: 2,344 $/Sq. Ft.: $299 Lot Size: 5,940 sq. ft. Type: Single Family Residence Style: Other Year Built: 1972 Stories: Two Levels Area: Northwood County: Orange MLS#: P595176 Status: Active On Redfin: 37 days
From Redfin, "This house features 4 bedroom plus a bonus room, 3 full bath, remodeled kitchen with new appliances, granite countertop and travertine backsplash, dual panel windows and located close parks and tennis courts, schools, restaurants, shopping centers and easy access to I5 and most of all a motivated seller."
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You have to admit, this is an impressive rollback. The asking price is a full 20% under the purchase price, and this property was purchased before the 2006 peak. If the seller manages to get their full asking price, they still stand to lose $211,094.
Realistically, this one is headed to foreclosure. This was another 100% financing deal, so the seller is motivated to walk. The bank will foreclose before they take a hit on their first mortgage, so any loss in excess of $173,800 will not get approved. The second mortgage holder... well, that is probably going to be a total loss. These are big numbers. How many of these can the banks absorb?
BTW, all the "moderates" who think we are only due for a 10% to 15% correction should be rejoicing. This must mean we are at the bottom.
You know, it doesn't look or feel like the bottom to me...
Prison gates won't open up for me
The summer had inhaled
Unsold in 90+ days
