Every limbo boy and girl
All around the limbo world
Gonna do the limbo rock
All around the limbo clock
Jack be limbo, Jack be quick
Jack go unda limbo stick
All around the limbo clock
Hey, let's do the limbo rock
Limbo lower now
Limbo lower now
How low can you go
The Limbo -- Chubby Checker
These rollbacks are coming up so frequently these days, I am forced to wonder, "How low can you go?"
Asking Price: $651,900
Purchase Price: $735,000
Purchase Date: 5/4/2006
Address: 144 Saint James, Irvine, CA 92606
Beds: 3
Baths: 2.5
Sq. Ft.: 1,931
$/Sq. Ft.: $338
Lot Size: -
Year Built: 2002
Stories: 2
Type: Condominium
View: Park or Green Belt
County: Orange
Neighborhood: Walnut
MLS#: S498460
Status: Active
On Redfin: 15 days
From Redfin, "Spacious floor-plan in beautiful gated community of Parklane! Great curb appeal! A must see!!! Den or office off master suite! Corian counters! Center island! Clean white cabinets! Custom tile flooring! plantation shutters! enclosed patio! Best price detached home in the area for the square footage! Light & bright! sides greenbelt! Go direct!"
Three exclamation points: check.
No periods: check.
"Light and Bright:" check.
This realtor probably has an advanced degree in realtorese.
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At first glance this seems like just another rollback, but wait... Check out the sales history:
Sales History
Date Price
05/04/2006 $735,000
07/11/2003 $667,000
This is a 2003 rollback!
I imagine this seller thought they were getting a good deal when they bought at the peak and only paid $68,000 more than the previous buyer. Oops! It doesn't seem to have worked out that way. If they get their asking price, minus a 6% commission, they stand to lose $122,214 in just over one year of ownership. I guess buying on St. James street did not bless this transaction.
These rollbacks have clearly wiped out all of the market gains through 2005 and 2006, and we are working our way through 2004. Now we even have the occasional 2003 debacle.
To be honest with all of you, I did not expect to see the market deteriorate this quickly. I was expecting real signs of distress in the fall and winter (I still think it will get much worse.) Real estate markets typically do not turn this fast. Of course, this is no typical real estate market.
The market decline of the early 90's was a slow deflation. There was no single period of intense panic selling; however, it really is different this time. These prices were bid up so high, with so little regard to fundamental valuations, and was played by so many people with so little to lose (100% financing) that it certainly appears as if it is going to behave like a traditional commodities market.
If you think it is bad now, wait until the crushing weight of inventory and the massive dump of REOs hits the markets this fall and winter. I predict we will see a full scale panic like the residential real estate market has never seen before. Watch for the psychological shift I described in Houses Should Not Be a Commodity. When we move from denial into fear, the bulls will go strangely silent. When we move from fear into panic and capitulation, we will see a massive inventory spike, and they will all be rollbacks. Watch for it. It is coming soon.
I hope you have enjoyed your week at the Irvine Housing Blog. I have enjoyed bringing it too you. See you next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
. . . however baby man may brag of his science and skill, and however much, in a flattering future, that science and skill may augment; yet for ever and for ever, to the crack of doom, the sea will insult and murder him, and pulverize the stateliest, stiffest frigate he can make; nevertheless, by the continual repetition of these very impressions, man has lost that sense of the full awfulness of the sea which aboriginally belongs to it.
. . . these are the times of dreamy quietude, when beholding the tranquil beauty and brilliancy of the ocean's skin, one forgets the tiger heart that pants beneath it; and would not willingly remember, that this velvet paw but conceals a remorseless fang.
Moby Dick -- Herman Melville
Wall Street financiers came up with a number of financial instruments designed to minimize their risks (Collateralized Debt Obligations, Credit Default Swaps, etc.) In doing so, they created a false sense of security and moral hazard which caused huge sums of money to flow into residential home mortgages. Like the first quote from Moby Dick above, the market participants "lost that sense of the full awfulness" the markets can inflict upon them.
For all our wisdom and collective experience, none of us knows what the markets will do next. Like an ocean current or a raging river, a financial market charts its own course. It is fickle and feckless and flows without regard to our hopes and dreams. To forget this fact is to book your financial passage on the Edmund Fitzgerald (Link to great music video).
The ebbs and flows of financial markets are meaningful to us, but in reality they are just movements in price; nothing more. Price rallies make homeowners blissful and renters bitter, while price declines make homeowners gloomy and renters gleeful.
These feelings and emotions are independent of movements in price. The market just moves, that is all it does. It is benign, yet dangerous; it is indifferent, yet demonstrative; the market is a paradox which me must simply accept.
It has been argued -- convincingly in my opinion -- that the health of a real estate market starts at the bottom of the food chain. Like the plankton in the sea, the entry-level buyer is the base of the real estate food chain. If the organisms that make up the base of the food chain are not healthy, the entire ecosystem is in peril. So it is with our real estate market.
In several posts I have talked about the complete lack of sales at the low end of the market. It occurred to me I haven't profiled enough of these properties to show just how bad things are. Today I am going to profile three properties in "The Lakes:" a severe rollback, a bank REO and a peak buyer hoping to limit their losses. Enjoy...
Asking Price: $270,000
Purchase Price: $340,000
Purchase Date: 12/15/2005
Address: 79 Lakepines, Irvine, CA 92620
1st Loan $255,000
2nd Mtg. $51,000
Downpayment $30,000
Beds: 1
Baths: 1
Sq. Ft.: 934
$/Sq. Ft.: $289
Lot Size: 763 sq. ft.
Year Built: 1977
Stories: 2
Type: Condominium
View: Water
County: Orange
Neighborhood: Northwood
MLS#: S488313
Status: Active
On Redfin: 86 days
From Redfin, "Charming, Spacious two story Loft Bedroom home in resort like Lakes community. Best location. Tranquil Back patio faces serene stream and water features. Cozy fireplace, Catherdral scraped ceilings, Skylight, Garden Window, new lighting fixtures, designer paint, Newer appliances including stove, microwave, dishwasher. Walk in Closet in bedroom. Turnkey."
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Look at this depth of this rollback: 20% off; even at this asking price it is still on the market after 77 days. Further price reductions will be necessary before this sells. If they manage to get the asking price, and assuming a 6% commission, this seller and their bank stand to lose $86,200 -- that is 25% off a 2005 price!
The lake, it is said, never gives up her dead
When the skies of November turn gloomy.
The Wreck of the Edmund Fitzgerald -- Gordon Lightfoot.
Real estate always goes up, or so our next seller hopes...
Asking Price: $241,500
Purchase Price: $191,826
Purchase Date: 6/11/2007
Address: 171 Streamwood, Irvine, CA 92620
1st Loan $178,500
2nd Mtg. $31,500
Downpayment $0
Beds: 0
Baths: 1
Sq. Ft.: 415
$/Sq. Ft.: $582
Lot Size: -
Year Built: 1977
Stories: 1
Type: Condominium
View: Trees/Woods, Water
County: Orange
Neighborhood: Northwood
MLS#: S497917
Status: Active
On Redfin: 17 days
From Redfin, "Enjoy the sounds of meandering streams from one of the least expensive condos in all of Irvine. This studio unit is on the ground floor within a great community close to shopping, dining and transportation. Numerous association amenities including 2 clubhouses, 2 pools, 2 spas, and tennis courts make this a great place to live!!!"
The obligatory three exclamation points...
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Look at this sales history:
Sales History
Date Price
06/11/2007 $191,826
03/21/2005 $210,000
04/16/1998 $57,500
This was a 2005 rollback foreclosed on by the Bank of New York in early June. Does anyone want to bet this will sell for less than the June sales price? And look at the 1998 price. If you calculated its rental value -- and at 415 SF, it is only useful as a rental -- the 1998 price is probably not far from is real worth.
Back to the behavior of lenders and our moral hazard:
By this, he seemed to mean, not only that the most reliable and useful courage was that which arises from the fair estimation of the encountered peril, but that an utterly fearless man is a far more dangerous comrade than a coward.
Moby Dick -- Herman Melville
Asking Price: $399,999
Purchase Price: $427,000
Purchase Date: 3/2/2006
Address: 3 Lakepines, Irvine, CA 92620
1st Loan $340,800
2nd Mtg. $85,200
Downpayment $1,000
Beds: 2
Baths: 1.5
Sq. Ft.: 1,202
$/Sq. Ft.: $333
Lot Size: -
Year Built: 1977
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Northwood
MLS#: U7003339
Status: Active
On Redfin: 1 day
New Listing (24 hours)
From Redfin, "Very spacious and open floor plan. Combination kitchen/dining/living room great room. Private patio area for a small animal, and or bbq area and relaxing. Vaulted ceilings with sky lights. Association area includes two pools & spas, tennis courts. Lakes and streams running all around complex."
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Given the whopping $1,000 downpayment, I am not surprised this would be millionaire is walking from this stellar investment. If this property sells for its asking price, the seller bank stands to lose $51,000.94 after a 6% commission.
The Captain wired in he had water coming in
And the good ship and crew was in peril
And later that night when his lights went out of sight
Came the wreck of the Edmund Fitzgerald.
The Wreck of the Edmund Fitzgerald -- Gordon Lightfoot.
I was listening to the radio
I heard a song reminded me of long ago
Back then I thought that things were never gonna change
It used to be that I never had to feel the pain
I know that things will never be the same now
I wanna go back
And do it all over again
But I can't go back I know
I Wanna Go Back -- Eddie Money
Link to Music Video
With all the rollbacks we are seeing in the market, do you think some of these homeowners would like to go back and do it all over again -- and perhaps make different choices? I imagine they are feeling the pain...
Asking Price: $639,000
Purchase Price: $622,500
Purchase Date: 11/23/2004
Address: 110 Reunion, Irvine, CA 92603
Beds: 3
Baths: 2.5
Sq. Ft.: 1,300
$/Sq. Ft.: $492
Lot Size: -
Year Built: 2005
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Quail Hill
MLS#: S489036
Status: Active
On Redfin: 67 days
From Redfin, "Stylish ultra luxury detached residence in highly sought after Quail H ill development. Nestled in back of CDS - very safe & quiet! Loaded w/ model upgrades, this gorgeous residence will not stay on the market long! Great floorplan enhanced w/ hardwood flooring, recessed lighting + base & crown molding. Gourmet kitchen w/ granite countertops, splash & under cabinet lighting. Upstairs bedrooms & loft. Large master suite w/ walk-in closet & bath. Charming garden patio. Resort quality association."
Wow! Ultra luxury. Not just ordinary luxury, but ultra luxury... It must be on par with Burj Al Arab.
It won't stay on the market long -- only 67 days so far...
And, of course, another gourmet kitchen...
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This one is not technically a 2004 rollback, yet. The asking price is still above the purchase price, but with 67 days on the market, I highly suspect the final sales price (if there is one) will be under the purchase price. If they can get their asking price, they stand to lose $21,840 after a 6% commission.
Asking Price: $679,900
Purchase Price: $586,500
Purchase Date: 11/1/2004
Address: 86 Reunion, Irvine, CA 92603
Beds: 3
Baths: 2.5
Sq. Ft.: 1,300
$/Sq. Ft.: $523
Lot Size: -
Year Built: 2004
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Quail Hill
MLS#: S483874
Status: Active
On Redfin: 10 days
From Redfin, "Quality upgraded home with granite counter Tops, ceiling fans in each room, upgraded carpeting, hardwood floors throughout fist floor with 9 ft ceilings. Wood blinds, natural slate courtyard, recessed lighting, and more. Ample parking, walking distance to pools, schools, and shopping. Bright home in a very quiet surrounding. Lowest priced Sage plan 3 California Pacific Home."
fist floor?
umm... This isn't the lowest priced Sage plan 3. The unit profiled above is...
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This property is listed for a wishing price. 110 Reunion is an identical plan offered for $40,000 less. In short, they are at least $60,000 overpriced.
In a strong market, this seller might get their wishing price, but in a declining market, it is a race to the bottom. 110 Reunion is currently in the lead.
** AN IRVINE HOUSING BLOG NEWS FLASH **
A 2003 rollback has been sighted!
We interrupt our regularly scheduled sequence of properties in Quail Hill to bring you this special breaking story. An auction site has listed a property for sale at a price lower than its 2003 purchase price.
Is this a ploy to generate a bidding frenzy? Sure it is.
Will it sell for less than its 2003 purchase price? Who knows.
Is this auction site hoping the Irvine Housing Blog will call attention to their listing? Power To The People. Always glad to be of service...
Asking Price: $400,000
Purchase Price: $415,000
Purchase Date: 12/2/2003
Address: 1404 Terra Bella, Irvine, CA 92602
Beds: 2
Baths: 2.5
Sq. Ft.: 1,327
$/Sq. Ft.: $301
Lot Size: -
Year Built: 2001
Stories: 2
Type: Condominium
View: Mountain
County: Orange
Neighborhood: Northpark
MLS#: S494809
Status: Active
On Redfin: 30 days
From Redfin, "This is a fabulous Tuscan Villa with upgrades galore. This warm and inviting home is bright with extra windows and faces the morning sun. Ceramic tile flooring, Euro White Cabinets, Window Blinds and shutters, Neutral designer carpet with a security system can all be yours! This is a private end unit with no one above or below."
Link to Auction site The auction is today, so there is still time if you want to buy it... Not.
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The property records from my data source shows a first mortgage for $331,840 and no second. There must be more to this story for it to be going at auction.
If this sells for asking price, and the auctioneer takes a 10% commission (that is their fee), the seller will recognize a loss of $55,000 on a 2003 purchase.
What more needs to be said...
How about Jim Cramer's take on the housing market...
Jim Cramer in October 2006.
Jim Cramer in July 2007.
What a difference nine months makes...
So long sad times
Go long bad times
We are rid of you at last
Howdy gay times
Cloudy gray times
You are now a thing of the past
Happy days are here again
The skies above are clear again
So let's sing a song of cheer again
Happy days are here again
Happy Days are Here Again - Music and Lyrics by J. Yellen and M. Ager
Youtube link Barbra Streisand - Happy Days Are Here Again
A special thanks to mk9 for posting this property in our forum.
Real estate markets move like large ocean liners: once they start going a certain way, they tend to continue in that direction for extended periods of time; they are slow to change direction. The credit markets have grabbed the rudder and ordered a price decline. The boat spent the better part of a year changing direction, but now it is clearly headed toward the rocks.
Today's properties are on the same street in Northpark. One was purchased at the peak and is now offered for sale at a 10% discount. The other was purchased in 2005, and they are hoping for a breakeven sale.
Asking Price: $664,999
Purchase Price: $712,500
Purchase Date: 5/31/2006
Address: 75 Burlingame, Irvine, CA 92602
Beds: 3
Baths: 2.5
Sq. Ft.: 1,664
$/Sq. Ft.: $400
Lot Size: -
Year Built: 2000
Stories: 2
Type: Condominium
View: Park or Green Belt, Trees/Woods
County: Orange
Neighborhood: Northpark
MLS#: S491713
Status: Active
On Redfin: 43 days
From Redfin, "Northpark beauty! Fireplace in the cozy living room, lg. upgraded entertainers kitchen, cathedral ceilings, spacious patio, rare side yard & more. Large master bedroom/bathroom w/ sep. tub & shower. New carpet, fresh paint, plantation shutters. End unit, so feels like detached for attached price! Excellent, private location with attached 2-car garage. Pools, spas, sports courts, walking/bike paths - come enjoy the best Irvine has to offer in this guard-gated, private Northpark townhouse"
I am surprised this unit wasn't listed as having "custom paint." I actually like the colors, but I could see how some might not.
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If this seller gets their asking price, they will lose $87,400 after a 6% commission. This unit has been on the market for over 30 days, so it doesn't appear they are fielding multiple offers over the ask. In short, they will not get their asking price, and they will lose more money.
Asking Price: $545,000
Purchase Price: $550,000
Purchase Date: 4/29/2005
Address: 17 Burlingame, Irvine, CA 92602
Beds: 2
Baths: 2.5
Sq. Ft.: 1,475
$/Sq. Ft.: $369
Lot Size: -
Year Built: 2000
Stories: 2
Type: Condominium
View: Other
County: Orange
Neighborhood: Northpark
MLS#: S495748
Status: Active
On Redfin: 17 days
From Redfin, "Model Perfect With A Large Wrap Around Yard. view Of City Lights, Priva te & Cozy. Highly Upgraded W/ hardwood Floors, Shutters, Custom Paint, ceramic Tile And More. Unique Floor Plan Offering A Full Suite Downstaris With Full Bath And Walk-in. Master Upstairs , Open Living And Dining, Cute Balcony This Is Your Buyers Dream Home. Prestigeous Guard Gated Community Of Northpark. "
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If this seller gets their asking price, they will lose $37,700 after a 6% commission.
With falling home prices, I think we can safely say that for the housing ATM, the game is over.
