I want a new drug
One that wont make me sick
One that wont make me crash my car
Or make me feel three feet thick
I want a new drug
One that wont hurt my head
One that wont make my mouth too dry
Or make my eyes too red
One that wont make me nervous
Wondering what to do
One that makes me feel like I feel when Im with you
When I'm alone with you I want a new drug
One that wont spill
One that dont cost too much
Or come in a pill
I want a new drug
One that wont go away
One that wont keep me up all night
One that wont make me sleep all day
Right when I start to think sellers are accepting the reality of the new market, I come across a listing that makes my jaw drop at the greed and clueless irrationality of my fellow man. Today's seller needs a new drug because they have clearly overdosed on the kool aid...
One of largest entertaining back yards in community. Low HOA fee. Highly artistic customized upgrades with oak wood cabinets and granite counter tops through out, stainless steel appliances, cove & recessed lighting in the kitchen & 1st floor BR, wine rack in kitchen. 18'X18' travertine flooring, wood & carpet flooring, Granite shower walls, frameless glass cover enclosure of master BR shower, 3 French door openings in Living room & 1st floor Br, 2 French doors in family & living Rooms, Granite counter top with top grade grill for built in private B. B. Q. Built in out door granite bar. Professional Landscaping.
How many times does the word "granite" appear in this listing?
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It has been demonstrated on the blog over and over again with listings all across the spectrum of housing that we are in a market decline, and pricing is back at 2004 levels for those few properties that are actually selling. But no, this property is different, this property has increased in value over 60% during the last 4 years. Forget the fact prices have dropped almost 20% from the peak; it is as if that never occurred. This property has been appreciating at 15% a year just like it did during the height of the bubble when they bought it. Do these sellers have their heads in the sand, or is it somewhere else? The cognitive dissonance is truly remarkable. It takes courage to put a listing price out there like this. This price clearly insults the intelligence of every buyer in the marketplace. Aren’t they worried about insulting potential buyers? No wait, I suppose potential buyers should be worried about insulting them with a lowball offer, right? This property would be fortunate to sell for what they paid for it. Can you imagine their reaction if they got an offer for what it is worth in today’s market? What would happen if they got a real lowball offer for perhaps what this place will be worth at the bottom -- I'm guessing 50% off their asking price? Anyone want to go mess with them? It is the only buyer interest they are likely to see at this listing price.
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That concludes another 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.
Address: 1124 Scholarship, Irvine, CA 92612 Plan: 1A 725 sq ft - 1/1 MLS: P609516 DOM: 46 Sale History: none Current Price: $334,990
See our previousposts on Avenue One. This brand new home is for sale by the builder, K Hovnanian. The builder listed a similar property in October 2006 for $396,990 which translates to about a 15% drop in asking price in the past 14 months.
Here are the private remarks on the property:
BROKERS AND REALTORS, DOUBLE YOUR COMMISSION TO 6% ON SELECT UNITS. Contracts must be written by 12-31-07 and COE by 1-31-08. MOVE-IN-READY. $10,000 Deposit required. Agents must bring Buyers to the Sales Office and register them during their very first visit to Avenue One. Our Sales Office ( 2100 Scholarship ) is open Mo. 1p.m. - 5p.m. and Tue. - Sun. 9a.m. - 5p.m. Please call a Sales Consultant at 949-975-8545 and ask about our current specials , incentives and upcoming events.
The builder has priced this well below other units with the same plan. It's putting this seller (a RE Broker who has the highest asking price for this plan) in a tough spot:
Address: 1138 Scholarship, Irvine, CA 92612 Plan: 1A 725 sq ft - 1/1 MLS: P584759 DOM: 123 Sale History: About $409k on 8/2006? Current Price: $420,000
These 725 sq ft units can bring in a rent of $1400-$1600/month. What's the unit worth to you?
UPDATE #1 - February 13, 2008
Recently, I noticed that several units in this complex were labeled as 'Sold' in MLS. What's interesting is the price listed in MLS as the Sold Price. These units were all sold by the builder:
1164 Scholarship - Plan 1B - 1/1 - 602 sq ft - Sold for $323,990 on 1/10/2008
1124 Scholarship - Plan 1A - 1/1 - 725 sq ft - Sold for $253,492 on 1/30/2008
1327 Scholarship - Plan 1A - 1/1 - 725 sq ft - Sold for $280,591 on 1/29/2008
1434 Scholarship - Plan 2AL - 2/2 - 1213 sq ft - Sold for $445,042 on 1/25/2008
And here's what is pending from the builder:
2138 Scholarship - Plan 2A - 2/2 - 1037 sq ft - $474,990
2434 Scholarship - Plan 2AL - 2/2 - 1213 sq ft - $556,990
1446 Scholarship - Plan 3AL - 2?/2 - 1538 sq ft - $674,990
The Sold prices are significantly lower than anything we've seen in this tract. I haven't been able to confirm this information with the Title info. If anyone can confirm, please post. As I've mentioned on other Avenue One posts, the builder is going to sell these units one way or another.
The 1124 Scholarship unit is the one that started the this post on Dec 27, 2007. If it can be rented for $1600/month, then it is at just under the 160 multiple.
As part of my Valentine's gift to my wife, I have asked her to show me her favorite house available for sale in Irvine. I told her it did not have to be realistically within our price range, it just had to be her dream house. If any of you have seen the video for The Secret, it does contain a thread of truth concerning goal setting and visualization of a better future. Although these things have no impact on a financial market, they can influence decisions in one's daily life that have a powerful synergistic effect leading in many cases to the achievement of the goals and aspirations of one's deepest vision. This post is my wife's vision board of the perfect house.
Now if I could just get each of the 3,500 daily readers to donate $3,336.85 to my downpayment fund, I could raise the $11,679,000 necessary to buy the house. I haven't quite figured out where I am going to come up with the $9,732 per month I would need to cover the property taxes, but according to The Secret, I don't need to worry about how these things will happen, I just need to focus on the vision of it happening. Perhaps I am a bit myopic, but I have a hard time seeing this coming to pass...
Tuscany inspired residence on one of Shady Canyon's largest and most private lots. One of the finest homes yet to be offered in one of the country's most prestigious private communities. This home features 5 large bedrooms, 6 full and 3 half baths, 3000+ square feet subterranean garage, commercial elevator and nearly 11000 feet of living area, huge pool and outdoor entertaining areas with multiple water features.
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Let's take a closer look at this property...
The view is fantastic. The rock outcrop provides an interesting focal point.
A great entertaining room with wet bar and big screen with beautiful wood inlays.
A modest room to hang out with the family. I particularly like how the indoor and outdoor spaces blend together by eliminating the separating wall.
This was one of my wife's favorite features. Again the distinction between what is an indoor space and what is an outdoor space is blurred. The swimming pool becomes part of the environment.
The pool and spa are spectacular.
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So there you have it, my wife's Irvine dream home. I must admit, I like her vision.
For those of you who want to work on your visualization skills this Valentine's day, I have a video for you: Kiss Me.
California, preaching on the burning shore
California, Ill be knocking on the golden door
Like an angel, standing in a shaft of light
Rising up to paradise, I know I'm gonna shine.
My time coming, any day, don't worry about me, no
Its gonna be just like they say, them voices tell me so
Seems so long I felt this way and time sure passin' slow
Still I know I lead the way, they tell me where I go.
This could be the song of the guy who delivers the paperwork for a foreclosure...
Today's owner must have estimated a fair profit for their property; otherwise, they probably would not have gone out and borrowed more than they paid for the property. In context with the previous HELOC abusers we have profiled, today's seller is a minor leaguer. They are extraordinary in their ordinariness. They are stereotypical of many homeowner's behavior during the bubble. People really believed their home appreciation was free money they could spend as income because their house would go up in value forever. In hindsight, it is laughable and ludicrous -- and to some of use in foresight it was as well -- but to those caught up in the mania, it made perfect sense.
Irvine will not be savaged by subprime (other than the job losses.) Irvine will be devoured by its own consumption. As I demonstrated in What is Equity?, if you consume your equity or buy at too high a price, the inflation hedge is the only thing keeping you above water, and if you consume too much through bad loan terms or HELOC abuse, you will go underwater and you will be at serious risk of losing your house.
Today's seller bought in the upward trajectory of the speculative equity curve. Since they bought in 2003, they were too late to stay above water at the bottom of the trough; however, it might have been manageable if they had used conservative financing and not used their HELOC. Instead, they chose a different path, and now they are a short sale. This actually makes it easy to estimate their profit: they paid $830,000, and they borrowed $952,000, so the made $122,000 on the property. Of course, since they have recourse loans on the property, and they are a short sale, they have no protection from the lenders collections department. There may be a question as to how much of this "profit" they will be able to keep...
Magnificent turnkey gem nestled on ultra-premium lot on end of safe & quiet CDS! Gorgeous curb appeal thanks to contemporary styling + stone detailing & mature landscaping. Dramatic living room entry boasts nice hardwood flooring + custom lighting & French door access to patio. Stunning gourmet kitchen w/ rich European cabinetry, granite counters, backsplash, island & built-in range & hood. HUGE master suite w/ private bath & walk-in closets. Entertainers' yard.
Ultra-premium end lot? You mean the one backing on to Jamboree? safe & quiet? Have they no shame?
CDS? Collateralized Debt Servitude?
Magnificent Turkey...
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This property will probable look like a breakeven transaction when it finally sells. If they had used a 30 year fixed and avoided the HELOC, they probably would escape with some equity. As it stands, any assets they do escape with will be a target for their lender, although in the short term, they made $122,000. If this house sells for asking price and a 6% commission is paid, the lender stands to lose $106,940.
If you were the lender who had the second lien that did not get paid off in full, aren't you going after the money the borrower took?
Being financially responsible can be difficult. I haven't always been, but I guess there are none so religious as the converted, right? There is a belief in our culture that one can be "responsible with debt." Personally, I think the whole idea is BS perpetuated by the credit purveyors (drug dealers) who want everyone to be hooked on their product. The most responsible way to manage debt is not to have any and use savings instead.
Most people don't budget well if they budget at all. Instead of running a surplus each month and putting money into savings, most people (who at least try to be responsible) will target a monthly breakeven where they at least do not fall behind. The problem with this approach is the unexpected always comes up and puts you behind. Budgeting for the unexpected is called saving, and most people do not bother or do not realize its importance.
The true spenders do not set out to run up a mountain of debt, but if they see something they want, they buy it, and they end up with a mountain of debt because of this behavior. Usually this behavior will go on as long as someone will extend them credit to enable their lifestyle. These people are only stressed when all their credit lines are tapped and they actually have to live within their incomes (minus debt service of course.) The longer this behavior goes on and the more it is enabled, the more debt this person will take on until finally they experience a personal Minsky Moment, and all of their debts come due. This is generally a very painful experience.
Today's seller is a profile of a spender who was enabled by the housing bubble. She bought a small place at the bottom of the last cycle in 1997. Over the 10 years that followed, she refinanced 5 times. Each time it was for a small amount and it was likely used to pay off credit card debt (I am speculating, I don't know for sure.) Rather than run into a credit limit barrier which might inhibit her lifestyle, she was enabled by the speculative equity building in her little condo to continue this pattern of overspending for a full 10 years. Only now that prices have stopped going up and credit is tightening is she going to be faced with a curtailment of her spending habits. If she drops her price much more, she may even become a short sale, and that would cut off credit altogether. This is where the analogy between credit and drugs breaks down -- when you go cold turkey from credit, you don't have any withdrawals.
Perhaps it is unfair to call this behavior irresponsible, particularly if the bills are paid on time and no creditor is facing a loss; however, this seller could have made $350,000 in equity profit which could have been used for more worthy purposes (retirement, move-up housing, etc.) This was perhaps a once-in-a-lifetime opportunity to gain wealth through fortunate timing in a speculative market, and she blew it. If living this way is not irresponsible, it is at least unwise.
Largest model, end unit & 'premium' large side yard. New paint in & out. New carpet in master & newer laminate flooring in living room, stairs, hallway & 2 BR. New Italian tile flooring-all bathrooms. Toilets have all been replaced, as water heater, motors in furnace, washer & dryer. 4 ceiling fans. Designer archway with colomns lead to 'gourmet kitchen', all stainless appliances, sink, potrack with light over a large added kitchen island. Granite look countertops, custom recessed lighting, all cabinets have been replaced, pull out drawers & built-in 'wine cooler'! Custom french sliders lead to lush topical paradise paved with flag stone, dramatic lighting, Koi pond and water fall, a place to sit under palm trees and enjoy the soothing sound of rushing water. Evenings entertain in this tropical setting around the built-in bar-b-que (which stays) and can be used with butane or with the newly added gasline. New rollup garage door has just been installed. All this & priced to Sell!!
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So how did this seller manager her mortgage?
The property was purchased in December 1997 for $163,000. There was a first mortgage for $156,000 and a $7,000 downpayment.
12/15/2000 the property was refinanced for $190,000.
12/5/2001 another refinance for $194,500. Christmas shopping money?
1/10/2003 a refinance for $232,000. Pay off Christmas shopping debts?
11/28/2005 a refinance for $381,000. Remodel?
1/3/2007 a refinance for $418,000 with an Option ARM.
Ten years and a steadily increasing loan balance on the property. Now if they sell for asking price (which seems high at $381/SF) they stand to walk away with less than $100,000 in cash from a property that went up almost $400,000 in price. Does this seem like good financial planning to you?
It appears we are having a problem with defaults. The above chart is based on a percentage basis, so it is adjusted for the increase in housing units over time.
Address: 28 Bolinas, Irvine, CA 92602 Plan: 3 - 1622 sq ft - 3bd/2ba MLS: S516101 DOM: 4 Sale History: 12/4/2007: $638,586 (back to the bank)
9/9/2005: $680,000
6/11/2004: $675,000 Current Price: $529,900
This Plan 3 in the San Juan Bautista tract in Northpark went back to the bank earlier this month. At the current asking price, the bank is willing to accept a $100k+ loss on this property.
Here are the private remarks:
Combo R-E-0. Buyer must submit a prequal w/Wells Fargo along with the offer. (Bank rules)Call xxxxxxxxxxxx Property sold AS-IS. $1,000 bonus to selling agent if closes by 2/28/2008.
There is actually another Plan 3 REO townhome in this tract (15 Bolinas) which is pending sale at $532,900. These 2 REO's will definitely have an impact on the comps.
Address: 7 Chenile, Irvine, CA 92614 (Woodbridge) Plan: 2201 sq ft - 4/2.5 MLS: S442943 DOM: 137 Sale History: 4/27/2006: $885,000 9/17/2003: $665,000 Price Reduced: 07/11/06 -- $1,045,000 to $999,000 Price Reduced: 08/02/06 -- $999,000 to $979,000 Current Price: $979,000
Our flipper purchased this Plan C in the Parklane tract in Woodbridge earlier this year and then put it back on the market 1 month later on 6/1/2006 hoping to flip this home for a quick $160,000! He apparently has had a difficult time finding a GF as this home has been on the market for 4.5 months.
The private remarks state:
Price Reduction for the 2nd time. Great Value for the location with lots of upgrades. Vacant - Owner is extremely motivated to sell. Please show and bring all reasonable offers!
Vacant? That explains the extreme motivation. But 2 price reductions and it's still priced $94,000 over what he purchased it for! After 6% in selling costs, our flipper stands to make over $35,000 in profit if he gets his 'reduced' asking price. We'll have to keep our eyes on this one. The flipper put 10% down as far as I can tell and so there is definitely some room for this price to come down.
UPDATE #1 - December 26, 2007
Well it's been a little over a year now and thanks to our wonderful helper britney, we know that this flipper did NOT succeed. The latest listing for this property is: MLS #: S493874. It started out at $947,000, went to a low of $819,000, and is now listed at $850,000.
It looks like when the flipper bought in April 2006, they put 10% down. If sold at the short sale price of $850,000, I'd imagine the bank/seller are going to lose a combined total of about $86,000!
This is a $200k drop from the original asking price in June 2006. Time to buy!! Would you purchase this home for $850k? What about the 2003 price of $665k?
Every afternoon, as they were coming from school, the children used to go and play in the Giant's garden.
It was a large lovely garden, with soft green grass. Here and there over the grass stood beautiful flowers like stars, and there were twelve peach-trees that in the spring-time broke out into delicate blossoms of pink and pearl, and in the autumn bore rich fruit. The birds sat on the trees and sang so sweetly that the children used to stop their games in order to listen to them. "How happy we are here!" they cried to each other.
One day the Giant came back. He had been to visit his friend the Cornish ogre, and had stayed with him for seven years. After the seven years were over he had said all that he had to say, for his conversation was limited, and he determined to return to his own castle. When he arrived he saw the children playing in the garden.
"What are you doing here?" he cried in a very gruff voice, and the children ran away.
"My own garden is my own garden," said the Giant; "any one can understand that, and I will allow nobody to play in it but myself." So he built a high wall all round it, and put up a notice-board.
TRESPASSERS WILL BE PROSECUTED
He was a very selfish Giant.
The poor children had now nowhere to play. They tried to play on the road, but the road was very dusty and full of hard stones, and they did not like it. They used to wander round the high wall when their lessons were over, and talk about the beautiful garden inside. "How happy we were there," they said to each other.
Then the Spring came, and all over the country there were little blossoms and little birds. Only in the garden of the Selfish Giant it was still winter. The birds did not care to sing in it as there were no children, and the trees forgot to blossom. Once a beautiful flower put its head out from the grass, but when it saw the notice-board it was so sorry for the children that it slipped back into the ground again, and went off to sleep. The only people who were pleased were the Snow and the Frost. "Spring has forgotten this garden," they cried, "so we will live here all the year round." The Snow covered up the grass with her great white cloak, and the Frost painted all the trees silver. Then they invited the North Wind to stay with them, and he came. He was wrapped in furs, and he roared all day about the garden, and blew the chimney-pots down. "This is a delightful spot," he said, "we must ask the Hail on a visit." So the Hail came. Every day for three hours he rattled on the roof of the castle till he broke most of the slates, and then he ran round and round the garden as fast as he could go. He was dressed in grey, and his breath was like ice.
"I cannot understand why the Spring is so late in coming," said the Selfish Giant, as he sat at the window and looked out at his cold white garden; "I hope there will be a change in the weather."
But the Spring never came, nor the Summer. The Autumn gave golden fruit to every garden, but to the Giant's garden she gave none. "He is too selfish," she said. So it was always Winter there, and the North Wind, and the Hail, and the Frost, and the Snow danced about through the trees.
One morning the Giant was lying awake in bed when he heard some lovely music. It sounded so sweet to his ears that he thought it must be the King's musicians passing by. It was really only a little linnet singing outside his window, but it was so long since he had heard a bird sing in his garden that it seemed to him to be the most beautiful music in the world. Then the Hail stopped dancing over his head, and the North Wind ceased roaring, and a delicious perfume came to him through the open casement. "I believe the Spring has come at last," said the Giant; and he jumped out of bed and looked out.
What did he see?
He saw a most wonderful sight. Through a little hole in the wall the children had crept in, and they were sitting in the branches of the trees. In every tree that he could see there was a little child. And the trees were so glad to have the children back again that they had covered themselves with blossoms, and were waving their arms gently above the children's heads. The birds were flying about and twittering with delight, and the flowers were looking up through the green grass and laughing. It was a lovely scene, only in one corner it was still winter. It was the farthest corner of the garden, and in it was standing a little boy. He was so small that he could not reach up to the branches of the tree, and he was wandering all round it, crying bitterly. The poor tree was still quite covered with frost and snow, and the North Wind was blowing and roaring above it. "Climb up! little boy," said the Tree, and it bent its branches down as low as it could; but the boy was too tiny.
And the Giant's heart melted as he looked out. "How selfish I have been!" he said; "now I know why the Spring would not come here. I will put that poor little boy on the top of the tree, and then I will knock down the wall, and my garden shall be the children's playground for ever and ever." He was really very sorry for what he had done.
So he crept downstairs and opened the front door quite softly, and went out into the garden. But when the children saw him they were so frightened that they all ran away, and the garden became winter again. Only the little boy did not run, for his eyes were so full of tears that he did not see the Giant coming. And the Giant stole up behind him and took him gently in his hand, and put him up into the tree. And the tree broke at once into blossom, and the birds came and sang on it, and the little boy stretched out his two arms and flung them round the Giant's neck, and kissed him. And the other children, when they saw that the Giant was not wicked any longer, came running back, and with them came the Spring. "It is your garden now, little children," said the Giant, and he took a great axe and knocked down the wall. And when the people were going to market at twelve o'clock they found the Giant playing with the children in the most beautiful garden they had ever seen.
All day long they played, and in the evening they came to the Giant to bid him good-bye.
"But where is your little companion?" he said: "the boy I put into the tree." The Giant loved him the best because he had kissed him.
"We don't know," answered the children; "he has gone away."
"You must tell him to be sure and come here to-morrow," said the Giant. But the children said that they did not know where he lived, and had never seen him before; and the Giant felt very sad.
Every afternoon, when school was over, the children came and played with the Giant. But the little boy whom the Giant loved was never seen again. The Giant was very kind to all the children, yet he longed for his first little friend, and often spoke of him. "How I would like to see him!" he used to say.
Years went over, and the Giant grew very old and feeble. He could not play about any more, so he sat in a huge armchair, and watched the children at their games, and admired his garden. "I have many beautiful flowers," he said; "but the children are the most beautiful flowers of all."
One winter morning he looked out of his window as he was dressing. He did not hate the Winter now, for he knew that it was merely the Spring asleep, and that the flowers were resting.
Suddenly he rubbed his eyes in wonder, and looked and looked. It certainly was a marvellous sight. In the farthest corner of the garden was a tree quite covered with lovely white blossoms. Its branches were all golden, and silver fruit hung down from them, and underneath it stood the little boy he had loved.
Downstairs ran the Giant in great joy, and out into the garden. He hastened across the grass, and came near to the child. And when he came quite close his face grew red with anger, and he said, "Who hath dared to wound thee?" For on the palms of the child's hands were the prints of two nails, and the prints of two nails were on the little feet.
"Who hath dared to wound thee?" cried the Giant; "tell me, that I may take my big sword and slay him."
"Nay!" answered the child; "but these are the wounds of Love."
"Who art thou?" said the Giant, and a strange awe fell on him, and he knelt before the little child.
And the child smiled on the Giant, and said to him, "You let me play once in your garden, to-day you shall come with me to my garden, which is Paradise."
And when the children ran in that afternoon, they found the Giant lying dead under the tree, all covered with white blossoms.
I want a new drug
Do these sellers have their heads in the sand, or is it somewhere else? The cognitive dissonance is truly remarkable. It takes courage to put a listing price out there like this. This price clearly insults the intelligence of every buyer in the marketplace. Aren’t they worried about insulting potential buyers? No wait, I suppose potential buyers should be worried about insulting them with a lowball offer, right? This property would be fortunate to sell for what they paid for it. Can you imagine their reaction if they got an offer for what it is worth in today’s market? What would happen if they got a real lowball offer for perhaps what this place will be worth at the bottom -- I'm guessing 50% off their asking price? Anyone want to go mess with them? It is the only buyer interest they are likely to see at this listing price.
Unsold in 90+ days
