Some time ago, I wrote the post Timing Does Matter, to document the financial impact of properly timing the market. Today's featured property owners show how a family should manage their mortgage, and the benefits that can be obtained in retirement if you sell near the peak of a massive speculative bubble. I commend today's sellers. They are the role models I will emulate in my own life.
Today's featured property is a very rare find in Irvine -- a vacant lot on which you can do what you want. You wouldn't have total freedom, this is still Irvine, and you would have to deal with the Turtle Rock HOA, but you would not have to deal with the Irvine Company or one of its approved builders. You could create a custom home exactly the way you want it, without having to buy an existing house and demolish it. Our challenge today is to figure out what this lot is worth.
Some people still have not figured out there is an epic price crash taking place. When you look at the asking prices in Irvine, people are still of the opinion their houses are worth at or above peak prices. The fact is that prices have dropped more than 20% and they continue their downward descent. Even when confronted with neighboring properties selling for less, people lapse into denial and believe "my house is worth more." I guess $15,000 in pergraniteel can add $150,000 in luxury value to a property. Who knew?
The twin towers known as the Marquee at Park Place is a lasting symbol of everything wrong with the housing bubble (Two mass fires, yes! One hundred stories high.) These urban units were 30 years ahead of their time, and perhaps in 30 years, the buyers in these towers will be able to sell their units for what they paid for them. The obscenity of the prices there will be laid bare in today's post. I will run through the cost of ownership numbers as compared to the cost of a rental and demonstrate what these units are really worth to an owner occupant.
I must confess, I have been holding off profiling these towers. There is limited information available on these units in the data services I use, so my picture is somewhat incomplete; however, the main reason I have waited to post on these units is because in the very first post done on this unit back in early 2007, I lost it in the comments section. It is pretty rare that I lose my cool, but I did there. The exchange went as follows:
Comment from a resident:
2007-01-03 04:56 PM
Everyone
is entitled to their opinion, and sometimes its good to keep it to
yourself. It is very simple, for those of you that don’t like Luxury
living in a place like Marquee, hey, no one is forcing you to buy here.
stay where you are and be happy, what is with all the bitterness. Your
bitterness is in result of ENVY. Chill out. Those who buy or bought at
the Marquee made a choice and obviously like their investment.
Comment by me:
2007-01-03 09:10 PM
(Resident)
“Everyone is entitled to their opinion, and sometimes its good to keep it to yourself.”
You should have followed your own advice.
“what is with all the bitterness. Your bitterness is in result of ENVY.”
You people don’t seem to get what we are saying, so I will try to spell it out for you:
WE
DON’T
ENVY
YOU:
WE
PITY
YOU.
You have made the worst possible purchase in all of Orange County. When
the flippers can’t make the payments and are forced to sell, the value
of your units is going to plummet: more so than others because your
fees are so high. Every time we on this board drive by, we look up with
amazement at the monumental folly of buyer greed. Your dark tower is
going to stand as the symbol for the height of hubris of the housing
bubble.
We don’t envy you, we are very thankful we are not you.
P.S. Please ignore my previous post where I tried to make nice, reinforce your delusions, and leave you with a shred of dignity.
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The comments section on that original post was invaded by residents and Marquee staff members. I hope we get so lucky this time around
Today's featured property is another mortgage equity withdrawal casualty. Properties like this underscore the dangers of partaking in the appreciation kool aid of the Great Housing Bubble. Most, if not all, of the people who believed in endless appreciation and serial refinancing took out their equity. Many utilized Option ARMs, and they are going to lose their homes. Think about the ramifications of that belief and the decision it influenced: Homeowners who did not take out their equity and refinance with Option ARMs are not going to be in financial trouble, and they will keep their homes. Those that did take out their equity are going to lose their homes. This is one very important life decision supported by a bevy of fallacious beliefs with very serious consequences. Financial bubbles are only fun when they are inflating...
Mortgage Equity Withdrawal 1991-2007
There could be any of a number of reasons this house is for sale now,
but the fact that the owner took out an Option ARM with a 1% teaser
rate in January of 2006 is likely the reason for the sale. A 2/28
Option ARM would have reset in February, and the payment on a
$1,000,000 mortgage is quite large. There is also a HELOC for $144,500. If the HELOC is tapped, and if the negative amortization has accumulated, the total debt on this property could be approaching $1,250,000. It doesn't seem likely they owe less than a $1,000,000. Perhaps they invested the money wisely and they can pay down the debt at resale. If so, they would be the exception and not the rule.
Beautiful, Brentwood/French Country elevation with long driveway,
porte-cochere w/ security gate, first floor bonus room, grand entry w/
hardwood floor and spiral staircase entry, separate formal
living/dining rooms, two fireplaces, kitchen w/ large sit-up center
island, granite, built-in Monogram refrigerator, G. E. profile
appliances, dual ovens, convenient breakfast nook w/ built-in seating
overlooks courtyard, walk-in pantry, custom media niche built-ins,
second floor computer work station, crown moulding, plantation
shutters, berber carpet, window casings, large master suite w/ sitting
area, luxurious bath w/ upgraded counter tops, separate shower, deep
oval soaking tub, individual vanity, dual sinks, huge mirrored walk-in
closet, entertainer's backyard w/ built-in BBQ/sink, fireplace, resort
amenities: pools, parks, spas, tennis/sports courts
Do you like our new graphic, MaxedOut HELOC?
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If this seller obtains their asking price, they stand to make $476,760. That is a great profit for 7 years ownership. Of course, they probably won't get their asking price, and it is likely they have already spent their profits, but if they get lucky, someone will bail them out of their debts and buy this property. Let's assume for a moment this seller gets their asking price and walks away with no debt and no credit damage. So what? If they spent all the money, they don't have any equity to take with them to buy the next property. Do they have the income and the saved downpayment to afford a similar property in the future? Maybe, but I rather doubt it. Once that money is spent, it is gone forever. There is a price to be paid for that "free" money during the bubble. Many former homeowners will pay the price with a greatly diminished quality of housing. HELOC abusers do pay a price. Nothing in life is free.
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Another song about the housing bubble? Is it raining debt? Is it raining REOs? Will praying for a bailout help? Where is the market going? going down now...
If it keeps on rainin', levee's goin' to break, If it keeps on rainin', levee's goin' to break, When The Levee Breaks I'll have no place to stay.
Mean old levee taught me to weep and moan, Mean old levee taught me to weep and moan, Got what it takes to make a mountain man leave his home, Oh, well, oh, well, oh, well.
Don't it make you feel bad When you're tryin' to find your way home, You don't know which way to go? If you're goin' down South They go no work to do, If you don't know about Chicago.
Cryin' won't help you, prayin' won't do you no good, Now, cryin' won't help you, prayin' won't do you no good, When the levee breaks, mama, you got to move.
All last night sat on the levee and moaned, All last night sat on the levee and moaned, Thinkin' about me baby and my happy home. Going, going to Chicago... Going to Chicago... Sorry but I can't take you... Going down... going down now... going down....
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.
There must be a stealth rally happening in the Irvine housing market because I sure don't see it. Perhaps it has just been a stealth market crash because today's seller didn't seem to notice. If you took the rally that lead up to 2006's peak pricing and projected it forward into 2008, you might be able to come up with today's asking price, but in our current market? WTF?
Most Spectacular Home in the Woodbridge Reserve. Attention to detail throughout this incredibly gorgeous Home. Living Room with Fireplace and Cathedral Ceilings. Gourmet Kitchen with Granite Counters, Recessed Lighting, Tile Floors, and Custom Backsplash behind professional grade cook top. Formal Dining Room with Chandelier. Family Room with Media Niche and Second Fireplace, and One Downstairs Bedroom. Master Suite and Three additional Bedrooms upstairs. Oasis like extra deep Backyard with sparkling Pool, Spa, and Fountains. Covered Outdoor BBQ Area with recessed lighting, custom built granite and stone counters, and ceiling fan. Outdoor Fireplace with sitting area perfect for entertaining. One of the newest developments in Woodbridge by Standard Pacific Homes and NO MELLO ROOS!
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When I first saw this listing, I figured it was just a vanity listing. By putting the house for sale for $2,000,000, some homeowner can believe their house is worth $2,000,000. Perhaps it makes everyone else in the neighborhood feel good as well, or perhaps a homeowner just wants to tell all his neighbors that his house is better than theirs.
However, when I looked at the mortgage data, I was astounded by the activity on this property. I can't determine how much this homeowner really owes because the total of all the listed loans is $4,631,380. Hopefully, on one of the many refinances, some of these old loans were paid off. His mortgage broker must love him with all the fees this guy has generated. Apparently, he can handle the payments as there has been no activity since late 2004. This doesn't appear to be a distressed sale, but it doesn't appear this seller would get a $1,153,060 check at the closing either. Of course, at this WTF price, there will be no closing, but it makes for a nice fantasy.
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You were the girl that changed my world
You were the girl for me
You lit the fuse I stand accused
You were the first for me
But you turned me out baby
You dropped a bomb on me, baby
You dropped a bomb on me.
But you turned me on baby.
You dropped a bomb on me, baby
You dropped a bomb on me.
You were my thrills, you were my pills
You dropped a bomb on me
You turn me out, you turn me on, you turned me loose
Then you turned me wrong
You dropped a bomb on me, baby
You dropped a bomb on me.
If it keeps on rainin', levee's goin' to break,
