I guess “staging” of this property isn’t any kind of priority.

This property was a starter property in Woodbridge when we first became owners some 20+years ago.  We had a different model/builder in nearby Alders, but we’d take the kids down to a park that was surrounded by these exact units.  They were not new then, but it made sense to pay down a mortgage, rather than rent the same type of housing for more money. 

This was typical for brand new families with a couple of very small children.  The last few years, I’ve noticed that brand new families with little kids were purchasing much more fancy housing.  There is a sense of entitlement to start on rungs of the real estate ladder, much higher than in the past. I really think that ratcheting down expectations is going to be difficult for some of these families.

Plus side, Woodbridge has a lot of interesting ammenities, including their Lake.  No Mello Roos, so that’s on the positive. 

Two association fees to pay each month.  Very restrictive HOA CCR’s and living is literally very crowded in this particular area.  You get used to deliberately not looking into open windows and other visible living spaces, out of the need to maintain some kind of mindset for privacy.

That little door on the patio leads to the closet sized “storage” area that was referred to.  We could hang two adult bikes and a Burley bike trailer in ours, but not much else.

I don’t see how this place appraises beyond 180K even in the inflated CA market.  This knife would probably be caught at 130K in the current AZ market.

Maybe it will indeed bottom out for you in the 250K range.  I wouldn’t pay that, but someone else probably would.

Steaming $hit sandwich - LOL!

I totally agree - the term “Starter House” seems to have fallen out of anyone’s vocabulary.  And with the free money flowing in the past few years, why would anyone need to start at less than $500K?  It’s going to get very tough for a lot of people.  Look for a spike in divorces and depression.

interested in things financial i had to look up the lender, homecomings financial. i had to wonder who would give their capital to these fools who lend $550 on something that looks like the condo i rented in college with 2 roomies, and probably about the same time too, 20 years ago.

so, homecomings financial, a GM Acceptance Company,

Ah, the same people who give you ever-larger surburbans in the world of $4 gas, and the same people that made a crippled joke out of what was once america’s greatest company, that explains it.

not that they probably were not happy to get the deal, and who knows who owns it now, so maybe the greater finance fools were those that bought the paper, but jeez! this is real money, or used to be i suppose.

We bought 13 Elderglen as a starter home many years ago for $117,000 and sold it two years later for $134,000 - we thought we’d hit the jackpot! At least it’s a quiet area - no street noise, no trains, no freeways, etc.

When you a rent a unit like this out - who pays the almost $300/month association dues - the renter or the owner?

Dano

Two bucks a square foot rent? Seems high to me. I pay 1.10/sqft, in a nicer place. It’s in Costa Mesa, of course, but I also have a big back yard and other niceties. Plus I’m a lot closer to the beach.

I think the listing is being dishonest.

1) The listing says there have been no price reductions. It says been on 41 days at 350k.

2) The listing does not mention short sale status. Isn’t that a bit rude to not let people know they’ll have to deal with an unresponsive bank on any offer?

So, they’re liars, f#ck ‘em.

This is clearly a relisted property. We profiled it before. I wonder if they are hoping for a bidding war by lowering the price so much. Good luck with that in this market environment.

From the 22 Daffodial thread in the Forums

2 bd/ 2 ba 1334 sq. ft. built in 2001 for $359,000

http://www.redfin.com/stingray/do/printable-listing?listing-id=1651695

If this is selling at rental parity, then rents are too high.

We lived in this exact neighborhood for two years, and then moved to a bigger place last summer.  We rented a 3/2, 1200 sq ft place for $2100, but not the same model.  The neighborhood is very nice, there are many families with young kids, and Woodbridge does have a lot of amenities.  I think that 2100-2200 is a reasonable rent for this property.

To answer Dano, the landlord pays the HOA dues and it is supposedly included in the rent.  A landlord doesn’t want to risk passing along the HOA dues responsibility to the renter, given that the association can put a lien on the property if dues are not paid.

As a side note, after our first year of renting, our landlord asked if we were interested in purchasing (this was near the height of the bubble) and he thought that our 3/2, 1200 sq ft place would be worth around 550k.  My how times have changed.

Rents in Irvine are very high, mainly due to a monopoly of The Irvine Company apartments, they have really been on a rally the past 5 years so it almost seems normal to pay $1700 for a one bedroom and well over $2,000 for a two bedroom in their communities. Since they get away with it, everyone else can get away with absurd rent prices in the area. Even just being a room mate in an apartment or condo in Irvine will run you over $1,000/month, yep, just to rent a room.

People often forget the restrictive effect of high HOAs on cash flow.

Lets say that with my current salary I can only afford to spend $2570/mo on my house (mortgage, taxes, etc). That means I can finance up to a 350K property (assuming zero HOA):

$350,000.00     Purchase Price
$0.00   0% Downpayment
$350,000.00   Mortgage
$446,405.71   Interest Paid over the Life of Mortgage
Monthly Cost Breakdown
$2,212.24   Monthly Mortgage Payment @ 6.5%
$291.67   Property Taxes @ 1%
$72.92   Homeowners Insurance @ 0.25%
$0.00   Special Taxes and Levies @ 0%
$0.00   Homeowners Associate Dues or Fees
$0.00   Maintenance and Replacement Reserves @ 0%
$2,576.82   Total Monthly Cash Outflow

If you add a $300 HOA fee on top of that, the largest house I can afford is $309,000:

$309,000.00     Purchase Price
$0.00   0% Downpayment
$309,000.00   Mortgage
$394,112.47   Interest Paid over the Life of Mortgage
Monthly Cost Breakdown
$1,953.09   Monthly Mortgage Payment @ 6.5%
$257.50   Property Taxes @ 1%
$64.38   Homeowners Insurance @ 0.25%
$0.00   Special Taxes and Levies @ 0%
$300.00   Homeowners Associate Dues or Fees
$0.00   Maintenance and Replacement Reserves @ 0%
$2,574.97   Total Monthly Cash Outflow

The monstrous HOA fee just dropped the purchase value of this *cough* apartment *cough* by $41,000 and suddenly the 160 GRM seems too high.

I am still in a starter home after 10 years…Most (all) of the people we know live in bigger houses than we, and at times the wife is none to pleased..what, with four kids. Our mortgage is down to the 40k range, that is one of the positive notes. Having a paid mortgage is no longer viewed as something to be proud of. Your pride is now tied to sq ft, the cars in the driveway, ect… Pride was more of a self concept one had in ones own successes, of knowing you don’t have a mortgage. Now pride is in what others see, we all want to be seen as visible, appealing, successful…we have been programmed as robots to no longer think on our own, we let others think for us and tell us what is right (what to buy, what to drive, what we need). We bought a used play structure, people turned up their noses at us, I drive a 10 year old car, and most folks think I am weird.

Ibilis,

Yes, in fact rents are too high and I believe that they will start to go down over the next 3 to 5 years.

We had extreme inflation in the housing market from 2000 to 2007 that caused landlords to start raising rents. Now that we have an over abundance of rental units, deflating home prices, and a lot of individual investment properties on the market, prices will fall, maybe faster than anticipated.

LOL! Yeah, I didn’t expect that gem from IR.  And I don’t remember seeing that expression in the writings of the Buddha.

So, if this one sells at rental parity, are we done here?  After all, that means we’re at the bottom right?  Would the last person out of IHB turn the lights off, please.

Priced_Out…

*Very well done* you are to be commended. This is *excellent* work!

Point: You use 1% for taxes. This is incorrect. When you actually get your “tax bill” you’ll see that the sum-total (“fees” and whatever) is much closer to 1.25%

So, maybe $275K “fair value”?

Also, while with a condo (etc) you have “appreciation potential” (plus the tax-break) this (more “economist-speak”) is somewhat offset by the risk-of-HOA-assessment a sort of “doomsday scenario” that happens weekly somewhere in OC.

Renters have *no* opportunity-cost i.e. renters are always “available, portable” when it comes to opportunity. The larger (more expensive) your home, the larger your risk of lost-opportunity because you are “not portable” hence “not available” to any out-of-area brass-ring opportunities.

Again (to all) I love this blog, use it as a reinforcement of my “stay rented” lifestyle (and yes I was previously a long-time homeowner).

That is a very good point. The GRM lets you know if you are in the ballpark. Only a detailed analysis of costs like you provided will tell if it really is at rental parity. Factoring in high HOA dues lowers the breakeven GRM just as you have pointed out.

The first mortgage was a neg am, surprise surprise. 

Homecomings was pretty much exclusively neg am oriented.  In fact they were one of the few lenders that accepted borrowers who a 30 day late payment within the last 24 months.  Crazy.  I knew an account executive who made over 300k in 2005 working for them.

Well, there is a reason why the IAC units rent for the prices they do.  They are still too high IMO and are coming down, but they’ll always command a premium over private rentals. 

Security is number one for many renters.  I never have to worry about the sheriff knocking on my door because the landlord is in foreclosure.  I have amenities to use, and I don’t have to worry about ANY maintenance at all.

Also the deposit is a big one too.  I’ve never had a deposit over 300 bucks with an IAC rental.  Private landlords often want first and last months rent plus a little extra sometimes.

Much worse! Private landlords want (typically) $3500 “security deposit” and just the first-month in advance. Then “stern words” in the lease that the security deposit “not to be applied toward the rent”.

I just went through this dance (multiple times) with private landlords.

Also, most private rentals do *not* have washer/dryer/fridge (must be purchased). So, “typical move-in expense” for Private vs. IAC is a whopping $5,000!

I think that 2500 a month is too high for the comparative rent for this place.  I see SFR’s outside of Irvine for 1800-3200 a month all the time.  For another $700 the prospective renter gets a 3800 square foot monster with a gardener in Coto that last sold for about $1.2m.  Anything over 2200 a month you’re in rare air.

plus, this is for a one carport parking spot.

not a two car garage, which is what most families want/need.  attached please.

and this place is 30 years old.

if you can rent a real townhouse that is more modern and has the garage for (what, $2500?) who would rent this place for more than 2grand?

i see a more realistic rent (ie in a few years) to be $1800, less $300/month HOA (and you hope it doesn’t go up with the aging infrastructure).

that means ~$1500 x 120 = $180k for an investor.

Why do you say $250k, IrvineRenter?

$2200-$2500 rent for this place? Are you guys kidding me?

I’m renting a 1700 sq ft, 2br/2ba built in the last 2 yrs in Quail Hill for $2200/mo.

I don’t care that 17 Elderglen is 3/2, its only 1200 sq ft.

If I’m paying $2200 now, that place should rent for $1850 to be honest.

Wow! Does it have 2-car-garage? You have a DEAL for sure!

Wow! Does it have 2-car-garage? You have a DEAL for sure!

How much was your security deposit? Who owns the washer/dryer/fridge?

I think it could drop another 100k, and then it might be worth it.  I’m not sure if purchasing will ever be cheaper than renting at this point, but this is not even within 10%.

nanowest:  I made this point months ago on this blog to many howls that there was no bubble in rents, that I was crazy, etc.  You are absolutely correct:  rents have bubbled to unsustainable levels and are now reverting to the mean.  Lansner’s blog has numerous postings lately regarding the rising vacancies and flattening rent appreciations.  Just take a drive down Jamboree (starting at the mother of all bubble-dom, the mothballed “Central Park West”) and head towards Tustin.  Acres and acres of just built rentals and hundreds still in construction.  All coming online at the worst possible time with OC heading into a deep real-estate-induced recession.  I went to the food court next to the “daily grill” on Jamboree yesterday.  Hadn’t been there in years, it was always a hassle parking and super crowded.  But yesterday, no problem parking, got to park up front and center:  all the real estate folks have been laid off that used to flock to this place, it was plain to see.  Not only that, the food court now sucks because the mexican place I would frequent there is out of bz now with all the layoffs. Just a nasty Hawaiian and also a Greek place (by the way, the Greek place in the food court on Main blows this s-hole out of the water, the monster made me choose between rice and salad whereas you get both with your combo on Main).  In any case, the rents i see folks touting on this blog are hopelessly bubble-based and unrealistic.  OC has so far to fall still.

And rents do go down…  take Silicon Valley, for example:  Average asking rent in Santa Clara County for 2008 is “strongly UP” ;  YET it is still less than in 2000!  Rents by year:
2000: $1758   2001: $1743   2002: $1426
2003: $1312   2004: $1282   2005: $1305
2006: $1425   2007: $1590   2008: $1660
(From SJ Mercury, April 17th)
Landlords were offering FREE month rent, too, trying to keep existing renters from demanding reductions.
Anyone who buys a rental investment property based on increasing or even stable rents, in the face of a recession, may be in for quite a surprise.

Corrected for inflation (doubtful the SJ numbers are corrected) the 2000 rent is $2168 today.

So, the rent-deflation is actually quite-worse than it appears…

If my numbers are true (i.e. above data not-corrected for inflation), rents there have decreased 30%.

In reverse, $!660 today is worth $1345 in the year 2000.

I didn’t do a detailed analysis, but I think you are right. When you factor in the HOA cost, the price drops to the $200K range.

http://finance.yahoo.com/q/bc?s=^IXIC&t=my&l=on&z=l&q=l&c;=

The year 2000 is the absolute-peak of the “tech-bubble”. So, “compounding bubbles”!

PS>> Forgive me for being a blog-hog, but today is 3rd-Friday (options-expiration) and I run a fund so “glued to the tube” :-(

This property is an example of housing that appears no different from your typical run down rental. I don’t understand why anyone would want to own a property like this unless it could be employed as a positive cash flow rental. Even if it could be purchased at rental parity would most people want to be financially tied to and live in an “apartment” like this?

It makes little sense to tie up a 10 to 20% down payment in a property like this and suffer the before mentioned opportunity costs one would incur all for the priviledge of owning your apartment. This is one aspect of the bubble I never understood. Why would someone want to own their apartment? Even if I could own my present apartment at rental parity I wouldn’t want to. Heck the purchase price would need to be way the heck under rental parity for me to even consider it. Buying and selling a home is a huge and expensive hassle that makes no sense in enduring just to save a few bucks on month on rent.

What I find most baffling is that people purchased “apartments” like this at prices much higher than rental equivalents.

One is assuming that HOA $300/month is a constant.  Having experience with condo’s, it has been my experience that HOA dues due increase as time goes on (all costs rise with inflation) and HOA’s are also prone to levy intermittant “special assessments” to cover unforeseen costs.  Thus the monthly HOA expense probably lowers the rental equivalent value more that the $41k quoted above.

Since the 1980s, my husband and I have always been “career renters.” We found we could always rent a nicer place in a better neighborhood than we could buy.

We got sucked into buying our rental in 2004, landlord decided to sell and we didn’t want the expense and hassle of moving. (We had just moved in there a year earlier.)

We escaped in May 2007, lost about $9000 in commission fees and transaction costs. Averaging it all in, the 3 years we owned ended up being exactly what we would have paid in rent. So we were even-steven financially. But owning is much more stress, time, and hassle. I can’t tell you how happy we are to be renters again.

Also, we will NEVER rent from an individual landlord again. We’ve done this twice, and each time, the rules changed after we moved in. The managed apartment communities are worth every dime in peace of mind.

P.S. We sold our place for $40,000 more than we bought it for. So on paper it looks like a gain. But when you factor in the commissions, fees, and a $10,000 “credit incentive” to the buyer, it was actually a loss!

You are aware that the same type of unit is $139,000 a couple of miles away in Tustin/Santa Ana?

We lived in Palo Alto in 2000-2002.  Our rent on a 3 BR 2 BA, 40 year old (nothing updated) 1700 square foot house was $3250.  We asked our landlord to lower the rent by $500 after my hubby lost his job so that we could stay in that house.  She refused.  So we moved out, and then she let it sit empty for a month, before finally renting it for $2200.  Needless to say, she was sorry she didn’t accomodate us. Served her right.

Santa Ana….

OK, what I want to know is what the hell you do with a “huge mirrored closet”

“When you a rent a unit like this out - who pays the almost $300/month association dues - the renter or the owner?

Dano “

We kept ours and rented it out for a number of years.  The landlord pays the hoa fees and it is part of the “rent” collected.  You’d be insane to let your renter decide if they were going to pay the HOA each month.  The last thing a landlord needs is a lien against the property for non pay of HOA.  Same with property taxes - Landlord pays those each year and hopefully the rent will also cover those.

All those folks who are “renting out” their very expensive homes and not covering the cost of mortgages as they wait for the real estate market to “recover” are taking a silent beating.  The mortgage is just part of the cost.  HOA/s fees.  Mello Roos.  Property taxes. Homeowners Insurance. Management fees.

These Naiive “landlords” need to be cleared out of the market, too, if speculation is to be reined in.

“We bought a used play structure, people turned up their noses at us, I drive a 10 year old car, and most folks think I am weird.”

By purchasing a used play “structure” you unnecessarily exposed your child to disease. Most people would agree that a new sterile structure would be the reasonable thing to purchase. By purchasing a used structure and delaying your purchase of a car you have cost American’s their jobs. Congratulations, you are part of the eco-terrorist conspiracy.

I could understand the old car if it was a pre ‘75 model, but it’s not. I certainly would never drive anything with a catalytic converter. Those things go against everything I stand for. I’m not a hypocrite though. I’ve supported the automotive industry by purchasing after market headers, filters and various other performance parts. I even add lead to my fuel to support Pennsylvania lead miners. I, unlike some people, have a conscience.

I heart Kirk.

I don’t know.  What do you do with a walking closet?

You are today’s Snark King.  Congrats!

Schadenfreude indeed.

Because it could probably rent pretty quickly @1700/month.  I would guess that the equivalent in AZ would be lucky to hit 1000.

Of course, it could still use another 50K haircut, at least.

Yes, it has a 2 car garage. Security was $2000. My landlord owns the fridge, washer and dryer.

When I rented it, there were a glut of rentals here and at the time there were 3 or 4 at this price. I’ve seen 3/2’s go for $2300-$2400 which a detached.

Thats why it seem absurd the property in the blog post should get $2200 rent.

What can I say, I woke up on the wrong side of the bed and didn’t get my morning double espresso shot.

Interesting. I’ve always rented from private landlords. All the “rules” I need a spelled out in the lease.

I find private landlords negotiable with the rent when they see someone w/ good credit and negotiable with some of the “rules.”

Companies like IAC have fixed rules and nothing is negotiable.

Check out this listing

22 Daffodil
Irvine, CA 92618

almost 40% off from 2006 buy price. nice.

here is the link

http://www.redfin.com/stingray/do/printable-listing?listing-id=1651695

So the median househouse there can afford what looks to me like the most basic starter housing?

If you have another 20% to go down and I think you do, then you get $280.  Still seems outrageous.

Yeah , I hear wood is really non-sterile…it was owned by a doctor whose kid never played on it. My other car is a gas guzzling suburban, so your eco terrorist conspiracy is flawed. Its not a matter of delaying a purchase, I would rather buy your second hand crap that you put on credit cards at 21% interest then list on c.l. for 10% of the original purchase price.

In fact, for the higher end IAC properties the rents are already going down. IAC has been advertising on Craigslist and MLS apartments at almost 10% off from a year ago for a couple of months now. When I went in and asked them why they were advertising apartments for less than our rent, they told me that it was a “special” case of an apartment sitting empty for 6 months.

Think of that. An IAC apartment sitting empty for 6 months….and because they didn’t want to lower my rent, they’ll have yet another unit to add to their inventory.

You can negotiate a little with the IAC. A little on the price and a little on the length of the lease. They won’t negotiate on the other terms.

I read bitterness with every word you write. Maybe if you spent less time lashing out and more time learning the art of finance you could also become a sophisticated purchaser instead of the typical earn and spend liberal.

There are nice parts of Santa Ana. But that has some land lease problems. 

I’ll be moving into an IAC place on Tuesday. Regarding “negotiate with IAC” not-so-fast…

On price, “a little bit” but regarding lease-term, I wanted *longer* than one-year and IAC said NO WAY.

Maybe you meant “negotiate a lease for less than a year”?

Yes. we only tried to reduce the term.

Zeke…  Nice research. I note that the HOA is very low $225/mo approx “a deal”. Personally “not a buyer” but if the price dropped to $320K then “rent parity” it would seem…

My #1 personal issue here is that I’m retired, so “tax break” isn’t all that great.

At $280K (is this possible?) nobody currently renting 1200sf could pass it up

Is a GRA of 160 really appropriate for this substandard property? How about 120X rent? After all, the HOA is steep and the condo is old (by Irvine standards)and ugly. It looks cheaply built.

Remember that there is a lot of fresh new inventory standing around everywhere, and that has to have a very depressing effect on stuff that is aged and less than beautiful to begin with, making it worth even less than it would have been to begin with.

I’d figure the rent at $2000, given what Irvine denizens posting in here say its worth, from $1800 to $2200, for $240K tops,less the cost of doing needed work, like redoing that hideous kitchen.

Yep. You are for sure a yankee cowboy, in the same vein as your savior w. You come to texas talking your cowboy smack, acting like a texan. I can tell you as a native of the state, that the best cowboys are yankees, because they like the hats, boots and persona. good luck yankee boy in Texas. In fact, I live in Texas (native), and you are a complete moron trying to guess what side of your religion I fall on. Good luck yankee boy. You will never , never be a true Texan! You will always be like your half witted savior w, a drug store cowboy.

yep, that’s what has kept us in IAC. Last year we looked at private rentals but the deposit/move in expenses were huge. Also when you have a problem (leak, etc) you just have to call maint. and it’s taken care of within 48 hrs. When we rented a house in Long Beach, we had to call the landlord and then wait for them to call someone out to fix whatever it was. Sometimes that took a week.