4 pictures? 2 of the outside?? Hmm….
And what on earth is a 3/4 bath? A 1/4 bath I’m guessing is just a sink, so maybe it’s like a hotel with a sink outside and the toilet and shower inside but they’re counting those as two separate bathrooms to get to a total of 4….

(okay so I’m just commenting so I can get everyone else’s comments emailed to me all day…)

Look for 50% off this place in a couple years.

It will surely become worth less than what this sucker paid the original builder.

I guess when people are lining up at 5AM in the morning to buy condos - the builders can’t help but jack up the prices and milk these morons and their mortgage masters for every penny they can.

“They have set the stage for the next wave of foreclosures when all the ARMs begin to explode.“

Did you mean Option ARM?  After seeing that map of misery you posted a few weeks ago California looks like it is going to be a dreadful place come 2010.  Those owners are severely underwater and just do not know it yet.  We will probably need to call the Option ARM crew Running Away or something of the sort - they will leave much faster than the Walk Away crowd.  One look at the balance when the loan recasts and they will head straight for the door.  And who could blame them…

This one should be under the heading, Midsummer Night(mare).

It isn’t just Option ARMs, it is all adjustable rate mortgages including interest-only and negative amortization. Most of these loans will reset to higher payments, and few of the borrowers will be able to refinance.

It does have to be a nightmare for the seller. In the spring of 2006, we just had witnessed the largest multi-year increase in real estate prices ever. I can see where it might come as a surprise (and not a good surprise) to buy in that environment only to see prices drop 20% in two years with no end in sight.

I am guessing the next wave of delinquent borrowers will not be leaving their homes until the sherrif shows up.  It seems to me that just about now, the home debtors are reading about and figuring out that they can live in their homes rent and mortgage free if they just do nothing, including not moving.  I think the walk aways will slow down and the squatters will increase.

In regards to AzDavid flaming cash picture…..

This money was not really torched and destroyed.
Huge bank losses are often discussed here…..but someone else benefited hugely here and I’m not talking about all the commission fees in transactions.

Someone who sold at the peak and stayed out of the market reaped a huge benefit and would be sitting on all that cash in AzDavid flaming cash picture.  In addition all the HELOC money that was spent on goods propped up the economy and directly benefited many people that were not associated with housing. (whether it’s China or someone else who was smart with their money; many people who post here and rent for example)

No doubt the house of cards is falling apart.  A fraction of our population is distressed and depressed and our economy is in turmoil. 

Saying the cash was burned is really incorrect in my oppinion….. sure a lot of it was sent to China and elsewhere for consumer goods….. but this cash changed hands…....  the rich are getting richer in this country.

If someone did an analsyis on what happened to all this money I would be interested.  Every billion a bank writes down went into someones pocket….. a billion here a billion there, right?

Cara,
A half bathroom is a toilet and sink.  A full bath is a toilet, sink, shower AND tub.

3/4 bath= toilet, sink and shower OR tub.

If the fed keeps lowering rates, is there any chance that some of of these loans will reset to lower payments?

This money was not really torched and destroyed.

I’d hedge my bet that today’s seller would not agree with you.

Someone who sold at the peak and stayed out of the market reaped a huge benefit and would be sitting on all that cash in AzDavid flaming cash picture

Only if they put that money in the bank and became renters.  The vast majority put their bubbly cash right back into more real-estate.

If someone did an analsyis on what happened to all this money I would be interested.

Real-estate, cars, vacations.  Our country’s savings rate is now below 0% I believe.  We consume more than we produce.  Not too difficult to connect the dots on where all the money went.  Just look around at all the toys people are driving around town, all the nice clothes and jewelry everyone is wearing….

This bubbly wealth is vanishing.  Suppose I sell my house for a million dollars.  I split that million 4 ways for down payments on 4 houses.  The market tanks, all 4 of my houses are forclosed.  My million bucks is gone.  Each of the people I gave 250K to then put theirs down on another house which subsequently loses half of its value.  Half of their 125K is now gone.  The people they bought the houses from do the same.

It all vanishes eventually.  It’s just the Ponzi undoing itself.  Working in reverse.  The bubbly “equity” is burning away.

It doesn’t look like it. Long-term rates are rising due to inflation concerns brought about by the FEDs lowering of interest rates. There may be some people with 1 year ARMs who may be able to lower their rates, but that is only a temporary fix. Plus, since many will be either underwater or unable to meet the LTV standards, they will not be eligible for refinance.

“Every billion a bank writes down went into someones pocket”

Not necessarily. The money the banks are losing was created out of thin air. That is how fractional reserve banking works. When created money is collateralized by an asset which is declining in value, the lender is unable to “zero out” the account when they foreclose. This causes money to disappear from existence—the definition of deflation.

I would argue the money was “zero-ed out” on the opposite sides of the transactions…... whether it’s the peak seller, bottom seeking buyer, or HELOC benefactor…...

I agree with your point in regards to fractional banking…..... I don’t think this cash has been destroyed…. I think the cash generating engine of the ponzi scheme has been destroyed.

I would be interested to see how this money was dispersed…. both internationally and domesitcally.

I don’t believe that is how these “creative financing” “products” work.

Check out this link:

http://www.bubbleinfo.com/option-arms-how-they-work/2006/9/20/explanation-of-how-option-arms-work.html

Even if rates fall, no one will loan more than the house is worth so the only way these guys get to refinance is by bringing cash to the table.  Problem is that most don’t have that kind of cash.

see my response to IR:

for every loser there is a winner

the destruction of the cash generating engine is far more damaging than burning the cash

Yes, the money is dissapearing, because of the manner it was created.  The banks lend money they do not have.  They create it when they make the loan.  Money in a fiat currency fractional reserve banking system is not money.  It is debt.  And when the collateral decrease in value, the “money”, debt, dissappears.  This is not a matter of opinion.  These are the facts of fractional reserve banking.

my point is not around whether a greenback is worth less today than it was yesterday

tell the guy who sold a house in 2006 and sat on the cash that the money dissapeared….. it may be worth less…. then again that same guy might have taken the cash and put it in something else

the money gets funnelled somewhere, i think it just depends on whether you look at it from 5000 feet in Ben’s helicopter or 30,000 feet from a private jet

for every loser there is a winner

There are no winners on the way down.  Only losers.

you think?.... i’ve done pretty well with SRS and SKF

on a larger time horizon, the peak seller and bottom buyer would similarly disagree with you… both winners

Let’s talk about the guy who buys a house in 1990 for 100K.  In 2006 he cash-out refi’s for 600K and buys 400K worth of granite counter tops, Hummer H2, and goes to Aruba for a month.

The market tanks.  His house is now worth 200K.  He owes around 400K that he cannot pay back.  He jingle mails the bank.

The bank re-sells the house for 200K and has to eat the 400K that the deadbeat couldn’t pay back.

What happened to that 400K?  It is gone.  Poof.  Like a moth to the flame.

Notice that I did not explicitly say “peak seller” or “bottom buyer”. 

I said “on the way down” which implies that it is too late to be a peak seller and too early to be a bottom buyer.

mav - I am the guy who sold his house in the summer of 2005 and invested the proceeds and is now waiting for a few more years to buy another property.  If that is what you are referring to, you are missing the macro view and do not understand what currency is.  There is not always a winner for every loser.  It is not a zero sum game.  Prices did not go up because there was an increase in productivity and concurrent income.  Fiat currency was created out of this air.  Do you understand that?  That is monetary inflation.  There is not a fixed amount of currency.  It is not a zero sum game.

Short is such an appropriate title for this post.  As in shortsighted.

this is my last post…. as this is getting to be a monumental waste of time

the $400K went somewhere….. just ask the guys who built the H2 or the cabana boy in Aruba who was getting huge tips….. etc etc…..

you could track every dollar, there are definitely winners in this and i’m not talking the 6% commissions…..... 

ask the guy in his private jet flying from Bangkok to Dubai today

does the instability caused by this ponzi scheme now creat huge havoc? hells yeah… but there are even winners in the chaos now…....

i would argue anyone who can keep their job over the next 5 years and get raises over inflation is a HUGE HUGE winner

Time for a new phrase turn?

This is an ARMs race?
And we have MAD (mutually assured destruction).

The winner (loser?) of this race will be the house that costs the most for both the buyer and the seller.

ok seriously last post this time…...

i agree it’s not a zero sum game if you look at it strictly from a macro US standpoint

if you look at it from a macro global standpoint i think the picture is more foggy

paper is paper and hard assets are hard assets, right?

In 2006 it looked like a sure bet for 1.5 m in a flash….

Oops, in 2008 it looked like a sure bet for 0.5 m in a flash….

Mav, I understand what you are trying to say.

The problem with your argument is that all these winners that you are talking about received money that originated from a pile of I.O.U’s (or debt as some people refer to it).

That is the krux of the entire problem.  You and I would be in complete agreement if the money originated from debt-free spenders.

The money that fueled the economy never existed.  It was all based upon people promising to pay in the future.  A promise that was not kept.

However, the money was just created out of thin air using debt.  That is why everything is burning away now that the debt engine money spigot has run dry.

Don’t forget the the day-laborers who installed the granite counter tops and their remittances they sent home to build a new house in Chiapas.

Don’t forget the bonuses made by the mortgage brokers who refinanced the home that were spent on some good quality Colombian cocaine.

Don’t forget the creation of the thousands of slave jobs to serve the nouveau riche

I agree that they create money out of thin air, but I definitely had some cash show up in my pockets when I sold out in 2006.  The homedebtor that bought my place was just foreclosed on and the home is back on the market at a greatly reduced cost.  The bank is open to a short sale to recoup the first mortgage it looks like.

Did you see this one?

http://bubbletracking.blogspot.com/2008/05/flat-or-declining-inventory-what-gives.html

Distressed homeowners are not even trying to sell, they are just running out the clock.

There is always opportunity AZDave.

It just may look a little different than it did before.  Those who have downsized or liquidated outright have “won” over the last two years, wouldn’t you say?

The pessimist feels that the wind is always against him.
The optimist hopes that the winds will change.
The realist adjusts the sails and makes the best of it.

This profile is shocking in so many ways.  960k with 100% financing.  I totally agree we will see another 50% off this place.  It will bottom out about 380k with will be a good 65% off its peak price.  I think it is very safe to say we will never see this kind of financial recklessness again.

Eviction Day in OC video
http://www.ocregister.com/video/index.php?bcpid=1127694947&bclid=1125901233&bctid=1529567237

The money is destroyed.  It just hasn’t been pulled out of our 401K retirement plans yet.

I agree with Mav.

Just like stocks. They trade hands, one person reaps the difference in the transaction.

Either a profit or a loss…...

Yes banks loan money they do not have, but those loans that they write are written with CURRENCY.

Just ask all those people that did cash out refis and helocs.

Good thing IR’s bear has reading glasses, eh?

What if a house has two 3/4 baths?  Is the house advertised as having 1-1/2 baths?

Is that accurate?  A colleague of mine has an adjustable rate mortgage on a second home.  It just reset and the rate went down a hair.  I don’t know if it was initially a 1, 2 or 3 year teaser rate, but it did reset lower.  Maybe he’s the exception?  He’s ipop-like in his financial savvy, so I wouldn’t doubt it.

There is always opportunity AZDave.

This is Kool Aid speak.  Sounds good on the surface, but has no real substance because it overly generic and borderline churchy.

Nice try.  We all know that “opportunity” is a NAR code-word for “knife-catcher”.

Those who have downsized or liquidated outright have “won” over the last two years, wouldn’t you say?

During the bubble - for every winner, there was another winner as everyone continued up the cliff extending themselves further than the previous fool.

Then we come to the peak.  The last wave of winners sells to the first wave of losers (bag holders).  This is where we have gone off the cliff.

We then begin the trek back down the mountain where the previous wave of losers sells to another wave of losers (who think they are getting a deal) who sells to another wave of losers until we finally hit the bottom.  The knife catcher phase.

The pessimist feels that the wind is always against him.

Cliche

The optimist hopes that the winds will change.

Cliche

The realist adjusts the sails and makes the best of it.

Let’s drop the Jedi mind tricks, IrvineRealtor.  Please, point us all to some of these great opportunities that you are seeing.  If you try to make the classic argument that a price is good today because it is less than it was 1 month ago (while ignoring the depreciating market) then I will promptly horse-laugh you.

If somebody bought at the peak and is now in deep doo-doo, like today’s feature, then the money went to the person who sold this house at the peak.  (Except they probably just traded up and are in the same boat but with a $2M house.)  So, the person holding today’s money would be the last person in the chain who cashed out of the So Cal housing market.  Or, it could be somebody who traded up and makes enough money that they are able to keep up with their payments, so the cash they made is just equity in their current property.

If a property is short-selling due to HELOC, then the money-holders would be General Motors and/or Mercedes and/or Home Depot and/or Sears, etc.

But they weren’t paid with IOUs.  They were paid with cash.  The hotel in Aruba received cash.  The kitchen contractors were paid in cash.  The Hummer dealer received cash.  (And by cash, I mean either directly, through VISA or through the bank that financed the purchase.)  But none of them took an IOU that was dependent on the original HELOC being paid off.  Discretionary spending is typically a good thing for the economy (although not at the expense of negative savings rate, to which you alluded).  The more times a dollar changes hands, the better off we all are.  I agree with one of the commenters above—the money is not disappearing, the engine for creating the money has disappeared.

Maybe what you are saying is that there is paper wealth that is disappearing—primarily in the form of bank write-offs and declining property values.  Americans as a whole are less wealthy, but not because money is vanishing from the system.

It doesn’t matter where the money came from.  The cabana boy still won because he pocketed some actual cash that he actually earned that he may not have otherwise earned if not for the IOU that the homedebtor now has.

They trade hands, one person reaps the difference in the transaction.

Very good, camsavem.

Now explain when one knife catcher sells to another knife catcher.

Both get to reap a negative difference in the transaction.

“I think it is very safe to say we will never see this kind of financial recklessness again.“

I hope you are right. Institutional memory is short, and greed springs eternal…

I’m thinking even less than 380K.  Condos are bought by the younger crowd who are more likely to not have the same earning power as their elders who would be spending 380K on a fully detached house.

Patrick.net linked a really good eye-opener today:

http://mrmortgage.ml-implode.com/2008/04/29/how-much-house-can-you-afford-are-you-sure/?ref=patrick.net

Let’s be realistic folks.  $380K is below 2001 pricing.  I believe this is a detached condo meaning that it doesnt share any walls.  The only reason it is listed as a condo is becuase it has no yard.

This place would sell in a minute if it was listed at $700K.  I think these kinds of properties will go for $550K at the bottom.  Remember, it is quite large at nearly 2400 sq ft.

Short-term rates have been dropping with the rate cuts, but long-term rates have been rising. If all the people with ARMs manage to refinance with short-term rates, it just delays the inevitable.

It’s funny, mav, when you started your post with “AzDavid” and “flaming”, I thought you were going to comment on why some guy in Phoenix flames away with more posts on an Irvine housing blog than all the locals combined…

This place would sell in a minute if it was listed at $700K

I never claimed otherwise.

This place is surely going to be anti-flipped along the way to the bottom, rkp.

I think these kinds of properties will go for $550K at the bottom

Not without “creative financing” they will not be.  You are talking about a 4700.00 monthly payment on a condo that requires 140K yearly income to qualify.

Keep going.

Whoa there RKP.  Condo for $700k?  I don’t think so.  We lived in a condo w/ no yard until the baby came along.  Then our priorities changed and changed a lot.  Pergraniteel - who gives a crap.  We need a yard for the little one.

So, what singletons are going to want/be able to pay $700k for something they are going to have to sell when the baby/babies come along?  Large condos are a joke—no family WANTS to live there.

Condos should be 2-bed/2-bath starters that are perfect for singles, young families and retired people. Who needs 2,400 sf if you fall into these three categories?

This is $350k - $400k.  Very, very upper end starter condo or retired move-down.

The housing bubble is not an “Irvine only” problem, skek. 

It may have originated there, but the monster has become so large that even people in Phoenix feel it and want to know WTF.

The “winner” on the way down is the new buyer who doesn’t have to mortgage their life for a condo.

You are really annoying AZ- IrvineRealtor made a good point and here you are bashing him because he has realtor in his handle.  I dont see jedi mind tricks or anything like that.

Regardless of the situation, there is always money to be made.  I have a friend who worked at CW creating the MBS products and now left that world to work at a company that packages foreclosures.  I never thought my friend could find another high paying job so quickly with the MBS market getting destroyed but they did.

I see what you guys are saying.  You both make good points but I think outside of this property being zoned a condo, it is an SFR for all given purposes.

Maybe its because I grew up near Santa Monica but the idea of not having a yard doesn’t bother me.  Many beach houses or houses near the beach fill up the lot and don’t have a yard.  This condo is like that.  Its an SFR but has no real yard.

I have many friends who live in “condos” like this and they don’t see it as a starter home.  A lot of communities that have this type of product have shared parks and shared community centers.

Trust me guys, I would love to see this place drop down to the $300s so that I can buy a nice real SFR for $400s but I just dont see that happening.

Guess AZDavidPhx thinks he’s so clever with the cut-n-paste photo of the day.  Move along folks, nothing interesting to see here.

Everybody gets paid cash.

The bank now has 400K less to loan to the next guy. POOF!

Credit crunch!

“Is it any wonder the banks are taking multi-billion dollar write offs?”

John McCain says these write downs are simply because of mark to market accounting. His solution is to mark to model. I assume since the banks are already marking to model until the loan fails to perform that John means that even the failed loans should remain marked to model. After all, they’re not really losses until you recognize them. I’ve been saying the same thing about cancer research for years. If you just refuse to recognize the cancer you’ll never die from it. Why are my tax dollars being wasted on cancer research? Another government boondoggle.

When the “winner” in your scenario tries to sell in 2 years - they quickly become a “loser” at the closing table as their steal of a deal has further depreciated and put them underwater.

We are all going to be losers for a while.

Even the financially responsible are going to suffer this year, just not as badly. What do you do if you have no debt?  Investments don’t look great. 
Real estate? Rrices aren’t low enough yet for positive income investment and I don’t hear anyone on this blog holding out for capital gains.
Shares?  A good time to hold and possibly add to decrease your dollar cost average but the short term looks shocking and medium term mediocre.  I know shares should be longer term investments but why pay a premium now?
Cash/Treasuries?  Returns do not yet reflect the inflationary expectations, and its even worse when you pay tax on your interest earned.
Or how about high risk Junk Bonds?  I’m sure there are a lot of companies out there (especially finance companies)who would love some more capital.  Its just like Russian roulette except you start with a fully loaded gun and remove only 1 bullet.

The best off are probably those with standard mortgages at fixed rates - they have a nice inflation hedge and those that fixed are probably smart enough to have fixed at a rate they could afford.  (Do US fixed rate mortgages allow for periodic capital repayments without prohibitive penalties?

The irresponsibility of the bubble speculators and their lenders is going to hurt us all.  At least the financially responsible should have positioned themselves to handle a loss/downturn (or else they aren’t truely financially responsible.

Bananatree
(A financially responsible loser for this year and probably next)

to add to AZD, more people borrowed money on the way up than should have normally happened, so in reverse, alot more people will get screwed on the way down.

In other words, money was created on the way up, moved around near the peak, will no where to be found my the masses on the way down. 

They have to come down, rkp - it is only a matter of time and how long the government interferes with the free market. 

People simply cannot afford at even today’s levels.  There is no reason that people should have to sacrifice their first born to live in a house.

may have gone to CHINA  

Exactly, mmg.

Enter “Cash is king” phase.

Very few people have the cash on hand to afford the 900K condo whose price depended on every expanding debt leverage.  The market will not bear such prices and has to come back down to levels that are more in sync with income.

All that bubble money gets washed along the way as the knife catchers trade up or spend their bubbly profits.

Thank you.

if banks are writing down $$, then it is disappearing from some one’s account(s). that is why FED will try to avoid run on the banks, as too much money vaporizes from the system.

Regardless of the situation, there is always money to be made.

True.  But, I would say that there is definitely a lot more money to be made when your economy is not in a recession.

Good explanation except the example margin of 2.8 is extrememly low. Brokers were getting paid on the back end depending on how high of a margin they could sell the borrower on…most of the time a borrower would get a margin between 3.5-4.5 even though they qualified for a margin of 2.5, the broker would get the difference in points paid to them by the lender as a “ thanks for ripping the borrower off with this high rate, we love you and will reward you for it” The other thing is most neg-am’s that would allow a initially high LTV would cap out at 110-115%, I believe the 125% neg-ams were harder to get, as in they had stricter LTV limitations. Option arms are very complex and there are many different options to them, that is why we see a very large window of when they will recast….then foreclose.

How do you decide which homes to write about? There has got to be so, so many homes just like the ones you profile in Irvine. You could do a post a day all year long and not come close to running out of examples. Talk about low-hanging fruit!!!!!!!!!!!!!

I happen to enjoy AZDavidPhx’s photo posts.

Rock on AZDavidPhx. How about a Phoenix Suns-related photo next time, to commemorate their traditional annual playoffs flameout???

Getting back to the “house”

where is the “hardwood flooring”?  all I see is 12” (not even 18”) tile in the dining room.  Who would put tile in a dining room?  Shouldn’t that room be a ‘warm feeling’ room?

Why in the world are there only two interior pictures?  Is the place trashed?

AZDave -
Sell now or forever be priced IN…

I disagree. These things seem to run in 20 year cycles, while our involvement in pointless quagmire wars runs in 30 year cycles.

Actually, I would like to see some posts on what recently closed escrow.  It would be interesting to understand what kinds of properties are closing and if it is 2003 or 2004 pricing that is generating the closings.

Also, I would like to see more posts on SFH vs condos.

gee sorry, didn’t know this was a ‘locals only’ blog. I would submit that the Phoenix RE market was just like the SoCal market, minus the multiplier effects of the ‘keep-up-with-the-Joneses-at-all-costs’ SoCal ethos, the higher cost-of-living and the already-inflated housing costs.

IOW, Phoenicians were somewhat less insane than their SoCal home-buying cousins.

3/4 bath has a shower, no tub.

It’s not how many times the money changes hands. That sounds like a Ponzi scheme. The key is how productive you are in providing goods and services. Capital expenditures are suppose to make you more productive. To the extent that all this money was not put to increasing productivity, it’s just a big ponzi scheme.

The consumer driven economy is about providing profits to corporations that then invest in becoming more productive so that they can sell more. A savings based economy is about lowering the cost of money for corporations so that they can borrow money to invest in lowering the cost of production, so they can sell more. The key is that at some point the money needs to be get to an industry that increases the overall productivity of the nation.

The HELOC money that was spent on Flat Panel TV’s, foreign cars, imported stone, vacations overseas, etc… does nothing to make the USA more competitive. To the extent that the USA is not becoming more competitive means that foreign wages become a more attractive substitute for US wages.

Looks like a race to the bottom with 51 Bombay, listed at $760,000 and the mirror image of #26.  Short sale, currently “Backup Offers Accepted”; looks like somebody made an offer, wonder for how much?  Will the bank bite? or will this go REO?
Ah, the suspense…

Actually, I don’t think it will go so low.  It is a good sized detached condo with 4 bedrooms and It’s got two working bathrooms with an extra power room ( three effective toilets).  Of course, the claim of 4baths is a complete joke!!!

This kind of property will do a family of four very nicely.  It’s not a McMansion but it’s well sizedand it would not require a family to “move up” like the 2 and 3 bedroom condos.

My gut feeling is that will settle north of $250 per square foot which puts it around 500K.  With a 100K downpayment and a 30 year fixed this would be a $2500/month payment which is quite doable.

OTOH, why would anyone pay $900K for this is really nuts, eh?

Even at a global scale it is not a zero sum game. If it was a zero sum game we would all still be hunter gatherers.  Why is not a zero sum game? Increases in productivity via capital investment and specialization. Only day traders would see macro economics as a zero sum game.

The Orange County Sheriff was indicted for corruption and graft and is under trial, likely going to jail.

So, it may be a good idea for delinquent homeowners to wait for the sheriff because it may be quite a few years and by then they maybe able to take a loan. 

IOW, Phoenicians were somewhat less insane than their SoCal home-buying cousins.

Not that much less!

Google “Phoenix Flippers In Touble”

AZ had a huge influx of specuvestors from California.

Many speculators using their California housing refi lotto winnings to purchase “investment” homes in Phoenix.  I suspect this phenomenon was also happening in Vegas/Miami too.

Others just plain left California and moved to AZ where you could buy a nice McMansion for what you could sell a CA crap-shack for.

Many of the Phoenix locals quit their jobs at call centers, bars, etc and became real-estate agents and made easy money for a little while.

We had our own form of insanity in the form of the 30K Millionaires.

Now, Phoenix is tanking just like OC.

maybe there is gold on Mars

$350k - $400k???  Are you kidding?  Less than $150/sq ft?  What is that, like 1995 pricing? C’mon folks, it’s going down but talking out of your a$$ like that is just as bad as someone coming here saying this place is *worth* $900k. Agree with the voices of reason in rkp and tonye that this is easily $550k - $600k at the bottom. I am quite sure there are a LOT of working families in Irvine who would be just fine with a 2,400 sq ft townhouse/condo. Not everyone is looking for a back 40 to take care of after working 50-60 hours a week…

People often refer to the year/pricing as if these figures are set in stone.  The market clearing price unrelated to the past.  QLogic (QLGC) used to trade at $89/share in al the way back in 1999! Now its at $16 and change.  Why should houses be any different.

The market clearing price of houses is a result of supply and demand.  That’s all.

2.9% of all U.S. homes are VACANT (the highest in the 55 year history of the statistic, and presumably EVER).  No renter, just some poor S.O.B. paying a monthly carrying cost waiting for someone to come along and put them out of their misery!  Read: HUGE Supply

But wait there is more…  The supply of homes for sale will continue to increase at the wave of foreclosures continue.  At 12% price declines over the last year somewhere around 1,000,000 home owners are underwater in their homes.  If that price decline continues another 10% down during the remainder of 2008 (which seems very likely), then 14,000,000 homeowners will be underwater in their homes.  This is a DOOMSDAY scenario for supply, as each of these owners must decide whether to continue to carry asset for which they overpayed or excercise their Put-Option and walk away.  Recent data would indicate that increasing numbers are doing the latter.

We’re not done.  The availability of credit, even to the most credit worthy borrowers is now severly limited the ability and/or willingness of bank to lend.  Read: Demand will continue to evaporate, and not because people don’t WANT to buy but because they the CANNOT buy.

And apparently those people in Phoenix feel that makes them an authority on what a condo they’ve never seen in an area of Irvine they aren’t familiar with is worth, and drives them to post 25 times a day about it.  Just sayin, bud.  But your pictures are cute.

No, not a locals only blog, renato.  Just an ongoing debate with AzDavid who likes to correct the people who live, work and buy homes here as to what our properties are “really” worth based on what they might be worth in Phoenix.

Yes, you did have some cash showing up in your pocket if you sold in 2006.  However, most folks don’t like carrying around such a load (contrary to what they may say) and are/were eager to dump their “winnings” in an equally inflated house asset, which is now deflating. Just ask the braggard, Sui Generis, who posted his triumph many months ago on this blog.  How’s the investment Sui?

If one cashed out and is now renting, then they played the game right.

Since rates are so low is there still the specter of an ARM explosion?

Your household incomes are not going to support those prices.  Sorry, CK.  Get ready for re-education.

“Hey dad, how’d we get so rich?“

“Well, first I helped create a disease which made a lot of people deathly sick and after a while I starting selling caskets!“

“Wow, cool!  I guess I can grow up to be an a-hole too and I don’t have to worry about you looking down on me!“

Skek - this place might be able to get 275K in Phoenix.  The 350K is taking your local inflated market into account.

Good point. I guess I had never thought past the 2.5 bathroom point (literally two full and one half baths). Of course any more than that is too much overt consumerism for my blood.

Indeed. 

The realtors sure did enjoy “helping” and stroking the egos of all those folks buying 900K condos during the party and stirring up bidding wars between competitive debtors.

Now, they “help” all of the banks find knife-catchers on the foreclosed properties and tell us what a wonderful time it is buy a foreclosed house.

Helping society one commission at a time.

I assume you are joking and trying to bait me, but if you are serious, David, we’ve been through this before.

Is every house in Orange County worth 125% of the equivalent property in Phoenix?  Can you tell us what the school district is like for this property?  How’s the shopping nearby?  The traffic?  What’s the parking situation like?  How about crime?  Are there good jobs in the area?  Is there a microclimate that makes it more or less desirable?  How’s the local government in providing services?  What are your options for health care?  What about social opportunities?  Is it a good family neighborhood?

People push back on your predictions because you have no way of knowing what you are talking about.

I think that AZDavidPhx is failing to realize is that this is not a starter home.  Ergo buyers of this home will typically bring in a bunch of equity to the purchase, so hence their income does not need to support a purchase with 100% or even 80% financing.  While this blog highlights those that overextended and speculated, the majority of homeowners that did not purchase in 2004-8 are flush with old equity, and they will apply that to this home.