I don’t know if I agree with you that the “rich make their money by saving” (this might be a close paraphrase not a word-by-word quotation). I think that some rich people got rich by inheriting, by good investments, by buying other appreciating assets, etc..

True, but they don’t spend that inheritance, windfall, investment, etc. 

Plenty of people would.  Plenty of peope blow through a generous inheritance in a year and have
nothing to show for it.

The media encourages this because the advertisers want to sell stuff without limit.

There was a website devoted to how people spent
their rebate money.  Well, there is a website for everything.  But this one was on the news and if anybody used it for stuff other than skydiving and other non productive uses, the media didn’t say.  More encouraging of wasteful behavior.

Before you do all those - good investment & etc., you need capital. And, saving is the the father and mother of capital. You accumulate capital by spending less than you take in - wages, inheritance and so on. Debt and credit should be excluded - it is not your money.

I dont know about the location, but the house is not too bad.

Another year of foreclosure hell in Irvine and we might actually get down to prices that people can afford.

From the post, Southern California’s Cultural Pathology:

“You have heard the expression, “the rich get richer and the poor get poorer.“ It is more accurate to say the rich save money and the poor spend it: in the end, the rich will have money, and the poor will have none. This is not one of life’s inequities, but rather of of life’s simple truths.“

Money cannot accumulate without spending less than what comes in. That is the definition of saving.

AZDavidPhx, thank you for confirming what I’ve long suspected:  French involvement in the Irvine real estate crash. We’ve long been the envy of second world countries and it was only a matter of time before the reds unleashed an economic apocalypse on us. We need to respond with overwhelming force against the Netherlands.

How hard could it be to track down some of these people - offer them some money and make them tell you where they spent every penny of HALF A MILLION dollars. Good grief, this boggles my mind.

I don’t think it’d be that hard to blow through half-a-mil. I think I could do it within a year or two.

So can you!

Over the next several years, I believe we will see a new cottage industry in debt collection formed around harassing people over these debts. If companies will go after 5 year old credit card debts for $20, just imagine what they will do for $200,000. I think we will find out just how easy it is to track them down and get some of it back.

A financial planner for my dad recounted a story of two brothers who inherited several million dollars apiece.  One was a blue collar guy who was into Harley davidson motorcycles and kind of lived paycheck-to-paycheck.  The other was an engineer at a local firm.  Within 18 months both had completely blown their inheritance and the engineer was in BK.

I just liked all of the french overtones in the property description.

From “cul-de-sac” locations, to “french windows” with “plantation shutters” - the only thing missing to complete the cheese-ball listing is a bottle of Merlot and “French For Dummies” on the kitchen armoire.

I hope that after many of the same posts by IrvineRenter, you will begin to realize that is is the norm and not the exception.

You have to get a deficiency judgt first.  Ain’t
gonna happen.

They are supposed to have a deficiency judgment first, but I doubt that will stop them from trying.

I could do it at the jewelry store and a car
dealership in one day.  But then, I’d have a lot of nice jewelry and a car to show for it and someday the jewelry might be worth more than what I paid for it.

I suspect these people have some worn out purses, pictures of cruises and broken down cars
to show for it.  Unpaid for broken down cars.

More than 20 years ago, I did a closing for some people who had won one of the first Florida million dollar jackpots.

No, they weren’t buying their dreamhouse, they were selling the house they had acquired while lower middle class.

They tried starting a business.  Lost everything,
including what they started with.  At least they didn’t spend it on bling. 

Their windfall did not make them happy to say the least.

Sorry, I don’t know where else to post this…..

Could someone tell me what is happening with this rather unique house in the University Park area - the address is 2 Angell.

http://www.movoto.com/real-estate/homes-for-sale/CA/Irvine/2-Angell-203_S530914.htm

Dano

She Drinks yuknow!

Dano,
This property was commented on in the past.  I’m not sure where to point you to.

You interested in buying it? 

This house is a sh*t box and the city of Irvine should be out there today with a hot mop on that street. It looks as bad as any other ghetto city in OC. The house is worth about 269.000.00 or should be…a real POS.

Am I even aloud to have such thoughts about a house in irvine?

Really love the two tone wood floors in the kitchen/dinning area!

Whoa, whoa, whoa. This thread is seeming to get close to saying that the rich are just “better” than the poor.

Assume you could invest your money at 6%. The “rich” person who has $1M in capital will generate $60K a year in interest income. So, this rich person, essentially, generates a 2nd wage. The “poor” person? Investing their $10K at 6% gets them $600 a year. Oh boy! $600!

Yes, you cannot accumulate money without spending less than comes in. But, the “rich” person has a LOT more money coming in! If you assume living expenses are constant (or, more mildly, regressive), a rich person simply has more disposble income than a poor person. And they have a LOT easier time saving than does the poor person.

That said, Irvine Renter was exactly right when he said that tons of people (esp. in SoCal) have been spending more than they had coming in, in many cases because they assumed they had home equity as a stream of income, and were stupid with that money. As George8 said, debt is not income. (However, debt and credit CAN be used to generate wealth…that’s what home ownership IS for those not drinking Kool-aid!)

I like the lack of AC.
That house will NOT sell during the whole summer without AC. Not even a knife-catcher will walk out of their realtor’s cars with the AC cranked, into the 90 degree heat, then into a 95 degree house and think “I like this place!“

If the bank wants to sell this place at all, they’ll need to spend the money on central AC. Those few thousand might get this property off the books before Xmas. (with a 1/2 price cut)

Sorry, jewelery is an even worse investment than cars. Unless you have some well-known pieces from well-known people (e.g. Jackie Onasis).

I think you’re right though that very nearly all of them have blown the money on lifestyle. The debt collectors won’t find much to reposess except for memories.

Do the people who are displaced from their homes due to foreclosure ever go back to those houses after the new owner moves in and hassle or vandalize?  Sometimes I worry about that if I ever ended up in a foreclosure.

No AC?  $649k?

**Blink**

Hey…

I’ve jumped out of an airplane 673 times (and out of a helicopter once) and I consider money spent on skydiving to be a very productive use.  The jumps cost…but the grins are priceless!

Deficiency judgements are possible even in CA when it’s a result of refis.

Didn’t notice that “no AC”, good catch… (that must by why they have the lap pool).

Unbelievable, over 1/2 mil and no AC.  Shouldn’t be hard to retrofit if it has forced air heating but that should knock $25k off the price.

How do you guys find the loan history for a property? Is there a website (pay-for, I’m guessing) or is it from public records somewhere?

It is possible to live in Irvine w/o AC. This area might not get the ocean breezes as much as Turtle Rock or Turtle Ridge, but it is cooler than NP, Woodbury and PS.

When we decided to add AC, it cost under $6k. and that was with replacing the furnace.

YES, the daughter of the woman that was murdered in the house my mom and dad bought a few years after the crime came back ten years later and spray painted the house. She was arrested and put in jail for it. The scary thing is that it took ten years for her to come back. She is a mental case and the cops have to keep tabs on her. This is a very upscale place in the desert, not a ghetto at all but the story sure sounds like it!

looks like a neighbor a couple doors down is a REO.  smaller place, but still

Beds:  2
Baths:  1
Sq. Ft.:  1,192
$/Sq. Ft.: $409

http://www.redfin.com/CA/Irvine/14952-Greenbrae-St-92710/home/12508812

these things are still, IMO, stupidly overpriced.

Location is great if you like the rumble of freight trains, Amtrak and MetroLink.  It’s the 4th house from the train tracks and high voltage power lines.  Brain cancer and no sleep all for a cool $640,000.  Oh, there’s a nice short sale, same basic house but no association dues, twice as far from the tracks, just behind them for about $125,000 less.

“Plantation Shutters”?

I would have seen that more as slaveowner rhetoric.  The house has been this former owners’ whipping boy.

Chuck

I think Liz’s statement was that you have to go judicial foreclosure if you want a deficiency judgement.

Securitized mortgages aren’t setup to get a judicial.  They want what’s left and get it over with.  They’d rather take their pain now even if it means less money overall.

That’s why this crash will be more painful than those in the past.

Chuck Ponzi

Recent case in CA found no recourse against an individual who lied on a stated income loan application. Judge held it couldn’t be fraud because the bank had no reasonable basis for believing the statement.

LA area median house price falls by 22% in a year!

http://www.latimes.com/business/la-fi-homes17-2008jun17,0,3167689,print.story

i would like some whore from the NAR to sing the praises of housing as an investment in southern calif. now.

I’m far from an NAR whore, but having heard their ads on the radio daily for months now, I’ll give it a shot.

“Buyer opportunities have never been better! With historic low interest rates, buyers have their choices of many desirable properties! Historically, the value of a house doubles every 10 years, and now has never been a better time to buy! Conditions vary from market to market, so you need to have a licensed REALTOR(TM) at your side now more tan ever!“

(That might actually be the words in their ads on the radio!) I think my favorite parts are the “value doubles every 10 years” and “conditions vary.“ I love what counts as “historical” there…the years of the bubble inflating, not the last year. I also love “value” being measured without inflation. And, then, “conditions vary” allows them to say this crap when the market falls apart. Let’s not forget, the sale prices have gone UP in parts of Newport!

It’s not hard to lie.

Blueberry,

Have you not seen “House of Sand and Fog”?

Kind of scary if you think about it

Ok, I admit this may be a stupid question.  But I am still confused, dont you owe the money even if you walk away from the home.  Dont they have debt collectors hounding you for this?

There are still a lot of suckers out there who are buying at any price.
At a small corner of the Irvine real estate market, Quail Hill/Oak Creek, there are still such suckers.  Just look at www.toddm.com and you will see.
I wouldn’t blame the folks at NAR and the RE agents.  It’s their livelihood, moving properties between parties.  It’s the unsuspecting, foolish buyers, the flippers, the hoping-for-a-quick-buck investors, and the have-nothing-to-lose-everything-to-gain bankers with a not-my-money attitude towards lending.  Also it’s the whole fraud-filled, corrupt system that we should put the blame on.
And, wait for the icing on the cake.  The democratic congress and the new democratic president are going to bail those guys out, with your hard-earned money and with a not-my-money attitude.  They will raise the taxes to pay for the bailout.  And everybody will be happy again.  Life goes on.  It’s the little guys working eight-to-five everyday who are going to pay for this big mess.
So you see who are going to get screwed and who are laughing all the way to the bank.
Sadly, that is our system, my friends.  That is our way of life.
That is the government endorsed capitalistic system.
And it will be here, getting stronger and stronger long after you’ve ceased to exist.
So let’s play along with the system.  We’ll be all happy.  Who cares about the little guys!

A realtor in my folk’s neighborhood puts out a newsletter periodically.  Her latest mentioned that REO’s had been “matriculating” into the market.

Yes, she used the word “matriculate” to describe the process of foreclosed homes entering the market.  I was cracking up, as I had never heard the word used like that before.  I double-checked the dictionary and confirmed that it only has education meanings.  She just used a word that sounded right. 

Man, those RE agents can be funny!

How about those Italian Palazzos?  Italian for Dummies?  Bona Sera signore, Io vono una molto Grande Mansione de Bigge Macci.

Even in TR you need an AC.  We may not used it as much as those folks East of University Blvd but we still use it when it gets a bit too warm.

When you replace the AC, you may also have to look into the size of your ducting.  Heating only ducting may not be able to move as much air as the AC likes.

“it cost under $6k. and that was with replacing the furnace”

Maybe true, but you wouldn’t know that until the contractors come out and give you an estimate and start work.  What if you budget $6K and end up spending $20k.  When you bid on a property with a fixed deficiency (i.e. no AC), you need to adust your initial bid by a good margin over what the correction cost is to make sure you recoup.  If this wasn’t an REO and in a normal (not the recent bubble) market, their agent would tell them to spend $6K to put AC in before they sell so they could ask for $20K more for the property.

Don’t let Hank Stram know that “matriculate” is only supposed to be used for education.

“It is possible to live in Irvine w/o AC.“

Yes. The Native Americans and Spaniards did it. Can’t think of any good reason why I should.

The problem of human stupidity and real-estate is never going to end. 

The only thing that you can do is control and filter out the stupidity with high enough interest rates, down payments and thorough income verification/background checking to keep everyone honest.

When we reach the bottom, it is not going to be because all of mankind has realized that real-estate is a bad investment or because of the masses rising up and demanding lower prices and homes that are more than 5 feet apart from one another. 

We will reach the bottom when the lenders start taking their own survival into account and stop initiating the bad deals to usual suspects who have no skin in the game.

This is exactly why a bail-out of financial institutions would create an enormous moral hazard.  If the the banks know that they will be saved by the government, there is no incentive to protect themselves.  They’ll keep making the questionable loans.

If it’s a Nonrecourse debt then all they can take is the house and eat the difference.  Your credit score gets a black-eye, but so what.  Credit Card companies will love you because they know that you no longer have a mortgage payment and they can charge you extremely high interest rates (and they know you like to SPEND)

Looks lie price change month over month between May and June is rather steep if second half of June is same as first half.  Following is a list of 9 zip codes track regularly (the tenth is the zip for todays featured property).  This is the first time I recall seeing so many drastic MOM declines:

Month   Sales   Price   Month   Sales   Price   % Change
May-08   7   596   Jun-08   4   593   -0.50%
May-08   16   389   Jun-08   11   350   -10.03%
May-08   28   566   Jun-08   17   529   -6.54%
May-08   20   740   Jun-08   13   666   -10.00%
May-08   18   513   Jun-08   10   493   -3.90%
May-08   20   482   Jun-08   15   443   -8.09%
May-08   16   1351   Jun-08   8   976   -27.76%
May-08   14   434   Jun-08   12   428   -1.38%
May-08   18   388   Jun-08   5   261   -32.73%
May-08   16   556   Jun-08   7   507   -8.81%

Sorry - this may look a bit better:

Month   Sales   Price   Month   Sales   Price   % Change
May-08   7   596   Jun-08   4   593   -0.50%
May-08   16   389   Jun-08   11   350   -10.03%
May-08   28   566   Jun-08   17   529   -6.54%
May-08   20   740   Jun-08   13   666   -10.00%
May-08   18   513   Jun-08   10   493   -3.90%
May-08   20   482   Jun-08   15   443   -8.09%
May-08   16   1351   Jun-08   8   976   -27.76%
May-08   14   434   Jun-08   12   428   -1.38%
May-08   18   388   Jun-08   5   261   -32.73%
May-08   16   556   Jun-08   7   507   -8.81%

I don’t know if anyone has seen this one. It is a simple illustration of a CDO.

http://www.portfolio.com/interactive-features/2007/12/cdo

My guess is we’ll see collection agencies move into the breach.
Since HELOC’s are not “purchase money”, these bottom-feeders will find the legal loopholes that will allow them to step in and buy up the debt from the banks.  They’ll offer them pennies on the dollar then turn around and go after the debtors for anything they can get, probably threaten to torpedo their credit rating for years if they don’t settle up.

Tough sledding ahead for many.

For what it’s worth I know a few folks personally who are wealthy and not particularly thrifty or all that particularly smart either. Instead they won another version of lottery, what I like to call the IPO BINGO.  In short, they happened to go to work for a private company that, over time provided options as a means of bonus and retention incentives.  Company eventually goes public and BINGO! ole’ Jed’s a millionaire!!!  After all we’ve all heard the stories of admin assistant’s working for Microsoft who are now millionaires simply because they were in the right place at the right time. They would’ve been secretaries their entire lives and not been so fortunate.

But the overall point isn’t lost on me.  You cannot get rich by incurring debt, it is as simple as 1-2-3 ... spend less than you make and with time, good things happen.

“Yes. The Native Americans and Spaniards did it. Can’t think of any good reason why I should.“

One thing SoCal ain’t short of is p#ssies.

We (my family, here in Costa Misery) haven’t used an AC in years. Perhaps that’s because we don’t *have* an AC. We don’t, in fact, need one, and we’re happier not paying hundreds of dollars a month for a frosty air stream that needs to be replaced or fixed every 5 years. I suppose my opinion would be different if I lived in Riverside, but I wouldn’t live in Riverside.

I have little doubt that the vast majority of these HELOC loans are properly classified as “HELOC abuse”.  But contrary to IrvineRenter’s constant refrain, not all of the abuse is due to a crass desire to feel wealthy.  I know a HELOC “abuser” currently under threat of foreclosure who was using HELOC loans to keep his small business afloat.  When he had a heart attack, his family also relied on their HELOC to fund the medical care they could no longer afford.

Is this HELOC abuse?  Yeah, probably.  Is it understandable?  Yes.  It certainly wasn’t about buying a new Escalade, taking a vacation trip to Tahiti, or putting a new pool in the backyard.

I could blow it in 4 hours at no more than 4 stops on Michigan Ave in Chicago, the land of $50,000 evening gowns and dinnerware that costs $4800 a place setting. Never mind those facials at the Red Door.

There’s nothing easier in the world than blowing money, especially in this society. It takes no brains, no planning, no talent. You don’t even have to buy quality stuff.

If anyone in here ever has trouble figuring out how to shoot dough to no purpose, I can help out, no problem.

OMG!  Uh, note to self:  Cross El Camino Real neighborhood off list of search areas.

I don’t think the rich are better than the poor. And (as Gregg Easterbrook says), luck plays a significant role in our lives. Still—

>> Investing their $10K at 6% gets them $600 a year. Oh boy! $600!

Somewhere in the wealthies’ family trees—someone did exactly that. Saved a little bit, invested in a family business or real estate or the stock market or education.

Can’t say—it’s just a little bit—can’t dwell on that. Gotta start, spend less than you earn—give more to society than you take out.

Oh…I thought it was a play on Greenbrae, since she is wearing a green beret!

No AC here in HB. That house looks really nice compared with some at that price in Huntington Beach. Too bad the prices in Huntington Beach are s%&t;fu$*ing bonkers!

I live in Orange.  It’s 20 degrees warmer here and in Irvine than in Costa Mexico a lot of times.

I lived in the Bakersfield area for three years with no AC when I was younger and broke.  60 days of 100 degree plus heat, lows at night in the high 70’s if you were lucky.  I won’t be doing that again, but then again, I don’t drink Keystone Light anymore either.

No AC = it’ll be there a while.

Well, now he’ll be broke, disabled, unemployed, and homeless.  Grand slam of misery.

The first thing to do when you find yourself in a hole is to stop digging.  The second is to put down the shovel.

Those are things typically stated by people who have been given the ability to earn and save.

I believe most people that are poor, remain poor and those people that are wealthy remain wealthy.

Most people on the lower rungs of the earning curve will spend extra money that they make because it is something they have never had the opportunity to do.

Children that are born into wealth, have been used to having nice things, taking vacations, going to college and being around people of like social status. For someone to climb into those ranks without having that headstart is almost impossible.

I come from pretty much poverty but I have had the ability to earn a tremendous amount of money in my lifetime but I have never had the ability to keep any of it.

I have made people millionaires only to be left holding the bag and out of a job when they (the rich people) bankrupt the companies that I helped them build from scratch.

In my opinon, the wealthy are wealthy because they come from wealth and they care more about money then they do people, unless of course they can make a buck from someone while rear ending them at the same time.

When I first began going to blogs like this one to discuss the real estate bubble, I was amazed that people really believed the spending they were witnessing was money earned through wage income.

That’s why we call them HELOC-Davidsons. I told that joke to a guy whose wife was in the mortgage business and he laughed and laughed.
But, you know, down at the Harley-Davidson dealership, they didn’t find it funny at all. Some people have no sense of humor, or maybe those HELOC-Davidson riders are still all upset by the legions of POW-MIA guys still captive in Nam. I mean, can you blame them?

Me, I got rich the easy way. I married the right girl. Her Mom is in the Guiness Book of Worlds Records under “Tightest-Fisted Women Alive”. You know how everybody is trying to stretch a dollar these days? Well, my MIL is still stretching pennies!
And my wife, her daughter, covets that slot for herself when Mom (may God delay the day for as long as possible!) passes. And I reap the benefits.
Look, for God’s sake don’t tell her I said this, but she’s the only woman I’ve ever known who actually has an erogenous reaction to saving money. Just the thought that she is not spending money gets her excited.

But I’ve really said too much, and should stop.
Let’s keep this between ourselves, okay?

Jeez, can I stop a comment thread dead in its tracks, or what? Why is that, happens all the time.
Oh well, I guess I’m just not used to having the last word. Never happenes around here (Moosehall) that’s for sure.

No.  First, someone’s “family tree” says nothing about a person.  Second, there’s no basis to say someone in the family tree invested tiny amounts laboriously over time.  Third, “giving more to society than you take out” has nothing to do with anything.  Bond traders can make a heap without giving anything to society.  Great teachers give a ton, and don’t get rich.