The New York Times gets it:

For Housing Crisis, the End Probably Isn’t Near

“They don’t have as far to fall today, but the great real estate crash is not over, either. So if you are part of the 30 percent of American households who rent and you’re trying to decide when to buy, relax.

The market is still coming your way.”

Someone at the Federal Reserve who gets it:

Fed’s Hoenig: “Too Big to Fail” a Farce

“In surprisingly blunt criticism of both the government and his colleagues, Federal Reserve Bank of Kansas City chief Thomas Hoenig argued that “insolvent firms must be allowed to fail regardless of their size, market position or the complexity of operations.” His Congressional testimony Tuesday morning to the Joint Economic Committee provided some of the strongest criticism of the government bailout yet by any major figure within the Federal Reserve.”

I found it interesting that this little nugget did not get more attention:

IMF: Global Credit Losses Could Top $4 Trillion

The IMF is not a government entity trying to spin data one way or the other. IMO, they have more credibility than most because they simply tell the truth come what may.

I still don’t understand Irvine.

This is a million dollar condo.  A condo costing a million dollars.

The words “condo” and “million dollars” do not belong together, IMHO, at least not outside the downtown area of a major city (which Irvine is most definitely not).

Of course, the icing on the cake is the $475 monthly HOA fee.

This sad event will be closely watched.

It’s really only a condo in a sense that they share one wall.  The back yard with the view is 100x nicer than any of the new single family homes they are building today

It’s only one common wall…this is a nice lookin’ piece of property in a great area, but not for $1M + $475 HOA. Judging from the furniture, the owners seem to be doing okay.

I just moved to Turtle Rock Pointe (as a renter woo hoo!) and I’m told they haven’t sold a house (actually they’re condos) here in 1 1/2 years.

I pay $2700 (for 2100 square feet) and they want just under a million for the same house (there are 4 plans). Did I mention the HOA dues here are $475/month.

These houses are just getting to the age where they’re start to nickel and dime the owners.

It seems to me the prices have to come down a whole lot before it makes sense to own here.

many don’t have backyards per se but patios.

the views on some are much better than others (golf course, Sand Canyon Reservoir)

the asking price of a few open houses in Turtle Rock Pointe were between $426 and $460/square foot which seems a bit WTF especially with the additional $475 you’ll be paying a month for groundskeeping, a gate and a pool

It does look nice.  I just don’t understand why they didn’t design it so it shares zero walls.

Per Redfin, 11 homes sold in Turtle Rock the last 3 months.  1 of them sold for more than a million dollars.  There are 21 listed with an asking price exceeding 1 million dollars.

Most places that have HOAs seem to charge somewhere between $100 and $200 a month.  Surely that’s enough to pay for a gardener and a pool guy and a guy to man the front gate.  What does the extra $275-375 get you here?

Density. They probably got 8 units per acre rather than 5 by sharing walls and reducing yard sizes.

this number was printed on fox as in the billions and the typo was left unfixed..yeah our losses could be billions

If you can rent a place there for $2700, and if the HOA dues are $475, rental parity will be at or just below $400,000. That doesn’t bode well for people who think these are worth nearly a million dollars.

that covers everything exterior but its still a bit steep.

I’m glad I’m just renting here. It would cost me at least 2 times/month what I pay now to be a proud owner in “the point”

I’m told they haven’t sold a house in Turtle Rock POINTE in 1 1/2 years not Turtle Rock in general.

Maybe it’s just me, but I’m not a fan of houses that are nothing but garage from the street.

But here’s an actual quote from a realtor in my neighborhood association’s newsletter that we just got: “There has never been a better time to BUY. Prices are DOWN, sellers are motivated, interest rates are FANTASTIC and in most areas inventory is abundant.”

Those caps are hers - the koolaid is everywhere! But seriously, how can a licensed business professional get away with such misleading BS - tell people there’s literally never been a time to buy when prices are cliff-diving??

She then goes on to list some comps, many of which are 5+ months old, and some organic listings at wtf prices. She also tells people not to focus on negative news reports or the “recession” (quotes hers). I’m so glad I get my info from sources like this blog and not immoral liars like her.

But that’s a compromise that shouldn’t need to occur at a million dollar price point.  Besides, they don’t have to be TOO far apart.

I have been battling with recession stress lately.

You are not the only one - it is affecting everybody in one way or another.

I am not even involved in the real-estate business and, this year, I have seen people all over get layed off, forced into temporary leave of absence, reduced to part-time or changed from full time employee to “independent contractor”.

Almost everyone I know has been affected like this in some way, shape, or form.

Even when you are one of the few left standing, it still stresses you out because you are just waiting for your ticket to be pulled - plus you feel tremendous guilt watching your friends get pink slipped after being dedicated hard workers whose only mistake was that management deemed them more expendable than you at that moment in time.

It’s definitely pretty depressing out there, but I do take some solace knowing that at least the government is taking adequate measures to ensure that the executive members of the banking Oligarchy will survive; it gives me great hope for the future.

I think (not sure) that it also includes new roof, exterior paint, any other exterior fixes, repaving the roads since they’re private and insurance.

IR

I’m getting crushed by debt, would you look at my numbers and advise proper caliber necessary?
Unable to face truth alone…

Look at it this way, these are townhomes. 

If you want to see how close homes can be, look at TRidge.  Besides, TR has a very high percentage of “townhomes”.  And they are pricey.  We ourselves opted for a SFH, and yet it has a zero lot line on the north side.

It is/was construction cost more than density.  There are plenty of examples in T-Rock/Ridge where there is < 3 ft between exterior walls of SFR.  The common wall(s) reduce the construction, maintenance, and infrastructure costs to put the little houses up.

I know it shouldn’t make a difference, but I do feel bad for the people that lose their own money.

Why feel bad?  They lost nothing.  They had the privilege of living in a nice house for several years - that has to be worth something right?  They paid the premium to live the good life.

As a renter for the last 3.5 years, I’ve spent a lot of money that I will never see again and nobody feels badly for my loss….

Perhaps I am just not as empathetic as you are.  I have the perception that many house buyers feel entitled to a free lunch because they sat in a house for a few years, watched American Idol in it, and used the granite counters to rest their bucket of KFC; acting like the place just pays for itself. 

I don’t care about this seller’s loss; but that’s just me.

It could also be that the people renting the homes have long term mortgages and low debt.  Hence they properties can cash flow even at 2700/month.  And in this market they may not much care to sell unless they get their WTF price.

Hence, no motivation to sell and lots of motivation to cash flow the place.

One of my issues with TR Pointe is that as a gated community it discourages looky loos for open houses.

The area is very nice, indeed, but their HOA is very high for an older community so I wonder what they can be doing with that money… except that if the HOA does maintain the outside of the homes (Not necessarily common in TR’s “condo communities”) then I suppose it makes some sense.

I honestly don’t think that 400K is a reasonable point.  IMHO, if I ever saw one of these homes go for 400K I’d make an offer immediately.  The view alone is worth the bucks.

Hey, it’s TR.  No KFC… it’s Charo Chicken with a side of black beans!  They deliver! 

http://www.charochicken.com/locations.php

Ok, I can see a $400k condo.

Such a huge disconnect between rental parity and list prices.  Think these will actually drop to something close to $400k eventually?

Isn’t it amazing how right here - right now - is always the best moment in the history of the universe to buy a house? 

Who listens to these sleazebags for advice?  It would be like the equivalent of going to the Zoo to ask the shark if now is a good time to go for a swim.

Good negotiating, I suddenly feel like I need to call the landlord today.  If you can get $2,700 for 2100 sq ft in Turtle Rock Point I am way overpaying.  ($3k for 2,100 sq ft in Woodbury)

“But that’s a compromise that shouldn’t need to occur at a million dollar price point.”

The price point is determined by the market. The Irvine Company designed the place to maximize revenue on its holdings. The fact that these properties got bid up to nearly a million dollars says more about the availability of loose financing than anything else.

Amen, amen, amen.  I have said before I am sick to death of the gov’t invoking the shadowy ‘systemic risk’ bogeyman to justify whatever they do.  This is a farce, kudos to Thomas Hoenig for having the courage to point this out.  Fire Geithner and promote this guy now!

If that is the case, then he must be renting the place for under market value. I would have to imagine one of the view homes rents for much more than $2,700. I would go rent one of those if I could get it for $2,700.

Great metaphor.  Hope it catches on.

Kellermann, 41, who also served as a senior vice president, had been with Freddie Mac for more than 16 years.

Before assuming his current posts, Kellermann was corporate controller and principal accounting officer.

The company was subpoenaed for documents relating to accounting, disclosure and corporate governance matters

Makes you wonder if those investigators uncovered something they shouldn’t have….  Will be interesting to see what is said in the weeks ahead.

LOL - There you go. 

I bet it looks mighty tasty too against the backdrop of a nice slab granite counter top.

I was thinking the same thing.

I wonder if his estate will be responsible for any corruption discovered by the feds.

There’s still a major disconnect there.  If only one sold for more than a million in the last three months, yet there are 21 listed at more than a million, there’s probably going to be 20 or so disappointed home sellers.

You’re probably right.  I’m referring to the entire village.

I just wanted to point how healthy Turtle Rock real estate actually is (sarcasm) ... there’s 21 listings exceeding 1 million dollars, yet only 1 million dollar+ sale in the last 3 months.

If it was merely puffing up the accounting statements so they looked better, no.  If he actually took bribes or kickbacks, they might have to pay that money back or maybe pay back taxes on it.

I don’t think you can rent a 3 bedroom like this in Turtle Rock for $2700/mo.  It’s more like $3000/mo to start with.

Actually, the layout downstairs is to my liking, and it is GREAT to see some hardwood flooring (even if it’s not solid and is faux/veneer) - I am looking for a rental that does not look like a mausoleum, where one slip and you crack your skull…to say nothing of the cold and claminess they produce.  The common wall makes it a townhouse/condo, so it should be priced as such.  Here in newport the Bluffs are still showing WTF pricing for condo/townhouses and steep HOAs.  Maybe by the end of the summer after they haven’t sold the sellers will finally capitulate.  These condo-types should sell in the 500s, IF they have a good location/view.  Otherwise, hello 400s…

Even the gov’t subsidized mortgages are deteriorating ... and it’s getting worse.

This via The Big Picture:

No surprise here: Even amongst the most credit worthy borrowers — aka “Prime” — defaults are rising rapidly. Job losses, debt problems, loss of income are the primary causes.

Prime borrowers at least 60 days behind on mortgages — “Delinquent” is the official term for this period — rose from 497,131 in December to 743,686 in January, according to the Federal Housing Finance Agency. This is almost double the total for October.

Bloomberg:

“Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators

Of all borrowers who ended up in default, 34 percent told Fannie and Freddie they were earning less money, about 20 percent cited excessive debt as a reason for missing mortgage payments, and 8.1 percent blamed unemployment, FHFA said.”

I love Charo.  Once you’ve eaten there you’ll never go to El Pollo Loco again.

I’m looking at craptacular condos in Rancho Cucamonga (just shoot me), and the HOA fees of some are $300/month.  I, too, can’t figure out where all the money goes.

This is a really nice property but $949k still seems WTF.

The views must be spectacular.

This relates to our post a couple of days ago about the impact of foreclosure moratoria:

Delinquencies and Defaults Up, Up and Away

“At the same time, loans that were 60+ and 90+ days delinquent climbed. All loans 60+ days delinquent increased from 834,831 as of November 30 to 1,229,051 as of January 31, representing an increase of 47% over the period, the FHFA said. However, prime loans 60+ days delinquent increased by 69.6% while nonprime loans increased by a significantly lesser 23%.”

Am I the only one who finds “Pointe,” “Vue,” “Grande,” and “Shoppe” every bit as pleasant as 80 fingernails on 16 dry chalkboards?

We have a class of people—realtors and marketing professionals—who generally fail minimal tests of literacy in English, yet attempt to name places in a language somewhere between French and Spanish.

And was Irvine once the site of a giant turtle colony?

This is a really nice home.  If this drops below $500k, then everyone else really is toast.

I’ve been paying HOA dues for 16 years. My neighbor is on the board. Our dues pay for new roofs (which we got about 5 years ago), new fences (which were done twice so far), painting outside, replacing rotting wood outside, termites,basically everything outside. Landscaping (fixing the sprinkler heads after the kids destroy them),blacktopping the streets, and insurance which is a huge part of the budget.If the place burns down they rebuild and we are responsible for the interior such as new cabinets, new bathrooms etc. The parks and pools fall under the WVA dues.

market value is dependent on the owner’s financial situation.

If the owner can make money at 2700 per month and get a solid long term tenant by undercutting the market then they make just do so.

Of course, our new mortgage on our 5b/3ba home in TR is 2700 a month… ;-D

It that’s the case, then how much do you pay for HOA dues.  The upkeep on a house and yard can easily run $5K a year if you do things right.

Our HOA is cheap, but they don’t really do much, just some fences, common parks, the pools and tennis courts.  The streets on our neighborhood are maintained by the City of Irvine and they do a good job.

We carry our own home insurance ($2K a year with earthquake coverage) and pay for our own gardeners that take care of our expansive 2000 sq foot yard!

Our condo association has four different sites in Woodbridge, so it’s huge. I don’t know the numbers, but well over 200 units. The cost is $236 per month. The Woodbridge Village Association is $78 per month. The WVA maintains all the pools (at least 20), two lakes with beach and tennis clubs, parks for the kids and more I’m probably forgetting.

I was a board member on a HOA off and on for 8 years and believe me there is a lot of abuse with your money.
Our president wanted to be a big shot so he used our money and took out business members of our town out to lunch. He also hired the most expensive lawyer and went after a homeowner he was very jealous of and was out to get him big time. We had a huge amount of money and never spent it. I had to beg for new mulch and never got the new seed we needed for our deteriorating hillside.

It was a constant fight to get anything fixed or repaired. This man had a prior reputation from a former development and moved to ours under the tax shelter of prop. 13. He spent so much money on retaining and using this lawyer it was way beyond the cost of the homeowner fight.

The abuse and the fighting involved most of the homeowners and it was really a terrible place to live. And when I had my open house when I finally sold and moved he was right in my house. Oh yes HOA breeds sick power hungry people the likes you can not believe. I fought the city, a church, the homeowners for 8 years and won two big city battles—-It was a nightmare to say the least!!

Why not look at older detached houses in the same area?  As far as I can tell from a quick Redfin search, there seem to be some at similar prices as most of the condos in Rancho Cucamonga (<$200k), and there would be no HOA.  More repairs and upkeep, but you get more too.  The only negative might possibly be whether or not the neighborhood is any good (the cheap, older ones seem to be mostly located in the southwestern part of the city-I have no idea if that’s gang central or not).

I wonder how much money does a builder really save by using a common wall.

What bothers me the most about Irvine as I walk around I see an amazing amount of wasted space.

Huge areas of empty space that we water while the homeowner get a common wall.

Makes no sense. Huge areas surrounding parks while homeowners have no back yard. Yet they will build your home too close to a main road.

Irvine was never built with the homeowner in mind—it was built for the city managers to say look we have so many parks with all this open space.

The planning and zoning did a horrible job if you ask me. It was never for the homeowners just so it’s looks good on paper.

Oh and the best part where I live we get tickets if we park in our driveways because the average car doesn’t fit in the driveway—-And why because they didn’t provide adaquate space.

This is another picture of abuse to the homeowner—

This is why I would avoid moving anywhere with a HOA if ever possible.  Fortuantly, the vast majority of the single family housing stock in Riverside is non-HOA, so I had plenty to choose from.

Well, then $500k or something.  Still a lot less than spitting distance from a million.

Big surprise:

Golden State Mortgage Defaults Jump to Record High

This “analysis” is just wrong:

“The nastiest batch of California home loans appears to have been made in mid to late 2006 and the foreclosure process is working its way through those. Back then different risk factors were getting piled on top of each other. Adjustable-rate mortgages can be good loans. So can low- down-payment loans, interest-only loans, stated-income loans, etcetera. But if you combine these elements into one loan, it’s toxic,” said John Walsh, DataQuick president.

All of the loan terms he described are toxic most of the time. You do not need to combine them for them to be a problem. It is foolish thinking like that displayed in this statement that will inflate another bubble.

“Of the 3.7 million home loans made in 2004, less than 1 percent have since resulted in a lender filing a default notice. Of the 3.7 million loans originated in 2005, 4.9 percent have triggered a default notice so far. Of the 3 million in 2006, 8.5 percent have so far resulted in default. A particularly toxic period appears to have been August through November 2006 which had more than a 9 percent default rate. Of the 2.1 million loans made in 2007, it’s 4.6 percent - a percentage that’s likely to rise significantly during the rest of this year.”

In short, there are many toxic loans out there.

The “elected” board has to work with the property management company. Ours is called Action Property something. I know the board and some of the rules can be a pain. The only problem we’ve ever had is replacing outdoor lights without prior approval for the type of light. They even made us change the patio light to an “approved” light even though it was inside our fenced yard and patio. Someone walks around frequently checking these things. Oh, and we were fined $50 for having new windows installed before the final approval letter arrived in the mail. We were so bad!

Exactly my point.  I’m sure all those parks and green spaces are nice, but I imagine most people would perfer their own backyard and no common walls to them.  I would.

Less than 1% in 2004, and almost 5% in 2005 (and then 8.5% in 2006).  What a difference a year makes.  Of course, prices were much more insane in 2005 than 2004, require more “creative financing” to get the average working stiff into a house, plus more incentive to walk away.

Robert: am curious to know if you looked at other TR Pointe rentals; if so, how much were they asking per sq ft for a unit comparable in quality to yours?

Sue: does your hoa have earthquake insurance on all the units it represents? If so, do you know what the deductible is? And what the max payout is? About what percentage of the total # of units could be replaced (assuming there is land to build on) before the max payout was used up in your guesstimation?
I’m curious because I previously owned in a complex in San Clemente which kept hoa fees at the same amount for years by decreasing the earthquake insurance. It became obvious that only a minority of the units could be rebuilt before the max payout was used up. When I asked one of the board why so little insurance was maintained, he assured me that if there was an earthquake, there was no way that most of the units would be destroyed! (this is a complex built on a sloping hillside).

That kind of pretense always annoys me as well. My other favorite is “bistro.”

Also what you are seeing is the dramatic rise in defaults that occurs as owners submerge beneath their debts. The type of loan is important, but the debt underwater is equally so.

I agree I probably got a good deal. They wanted $3200 for others for rent (most in Turtle Rock Pointe are about 2100 sq ft). I think the time of year that you rent can make a big difference.

Yes, the HOA has earthquake insurance. Sorry, but I don’t know the answers to your other questions. Our monthly dues have gone up over the years.

Thanks for the info.
As Irvine Renter noted above:
If you can rent a place there for $2700, and if the HOA dues are $475, rental parity will be at or just below $400,000. That doesn’t bode well for people who think these are worth nearly a million dollars…
Using IR multiplier of about 126, rental parity @3200/mo and $475 hoa is about $463,000 - definitely not good news for those thinking their units are worth about $1M.

Thanks. If you are interested you can ask you management company (directly or through the HOA board) for a copy of the certificate of insurance (to include the page or two describing the earthquake ins) to which you are entitled as a homeowner. It might prove very enlightening.

As businessweek reports, Option ARM resets have been delayed. Does this mean that the problem is postponed for some period?
http://www.businessweek.com/lifestyle/content/apr2009/bw20090416_103126.htm

There are some hidden things going on here.  A huge portion of the 2004 loans were either refi’d or the homes were sold.  That’s one of the most effective ways of reducing portfolio risk, and it’s one of the reasons why banks thought they had less risk than they really did.

“Real estate always goes up” was blatantly stupid.  “A huge portion of these loans will refi anyhow” was only moderately stupid.  It was not obvious to many that the underlying reasons all pointed to the same places: increasing leverage and more and more underwriting standards.

The market will make the price no matter if it’s a view or a pool. Many think these would add to the renting value but without a market the price will come down to whatever renting level it finds. In some cases a pool can be a hindrance because of the costs involved in electricity and refilling the pool. Many may not want the increased costs.  While others don’t mind paying for it.

If you polled the over all renters I think real living space is priced higher than views, pools or other amenities. Supply and demand control costs.

The city’s push the costs of roadways, security, landscaping onto the homeowner. It really is a very expensive tax on top of the already state tax and government tax. And what it does is take your money pay another group to run the HOA and use the members to run the boards. It spreads out the money to yet another middle man. If the city took in this money maybe they too would either over pay themselves or over spend? As for a guarantee on mudslides and other acts of nature no one cared when our slopes were deteriorating. Those that run these boards really have to be monitored and should have term limits and be audited. Power corrupts most people.

The owner is effectively paid $10,500 per month in “rent” or equity burn, interest and expenses.  I also feel sorry for this responsible buy, who put a big down payment on the property.  If he only put down -5% the press would be falling all over the bank for predatory lending practices and he could walk away with money in his pocket. 

Last month, BW featured a couple (fed law enforcement and HR supervisor couple) who had a subprime loan with $3000/month.  The bank wants $5000 with the reset.  They ended up in the $4000 claiming they could afford more.  Guessing a fed law enforcement officer likely with a GS-11 with 20% automatic overtime and 20% hazardous duty plus the HR supervisor’s salary (likely household income $150-170k) couldn’t afford to pay $5000/month).  People felt sorry for this couple with essentially nothing down and the press helping to get better lending terms, but people putting significant down and loss their own money: no pity.

I think Turtle Rock and other high-end neighborhoods will be hurt MORE than median priced neighborhoods.  With real estate prices going down (way down) instead of up, very few people will be able to move up from their mid-level homes, because they won’t accrue any equity to do so. 

Not many people earn enough to buy these homes straight up.  The pool of buyers will be very small, and the depression is making it even smaller.

Who says that the one renting HAS to make money on it? Maybe he is happy to have atleast 2700/m. back on his mortage.

I have a house for sale in amsterdam and i would be happy to get at least some money back on the mortage

That’s true jumparound.  I’m an expat and will be heading back to the US this year.  I got a long-term renter for 3 years, and lowered the rent price to keep him in.  I don’t make back the taxes and insurance, but it does pay my mortgage.

We didn’t want to move anywhere else when we moved back, so it was worth losing some money on the rent to have the house looked after.

Congratulations to you for providing a platform and forum to exchange ideas and news with your readership.

You inform and engage the participant with concepts and events.

To your continued success.

David Pylyp
Toronto

its really good to hear up your ideas on the challenges you have faced specially when it come to living in your dream place

Nice work guys