“Getting out of my Irvine bubble has made me even more bearish about the high end.”

There just isn’t the income metrics to justify the valuations on most of the market.  It was all masked up by the monster leverage.

It’s gonna be an ugly summer.

For a decade the home has been paying for itself, and providing them around a $200,000 tax free income beyond that.

Can you blame them? A whole decade of the high life, all they did was lose 3 decades of home equity for it!

Wow. 

The only other thing I can say is that the pictures of the place on 21 S. Caraway (Our Heloc Economy) are a lot more appealing than these two shots.

“Original screening room used by Harry and many Hollywood friends still in basement.”

Shouldn’t someone let them out?

The couches and the tv area do not look like multimillion dollar furnishings.  It looks like squatters have been there for a couple of decades.

What was up with all the Helocs?  She’d HELOC up when she needed more $$ to pay the monthly mortage and bills?

I knew a woman in the early 1990’s who refinanced her home several times to pay for her three childrens’ educations.  She didn’t have a spouse to help.  She had her house as the second wage earner.

You have to love proposition 13.  Taxable land on that estate listed as $134,902.  I think if you’re going to start taking $1,000,000 out of your home, your property values should reflect that.

He he….I had to re-read that sentence a couple of times myself to figure out what the realtor was saying.

A little Googling will tell you that this is no Hollywood legend. She’s an “HBO producer”, age 27. Actually she’s an assistant to a VP of programming. She got married in September and presumably no longer needs the house.

At it’s peak, Malibu homes were selling for 34 times median household income for Malibu.

This was even more insane than CA in general.  LA County only got to 11-12 times median household income. 

I know a lot of homeowners in Malibu.  One sold a house in another neighborhood near the peak.  Their house in Malibu is now worth less than half what they paid at the peak.  However, their mortgage isn’t all that bad.  They brought about $700k of “free equity” with them.  They both have good jobs.  Still, their mortgage and property tax payments are over $6000 a month.

Another has had his house for quite a while.  He has/had a compulsive spending problem.  He refi’d perpetually.  I keep expecting to see his house in foreclosure.  It looks like it is in default now.  Probably something like $1.2-1.5 million of equity extraction.  His current job?  Selling health club memberships.

In that case, someone else, probably her parent(s), must have done the early equity withdrawal.  She would have been under 18 for part of that time.

I should add that her mother is retired partner from Goldman Sachs and was probably her financial advisor throughout.

I think if you’re going to start taking $1,000,000 out of your home, your property values should reflect that.

Just moved to California, and that’s what I can’t get over. I understand the impulse to make sure people aren’t property taxed out of homes as those homes appreciate. But California has thrown the baby out with the bathwater.

Isn’t there some way to collect some of that untaxed value of a house at the time it is sold?

“It’s over.”
I don’t think it is over yet.  Almost every week we hear from someone on here that says that they heard of someone getting a mortgage with <20% down for >500k or something similar.  I have heard of stories that folks are refinancing and the “valuations” they are getting are still WTF prices.  I recently heard a co-worker describe her Irvine re-fi and it amazed me.  How is the bank going to give her 80% of the current “value” when tomorrow that value will be 40% less?!?! (I know, it is so she can be a slave to her house, just putting off the inevitable.  But still…)

So it is not over yet.

Maybe her mother owns the house?

Nice enough house with a lovely lot. Kitchen is badly laid out, unfortunately. You’d have to walk twenty miles to make a decent dinner—not to mention all the extra time for all that walking back and forth. The kitchen layout alone is enough to make anyone who likes to cook bypass this house, unless the person plans to gut remodel the cooking area.

“This price crash will be epic; it really will be the great unwinding.”

65-70% off peak prices.  Welcome to 1996 nominal pricing. 

Malibu does have some real longtime residents.  About 1/4 of homes there don’t have any mortgage.  The people with mortgages have housing costs which on average are 6 times as large as those without mortgages (who still have property taxes, insurance, maintenance, and sometimes HOAs).

Surprise, 501 NORTH Rossmore is an apartment building, not a mansion.

>You’d have to walk twenty miles to make a decent dinner

I thought people drove around their kitchens in LA!

“Many at the top are just living their lives and trying to keep a low profile. When you really are rich, you don’t care if anyone knows about it.”

I remember reading that almost all the rich profiled in the Forbes 400 would dispute the figure Forbes had stating it was too high and they were worth less then claimed. One member would complain that the figure Forbes assigned him was too low however: The Donald.

Wow. Just f*cking wow. Wonder what lucky lender(s) get to eat this.

And the cut-through traffic in that neighborhood is ridiculous.

Bob,

I think you are mistaken. The person linked in your astute observation is not the owner of this property, nor does her name show up in any of the records.

Also, please do not provide any personal information you may find. This is about the behavior, not the people.

Cash-out refinancing should automatically trigger a reassessment just as if the property sold. If the money is taken out as a HELOC for home improvement, then the value should be adjusted to reflect the new value of those improvements, or at least reflect the value added. That would reduce people’s appetites for taking money out of their properties.

lucerne prop is not a good comparable.  29000 sq ft lot in this neighborhood (i live in it for now) is rare and has extra value around here.  it’ll go for 3 at minimum i suspect.

rossmore is a cut through street with a ton of traffic and while i wouldn’t live there with a giant lot like that someone with money won’t care.

as for the block, i know many people on it.  you have producers who no longer have studio deals, myspace execs (good luck with that), some high end doctors and so on.

the question about LA is entirely different from irvine.  for years i couldn’t figure out who had all that money in OC—here i know exactly.  every studio budget of 50 million is about 10 million more than it needs to be.  that money is the money that pays for all this stuff around here.  will the studios cut back?  some signs point to yes, but maybe not quite yet. the biz just had its biggest year EVER…10.9 billion in box office revenue worldwide.  as long as those numbers remain the housing market here will be ok.  and given that depressions don’t kill the entertainment business historically, maybe it will be ridden out here.

having said all of that, HELOC insanity like that is still just that: insane.

I was trying to figure out who Harry was. I wonder if it is Andy Dick’s father?

I definitely thing you’re right about the uber-rich.  My parents are long-time owners in Diamond Bar, and Edward Roski Jr. (the one who wants to build the LA NFL stadium, one of those Forbes list types) used to live across the street.  It’s a very nice part of town, where 3-5 million dollar homes are now the norm, but the Roskis lived in a one level house of about 4-5K s.f.  It was big - but sadly, like my parents’ house, likely to have been torn down by 50% of the buyers out there because it was “too small.”  Of course, I think one of the reasons that the truly rich are rich is that they know how to invest, what is worth spending money on, and when to stay put and reap the rewards of a fixed housing cost.

I love this house.  I’m not a great cook but can work magic with my micro-wave so the kitchen doesn’t bother me.  150k in the 70’s, If only. I wonder what this neighborhood was going for in 1998.  Still, at $662. a square foot seems really high but the land is quite large.  Tennis anyone?

Why have a job when you can make your house work for you?  My husband and I would drive around (and still do) beautiful areas like this and wonder what people did for a living to be able to afford their lives.  I always say that most of them are thieves but in this case it was legal.  I wonder what the average annual salary in the area is.

I agree, prop 13 is silly.  I like the other models used elsewhere better (ex. old lady in her big house has a smaller fixed tax rate, but when the house is sold or she dies, the balance of taxes owed is carried forward and paid for by the proceeds of the sale).  Seems to accomplish the same humane ends, but without the unfairness of different tax rates for different homeowners.

typo - should be “smaller fixed payment” as tax rate is the same as everyone else, just deferred payment

Purchased on the 1970’s for $150K and currently paying very little property tax.  No wonder the Hollywood and ultra rich crowds keep repeating you don’t pay enough taxes.  I wish I could pay there rate of taxes.  The 19970’s sale price of $150K sounds like a sweet heart deal—small house in SM were going for $40K at the time.

I figure if they cover the refinance debt and RE/sales fee, they came out ahead or even.  Low taxes, nice house and uses of low interest (and ITD) loan for years.  Only drawback was that area had smog that you could cut with a knife in the 1970’s.

Many place these homes in trust funds so they can leave it to their children so the tax rate continues onward—-

I have been looking in the Laguna Beach area for a few years now and you can see the same heloc abuse over there. Along with some new rebuilt homes that over spent most likely thinking they could really pad the price of a home once it was finished. We looked at one last week that was over three million but would probably be worth maybe two. When you first walk into these homes you have no idea how much they cost because the outside is so deceiving until you see the WTF price. It’s pretty astounding what they want in Laguna. The real estate boom here fed the entire area in a domino chain of events we all can see that now.

The banks will hold onto their foreclosures as long as they can with low rates begging us to buy the debt riddle homes.Those who do buy maybe stuck for many years as the unwinding will continue with increase job losses. And so far that is not abating.

Buying any asset and being stuck is an awful situation to find yourself in. In today’s paper Jerry Brown is suing Wells Fargo for bond holders of asset backed securities that are frozen. Just like owning a home you could be frozen hoping someone will pay for it so you can get out.

The Great Bust of California is really just beginning.

In the old days when you took out a second it was for addding something to your home—a second story or a pool—-an addition of some kind. Then the tax would go up to reflect it’s new value.

These Heloc abuse cases the money went to live.

Our taxes are going to go up to reflect this loss value of what these consumers were spending it on.

Unless they continue to cut the budget we will all pay for this abuse.

I stand corrected. I re-checked my original search (prior to the link I gave) and it was 501 N, not S. If that’s an apartment building, it makes a lot more sense now. Never mind. ;-(

Harry Warner.

You may have heard of him and his Brothers.

It’s not over until the surviving lenders say it’s over.

again, since clearly i must reiterate: the people who surround me in this neighborhood are predominantly in the film and tv business, with a heavy emphasis on writers and directors.  they make a ton of money for their jobs.  those jobs are for a business, hollywood, that continues to make huge amounts of profit for big corporations and continues to be massively productive (in the sense that tons of movies and tv are still being made).

so if someone was driving around wondering who lives in what is probably the nicest ‘urban’ neighborhood in LA, there is your answer.  it’s people who generally work really hard and make a ton of money in an industry that is willing to pay them thusly and still remains viable.  the thieves comment above is wishful thinking mixed with petty jealousy.

i’m not trying to be a dick about it, but could many people have said the same thing about anywhere in OC?  maybe the answer is yes, i don’t know.  but i know lots of people in Laguna and i could NEVER figure out what the hell they were all doing for a living to pay the monster prices for their houses on their tiny lots.

In any case, the Hollywood legend in this case was the original owner of the house, Harry Warner, who was one of the founders of Warner Brothers.

The problem here really isn’t Prop 13 (although that does help increase land values by stopping sales of people priced out by not being able to afford the property taxes).  The problem is the HELOC abuse.  There should be a law that any money taken out in a HELOC needs to be completely spent on improving the property.  Want to add a swimming pool or another bedroom?  Fine, you should be able to take out a HELOC to pay for that.  Want to buy a Porsche and take a vacation to Hawaii?  Bzzt.

It is completely conceivable that this lady literally lived off the HELOC.  If your house is gonna pay you $200k a year, why bother with a job?

If you click on the virtual tour and then click “Estate Description”, you can see the price from the previous listing-they didn’t bother to update the text.  Apparently, the house was once listed at $4,795,000!  Whether or not that was before or after the two price reductions from the previous listing is unknown.

Because if they pretend it’s worth more, they can refinance it.  They then get to claim success with the administration, use free government money, reconvert a loan with 26 years left on it back to a 30 year loan and torque the rate above market which she’ll slave away at to make payments on the next five years or more thinking the rebound is just around the corner.

Robert…where are you in the ‘hood?

The comp on Lucerne may be a smaller lot but it’s a better location. Southbound traffic on Rossmore is a nightmare and during rush hour you’ll be guaranteed to have cars idling outside for a couple hours while they wait at the light at 6th.

The Lucerne house was a probate sale I believe which led to the acceptance of the $2,050k offer.  It was last listed at $2,999k.

Current “comp killers”...or should I say “better deals” would include…

http://www.redfin.com/CA/Los-Angeles/650-S-Muirfield-Rd-90005/home/7091181

http://www.redfin.com/CA/Los-Angeles/606-S-Plymouth-Blvd-90005/home/7091435/claw-09-363617

http://www.redfin.com/CA/Los-Angeles/142-N-Hudson-Ave-90004/home/7095697

“Peak” Purchases In Hancock Park for comparison…both were “dumps” for the neighborhood IMHO.

http://www.redfin.com/CA/Los-Angeles/234-S-Rimpau-Blvd-90004/home/7095756

http://www.zillow.com/homedetails/335-S-Rossmore-Ave-Los-Angeles-CA-90020/20775067_zpid/

For those curious what houses in the neighborhood were selling for in the late 90’s.

Here are a few examples…

335 S Rossmore (zillow link above) sold for 550k in 1995.

This one sold for $1.465k in 1997…

http://www.zillow.com/homedetails/335-S-Rimpau-Blvd-Los-Angeles-CA-90020/20774991_zpid/

This one sold for $1,650k in 2001. There was a WTF listing for it about a year ago for $8.995k…

http://www.zillow.com/homedetails/414-S-Rimpau-Blvd-Los-Angeles-CA-90020/65242872_zpid/

In the 1970’s, 150k for the Rossmore house in this post is not unreasonable.  I’ve seen mimeographs from 1971 and 1972 local listings and 150k would be right in line with the prices at the time.  $175k was the asking price of a beautiful brick mansion in the 300 block of S Hudson at the time that sold for a bit over asking.  “Hoss” was selling his home at Muirfield and 6th at the time also.  Can’t remember what it sold for but asking was less than 200k and was lowered substantially although he was asking for a “premium” probably due to his celebrity status at the time.

Yes, the people in the neighborhood make/made lots of money as Robert says.  It will be interesting to see if their debt levels are commensurate with their incomes.  Who says the wealthy can’t overextend themselves?  Who says the royalties for the “hollywood types” will come in at the same blistering pace of yesteryear?  I’ve seen celebrities sell mid-renovation when their shows were cancelled.

OK…let’s talk about the house…

An E/W Tennis court?  I believe N/S is preferred.

All that ATMing and a WHITE refrigerator and dishwasher?!?!?  THE HORROR!

The house may be a “quality” house but it’s gonna take a bucket load of money to rid it of it’s “cheeziness” such as the tile floors and other hodgepodgery.

I’m guessing it will go somewhere in the neighborhood of $2,500k and $3,000k.  It was already in escrow once before (so said the sign out front).

Who knows, maybe we’ll see some other “big spenders” soon enough.

sorry for rambling

Boy…tax liens out the wazzoo in 90004 and 90020 per foreclosure.com. Some big ‘uns too.

If these people make so much, the least they could do is pay their taxes.

I think there’s more to this listing than the “keeping up with the Joneses” story.  Without revealing details:  the owner is probably in her nineties.  I won’t post more than that, but I’m sure.  I’m a little surprised that no one questioned the abrupt change in behavior beginning around 2000.  Someone in their 80’s isn’t going to turn materialistic overnight.  It’s either elder abuse, mismanagement or serious illness.  Irvine Renter, I think your bias gets the best of you sometimes.

perhaps the owner liked to throw parties…

http://www.deadlinehollywooddaily.com/2008-emmy-events-parties-lounges/

So it isn’t Harry Dick? I heard he got a divorce from Ima.

Whoever it is probably recieved more money from the heloc than a reverse mortgage—just wait till some of those hit.

I am sure many recieved more than the home is worth now.

“2008 Emmy Events, Parties & Lounges

12 PM Celebrity Green Gifting Chateau (LA Confidential/Platform Media Group)
Harry Warner Private Estate, 501 S Rossmore Ave, Los Angeles”

At least that 80-year old woman was having a good time.

Reverse mortgages shouldn’t be a problem, I wouldn’t think.  They only come due when the owner dies (or moves permanently out of the house; IE, into an old folks home), not when the value of the house is below a certain level.  So they won’t flood the market at any one time like foreclosures are currently.

then the value should be adjusted to reflect the new value of those improvements

As a Georgist I’m all for aggressively taxing the site value, but taxing the fixed improvements is counter-productive and just plain dumb.

Actually TMK kids automatically inherit the Prop 13 valuation, no trust required.

RMs are like attaching a time bomb to a property, set to explode when the owner has to leave. They are great for resetting the Prop 13 valuation of the place, since they serve to suck all the equity out via compounding interest, requiring the estate to unload the property at whatever price it can get—the seller doesn’t care since the bank is going to get all the money.

Curly,

Putting aside any personal interest the story may have (nobody likes to see elder abuse, but of course, these elders with lots of assets seem for some reason to be especially prone to being abused—e.g., the Marshall saga) it really makes little difference whether what the motivation was for the cash out—it was a form of HELOC abuse that a rational banking system wouldn’t allow, and a decent property tax system would account for.  Somebody walked away with nearly $4 million dollars on which no income tax was paid, and a minimum of $1 million of that will be total write-off to society at large. 

I’m not quite sure what sort of ‘bias’ you are accusing Irvine Renter of—the facts in this case speak pretty loudly for themselves.

i know lots of people in Laguna and i could NEVER figure out what the hell they were all doing for a living to pay the monster prices for their houses on their tiny lots.

living off of the rents thrown off of real estate investments most likely. Every apartment building and 20-30% of the single-family housing stock has got an owner somewhere.

What would people here think of a State of California “cashout refi” tax?  Maybe make the cashout amount subject to property tax?

Jeez, I hope that kitchen is wired right! If you open the oven and the fridge, the doors will touch. I hope they’re both grounded the right way, lest shorts ensue, with a great display of sparkage and breaker blownage.

“This property was purchased in the early 70s for around $150,000.”

I shoulda bought it.

I’m a little confused about something, since I paid for my house quickly, only pausing to negogiate a lower interest rate.

The debt follows the owner, right? Not the house.
So when you “walk away” from that house, do you have to change your name. Or will you be followed and pressed until the debt is paid, barring bankruptcy?

Excuse my financial ignorance, it is appalling, breathtaking, I know. Luckily, I married the daughter of the Guiness World Records Book Winner-Worlds Cheapest Woman, and she is lookin’ like slipping right into Mom’s spot when (may the day be long, long delayed) the formidable MIL passes.

If a homeowner refis with a given appraisal, they are agreeing that is the value of the home, and they are benefiting from it.  It should definitely be the new appraised value for tax purposes.

The floorplan/kitchen was probably laid out when people had more domestic help.

How do you have a $3+ Mln home and a 27” CRT-TV anywhere in the home?

Just think how many of those reverse mortgages were durning the bubble years when the homes were worth a lot more. I know one in Alamo ( a friends mother) recieved a nice chuck I highly doubt the home is worth millions now even in Alamo.

It’s absolutely remarkable that this 5500 sq ft home sold in the early 70’s for about $150,000.
In 1978 I purchased in San Clemente for $105,000 a 4 yr old 1600 sq ft 3br/2.5ba condo with a nice ocean view but located about 2miles inland and the view was over rooftops at the same level as my ground floor. (condo had sold new for $70,000 in 1974). At the height of the market an identical unit with same view, significantly upgraded, sold for $680,000. Condo appreciated just under 7X from 1978 vs. 18X for the house (based on the 2006 refi of 2.7M).
Conclusion: The buyer of the Hancock Park home in early 70’s got an absolutely, positively bona fide STEAL. And it appreciated 2.5 times faster than San Clemente. Incredible!

In CA, a purchase money loan only has the house as the collateral.  The lender can’t come after you for anything.  They of course will ding your credit.

If you refinanced, you now have a recourse loan.

What happens if the bank modifies the loan? Is it still a nonrecourse loan?

That is an interesting question. I had not thought about it. In theory, it would be a refinance, and it should be recourse, but since it is a modification of the original non-recourse purchase-money loan, the loan should still be non-recourse. Hmmm… The lender would certainly want to make it recourse, and they may be able to impose that on the borrower as a condition of the loan mod. The lender may not care if it is backed by the government through the GSEs. If it is a portfolio loan, they will care a great deal.

With a refinance, it’s a recourse loan.  A smart one will sell to their wife or husband, so it will remain a non-recourse loan. Look on the bright side, at least the house debt is not 3X over the current value of the house as a non-recourse loan.  However, I think both types of loans will be eventually paid in part by the taxpayers.

Maybe this will make a few feel a bit better about the tax situation.

Generally speaking, the interest on a maximum of $1,000,000 of the first mortgage amount is eligible for mortgage interest deduction on income tax, and the interest on a maximum of $100,000 of the HELOC amount is eligible.

Since you’re venturing outside Irvine, how about a visit down to Ladera Ranch next weekend, to profile some of that 50% off action?

But it doesn’t matter.  Let’s say there were a whole bunch of reverse mortgages written in 2005 and 2006.  But a good number of those people will live for ten or twenty years.  They will be equally spread around, year after year.  Plus, even if they die now, they’ve only have three or four year’s worth of equity withdrawal; there may still be equity left in the house, if they choose the monthly payment option, as opposed to a lump sum payment.

I agree.  I’m flabbergasted that this house was only $150kish in 1970ish.  That’s $27 a square foot!  And this had to have been considered at least a semi-prime location even then.  It’s not like it was in, well, Riverside.

The reason why I ask the question, is because in an posting a couple of weeks ago, someone mentioned how the President was doing a disservice to many by encouraging people to refinance to a lower rate which would result in many people losing their housing “put” in the future (This is assuming that the market continues to fall which I think most of us agree will happen).

This got me thinking about all of the “help” that companies like Countrywide are providing so that they do not have to take the property back and write down their books. In most cases the “help” is an interest rate reduction or adding the missed payments onto the back of the mortgage.  If this “help” results in the loan being treated as a recourse loan and if most modifications result in future default, then there would be a negative incentive for people to accept a modification and should result in more people mailing their keys back to the bank as opposed to accepting a modification.

Here’s what you could get in 1980 just south of Hancock Park for $189,000.

http://www.redfin.com/CA/Los-Angeles/814-Lorraine-Blvd-90005/home/6917272

Smaller house (by about 40%), smaller lot (by at least half, if not more), more money-but a decade later.

The thieves part was a joke mixed in with some truth.  Obviously not all rich people are thieves but there are quite a few high profile cases that prove what I am saying ie Madoff and countless others.  I have “friends” that religously go to church on Sunday and on Monday try and figure out how they can cheat on their tax obligations without getting caught.  Jealous?  No, I would love to live here but being a stay at home Mom is more important to me than any materialistic item on earth.  We all have the right to choose our priorities.

Possible scenario:  middle aged women, long time marriage, husband dumps her for a younger model, she ends up with the house, can’t make much in the way of income, having been married for decades and a probably stay-at-home-mom (lots of those back in the 70’s) lives (fairly well) off the rising value of the property for a decade.  Now she’s going to have to go live with one of the kids, maybe, unless she used some of the HELOC money to buy herself a condo in Baja. 

The small kitchen is understandable—Harry Warner had a household staff, so he didn’t care if the kitchen was awkward or not. 

The neighborhood is a reminder of the days when houses were not jammed in together, 3’ from the lot lines.

“...being a stay at home Mom is more important to me than any materialistic item on earth.”

Right-on, mama!

The rich can be pretty touchy about their wealth.  I have an old friend who is worth low nine figures, and he likes to pretend he is just a regular guy with a mortgage.  If you bring up the fact that he is fabulously wealthy he gets upset.

The majority of RE agents I meet do own many other homes and rent them. One I know owns five homes in Laguna and I just met a new one and she owned 3 in Quail hill. They can find the best deals and rent them. So I totally agree with your statement.

My landlord also owns and apartment building.

This was the way to make money here in the OC—buy and rent. And now it will contract to some degree.

This is the right time for real estate investing

The house has obviously not been updated in a very long time, so maybe someone old lives there.  Maybe this person had no income, and lived off the house.

The owner didn’t throw parties.  We’re talking about LA, right?  Isn’t it possible/likely that the owner rented out the house for events?

If this person is now very old, and ready for a move to assisted living, is it really correct to condemn her use of HELOCs? 

She basically outlived the boom economy. If she had died at the peak of the market, the house would have changed hands at a price sufficient to cover the debt, and those who knew her would have eulogized her for her financial skills.