Brandy
There's a port on a western bay
And it serves a hundred ships a day
Lonely sailors pass the time away
And talk about their homes
Brandy -- Looking Glass
Everyone sitting around talking about their homes. Sounds like every western port, doesn't it? Certainly the ones in California.
Today's property isn't a rollback yet, but it still has an interesting story to tell. The property is located in the land of kool aid and real estate zealots: Turtle Ridge. The property has been on the market just short of forever, but the seller still refuses to lower the price. Why is that? Does it have something to do with the amount of debt on the property?
Asking Price: $1,629,000
Income Requirement: $407,250
Downpayment Needed: $325,800
Purchase Price: $1,433,000
Purchase Date: 11/9/2004
Address: 24 Trumpet Vine, Irvine, CA 92603
First Mortgage $1,500,000
HELOC $200,000
Total Debt $1,700,000
Beds: 4
Baths: 3.5
Sq. Ft.: 3,046
$/Sq. Ft.: $535
Lot Size: -
Type: Single Family Residence
Style: Mediterranean
Year Built: 2004
Stories: Two Levels
View(s): Hills
Area: Turtle Ridge
County: Orange
MLS#: U7000774
Status: Active
On Redfin: 270 days
Unsold in 90+ days
From Redfin, "Ideal End of Cul-de-Sac Location. Taylor Woodrow Bontanica Plan 2 with Casita Garden Suite + Highly upgraded with Crown Moldings, Custom Built-ins. Private Courtyard. Rear yard with Grass, and Patio area with Built-in Grill. Desirable Guard Gated 'Summit Park'. Owner will consider Trade for Smaller Home in the Area. "
What do you make of the trade-down idea?
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I don't know how much of the $200,000 HELOC has been borrowed and spent, but I think we can make an educated guess. When an asking price doesn't drop after 9 months on the market, there must be a reason (other than foolish stubbornness.) If the seller gets her asking price and pays a 6% commission, she will be left with $1,531,260. The first mortgage is listed as conventional, so we can assume very little of the $1,500,000 has been paid down since August of 2006 when it was initiated (the first mortgage is a refi.) Therefore, if our seller has borrowed more than $35,000 on the $200,000 HELOC, she is looking at a short sale.
Quite honestly, I doubt she cares. This was a 100% financing deal from the outset, and she has already pulled over $67,000 out with the refinance on the first mortgage. Any of the HELOC she walks away with is a bonus. The bank will get to eat the rest.
Anybody want to estimate how much the bank will lose on this one?
This unit was originally offered by Taylor Woodrow for $950K in 2003, without upgrades as a brand new house. Assuming $50K for upgrades and $30K for the landscaping (for such a small yard), the first owner sold it for a profit of $400K within a year!
I believe the current owner bought into this home thinking she could make a profit based on the re-sale value of the Ledges. Ledges were building out, and finished re-sales homes were asking for $2MM.
Just came across a chart showing the actual value drops for San Diego California condominiums from 2005 to 2007.
This is a real eye opener! View at:
http://www.brokerforyou.com/brokerforyou
Oops, let’s try REALTOR ©
Brandy, sounds just fine.
I think the problem is that real estate is deliberately confusing so potential FBs feel overwhelmed. What happens when you’re overwhelmed? You trust someone who holds out their hand and says “Trust Me, I’m a Realtor #&169 “.
“Don’t worry, Real Estate ALWAYS goes up.“
“Don’t worry, you can always re-fi in two years or sell”
“Don’t worry, interest rates won’t go up too much”
“Buy now or you’ll be priced out of the market forever”
“Don’t worry your income will go up”.
Well, after being bombarded by “information” like that and the rest of the bubble psychology, what’s a potential FB to do? They want a nice place for their family and they’re a “Failure” if they don’t buy a house for their family.
Of course they sign. Once they decide to buy, all the power is out of their hands.
I think it’s supposed to be Market Ex-pert Wane, as in he’s an Ex- something, and his influence is Waning
Uh, on second thought, I should correct a misleading phrase:
“There’s a pattern behind this: Banks, brokers and agents closing both their eyes and holding their ears and nose…“
Sry, but English isn’t my native language, and it still takes a lot of concentration for me to make my points in an understandable way…
“Why punish them by restricting the types of loan products that can be offered?“
Why??? You’re joking, right? Because they are responsible for the worst financial crisis since S&L! This industry clearly showed it is unable to do reasonable business under the current laws. So it is absolutely necessary to regulate them more, not only to secure the customers, but also to prevent them creating another desaster in the future. They didn’t only harm themselves and their customers, but also their employees, investors, and the taxpayer, who will have to bail them out in order to prevent the credit crisis they triggered from putting the whole natioanl economy into a recession. That’s a bit too much. They will have to bear some consequences.
apropos investors: Y’all are very fast in pointing the finger at the borrowers, but what about the hedge fund managers and other gamblers who were so greedy for CDO’s that they demanded more and more of them? Their demand actually let the banks to lower the hurdles for mortgages? Don’t you think they bear a lot of responsibility for the catastrophe, too? This started the whole madness of wacky mortgages.
And don’t tell me it’s mainly or even solely the borrower who is responible. This would hold water if it’s been a minority of cases. But what we’re seeing is a widespread SOP of giving huge credits to people who could barely afford the interest under the very best circumstances. Remember the story of the two farm hand families who ‘bought’ a 700k house without any downpayment? That’s only the tip of the iceberg. There’s a pattern of banks, brokers and agents behind this, closing both their eyes and holding their ears and nose (yeah, must have looked funny), in order to close the deals that provided them with big salaries and provisions at that time. That’s not due dilligence, that’s criminal neglect. No amount of spin can turn those fraudsters into mere victims of the crisis. But some here act as if it’s all the borrowers fault. Pathetic.
Hehahahahaha.
But they would have to understand irony.
The borrowers, who want something, will simply refuse to understand. Handing them more pieces of paper will do nothing. I handed over thousands and thousands of pieces of paper. Not one in a thousand is interested in reading the pieces of paper.
If you handed them a piece of paper that said in huge bold letters YOU ARE A STUPID IDIOT SUCKER FOR TAKING OUT THIS LOAN, they’d sign anyway, if they wanted the house.
A reset a couple of years from now? Too long a time horizen to think about.
Hey, I don’t agree with MarketExpert, but leave him alone as to the screen name already.
We call that car centered look ?Welcome to My Garage!“.
I want your job!
Sensible points, Gray, but I disagree. The mortgage industry is already heavily regulated and it didn’t do much good. What’s more, there are many folks for whom exotic mortgage products make sense and should be available. The self employed, for example. Why punish them by restricting the types of loan products that can be offered? No, I blame the buyers. Who in their right mind enters into a million dollar transaction (likely the most significant transaction of their lives) without having a basic understanding of the finances involved? I mean, things like principal and interest are high school econ concepts. If there was actual fraud, the borrowers can sue the mortgage broker. Otherwise, buyer beware. Instead of bailing out a bunch of irresponsible borrowers, let’s invest that money in teaching the next generation of borrowers better financial skills. Now, don’t even get me started on public education reform…
“This legislation seems so patently unfair to those of us who chose to not assume a debt that we knew, long term we would be unable to manage.“
You have a point here. However, it shouldn’t be forgotten that there are many houseowners now facing foreclosure who simply got fooled into a financial adventure by greedy agents and brokers. They shouldn’t be bailed out, because this would only delay the necessary market correction, but they deserve some empathy. Not everyone is able to look through the tricks of real estate professionals to make a pig look like a fairy. Actually, apparently most people can’t.
What’s needed is another legislation, a bill to regulate the mortgage business, preventing the worst atrocities (especially regarding ARMs), and to make it much more transparent to potential homeowners to see the pros and cons of a deal. We read about the horrible resuls of an industry regulating itself every day now in the economics sections. It simply didn’t work, and laws preventing this from happening again would be at least one positive consequence from this disaster.
Yeah, it’s horrible. But I’m European, and I simply hate that ‘garage-focussed’ look, so other mileages may differ. However, this frontside plus the aestethic mess of the kitchen makes me think that this is the home of someone who has absolutely no taste and style. A millionaire would at least have hired a good architect and an interior designer, who would have prevented most of the atrocities. But this doesn’t look as if any of those professionals were involved at all. I’m really wondering what kind of guy would have built and/or bought such a house at all.
Yup, day trader may really be right. After all, there has to be something seriously wrong with the mind of people who are risking hundreds of thousands to make a hundred dollars, as the late stock pundit Andre Kostolany once said…
Troll, idiot, or girly man?
Want to disprove the statements of opinions on this blog? Then justify your arguments using logic and finance instead of kicking and screaming.
Isn’t this yet another reality check of the current market? It reminds me of a great movie, “The Matrix” and the difference between perception and reality. Too many sellers have opted for the “blue” pill, yet they will be see(th)ing red for some time.
I am an Irvine renter who has been looking at rental homes in both Irvine and Tustin lately. I looked at a house in hills above Tustin that was priced at $4,500 month or $1,700,000 if you wanted to buy it. What are these sellers thinking? The days of high priced housing is over only the sellers don’t know it yet. Today Fannie Mae and Freddie Mac the Prime lenders acknowledged a $10,000,000,000 loss. If prime paper is going bad at that rate lenders will not lend money to anyone buying these high priced properties unless the buyer puts 80% down!
For that idiot who thinks everyone on here is a deadbeat who can’t afford to buy a house, my bank balance is in excess of 500K and my income is above 250K. People like me using our own money are more cautious with it. All those people using other peoples money (OPM) were willing to pay any price to buy a house because they had nothing to loose. Now that a down payment is going to be required, things will change dramatically.
$450,000 in 2012 in inflation adjusted dollars.
Interesting chair in the office. I have never seen a chair like that. Does it have a specific purpose or is the tubing for aesthtics?
Regarding the market expert’s comment on the ridiculous comments: I have met up with some of the kool-aid drinking bloggers who “feed off each other and convince each other one day people will cut their prices in half”, and personally I found, without exception, their extreme intelligence to be intimidating.
And to the market expert himself, I spend much time here, and I would suggest that you could learn alot from the folks whom you are denigrating. If you are willing to put your money where your mouth is, whisper me on the Forums, and I will make a private bet with you.
Applying the rent multiple to arrive at the correct price of the dwelling produces interesting results.
Here in Chicago, it is typical for heat and all other utilities except electric to be included in the rent. Also, when you rent, your rent covers the taxes- a big item.
So, consider the maintenance and taxes on a condo comparable to your rental, and deduct those items from your rent to come up with the REAL rent, which is what you pay for the use of the property, a much lower figure.
Then figure 120X to 160X that figure (depending on the condition of the place), and you come up with a figure that is about half the ask price of the condos in any given area.
Same exercise on single family homes gives you a bigger discrepency. By applying this to the actual rent (rent after I deduct the cost of utilities that are included) you can figure that not only is it likely that we will see drops of 40% at least in major metros, but across the country in almost every other area.
Just going by the sales history
Sales History
Date Price Appreciation
11/09/2004 $1,433,000
We’ve seen 2004 rollbacks at the low end (though not at the high end yet), seems logical per the plankton theory of homebuying (ie. the first timers move up, then those people move up, etc.) that the high end ought to roll back to pre 2004 prices as well. How much past 2004 though, I don’t know.
A rose by any other name ...
““Jarvis, 34, refinanced her mortgage three times, most recently to invest in a car-repair business. She planned on refinancing that adjustable-rate mortgage before it reset.“
You have no idea how often this occurs in Orange County, the county of entrepreneurs. Why take out a business loan, which is much harder to get and at higher rates, when you can just tap your home equity? And hey, it’s tax deductible!!!
Nominee for post of the week. Reminds me of Tommy Boy dialog about guarantees on pieces of sh**.
The the homedebtor is owned, literally.
A day trader wouldn’t care about the market going up or down. They thrive on volatility, and actually volatility the last few years was historically low.
TRidge is like a beautiful sculpture made of feces…it looks nice but it is really made of crap.
If she’s lucky….under a bridge is more like it!
Screen names were an entire topic last week. Wayne proved my point that at least some people attempt to support their arguments in the selection of their screen names. Although “MarketExpert” isn’t subtle at all. Why not “Trust -Me-I-Know-More-Than-You-Wayne”? If you want to fool some people Wayne, try something less direct that might cause readers to lend more weight to your argument; e.g. “PHD from MIT in Econ Wayne.“
What’s a MarketExper? Or is it Market ExperWayne? Anyway, it goes to show you “ExperWayne’s” level of detail and expertise when he (apparently) can’t even get his screen name right (presuming he intends to flog himself off as a ‘Market Expert’)
Wayne, lots of us have very nice incomes and advanced degrees. Wanna know why we earn far more than do you? Because we’re smart and rational. And being smart and rational means we are not going to overpay into a hype. The SMART financial decision is to rent (which many do) or stay put in our little Irvine homes that we bought at reasonable prices.
I’d like to move up to a bigger place, but not at these prices and not into a sinking market. It would be neither smart nor rational. Why would I impoverish myself and my family to bail out someone else from their foolish decision? No thanks, I’ll just keep socking it into real investments until the bright rays of the market incinerate all the fools who overpaid.
Sorry you’re underwater, Wayne. But you made a bad decision and there are consequences. The music stopped and now you have no chair. But after you file for BK, you can rent one at Rent-A-Way. Want the number?
LOL!
That is where she is heading next.
No, I think you see the situation very clearly.
The first mortgage is a refi, and the second is a HELOC.
That listing is a good comparable. It shows just how far these prices have yet to fall.
It’s a newer, upscale hilly area (Irvine’s basically flat), below the 405 freeway and very close to Newport (yet still 6 or so miles from the coast.
Swing by Craigslist or OCHomeReview and take it look at what rental options are for a minimum of 4 bedrooms and max of $4500, $4000, or even $3500.
Now think what the rental equivalence price is when the rent isn’t $5000. Imagine, a minor downgrade in prestige but not functionality and equivalence for living cost is nearly $500,000.
At $4500, which give you the run of all but the tip top of the listings on Craigslist and rental equivalence is $720,000.
Cashflow investor? They’ll never touch it, but for giggles, it’s probably $550,000.
Speaking of rentals, IR, didn’t you profile the property in this one? http://orangecounty.craigslist.org/apa/484090265.html
I’ve never been there, so someone please tell me what is so special about this place (Turtle Ridge) that makes it go for an insane premium. $1mil will still buy you a nice custom in many desirable parts of socal, so why waste more on a tract home with no yard? Do they have Stanford quality schools around there? A massive population of fellatious women? Something else I’m missing?
“...if you could afford it which I am pretty sure you can’t…“
That’s a safe assumption, because at $1,6+ mil there aren’t many people who can afford it. IR’s stats place the income requirement at $400K+ and that’s with a downpayment of $300K+. So the percentage of households that can afford a home at this price is less than 1%.
160 is not a conserative rent multiplier for an SFR. It’s a rental par measure for an owner occupier.
Conservative rental cash flow will hit in the 8-10 annual rent or 100-120 monthly rent multiplier. A 10-12 or 120-140ish monthly rent is an aggressive rent multiplier.
But let’s examine it anyway. First you assumed rent will be 20% more than previously guessed, then you take the high aggressive rent multiplier of 160 and you still get a price that is 41% below asking price.
So you’re a neighbor? Really, though, based on any reasonable fundamental valuation method the place is far too overpriced. Just because the sticker shock has worn off on you doesn’t mean that its value is reasonable. What would this place rent for vs. what the interest on the loan would be a good place to start as a comparison. My guess is that you’ll find $750K a lot closer than $1.2 million.
“Owner will consider Trade for Smaller Home in the Area.“
Do apartments count?
A realtor with a good sense of humor would have had the IHB on those 4 computer screens!
They couldn’t sell it for $1.6 mil 9 months ago. The market has tanked since then. But I probably agree with the guy who said it would sell for $1.2 or $1.3 million today.
If it goes to $750K then that is $246 per foot. That sounds too cheap for Turtle Ridge. I will go ahead and pick a bottom of $300 to $350 per foot, putting it in the $910K to $1.07 million range for a bottom.
If it would rent for $6000 per month (a guess), then even using the 160 multiplier (which is a conservative measure) that gives you $960K.
I don’t think anyone in their right mind will spend over 1.5 million dollars for a 3000 sq foot house in Irvine. It’s not Newport, and even if it was, without an ocean view it’s still a bad buy.
I love it when people chastise you for behavior they engage in themselves. You apparently spend some of your valuable time reading comments on this blog as well “MarketExperWayne.“
I said it last week, but I really wish we could see financial statements of some extremely opinionated commenters. I believe the root of the expressed anger could be sourced very easily.
I dropped by this place during an open house back in the Spring. If I recall correctly, the seller was a (retired?) professional athlete. At least, there were a lot of memorabilia-type photos of him in football uniforms, etc around the house. (He was actually there, in the office, during the showing, so I’m sure the athelete in the photos was him.)
I know an agent who showed the property. The current seller is living way over his means. New exotic in the garage. Not a Day Trader - reeks of Multi Level scammer.
He is also claiming he is working directly with the lender to get a short sale but I wouldnt believe it for a second. Oh yeah, watch out for when he asks for a kick back.
This one will go to foreclosure.
From today’s WP:
http://www.washingtonpost.com/wp-dyn/content/article/2007/11/19/AR2007111901327_2.html?hpid=topnews&sub=AR
You’re gonna love this nonsense:
“Jarvis, 34, refinanced her mortgage three times, most recently to invest in a car-repair business. She planned on refinancing that adjustable-rate mortgage before it reset. But the real estate market soured. The value of her home dropped. Her business foundered. And her monthly payment jumped to $5,000 in August, from $3,600. Jarvis said she turned to her lender for help, provided all the documents
the lender requested and kept up with her payments as long as she could, even after the loan reset. But she never heard back from the lender. She has now missed two payments and may file for bankruptcy protection.“
This legislation seems so patently unfair to those of us who chose to not assume a debt that we knew, long term we would be unable to manage. Why exactly should my tax dollars go towards bailing these people out and in the process help prop up insane home prices that will make it impossible for me to afford a home myself? Am I missing something here?
It depends if they were purchase money loans or refi loans.
Don’t forget… this place is practically in Newport Beach. Just the air near there costs more!
I vote for $800k-$850k in 2010. $260-$280 sq ft sounds about right for TR, assuming median settles back to around $250 sq ft. This home is marginally (at best) better than the brand new Campanile in NP Square—- which is already in the low 8’s, or maybe cheaper by now, it’s been a couple months since I visited there….
amen brotha
at least a million I say :mrgreen:
What goes up…
I’ve seen a lot of asking prices cut by 30% already, and we’re just at the start of this whole mess. Would you care to remind me again who’s delusional? Anyone who would pay over $750k for a home like that is as retarded as the rest of the people who bought in that subdivision during the boom. If their stupidity and irresponsibility didn’t cause me financial burden it would be hilarious. It’s getting to the point where I want to punch some of these people in the face for what they’ve helped cause, and what they will likely get away with.
Naming yourself “MarketExpert” is almost as bad as naming yourself “Genius.“
Indeed. There are always the short ETFs too. SKF and SRS have been going crazy lately.
will this hurts her creidt score, i wonder how she can do that ?
I love it when the bitter homedebtors stop by…
This guy is teetering between anger and denial.
MarketExperWayne,
You are right, we are all pathetic dreamers who missed our one chance ever to own in Orange County. None of us make over $40,000 a year, so we need prices to cut in half so we can use our Option ARMS with 1% teaser rates to borrow 10 times our income and climb aboard the equity train.
BTW, when prices drop below $1M for houses like this, you won’t have the money to take us to Sizzler because you won’t have any equity left to tap your HELOC.
Give me a break 750, if you are going to comment be realistic. This home would sell in a day at anything above 1.2-1.3…even all of you, if you could afford it which I am pretty sure you can’t because you spend your time on a blog and don’t seem to do much else would buy it, if not to live in , at least for an investment as it is guaranteed to sell for at least 1.5 by 2009…please put that in writing somewhere on here. If this ever sells for under 1M I will send all of you daily bloggers a gift certificate to Sizzler for a big night out. Granted it is techinically Irvine and technically a tract home, but it lives more like Newport then most parts of Irvine. You can call me a bull, but to perpetuate idiocracy on this blog is ridiculous. Talk about drinking the kool-aid all of you daily bloggers feed off each other and convince each other one day people will cut their prices in half. Is there any way we can separate the intelligent comments by the ridiculous the site is becoming a laugh. Nanowest, Irvinerenter,.....every day a home goes up and they say, “that home is ugly I wouldn’t buy it for ........, I can’t believe the realtor took a picture with the lawn overgrown a week, look he forgot to add a comma…..“ peace out GOBBLE GOBBLE
Totally. I would have to start drinking in order to tolerate living in that place.
I was thinking day trader as well. Most people don’t need 4 monitors in a workstation, but traders do that frequently. Having the big $100 bill on the wall is appropriate in that context.
If she is a trader, then she should have cash where the lender can get to it.
If you can easily afford 750k with a 15 or 30 yr fixed rate mortgage, then I see no problem with buying a place like this.
Banks are stupid to lend this much money on this collateral. Appraisals abviously mean nothing.
In 18 months, we will be buying on the water in Newport Harbor for this price once again!
Thanks for the reply. Your info added perspective. Makes sense now. Couldn’t figure out where the 750K was coming from.
Looks like they started out close to that number in the first part of ‘03. Fast forward to the end of ‘03 and up 500K in price.
Wow, that seems unreal.
I’m pleased that for $1.6 mil you get a Rear yard with Grass. Chuckled when I saw how big it wasn’t. Honestly, is there enough room there for so much as a Slip ‘n Slide?
If this house ever sells for $750K, I’d like to buy it.
That all depends on whether they are comfortable with shorting and put options or not.
If this house rents for about $5,000 a month, the $750K price may not be far off.
Looks like a day trader or broker to me. The past couple of years have been very kind to them. The next 18 months will likely not be so nice. I hope they’re mostly in cash and unlevered. All boats lower with the tide.
Chuck Ponzi
Well.. back in January 2003, this home model / tract Botanica, model 2A 4/3.5 price was in the $800,000s in the beginning phases. By the end of 2003, the price was in the 1,300,000s near build-out.
If predictions are 2002 rollbacks then sub-800K looks like the magic number.
What do they mean by
“Owner will consider Trade for Smaller Home in the Area”
Otherwise, the house is nice. Are the comments that it will go for 750K in a few years sincere or are people just exaggerating?
I couldn’t really tell the difference.
Assuming the seller has anything to chase after…
Where is LM when you need him? If the first was a refi and the second a HELOC, I *think* those are recourse loans. If so, the bank could chase the seller for the difference.
I would say it is too expensive for 750K. It looks horrible.
My guess where the HELOC money is (without seeing thiers cars): Z Gallerie. 1.6M..??good luck.
Yeah, such a HUGE backyard for over a million and a half.
3000 sq ft for 1.6m? LOL!
Oops, they forgot to list the lot size. Looks like no room for a pool in the back.
I agree with a 750k price in a normal market.
Turtle ridge is reserved for the stupidest of the stupidest. This home is a tract home on a hill,,,,,,,750K
Is it just me or does this home/detached condo have very little curb appeal? For 1.6+ mil I would expect it to shout “hey! look at me!“ But this place is just fugly.
At least 500k.
Did you notice the frame blow-up of the hundred dollar bill in the office photo? Kind of tells you where these people priorities lay.
——-