Irvine Housing Blog

> They quit paying in late 2007 or early 2008.
> They did not pay for more than 9 months.
> Recording Date: 06/06/2008,Notice of Default
> Recording Date: 01/08/2009,Notice of Sale
> property was taken back on 6/11/2009
> it has rotted in shadow inventory for 18 months

i should be desensitized, but i’m still amazed by all the nonsense that’s going on.

- 9 months owner’s squatting.
- 12 months from NOD to REO.
- 18 months sitting before it’s listed
- 39 months total so far and the house hasn’t even sold yet.

awesome song.

just played a particularly brutal back nine.

really hit the spot.

thx 4 that

Why is it assumed that the only source of a down payment would be from the closing of another home?  Do people save anything?  Counting on appreciation as the source of down payments is a dangerous situation.  Many markets throughout the US did not have the degree of appreciation where you could double the cost of your home with your down payment coming only from the sale of your previous home - to go from 200k - 400k, you’d need your 200k home to have appreciated 40%.

“...With no equity to pay the transaction costs of leaving, homeowners with less than 10% equity are effectively underwater…”

Agreed, and remember, this isn’t just a “move-up unlikely” issue; it’s also a “refi unlikely” issue.

Some of my friends were refinancing into 15 year loans fixed at 3.75% a couple of months ago (30 year rates were ~4%).  We have cash to cover our underwater portion, but you need to be prepared to spend even more to refinance.  Even if you’re looking at an FHA refi ~97% LTV, the appraisal process has been improved and is more conservative.  So you’ll need to bring even more cash to the closing to get to 97% LTV due to the conservative appraisal.

i.e. The underwater situation is worse than meets the eye for any homeowner wanting to refinance to take advantage of lower rates.

I’m actually surprised that home prices are in the 500’s because it’s the Irvine area.  I’ll surprised if it gets into the 400’s because a lot of homes in Oceanside are in the 400’s and the number of jobs are up in the OC area not North County SD.

Gotta love this ... from the LA Times (Good for the country, but Bad, Bad, BAD for The OC:
_____________________________________________

Tax deduction for mortgage interest could be on the chopping block

... “I don’t have a problem with it,” said Sterling Hyden, 51, an insurance agent in Corsicana, Texas.

... So for someone like Hyden, who is paying about $3,300 in interest this year on his mortgage, he would stand to get a tax credit of nearly $400, as opposed to nothing under the current system.

... Home prices in his town, about 50 miles south of Dallas, average less than $100,000, he said. With a mortgage of a little more than $60,000 on their ranch-style house, Hyden and his wife don’t pay nearly enough mortgage interest to benefit from the tax deduction.

... On the other hand, younger homeowners in wealthier areas are likely to feel the biggest pinch. Take Hyun K. Chung of Orange County.

... The 37-year-old occupational therapist has a mortgage of about $500,000 on her house, which she bought at the peak of the market in 2006. Her loan carried an interest rate of 6.4% last year, putting her interest payments at about $32,000.
__________________________________________________

I like this ... point out the disparity in the tax code where a little town in Texas is subsidizing Orange County.  LoL

Most of the country is subsidizing places like Orange County.

This is one sad, fugly house. I notice that the listing has no photo of the kitchen- it must be a fright.

I can see why people would pay the list for most of the Irvine homes you’ve featured, but I don’t see why anybody would give more than $300K for this sad place. Additionally, the HOA seems steep- is this an older development with deferred maintenance?

That $337 association payment is too high for me!

You write: “The actions taken by lenders, the Federal Reserve and our government to create an artificial bottom in house prices is going to drag this problem out for years.”

The cost to sustain the banks to create this false bottom has been enormous.

Tyler Durden in the linked article, US To End 2010 With $13.9 Trillion In Debt, Total Debt Incurred Since Great Financial Crash: $4.4 Trillion, says “This is in essence the cost to US taxpayers to keep the financial system solvent, as the US has become the biggest marginal leveraging actor in the world.”

There is a limit on all things, such debt leverage cannot be maintained.

The stimulus given to the small cap US companies, that is the Russell 2000, traded by the ETF IWM appears to have maxed out as it rose 0.4% manifesting three white soldiers, a reversal signal, to close at 78.48.

The global investment bubble was likely pricked December 17, 2010, when the European Leaders, as John Mauldin said kicked the can down the road, having failed to provide a comprehenensive solution to the European Sovereign Debt and Bank Debt Crisis.

Thus the current support level for real estate is going to give way soon.

But where is the bottom?

Debt deflation is the contraction and crisis that follows credit expansion.  One of the most famous quotations of Austrian economist Ludwig von Mises is from page 572 of Human Action: “There is no means of avoiding the final collapse of a boom brought about by credit expansion.  The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.”

Global Debt Deflation commenced on April 26, 2010, when the value shares failed to outperform the growth shares.

The Value Growth Yield Curve, RZV:RZG, steepened today December 20, 2010, as small cap value shares rose more than the small cap growth shares. The strong rise in the value-growth yield curve documents the demand for small cap value shares over the growth shares, and documents how investors are seeking a safe haven, if it be called that, in US based bank and revenue shares. It is also a measure of tension in carry trades, that is to say that carry trades are greatly wound up; when these release there will be a terrific deleveraging and fall in asset value of the small cap shares.

I expect debt deflation to get underway soon, and I believe real estate values in Orange County will be much like those in Detroit Michigan before it is all said and done.