Irvine Housing Blog

When is IR starting up Cartel Crusher LLC and where do I send my check

If the featured house sells for 750K, looks like it is back at 2005 level pricing (near peak bubble).  After reading all the posts yesterday, it sounded like many people have thrown in the towel waiting for lower prices.

I could hear a booming voice in my head saying the following…this is Irvine, prices will never go down, buy now or be priced out forever…followed by a long Jabba the Hut style laugh.  If this is true, I guess any future generations can forget about living in Irvine (haha).  When people convince themselves that the price of something can not go down no matter what the fundamentals, this is usually the tipping point.  I’m no buyer yet.

Amusing that you give that Corona house (4 beds, 3 baths, 3,333 sq ft) a value almost exactly the same as the price on the 1 bed, 1 bath, 822 sq ft Irvine condo you highlighted yesterday.

This is one of the more absurd post I’ve seen here.  Hedge funds were built to take down the banks, but they didn’t special thanks to AIG and the tax payer.

Man, I could think of a lot of cool stuff to do with $300,000 in cold cash! I’m going to Dizz Knee Land!

Seriously, is it still possible to go to the bank right now in SoCal and get HELOCs like this? 
And who’s coming with me?

What would your concern be with the ‘owner’ not paying you the way they had been not paying the bank?

If this sort of deal is profitable, then you’ll have other participants enter and bid up the prices.

I think things similar to this, minus the keeping the existing tenant in place are happening a lot in SoFla because prices have fallen so far.

I’ve looked at some condos in my parents hometown.  The ones I’m looking at today sold in the 200-250k range in 2006.  They were most likely apartment-to-condo conversions.  I saw one REO sale for $38k now listed for $90k, and some other more recent REO’s in the 40k-60k range. 

One listing at $70k sold for $275k in ‘06, not foreclosed yet…  It’s been on the market for 652 days!  Probably an unapproved short sale?  OK, scrap that unit.  Just sold at auction 3/10 for $55k, but not cleared off MLS yet.

It doesn’t take much rent to cover a $55k sale.

This is a mess though.  I see one unit on MLS for $67k.  Find a final judgement for FC announcing an auction 2/10/10.  Ownership hasn’t appeared to change though.  First Lis Pendens filed September 2008.  95% financing through Pinnacle financial, a part of Impac that went down in early ‘08.  Interest-only and prepayment penalty riders.

You’ll earn your 6% fee finding these, sorting through the details and winning the auctions.

‘Strategic’ Mortgage Defaults Reach 12%, Morgan Stanley Says
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aMJJORdylY6M

Who cares if it is called a bank or a hedge fund?
If it is too big to fail (aka future bailout) - what’s the difference?

If it talks like a duck
walks like a duck
lends like a duck
gets bailed out like a duck
what’s the difference?

Thought I was being smart by staying out of it when the bubble was inflating - boy, was I a chump! If I had it all over to do again - had my time machine turned back to the year 2000 - I’d buy and heloc the hell of the property and I’d be sitting now in a nice McMansion not having paid any rent for two years. Yes, a chump I was.

If there’s a way to profit from this Frankenstein monster the government has created, count me in.

Here one possibility you might have missed, IrvineRenter: Cartel Crusher is actually created by Big Bank to profit from both sides of the debacle. Shades of Goldman Sachs?

Residential Real Estate Investment Makes a Comeback

(April 29)—The number of buyers paying 100 percent of a home’s list price was up 50 percent in the first quarter for Manhattan real estate law firm Edward A. Mermelstein & Associates. The properties ranged from a $3.1 million multifamily investment on the Upper West Side to a $17 million Upper East Side town home.

In Berkeley, Calif., three out of four March deals landed by Ira Serkes at Pacific Union Real Estate were all cash buyers, largely from the area’s high-tech community.

And in Sunnyvale, Calif., Julie and Eric Ziemelis sold their triplex investment after only six days on the market to a buyer offering $30,000 more than the $799,000 asking price, because the buyer came to the table with 70 percent cash down.

A new survey says interest in residential real estate investment has more than tripled in the past year, thanks in part to record-low interest rates and home prices.

Residential real estate’s big spenders are back.

While some experts predict the full housing recovery is still nearly a generation away, a growing number of deep-pocket investors are buying as if happy days are already here again.

“Most people prefer to believe their leaders are just and fair even in the face of evidence to the contrary, because most people do not want to admit they do not have the courage to do anything about it.  Most propaganda is not designed to fool the critical thinker, but only to give moral cowards an excuse not to think at all”
-  Michael Rivero

awgee…that’s ASTUTE!

We see that quite often ourselves. It does take some courage to try to do something about a wrong that’s occurring…and much more courage to watch seemingly rational people cower when it all starts to hit. It doesn’t matter if it’s regarding a violent kid on a Little League baseball team who happens to also be the inept coaches’ son, or a Pope who looks the other way, or a Goldman exec with incentive issues.

Some of us do try to fight the good fight, however (such troublemakers we are!).

As with a previous article, assigning comp rents remains a very difficult and risky part of the math on these investment properties, such as the 4BR/3BR property in Corona above.

There are comps nearby advertising rents for $3200-3300/mo, but there are also comparable 4-BR properties in the same tract with more square footage than this property that are renting for $2500/mo:

1) http://www.postlets.com/rts/3564022

2) http://maps.google.com/maps/place?cid=16617555517934639324&gl=us&hl=en&cd=1&cad=src:pplink&ei=IdjZS5m4BISGyATBr_2aDg&sig2=BXJd-BvRa_z_2llUNhf_sg

Unless there are differences in the properties that I have been unable to discern, this is an enormous swing in potential rental income and it makes for an eye-popping swing in target sale price for a cashflow investor.

Unless I could buy this property so that it would cashflow at the $2,500/mo price range, I’d pass on it as too risky.

-Darth

It’s a foregone conclusion that Lenders’ losses have been and will be socialized. Creating more losses does not punish lenders as these losses will simply be passed onto the rest of us (taxpayers) in one way or another. As long as (1) the “mark to fantasy” accounting rule is intact and (2) banks are allowed to borrow at 0% from Benny Boy and make risk free profits buying Treasury at 3%, they will stay “solvent” even as more home debtors decide to strategically default on their loans.  It’s not a punishment. At best it will create a little more “inconvenience” for banks as it may take longer for them to “earn” their way back into solvency. Just look at Japan – the zombie banks laden with NPL can survive and even prosper for a long, long time if central bank and the gov’t conspire to make that happen.

The only hope for some real justice is a Pecora style prosecution of large banks for criminal conduct during housing bubble and its ensuing collapse, i.e., the GS civil trial may actually signify something more substantial to come. I am not going to hold my breath but hey, miracle does happen sometimes.

The sad truth is no matter how horrific banks’ transgression was during the great housing bubble, their existence is vital to our economy. If the Gov’t did not nationalize insolvent banks back in late 2008/early 2009 when the timing was perfect, fat chance they will do it anytime now or in near future.

Hedge Fund’s “short selling” on RE would not crush banks. If this does happen they will make a handsome profit at banks’ expense but banks’ loss will again be shared by all of us – renters, savers, the responsible.

I wonder about all the references to Japan in these comments. The Japanese are certainly an example of how insolvent banks can be propped up for decades by the policies of an enabling government.

That is true. Also true, yet not always acknowledged here, is that real estate prices in Japan declined for two decades under these conditions, with the average time on the market often approaching 18 months.

Play crack shack or mansion. It makes California’s Real Estate market look sane!

http://www.crackshackormansion.com/

Those that have tried to get a loan lately will likely get a kick out of this…

Part of rebuilding New Orleans caused residents often to be challenged with the task of tracing home titles back potentially hundreds of years.  With a community rich with history stretching back over two centuries, houses have been passed along through generations of family, sometimes making it quite difficult to establish ownership. Here’s a great letter an attorney wrote to the FHA on behalf of a client:

You have to love this lawyer….....

A New Orleans lawyer sought an FHA loan for a client. He was told the loan would be granted if he could prove satisfactory title to a parcel of property being offered as collateral. The title to the property dated back to 1803, which took the lawyer three months to track down. After sending the information to the FHA, he received the following reply.

(Actual reply from FHA):

“Upon review of your letter adjoining your client’s loan application, we note that the request is supported by an Abstract of Title. While we compliment the able manner in which you have prepared and presented the application, we must point out that you have only cleared title to the proposed collateral property back to 1803. Before final approval can be accorded, it will be necessary to clear the title back to its origin.” 

Annoyed, the lawyer responded as follows:

(Actual response):

“Your letter regarding title in Case No.189156 has been received. I note that you wish to have title extended further than the 206 years covered by the present application. I was unaware that any educated person in this country, particularly those working in the property area, would not know that Louisiana was purchased by the United States from France in 1803,  the year of origin identified in our application.  For the edification of uninformed FHA bureaucrats, the title to the land prior to U.S. ownership was obtained from France, which had acquired it by Right of Conquest from Spain. The land came into the possession of Spain by Right of Discovery made in the year 1492 by a sea captain named Christopher Columbus, who had been granted the privilege of seeking a new route to India by the Spanish monarch, Queen Isabella. The good Queen Isabella, being a pious woman and almost as careful about titles as the FHA, took the precaution of securing the blessing of the Pope before she sold her jewels to finance Columbus’s expedition.  Now the Pope, as I’m sure you may know, is the emissary of Jesus Christ, the Son

of God, and God, it is commonly accepted, created this world. Therefore, I believe it is safe to presume that God also made that part of the world called Louisiana . God, therefore, would be the owner of origin and His origins date back to before the beginning of time, the world as we know it, and the FHA. I hope you find God’s original claim to be satisfactory. Now, may we have our damn loan?”

The loan was immediately approved

NOTE: JUST WAIT UNTIL THE BUREAUCRATS START HANDLING HEALTH CARE-GOD HELP US ALL !!!!

I’m confused about mortgage ownership. Who is doing (or not doing) the foreclosing? If all the firsts were bundled into CDOs, are the mortgage docs now returning to the investors in the security? How would that work? What about grandpa’s pension fund?

Of is when BofA says they’re massively increasing foreclosures, that they are just acting as an agent for the security? Or do they have a bunch of their own loans that never made to the derivatives market?  Anyone know if and how the securities are being unwound?

Ernasty 

The hedge funds win, the buyers win, and the lenders lose.

Not exactly, the 30% of this nation who rents their home gets the shaft too, as they will remain priced out of the market.

The fools who bid up the home prices to unsustainable levels get to keep their homes and maintain unsustainable prices.

Maybe just letting market forces take it’s toll- AS SIMPLE AS IT SOUNDS- is the BEST alternative to correct this mess. No more decade long lending schemes, govt prop ups and band aids or new “ideas” are needed. Thank you.

Prices are going a lot lower and this gig is why.  In the game of investing, this is what is known as catching a knife.  Risk becomes concentrated like it is in this situation, it is generally a recipe for disaster. The bubble was created in the first place because of the leverage game that hedge funds were a part of. Maybe this one just deals with real estate, but should they need cash in other matters, housing is a very non-liquid security.  It appears the number of people that can pay the type of payments mentioned is going down, not up. So much of the last 20 years prosperity came from extraction of home equity.  I fully expect a sizable number of these partnerships to be liquidated in bankruptcy, throwing massive numbers of homes on the market.

Lots of great responses. I enjoyed reading this thread.

The next wave is coming and that is the commercial crash.  Fortunately there are still a few lenders out there who can help property owners who are having a hard time getting financing. 

We represent a private equity fund that is doing loans that most banks will not.  We also do commercial loan modifications (debt restructuring) SBA loans, medical and dental practice loans.  We also buy commercial short sale properties.

Let us know if you know anyone in need of commercial financing. 

http://QuickCloseCommercial.com