Pent-Up Supply

Many realtors like to blather on about pent-up demand. The reality is our market has an enormous amount of pent-up supply due to hit the market 6-12 months from now.

Asking Price: $5,400,000

Address: 21 Ridgeview, Irvine, CA 92603

Pent-Up House -- Sonny Rollins: jazz violin maiko live!

Despite the news headlines of a real estate bubble and economic termoil, many sellers believe their properties have appreciated since they paid peak prices. They are asking, "What Bubble?"

Denial comes in many flavors. One of the more interesting forms of denial is exhibited by those sellers who are completely oblivious to the price crash. Either these people are completely ignorant to what is happening, or they are willfully ignorant and believe the problems all around them do not apply to their property. If I had to guess, I would lean toward willful ignorance as the most likely explanation.

The market for mid- to high-end homes is like playing the lottery. There are very few sales occurring at these price points because people are no longer being given huge loans, and they will not be any time soon. With mortgage financing going back to qualifying people for amounts they can afford to pay back with their real income, the only sales at the high end are buyers with enough cash to close the deal. There are very few of these people relative to the number of sellers out there. The few lucky sellers are cashing in a lottery ticket funded by a knife catcher.

The 92603 Zip code shows the extreme dissonance between asking prices and selling prices in today's market. According to DataQuick, the median sales price in 92603 at the end of March was $638,000. According to Redfin, the median asking price is $2,190,000. Someone explain to me how that is supposed to work.

Let's employ a bit of logic here. Median sales prices reflect what people are paying in the market. Even with super-low interest rates and plenty of kool aid, buyers in this zip code are only bidding prices up to the low $600s. Buyers are not going to raise bids any time soon because that would require toxic financing which isn't going to be available, probably ever again. If buyers are unable to raise their bids, sellers must either lower their prices, or there will be no transactions. The extremely light transaction volume reflects this reality.

If there were no distressed sellers in the market, transaction volume could fall to near zero, and prices could stay artificially inflated indefinitely. The current asking prices in the market act like an informal cartel. With the huge incentive to cheat by lowering price to capture a knife catcher, prices would come down eventually, but it would be an agonizingly slow process. However, the reality in our market is that there are large numbers of distressed sellers whose properties will be on the market 6-12 months from now (See The Foreclosure Onslaught Continues for nice graphs). Prices will fall.

 

Now that all the foreclosure moratoria have been lifted, lenders have been sending out notices of default to all the people who defaulted over the last 6 months who were not entered into the process. Months ago, I wrote a satirical piece titled, Moritorium on Defaults Announced. The point of the writing was to demonstrate the absurdity of foreclosure moratoria. The problem isn't foreclosures, the problems is borrowers who default. Stopping foreclosures does not stop defaults; what is does do is create a backlog of foreclosures as people default and live in their houses rent free.

If you look at the flowchart above, many properties are at the notice of default stage. In 90 days, most of those borrowers will be given a notice of trustee sale. As soon as 21 days after that, the property may be scheduled for foreclosure auction. Then depending on the backlog of REO and the lenders staffing, these properties will be prepared for sale in the open market. From the time of the notice of default until the property is offered for sale in the open market takes 180 days or more. Since this process was restarted in earnest in April, look for the first of these REOs to hit the market in October.

When you think about it, the lenders really hurt themselves by delaying 6 months. The flood of REO to hit the market this fall and winter could have been arriving on the market today when there are more active buyers. Instead, the REO that should be hitting the market now is going to be added to the numbers due to hit this fall naturally. The result is going to be an enormous influx of supply just as demand is starting to wane due to the end of the prime selling season. Supply will overwhelm demand, and the mid- to high-end market will see a big leg down in pricing just as the low end did during the fall and winter of 2007-2008.

 

The ARM reset schedule has always shown a 2-year gap between the subprime wave of foreclosures and the second wave from the mid- to high-end foreclosures. The defaults from the second wave began early, and they have been exacerbated by the weak economy. This would have had the effect of shifting this wave forward in time and smoothing it out, but instead, the government and lenders embarked on a program of foreclosure moratoria that pent up this supply into another large wave.

Perhaps on a national level, the moratoria may have helped do some workouts and save a few marginal borrowers with conforming loans, but locally, our jumbo-dominated market with extremely leveraged borrowers is not eligible for these workouts. The ARM reset wave may have been lessened on a national level, but here in California, we will see the full brunt of the second wave of the foreclosure crisis.

Asking Price: $5,400,000

Income Requirement: $1,350,000

Downpayment Needed: $1,080,000

Monthly Equity Burn: $45,000

Purchase Price: $4,311,500

Purchase Date: 4/25/2006

Address: 21 Ridgeview, Irvine, CA 92603

Beds: 6
Baths: 6
Sq. Ft.: 6,070
$/Sq. Ft.: $890
Lot Size: 0.36 Acres
Property Type: Single Family Residence
Style: Other
Year Built: 2007
Stories: 2
View: Canyon, City Lights, Panoramic
County: Orange
MLS#: P683268
Source: SoCalMLS
Status: Active
On Redfin: 7 days

** One of the Best Location & Most Beautiful Estate in Turtle Ridge ** Magnificent Pano. View from City Lights to Shady Canyon ** Premium Pie Shape Lot at the end of Cul-de-Sac ** Every Espect of the Home has been Crafted with the Utmost Attemtion to Detail, Unique Material and Finest Workmanship Both Inside and out ** 6 BR 5.5 Baths + Library + Media RM & Bonus Room ** Extra Lrg. Formal Dining RM & Breakfast Nook * Gourmet Kitchen w Oversized Center Island, 2 Built-In Refrigerators & Wine Cooler.. & More ** Marble, Granite Hardwood Floor, Plantation Wood Shutters, and Custom Mirrors ..etc. ** Imported Drapes, Crown Moldings, Euro. Style Cabinetry, French Doors 4 Car Attached Garage w Epoxy Floor ** Luxuriou Resort Like Landscaping for Relaxed & Entertainment ** Fully Automatic Salt Water pool & Spa ** Oversized Gazebo, Outdoor Fireplace, Fire Pit ** Natural & Flag Stone Throughout the Yard ** MUST SEE ** Awards Wining Schools.

In English, we use this thing called a "period" to end sentences. The double asterisk only works in realtorspeak.

Why Is This In Title Case?

Pano. Do you think the writer did not know how to spell panoramic?

Espect? Luxuriou?

Utmost Attemtion to Detail? Where was the attention to proper spelling?

And this is a description for a $5,400,000 home...

One of the problems with cul-de-sac lots is the difficulty with orienting the front of the house to the street. This house might have a fantastic front elevation, but since it needed to be twisted to fit on the lot, the presentation from the street is of the side of the house with an ugly garage prominent to the visitor. Just what everyone wants in a $5,400,000 showpiece.

When I put the income and downpayment requirements, it was tongue-in-cheek because most buyers of properties over $2,000,000 pay cash. If you can truly afford a property that opulent, you don't need to borrow. However, during the bubble, lenders will willing to loan people multi-million dollar sums to purchase properties. Today's owner was one such borrower. 

This property was purchased on 4/25/2006 for $4,311,500. The owner used a $3,131,000 Option ARM first mortgage and a $1,180,500 downpayment. Can you imagine a $3,131,000 Option ARM? If WAMU was making loans like that, it is no wonder they collapsed. On 3/2/2007 this owner opened a $700,000 HELOC.

Of course, the financing data doesn't matter because this seller is going to make another $1,000,000 or so on the appreciation since the peak in mid-2006... Yeah, that is going to happen...

This seller is not alone in the dreams of post-bubble appreciation. I came across these properties that have also appreciated since the owners bought at the peak:

3141 Michelson Dr #501 Irvine, CA 92612

4 Windsong Irvine, CA 92614

161 Weathervane Irvine, CA 92603

77 Canal Irvine, CA 92620

6 Los Olivos Irvine, CA 92602

There are plenty of others. The uptick in sales activity is starting to bring out the organic sellers and their WTF asking prices. Everyone wants to hit the appreciation lottery. They better cash in their tickets this spring and summer.


Astute Observations

Astute Observation by Texas Triffid Ranch
2009-04-20 07:10 AM

Ever notice how “MUST SEE” in house listings is the equivalent of “L@@K!” on eBay?  In both cases, it screams “Yes, I know it’s a load of utter garbage, but I want to see if you’re crazy enough to take a look anyway.”

Astute Observation by awgee
2009-04-20 07:10 AM

“the median sales price in 92603 at the end of March was $638,000. According to Redfin, the median asking price is $2,190,000. Someone explain to me how that is supposed to work.”

Bwa-ha-ha-ha-ha-ha-ha-ha!
Bwa-ha-ha-ha-ha-ha-ha-ha!

This gives a whole new meaning to the phrase, “low ball offer.”

IR - Do you remember how many posters have insinuated I was foolish for wanting to and being ready to pay cash?

Waiting may be difficult, but it sure is profitable.

Astute Observation by IrvineRenter
2009-04-20 07:31 AM

“Do you remember how many posters have insinuated I was foolish for wanting to and being ready to pay cash?”

I sure do. They were the same people that said if prices dropped 10% that buyers would be everywhere picking up multiple properties (I have to wonder how many put their money where their mouth is and now own several underwater properties).

We have talked about increasing bid/ask spreads as being a sign of a declining market, but I never thought I would see such an extreme spread. Thirty percent is very high, three hundred percent is so large you can’t quite get your mind around it.

Astute Observation by Lee in Irvine
2009-04-20 08:46 AM

The spread between the bid and ask indicates just how distorted things are in the desirable parts of Orange County ... in particular 92603.

I’ve said in the past that real estate is starting to look attractive in a few locations, though none of them are in Orange County.  Reason being, we simply have too much (or will have too much) inventory that requires securtized money from Wall Street.  They’re not gonna do it anymore.  It’s just not gonna happen anytime in the near future.

We’re too gawd damn top heavy.  The word that comes to mind is calamity.  Everything is gonna get crushed down below.

Astute Observation by Lee in Irvine
2009-04-20 08:55 AM

One more point.

How are the banks gonna deal with these McMansion properties as more of them become REOs?  The banks know that borrowers (even prime borrowers) will face major hurdles getting the money necessary to buy.  There’s one answer, and we all know what it is.

The problems facing the banks are just catastrophic.  There’s no escape.

Astute Observation by AZDavidPhx
2009-04-20 09:15 AM

How are the banks gonna deal with these McMansion properties as more of them become REOs?

They are going to be a dime-a-dozen; granite countertops and all.

Astute Observation by MalibuRenter
2009-04-20 10:04 AM

The only thing helping the banks is that such homes weren’t more widespread.  Still, there will be a decent number of homes where losses are a million dollars each.  Given that stated income loans were advertised on properties up to $40 million, I think the largest loss on a single residence will be over $10 million.

Astute Observation by george8
2009-04-20 11:08 AM

>>million, I think the largest loss on a single residence will be over $10 million<<

Agreed. I do not know how many $30 million mortgage homes are out there. But the banks are going to lose easily over $10 million each on those REO.

Astute Observation by tazman
2009-04-22 12:33 PM

Irvine Renter, I normally agree with you, but I have to take umbrage with your statement that in “When I put the income and downpayment requirements, it was tongue-in-cheek because most buyers of properties over $2,000,000 pay cash.”  That is not true.  They ARE purchased by people with significantly higher down payment requirements.  When I worked at Citi (pimping loans through the Smith Barney distribution channel), we had a 30% down requirement for >$1m to $1.5 mil.  $1.5 mil to $2 mil was 35-40% depending on other factors.  Over $2 mil was a 50% down proposition, no exceptions.  There are people who are paying cash for these type of houses, but they are the exception, not the rule.  Think of Ed McMahon….

Astute Observation by Geotpf
2009-04-20 07:45 AM

Clearly, what is happening here is something along these lines: That zip code has houses selling for $500,000, $600,000, $700,000-and ones selling for $2 million, $3 million, $4 million, and only the first group is selling at all.  That is, nobody is paying $638k for a house listed at $2.19 million.  Nobody is paying anything at all for the $2.19 million dollar properties, because they ain’t selling, period.

Astute Observation by MalibuRenter
2009-04-20 08:36 AM

That sounds like an interesting challenge.  Find a home initially listed for 3X its final selling price. 

There are an assortment of homes selling for 2/3 or more off peak in Riverside, Merced, Sacramento,  and Palm Springs.  You could probably find a few individual listings which chased those markets all the way down.

Astute Observation by .
2009-04-20 08:37 AM

Not quite true.  According to dataquick, 6 SFRs sold in February (the March numbers aren’t on the website yet) for a a median price of $2,045,000.

Astute Observation by .
2009-04-20 08:49 AM

in February the median price for the 12 condos sold was $664,000.

The data in Irvine Realtor’s spreadsheet indicates that the median price for both SFRs & condos for March was $784,000.

Astute Observation by IrvineRenter
2009-04-20 09:10 AM

The 92603 zip code has always been pretty volatile. There are so few sales and the range of sales prices is so wide, that a few sales on one end of the spectrum or the other can cause wild swings in the reported median. Given the difficulty in obtaining jumbo financing, I would not expect the median to go far above the conforming limit any time soon.

Astute Observation by Geotpf
2009-04-20 09:16 AM

And here we go.  The condos are selling at a pace twice as fast as the houses, but there are more houses listed than condos.

Here’s Redfin’s current stats on the zip code:

http://www.redfin.com/zipcode/92603

Summary Data
  House   Condo Total
Total Homes for Sale 127 79 206
For Sale By Owner 1 3 4
Bank- & MLS-listed Foreclosures 2 3 5
Median List Price $2,195K $620K $1,275K
Median Sold Price*  $1,850K $520K $660K
Median List Price/Sq. Ft.  $590 $392 $486
Median Sold Price/Sq. Ft.*  $442 $336 $382
Median Days on Redfin*  77 96 93
% Homes with Price Reductions*  37.3%  51.1%  43.4% 
Median # Reductions*  2 2 2
Median Total % Reduction*  10.2%  7.5%  8.5% 
% Sale to List Price*  -  -  97.5% 

*Based on homes sold or taken off market in the last 90 days


Weirdly enough, those stats show houses selling faster than condos, although both are taking quite awhile (77 and 96 days respectively).  Redfin also counts a property as “sold” if it was merely taken off the market without a sale-dunno how that changes things.

Astute Observation by tonyE
2009-04-20 01:29 PM

92603 (my zip code) is volatile.  TRidge is included and those guys are simply in complete denial.  The rest of the zip code is older homes with quite a few attached homes.  Hence, you get the TRidge morons facing foreclosure (as the one you highlighted) and a ton of sales of attached homes.  Since they are not really considered condos they can get loans.

Astute Observation by MalibuRenter
2009-04-20 11:00 AM

How about this house which was offered for sale at more than 50% off, and didn’t sell at the foreclosure auction?

http://www.nctimes.com/articles/2009/04/20/business/z78833e3c672f2d568825759a006c9957.txt

Astute Observation by Chuck in Newport
2009-04-20 07:24 AM

Awgee, I think you have many companions on the sidelines who completely agree with your strategy - “as long as it takes” to get reasonable.  Initially, I was leery of being “priced out” but the more time passes, and the more we get to see of the shenanigans that banks, the Fed, etc. are playing with money, REOs, etc., the more content I am to sit and wait.  And with the WTF pricing going on, like with this profiled property, both in many parts of Irvine and for sure in Newport, I am more convinced than ever that the tsunami of lower prices is not too far away.  Low mortgage interest rates for me says, “just try and sell your house for a profit in 5 years when rates are 8 percent.”  It’s tempting to borrow at 4 percent, but you have to look at the whole picture.  It ain’t pretty (enough to buy), yet.

Astute Observation by Nick
2009-04-20 07:45 AM

I’m just curious about your logic here:

“The 92603 Zip code shows the extreme dissonance between asking prices and selling prices in today’s market. According to DataQuick, the median sales price in 92603 at the end of March was $638,000. According to Redfin, the median asking price is $2,190,000. Someone explain to me how that is supposed to work.

Let’s employ a bit of logic here. Median sales prices reflect what people are paying in the market. Even with super-low interest rates and plenty of kool aid, buyers in this zip code are only bidding prices up to the low $600s.”

Huh?

That’s the median price. That means that fully half the sales are above the low 600’s. You can’t say buyers in this zip code are only bidding prices up to the low 600’s when clearly a full 50% of them are paying mid-600’s or higher.

Now that’s a real long way from five million, so we’re all on the same page. But that logic is odd. Wouldn’t the more interesting statistic be the distribution or comps? At the very high end medians and averages are kind of useless, both to support or deny valuation. It would stand to reason that this house is like 2-3 standard deviations away from the mean for the area.

If I were looking at this one I’d just ask a much simpler question—has ANY house in the relevant area sold in the past 2-3 months for over $4-5 million. If the answer is no, well there you go. If so, then how do those properties compare with this one in terms of size and location.

By definition medians have only so much value in assessing extreme outliers. By the same logic I’d just as happily shoot down the errant crappy garden apartment complex condo owner in this zip code living in an off-ramp and claiming that a mid 600’s median makes their worthless condo incredibly valuable. Median prices describe median properties.

Astute Observation by IrvineRenter
2009-04-20 08:04 AM

The median certainly has limitations for measuring market activity. The point of the post was not to extoll the virtues of using the median. Half the people are paying more than the median, and half are paying less. The median is a good measure of what people are paying in a market even though it is bad at measuring what they get for their money.

In a healthy real estate market, the median listing price and the median sales price are usually close together (asking prices are usually about 10% higher). When you look at 92603, there are so many outliers in the over million dollar range that they cease to be outliers and actually begin to define the median. Whenever the asking prices and the sales prices (which reflect actual bids) start to diverge, the market is in trouble. When they diverge as much as 92603, the market is facing an apocalypse.

Astute Observation by NIck
2009-04-20 08:56 AM

That makes sense. The divergence between median ask and median sale is truly breathtaking in its magnitude and does define some sort of fundamental disconnect here.

But I’ve been paying alot of attention to another unrelated market on the east coast, and it’s interesting to see the relationship of asking prices to sales.

The difference between median ask to median sale is astronomical too. But the average difference between the asking price FOR HOUSES THAT ACTUALLY SOLD and the final sales price is a roughly standard 10% or so. Suggesting a bifurcated market, where some people are actually trying to sell houses, and some people are just throwing out WTF asking prices.

And never the twain shall meet. It’s almost like the available inventory is a subset of the listed inventory, where people aren’t insane. I’d imagine Irvine has some similar attributes.

Astute Observation by IrvineRenter
2009-04-20 09:08 AM

Yes, we see the split you describe in the REO versus organic listings. The REO is priced near recent comps, and they do sell. The organic listings are still living in bubble land, and they sit on the market forever. It is the plethora of organic listings with WTF prices in 92603 that is causing the median asking price to be so high.

Astute Observation by tryingtobuy
2009-04-20 09:52 AM

IR in addition the realtors game the system in regards to listing and actual sold. I have seen this on numerous occasions in different forms.

A house will list for a WTF price, go off the market for a couple months, come back on much lower and finally sell. Then the second listing is recorded as the % difference from asking.

I have seen a TR house listed at $2.1 forever, sell at auction to pro’s for $1.37, put back on the market for $1.639 and sell immediately. It is then recorded as sold 100% of asking. WTF !!

Astute Observation by IrvineRenter
2009-04-20 01:20 PM

Yes, I do not even pay attention to that statistic. It is a bullshit negotiating ploy they use with buyers. If a listing agent can convince a buyer they need to bid 97% of ask when in reality the seller would accept 90%, the seller is happy with the agent, and the buyer doesn’t know any different. This is a key statistic for agents to manipulate for that reason. Plus, it makes the market look healthier than it is.

Astute Observation by Geotpf
2009-04-20 08:07 AM

There’s no excuse for the bad alignment of this house to the street.  The builder had plenty of room to play with, as there is a lot of open spaces here that could be manipulated.  Even if not, the house could have been rotated on the existing lot so it didn’t look so stupid.  Maybe they were trying to get a certain view out of a certain window, which required the existing alignment.  But I can’t imagine the view is that narrow that the house couldn’t be rotated 45 degrees or so so it was aligned with the end of the cul-de-sac.

Astute Observation by Pwned
2009-04-20 08:09 AM

I see denial everywhere. Friends telling me they’re going to sell now and buy a much bigger house because they can save so much with the low interest rates. I tell them to sell asap if they can, then wait and save that money and more on principle in a year or two. But I think you’re right about this summer being the last chance. If you’re at all close to underwater now and you haven’t sold by this fall, you’re stuck. It’s too late now really, but in six months we’re in for some serious pain in the RE markets.

Astute Observation by AZDavidPhx
2009-04-20 08:09 AM

At first I was willing to believe that perhaps English was not the listing agent’s primary language - but she doesn’t appear to be inept at writing about herself on her website.

Is it just me or does this thing read like some porn flyer that you would be handed on the Las Vegas strip?

————————————————————————-
My Client-First Philosophy
There are many qualities and skills that go into being an excellent real estate professional - integrity, in-depth community and market knowledge, marketing savvy, effective negotiation skills and a high-quality professional network, all of which are hallmarks of how I work.

That said, in my experience as a Tustin real estate professional, I’ve also found that providing the very best service is essentially about putting my clients first. This means keeping myself accessible, being a good listener as well as a good communicator, and responding quickly to your needs.

This “client first” philosophy has always been my approach and it requires me to continually improve my skills and ways of doing business. In addition, I’ve found that the latest technologies are enabling me to do everything I’ve always done, only much more quickly and efficiently. They’ve also helped me to extend the range of services I provide to my clients.

So when you decide that you’d like to buy or sell a home in the Tustin areas, please contact me.
————————————————————————-

Perhaps she has not been introduced to the latest spell-checking technology, thus not enabling her to do everything that she has always done, only much more quickly and efficiently.

Astute Observation by Alan
2009-04-20 10:21 AM

“... ** MUST SEE ** Awards Wining Schools.”

I hope the writer did not go to school in this area.

Astute Observation by .
2009-04-20 10:31 AM

As someone who went to an award winning schools, I can assure you that verb/subject agreement NS teaching the difference between plural and sigular nouns took a back seat to physics and advanced calculus.

Don’t worry, biochemical engineers make much more money than newspaper editors.

Astute Observation by beerdude
2009-04-20 10:35 AM

Something about that quote struck me as odd, considering how terrible the MLS write-up was. 

Well, I just Googled a couple of lines from that little speech and got back over 37,000 - yes thirty-seven THOUSAND hits from realtards (agents and companies) that are using the smae line.

Nice plagarism Ms. Chen!!

Astute Observation by Jennifer
2009-04-20 02:59 PM

So help me, beerdude is right. There are real-estate agents all over the country copy and pasting as we speak.

But boy, I’d love that pool and driveway. And the landscaping!

Still, how does one come to own a 5 million dollar house and still decorate with sleigh beds?

Astute Observation by Blueberry Pie
2009-04-20 01:10 PM

She was probably in a hurry because she had 40 or 50 multi-million dollar homes that she needed to list that day.

Astute Observation by IrvineRenter
2009-04-20 01:21 PM

LOL! That comment is funny on many levels…

Astute Observation by Geotpf
2009-04-20 02:54 PM

Why are so many MLS entries so sloppy?  If it’s not typos and misspellings, it’s one photo (or none), and incorrect information (number of beds or baths wrong, square footage wrong).  It probably takes MAYBE an hour to take eight photos or so, look up the permits on the city’s website, count the beds and baths, type up a nice paragraph and run it through spell check, and make sure the listed square footage is at least in the correct ballpark.  I don’t care if it’s an REO and you are getting half the standard commision-it’s an hour’s worth of work, people.  Geez.

Astute Observation by Blueberry Pie
2009-04-20 03:46 PM

I’m a fan of the listings that include about 3 pictures (all fuzzy as if taken from a camera phone), 2 of them from the front of the house from slightly different angles and the third a photo of the toilet.

Here’s an example (all though not quite as bad as my description): http://ventura.craigslist.org/reb/1100043538.html

Astute Observation by IrvineRenter
2009-04-20 04:41 PM

“Why are so many MLS entries so sloppy?”

This amazes me too. The internet, and MLS listing sites like Redfin in particular, are THE method for getting real estate information now. If you are not putting your best presentation here, you are missing presenting to buyers. These same realtors probably waste tens of thousands of dollars every year on glossy brochures that few read and yet they ignore the internet where all the buyers begin their search. The only explanation I can see is that these people are still living 20 years in the past, and they missed the entire internet revolution.

Astute Observation by Geotpf
2009-04-21 07:30 AM

Even people who get all their info through their agent see these things.  Every time I went to my agent, he’d give me a bunch of print outs off the MLS (of course, many were ones I’ve already seen on Redfin).  A little old lady who has never touched a computer will still see all the misspellings and incorrect information due to this.

Astute Observation by Lee in Irvine
2009-04-20 08:27 AM

More proof that Wall Street is not about to start lending the money necessary to accommodate purchases like the one needed for the WTF asking price above.

The Jig is up ...

NEW YORK (MarketWatch)—Bank of America Corp. said Monday net profit more than tripled in the first quarter, but investors sold off the shares as they realized that much of the profit came from special gains, and that traditional banking business continued to suffer from tight credit and a weakening economy.

I guess most traders realize that the days of the gov’t loaning BAC money at 0%, then subsidizing conforming mortgages, is an unsustainable economic model, and will end very ugly.  The credit markets are deteriorating, not improving.  And this game of gov’t bailouts and subsidies is nothing more than a ripoff of future generations.

Reminds me of the lost decade.

JMHO ~ The equity and debt markets are gonna get hammered this summer.

Astute Observation by MalibuRenter
2009-04-20 08:46 AM

I am also expecting a large decline in equities, probably to under Dow 6000.

Astute Observation by Chuck in Newport
2009-04-20 08:42 AM

As for the “alignment” of the house…there are many reasons for the orientation of a house on a lot, but one of the most important reasons, for sustainable building, is for passive heating and cooling maximization.  I think a smart builder would orient the house to gain the most natural advantage for heating/cooling, and care very little about how the house looks from the street.  After all, it’s a shelter, not a postcard picture.  IMO, sustainability is our future, and gone should be the days of making houses “look” perfect from the street.  Having said that, I doubt that the builder here oriented the house for the most passive solar gain and passive cooling.  It’s a McMansion, and those that build such monstrosities are rarely, if ever, concerned about the environment.  Hopefully that will change.

Astute Observation by Geotpf
2009-04-20 08:49 AM

Well, there is such a thing as “curb appeal”.  This house is lacking in said department, which will probably hurt in final sales price and/or time to sell.

Astute Observation by OCRefugee
2009-04-20 09:28 AM

I think that most home buyers, are not “concerned about the environment” when it comes down to their wallet, at least from the point that they won’t pay extra for a home if it does not look good, and if it costs more for for environmentally friendly features, however defined.

It should readily pay itself back in a timeframe they can understand.  That is in reduced heating and cooling costs that they could see on a monthy basis when they pay their electric and gas bills.

And honestly, most homebuyers searching for a home that are truly concerned about the environment, are not buying in the suburbs like Irvine, they’re in a city or some other denser location, in condo or apartment.  Suburban buyers are mostly families that have energy consuming lives, and jobs with commutes and kids with activities that require chauffering around.

And they do buy a house for looks, not necesarily “postcard” quality, but something to be proud of when they pull into the driveway after work, or when family and friends come over.

Astute Observation by Chuck in Newport
2009-04-20 09:37 AM

I don’t agree.  I have a family, I live in Newport, and I want to build a “green” house.  Maybe there are more people that are “proud” of how their house looks when comparing them to the McMansions, but I for one care much less about looks than performance.  Of course I want it to look “nice” but I think you can have both.  And I hate dense living.  I don’t think most people who are concerned about the environment live in apartments.  How can you live “green” in an apt.?  How do you save rainwater to water your (non-existent) plants/garden?  How do you add solar panels to your apt.?  How do you do anything at all to make a house environmentally sustainable, except for maybe bamboo flooring?  There are some things that can be done inside, but not much when compared to building a green house.  First and foremost you need SPACE, which is not possible in the inner city.

Astute Observation by Geotpf
2009-04-20 09:56 AM

But it uses a lot more resources to build a house (and to heat it, cool it, water the plants, etc.) than a smaller apartment.  Apartment dwellers use less electricity, water, etc. than people who live in houses, especially large houses.  Plus, public transportation works in dense cities and, frankly, doesn’t, in suburbs.

The carbon footprint of an urban apartment dweller will be significantly lower than that of a suburban home owner.

Astute Observation by Nancy
2009-04-20 09:57 AM

You don’t think most people who are concerned about the environment live in apartments? Chuck, I think you’ve got it backwards.

Living in an apartment is the most environmentally responsible living style possible. Each apartment-dweller takes up very little ground space, leaving more land unpaved and in its natural state. Sharing walls makes the apartment more energy-efficient, because it retains heat or coolness better. People who live in dense areas tend to drive less, walk more, and use public transportation more. They need less land paved for roadways, because far more people live on each street.

When I lived in an apartment, I did not even own a car, and my utility bills were minimal.

No matter how many “green” features you incorporate into a detached home with a yard, you’re bound to take a larger per capita toll on the environment than the average Manhattanite does.

Astute Observation by Chuck in Newport
2009-04-20 10:11 AM

I’m not disputing that living like bees in a hive, ready to kill each other if one more stereo blares late at night…is the most economical and has the smallest carbon footprint.  That would be silly.An apartment easily uses less power, etc. than a SFH.  What I said was that the eco-friendly person wanting an eco-friendly dwelling for a family does not go to an apartment.  People live in apartments not BECAUSE they are “green.”  They generally don’t have the $$ to live in a SFH.  For those people, like me, that believe that you can build a house that uses zero energy from the grid, and indeed give back to the grid…we need space.  We can’t do that in an apartment.

Astute Observation by OCRefugee
2009-04-20 10:36 AM

I never realized that I lived in a ‘hive’, my current condo neighbors are quiet, as have almost all of my apartment neighbors over the course of 20 years of apartment living have been, sometimes afer I’ve politely pointed the noise they were making.

But then again, I’ve never lived in the ‘inner city’ or a ‘monstrosity’ of a ‘mcmansion’, and once I got into my 30s, I always had the ‘$$$ to live in a SFH’, It didn’t make sense for me as one person to do so, burning all that extra energy to heat, light & cool the rooms I wasn’t in at that moment.

You seem to have lot of disdain for anyone who’s living arrangement is not similar to your own.

Astute Observation by Chuck in Newport
2009-04-20 10:41 AM

Hardly,  You misread me and I would hope could give the beneft of the doubt to people.  Can’t we all just relax?  I have lived in nice and crappy apartments over my years here on planet earth.  I have no disdain for the PEOPLE who live in them.  I have disdain for the difficulty that such close living can (and has, in my experience) create.

Astute Observation by OCRefugee
2009-04-20 09:59 AM

You’re correct about space in an apartment, and also, all apartments are not in the inner city.  But if you live in an apartment, the common walls with the adjoining apartments don’t leak heating or cooling, if it’s a multlevel, same for the ceilings and floors.  You get the benefit of insulation from the other similarly “temperatured” dwellings that immediately adjoin you.

As for saving rainwater, in Southern californa where rain is sparse, is there really enough rainwater to capture to use? Wouldn’t just using less water accomplish more, I’m not being silly and suggesting foregoing bathing and clean dishes, but perhaps recirculating gray water for the toilet, or using gray water with the soap settled out for watering the lawn and garden might provide much more of a return on time and money than rainwater.  And I realize these suggestions are Southern California specific based upon the climate and precipitation level.

As for adding solar panels, these things just don’t pay for themselves in any forseeable timeframe.

I lived in Newport for 10 years and it has a climate (like most of the Southern California coast) that you can get away with little heating and cooling.  The weather is usually very pleasant year round winter and summer. I never had air conditioning and never missed it, I ran the heat very minimally in the winter to keep the chill off.  Trying to cut your (minimal) energy use here is like the skinny person trying to lose the last 5 lbs, give up and declare victory and enjoy life.

Astute Observation by Chuck in Newport
2009-04-20 10:38 AM

I completely disagree that because one is in So. Cal. coastal they can skip trying to do better on energy use.  Gray water usage is entirely possible but not w/o some needed fine tuning.  Solar panels are used to heat water, charge electric cars, power PCs, hairdryers, etc. etc. and not just heating the chill out of the air.  If everyone in areas like So. Cal. tried harder (solar panels, CAN pay for themselves w/in 5 years, and then give you free electricity for quite some time), the difference would be astounding.  I’m not suggesting that everyone build an earthship (see www.earthship.net for a truly self-sustaining house model), but I hope everyone has a better attitude than “we’re in sunny So. Cal. and enjoying the mild climate and our McMansions, thank you very much.”

Astute Observation by Laura Louzader
2009-04-20 07:18 PM

I applaud your efforts to live “green”.

However, I respectfully differ with you on the matter of the environmental virtues of low-density vs high density living.

Sorry, but high density living is a much lighter load on the environment.

If the apt and condo dwellers of NYC or Chicago’s lakefront were to be dispersed into SF homes, their carbon footprints would be multiplied 7X.

For one thing, the 42 households under my roof require much less pipe, street pavement and cabling than if they were in 42 buildings on 42 quarter-acre lots. The negative environmental impact only increases with larger lots and lower density, for that means much more road pavement, electrical and communications cabling, and water and sewer pipe to serve that many fewer households. We share one small lawn (the courtyard), and commons walls help to greatly reduce the heating/cooling load per unit.

We use far less water per household watering the lawn, far less gas heating our units, and since we are in a high density neighborhood with almost no parking but proximity to 24/l7 public transit, only 30% own autos, and most of us live withing 10 miles of our work sites.

Our building, being a multi-family over 18 units, is required to have its trash recycled, which SF home owners are not. We also pay for our own trash pickup, which the city provides for SF homeowners at the taxpayers’ expense.

Oh, did I mention that our building is taxed as a commercial building, which means that it pays property taxes that are 3X the rate that SF homeowners pay?

A geothermal heating system will pay back much more quickly for a building like this because the breakdown per unit is so much more favorable than for a SF house.
SF home ownership is “green” only if you’re farming your yard.

Astute Observation by MalibuRenter
2009-04-20 07:53 PM

Have you read “The High Cost of Free Parking”?

Astute Observation by MalibuRenter
2009-04-20 08:44 AM

I find “high end” homes like this one really instructive.  http://www.redfin.com/CA/Malibu/26264-Fairside-Rd-90265/home/6854378

Sold for $1.6 million at the peak.
26264 Fairside Rd
Malibu, CA 90265
Price: $549,900
Beds:  4
Baths:  3
Sq. Ft.:  1,700
$/Sq. Ft.: $323
Lot Size:  5,449 Sq. Ft. 
Property Type: Single Family Residence
Style: Traditional
Year Built: 1980
Stories: 3+
View: Mountain
County: Los Angeles
MLS#:  F1795429
Source: SoCalMLS
Status: Active
On Redfin: 97 days

Yes, it has gone from $1.6 million to well within conforming limits in almost exactly two years.  Guess what? STILL not selling.

Astute Observation by Geotpf
2009-04-20 09:06 AM

Well, it’s a fixer, and the listing says that they won’t even do a termite inspection/mediation, so I suspect it’s in horrible shape inside.  Now, the question is, was it in horrible shape on Feb 07, 2007 when it sold for $1.6 million?

I’m actually suspecting fraud here.  It sold for $350,000 on Jan 03, 2005 and $1.6 million on Feb 07, 2007?  Now, the market was crazy back then, but it wasn’t THAT crazy.

Astute Observation by MalibuRenter
2009-04-20 09:23 AM

I saw this house before it was foreclosed.  It was oddly laid out.  I had the feeling there was unpermitted modification.  It appeared structurally sound.

Astute Observation by AZDavidPhx
2009-04-20 09:12 AM

Ouch.  Well if you are going to be a bag holder, you might as well do it right.

Astute Observation by MalibuRenter
2009-04-20 09:25 AM

One other note.  In 2007, you couldn’t get a vacant lot with road frontage, water, and building permits for $550k.

Astute Observation by AZDavidPhx
2009-04-20 09:01 AM

[California]State unemployment rate highest since 1941
Saturday, April 18, 2009

(04-17) 12:06 PDT SAN FRANCISCO—The state unemployment rate soared to 11.2 percent in March, the highest since before World War II.

California’s higher rate of job loss is primarily the result of greater exposure to the housing downturn,” said Stephen Levy.

—————————————-
AZDavixPhx:
Wrong, Stephen.  The housing “downturn” is a “correction” - the solution to the problem.  The problem is the debt that Californians are taking on and not able to pay back. 

How are these companies supposed to make a profit when they keep having to increase salaries of the workers due to artificially inflated costs of living? 

It’s common sense that when these companies start to feel the pinch, they are going to stop the bleeding where it is most profuse and CA is consuming all the cash with its 100K minimum wage.
—————————————-

State figures show that employers cut 62,100 jobs last month. Since March 2008 the state has lost 637,400 jobs.

—————————————-
AZDavixPhx:
I wonder why…...
—————————————-

Meanwhile, record numbers of Californians struggle to find work in the toughest job market of their lives.

This is the first time I’ve been out of work for seven months,” said Phillip House, a 46-year-old San Francisco native who can’t find openings or land interviews in his chosen field of accounting.

—————————————-
AZDavixPhx:
Phillip - It’s because they don’t want to hire employees in areas where the cost of living is ridiculously out of whack compared to the rest of the country….
—————————————-

“I’m at the point where I’ll do any job that’s legal, moral and ethical,” he said.

—————————————-
AZDavixPhx:
Head for the hills….CA is not going to be a fun place to find work in for awhile.
—————————————-

Astute Observation by AZDavidPhx
2009-04-20 09:04 AM

AZ“Davix”Phx, there’s a new one.

Original article:

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2009/04/18/MNPQ174BVL.DTL

Astute Observation by Lee in Irvine
2009-04-20 09:23 AM

Great David ... I guess this really means California is royally *ucked.  Wouldn’t you say?

The good news is the state is run by a bunch of Utopian perma-idiots, and they’ve got the right idea ... raise taxes and fees ... let’s make it easier for them leave.

Astute Observation by AZDavidPhx
2009-04-20 10:50 AM

Makes perfect sense to me….

What gets me is how all these people fail to see the elephant sitting on the living room couch which is: people taking on debt that they cannot/will-not pay back.

Even if you “earn” 100K per year - there is no way that you are going to pay off a 1 million dollar loan based upon your income.  Nobody ever factors-in such nonsense. 

It’s a huge shell game of willful ignorance between all of the parties involved from the lender, to the sales agent, to the seller, to the buyer.

These writers get up there and spin that CA is the victim of some abstract thing called a “housing downturn” rather than “spending burnout”.  Hello? Hello?

Astute Observation by CA
2009-04-20 09:15 AM

From the Redfin link near the bottom;

92603 median household income = $139,930

3X = $419,790

This house / 92603 median income ratio = 38.6.
(But the current debtors of this house are probably on the high side of the median income figure.)

I live in 92603 (rent of course).  We walked around the walking path along Boomer and this neighborhood yesterday.  This does not “feel” like a million dollar neighborhood, for whatever impressions are worth.  There are lots of expensive cars and the homes are nice, but no way these houses are worth > $1.5MM.  Also, this entire area is dominated by traffic roar from Hwy 73 and Boomer as vehicles climb the hill.  The polycarbonate sound panels around the neighborhoods in this area are not weathering well with the blowing sand and dirt.

Astute Observation by MalibuRenter
2009-04-20 10:13 AM

At its peak in 2006, the average home sale in Malibu was 34 times median household income.

Astute Observation by Anthony
2009-04-20 09:19 AM

With all the bad news about layoffs, unemployment rates in CA, O.C. full of forclosure,...,
Is there an explanation for this?  Are Martians coming to O.C. to gobble up all the houses for sale???
http://lansner.freedomblogging.com/2009/04/20/demand-for-oc-homes-back-at-2005-levels/19395/

Astute Observation by Geotpf
2009-04-20 10:19 AM

Look at the extreme divergence between the low end and the high end.  The three lowest ranges ($250k and less, $250k-$500k, and $500-750k) all have less than a three month supply, while the highest range ($4 mil+) has a 98(!!!) month supply.  2 years ago, there was less than a three month difference between the highest and lowest price ranges.

Astute Observation by AZDavidPhx
2009-04-20 10:27 AM

Don’t let the bulls dazzle you with their smoke and mirrors.  The bankers are casting a wide net to lure in knife catchers with cash who are in search of an “affordable” monthly payment.

When the government decides to raise interest rates to combat the inflation that they are causing - these knife catchers are going to lose all of their down payment equity as home prices adjust downward to the increased cost of borrowing.

The bulls will eat crow (like they always end up doing).

Astute Observation by freedomCM
2009-04-20 10:02 AM

Is this house really only 15 feet from its neighbor?

How in the world was this thing ever $5M?

I’d rather pay $5000 mo rent, and live on the interest of the $5M in the bank.


(and I doubt anyone purchasing a 6k sf house cares a whit about the environment)

Astute Observation by Rochester NY Homes For Sale
2009-04-20 10:13 AM

Rochester, NY offers many homes for sale with many of the same high quality features but with out the same price tag.

Astute Observation by AZDavidPhx
2009-04-20 10:58 AM

Rochester, NY is not special though.  It probably has a cold day here and there whereas living in Irvine allows one to skippity-hop to the mall along the masterfully designed roadways, singing songs, and picking daisies along the way while bathing in the lord’s light.

You have to understand that Irvine, CA is located upon sacred land; designed by God himself.

You simply cannot compare gold with silver.

Have some Kool-Aid, you will love it.

Astute Observation by Gemina13
2009-04-20 12:44 PM

Why, David.  One would say you were being sarcastic.

Seriously, you can go almost anyplace in the U.S. (except for New York and parts of New England) and find a big, beautiful house for a lot less than you’d pay to live in Southern California.  Not to mention that you’d be farther from your neighbor than a mere 15 feet.

Astute Observation by tonyE
2009-04-20 02:39 PM

The same old song…. And you can move to Hawaii and live 10 feet from your neighbor but have perfect weather and rodent sized cockroaches.

Those big beautiful houses in Iowa are cheap because they’re in Iowa.  I mean, I’d rather live in a tiny apartment in San Francisco’s North Beach or my house in Irvine than a ten acre spread in most of the country.

Astute Observation by ockurt
2009-04-20 03:52 PM

Agreed.  I’m a weenie in too hot or cold weather.

P.S. Houston has rodent-sized cockroaches that actually fly!

Astute Observation by Gemina13
2009-04-20 04:51 PM

I’ve seen big sewer roaches in California, as well as mice and large wolf spiders.  I’ve battled roaches, hordes of ants every time it rained, raccoons, and the never-ending arachnids.  As for the weather, it varies between the sickeningly feverish heat of summer, cold and rainy winters, the furnace blasts of Santa Ana winds, and cold “June gloom” that starts in early May and goes through to the beginning of July.  I’d rather live in Chicago than California, and the only thing holding me back from returning there is that winter is a full 7-month, Ice Age experience.

Astute Observation by Kim
2009-04-20 06:29 PM

And coyotes that walk down the street like they own the place, looking for small dogs to eat.

Astute Observation by LVRenter
2009-04-20 11:05 AM

It seems to me that the main problem right now is not the hold up in FC, but the fact that banks are holding onto REO’s and stalling the market.  There have been several REO’s that I was tracking in Santa Clarita that are no longer on the market.  They did not sell, just sitting there for months now.
How long can the bank afford to do this?
I guess with no interest loans from the gov ehr us they can hold out for a while longer.
Must admit I have been renting for over 4 years now and am really ready to own a home again.
We are planning on buying next summer but if all the REO’s don’t even hit until Oct it will take another year for prices to be pushed down to where I feel they should be.

Astute Observation by Blueberry Pie
2009-04-20 01:08 PM

Why do realtors list houses for sale as “Not a foreclosure, not an REO!”?

As a buyer, what do I care?  Especially at an open house where I am looking at the property firsthand?

Astute Observation by AZDavidPhx
2009-04-20 01:16 PM

BOO HOOO HOOO!!

http://finance.yahoo.com/retirement/article/106934/Wealth-Less-Effect-Earning-Well-Feeling-Otherwise

Wealth-Less Effect: Earning Well, Feeling Otherwise

Proposed Tax Increases on Six-Figure Earners Highlight Mounting Costs of Living—and the Relativity of Prosperity

Ellen Parnell and her husband, Donald Parnell Jr., seem like the kind of well-off couple  A surgeon at Fort Sanders Sevier Medical Center in Sevierville, Tenn., he drives an Infiniti. They vacation at a beach resort every year.

Yet, right now he is working seven days a week. The car is more than a decade old, the vacation home in Sandestin, Fla., comes at a moderate weekly rate because members of Ms. Parnell’s extended family own it. Her family of five would like more room than they have in their 2,500-square-foot home, yet they can’t afford anything larger. The downturn has them skittish about paying for renovations.

“I’m not complaining, but the reality is Obama may call me wealthy, but I thought we were just good old middle class,” says Ms. Parnell. “Our needs are being met, but we don’t have a load of cash to cover wants.”

It is a tricky situation in which some Americans find themselves after a long boom: They are by no means struggling, compared with the 98% of Americans who make far less, but depending on where they live and the lifestyle choices they have made, they don’t necessarily feel rich, either.

Worse, in their view, they are facing the same tax rates as those making millions.

By any statistical measure, that income level is at the top of the bracket. But for those closest to the line, the money might be less a sign of affluence than it is of the industry of dual-income couples.

Wealth and comfort “depends on where you’re coming from,” said Lois Avitt, a sociologist and founding director of the Institute for Socio-Financial Studies in Charlottesville, Va. To a family earning $50,000, $250,000 is well off, but for the family earning $250,000, rising college and medical costs and dropping home values make the perception debatable.

The reasons for the insecurity are that net worth is declining at the same time that expenses like education and health care, two of the biggest concerns cited by members of that income group, are going up faster than wages and income, says Heidi Shierholz, an economist at the Economic Policy Institute in Washington.

Education costs, which are far outstripping wages and income, are especially worrisome for this income bracket because upper-income earners are much less likely to receive the kind of financial aid that lower income levels can expect.

Mr. Duran said he and his wife earn about $400,000 annually, but “I’m barely getting by.” They have high property and state taxes, as well as college tuition and savings to cover.

Van Moore, an optometrist in Sevierville, makes just enough in his practice that he worries he might qualify for the tax increase.  In the years after he finished optometry school, his first job brought in less than $20,000 a year. Then he made $50,000 for several years, all the while dealing with his $150,000 student-loan debt, which he still has. Now he is making just above $250,000.

For the Parnells, their perception of themselves is based on the math. The value of their house is down $60,000. Ms. Parnell says the couple’s gross income last year was about $260,000. Taxes, premiums for medical care and deductions for Social Security and their 401(k) contributions cut the gross to about $12,000 per month. The family tithes $1,300 a month at their church. Their mortgage, second mortgage and payment on land they bought is nearly $4,000 a month. Other expenses, including their family car payment, insurance and college funds, as well as basics like food, utilities and donations to charities, leave them with about $1,200 left over each month.
————————————————————————

GASP! 

These damn 401K contributions, church payments, family car payments, student loan payments, vacation payments, charity donations, land speculation payments, and the feeding 5 crumb-snatchers is just bleeding these poor people dry!  GASP!  They forced me at gun-point to go to that nice school that cost 150,000 after all was said and done!  Is there no fairness in this world??  Mr. Obama! I say, SIR - HAVEYOU NO HEART?!  Cease and desist with all taxation immediately!

Astute Observation by IrvineRenter
2009-04-20 01:27 PM

Someone just emailed me that one as well. Only the Wall Street Journal would have the balls to print a sob story about people making over $250,000 a year that will have to pay 3% more in marginal tax rates. We are talking about $7,500 more in taxes on a couple making $250,000 a year. Gee, they might have to cut out a weekend in Cabo. The horror of it.

Astute Observation by freedomCM
2009-04-20 03:32 PM

3% more on the *marginal* rate.  that AGI over $250k. 

plus, the story says that the Parnell’s gross is $260k, so they are not going to be affected *at all*.  and so even if their AGI was $260k, that would cost them $300.


For the “poor person” making $400k (again gross, but what is their AGI after all the deductions?).  Even if $400k is their AGI (not likely), that would be $4500/yr more.

Cry me a river..

Astute Observation by MalibuRenter
2009-04-20 07:59 PM

As someone who knows and has worked with a lot of people who make a lot of money, the level of savings and responsibility is all over the place.

One person I know spends like $12k a year on his daughter’s dance lessons and travel.  She’s like 10 years old. 

There are countless people who have bought way more house than they need.  A surprising number lease expensive cars and turn them in every 2-3 years.

On the other hand, my wife and I save more than 50% of our takehome pay. 

Personally, I was much more upset about the way self employed people get taxed, than about the top marginal rate.  The self employed get twice the medicare and ss taxes, and have weird deduction provisions for medical insurance.  The only good thing was being able to put away much larger amounts for retirement.

Astute Observation by Jersey Dave
2009-04-20 03:21 PM

What really stood out for me was that the Parnells gross $260K/year and they have a car payment.  They take home $12K/month and are financing their car!

Is it just me that thinks people with that level of income should be paying cash for their cars?

Astute Observation by MalibuRenter
2009-04-20 08:01 PM

I paid cash.  I highly recommend doing so on the last day of the quarter, or the last day of the year.  Somebody will really want to get in just one more sale.

Astute Observation by .
2009-04-20 09:05 PM

Does it matter how the person spent HIS money?  Why should he be taxed more to pay for your mistakes and how YOU spent your money (i.e., taking out a mortgage you can’t afford)?

Astute Observation by IrvineRenter
2009-04-20 01:44 PM

This is classic:

Detroit councilman walks away from mortgage

DETROIT - It was their dream home, a two-story, four-bedroom colonial in one of Detroit’s nicest and most stable neighborhoods.

But then, one day in December, City Councilman Kwame Kenyatta and his wife packed up their belongings, locked the doors, mailed in the keys and walked away — adding another vacant house to the thousands in a city hard hit by the nation’s mortgage crisis.

“We’re already underwater when it comes to what we’re paying on the house versus what the house is worth,” Kenyatta said.

Around the country, the practice, sometimes referred to as “mortgage walking” or “jingle mail,” appears to be growing. But for Kenyatta, the decision could do more than hurt his credit rating.

It could damage his bid for mayor of Detroit this summer, particularly since he has been one of the city’s most vocal supporters of measures to improve neighborhoods and clean up blight.

Astute Observation by Geotpf
2009-04-20 02:33 PM

Total fail for this guy.  He couldn’t find affordable housing IN DETROIT?  Sheesh.  Plus, what type of retarded loan did he have?  The home only cost $225k, yet his payment was stated to about to go from $2,600 to $3,600.  If he borrowed the entire $225k (no downpayment) at a (now) high 7%, his payment on a 30-year fixed loan (before taxes and insurance) should have been only about $1,500-why the exotic bullshit loan?  Also, at $3,600 a month, that would have been more than half his $81k salary.

Astute Observation by AZDavidPhx
2009-04-20 05:46 PM

LOL!

I love it.

Astute Observation by MalibuRenter
2009-04-20 08:03 PM

It might damage more than his credit rating.  If he becomes mayor, this is the type of thing that worries bond investors.

Astute Observation by Freetrader
2009-04-21 02:54 AM

This is absolutely appalling.  An elected government official is walking away from his house because it is “under water”?  That’s his EXCUSE? In other words, he doesn’t even attempt to excuse himself.  Very troubling.  With politicians like that, it is not wonder that Detroit was never able to re-invent itself.

Astute Observation by Geotpf
2009-04-21 07:34 AM

Well, he certainly couldn’t afford a $3,600 monthly payment on an $81k salary.  The question is why he set up such a moronic loan in the first place.

Astute Observation by randi
2009-04-24 04:16 AM

that’s a very good question, that’s what irresponsible people do

Astute Observation by AZDavidPhx
2009-04-20 01:52 PM

This just in!

Dead-cat bounce confirmed!  Another bull bites the dust.

Dow’s biggest decline in 2 months
Wall Street pulls back after six straight weeks of gains on worries about banks, despite BofA quarterly results.

http://money.cnn.com/2009/04/20/markets/markets_newyork/index.htm?postversion=2009042013

Astute Observation by Dan
2009-04-20 03:29 PM

You know, there are a few days out of the year when there isn’t an inversion layer over Irvine.  The photo of the home’s viewline would have looked a lot less asthma-inducing.

Astute Observation by Sam
2009-04-22 02:27 PM

as per this news, the Option ARM resets have been delayed
http://www.businessweek.com/lifestyle/content/apr2009/bw20090416_103126.htm?ref=patrick.net

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