He Paid How Much?
She's So High -- Tal Bachman
Many people fueled the market rally with a frenzy of fear buying. Fear of being priced out of the market, and fear of missing the great profits to be made through home ownership. Those who did not participate by wanted to became the stereotypical "bitter renters." These people were bitter because they believed the nonsense of kool aid intoxication, and they believed that they missed their chance. Of course, over the last year, many of these people got their chance and became knife catchers. Today's featured song encapsulates the feelings people had toward houses and those who owned them -- they were so high above them. The bitter renters were jealous and felt unworthy. Little did they know...
Dr. Housing Bubble has an ongoing series he calls "Real Homes of Genius." He profiles really awful properties in bad neighborhoods going for ridiculous prices. There is an intuitive revulsion from seeing these properties and the prices attached. It does not take a sophisticated financial analysis to recognize the housing bubble when viewing these properties. We don't have any run down properties of that sort in Irvine, but I remember having the same revulsion when I would see 1 bedroom condos going for over $400,000. I don't care how used to bubble prices you get, when you see tiny condos going for $400,000, the mind simply cannot grasp it. These prices were just wrong. No amount of kool aid could drown out the doubts about the prices of these units. Of course, the people who bought these units almost exclusively used 100% financing, so it didn't really matter what they paid, and they did not care. It wasn't their money. An Option ARM with a 1% teaser rate made owning one of these cheaper than renting, and in due time, it would be selling for millions. Even if it didn't, any losses would be someone else's problem -- which is where we are now. Today's featured property is a simple 100% financing deal gone bad. It is the collapse of prices at the low end of the market like this one that are serving as a drag on market prices, and they will continue to do so until we reach the bottom.
Asking Price: $299,900
Income Requirement: $94,975
Downpayment Needed: $59,980
Monthly Equity Burn: $2,500
Purchase Price: $410,000
Purchase Date: 1/21/2005
Address: 722 Timberwood, Irvine, CA 92620
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