Category Archives: Price Rollback

Twisted Towers

No big thinking today, just a humorous look at some twisted pictures of a jaw-dropping loss in the North Korea Towers.

3141 MICHELSON Dr 1307 Irvine, CA 92612 kitchen

Irvine Home Address … 3141 MICHELSON Dr 1307 Irvine, CA 92612
Resale Home Price …… $489,000

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{book1}

Oh come all ye faithful
Joyful and triumphant
Oh come ye, oh come ye to Bethlehem

Sing choirs of angels
Sing in exultation
Oh sing, all ye senders of the heaven above

Oh Come All Ye Faithful — Twisted Sister

I probably shouldn’t indulge is such great Schadenfreude on Christmas Eve, but this one is too good to pass up.

Net Gain (Loss) ………. $(482,840)
Percent Change ………. -48.1%
Annual Appreciation … -16.1%

OMG!

Four years and half a million dollars later, I have to think this guy is not having a happy holiday.

3141 MICHELSON Dr 1307 Irvine, CA 92612 kitchen

Irvine Home Address … 3141 MICHELSON Dr 1307 Irvine, CA 92612

Resale Home Price … $489,000

Income Requirement ……. $102,176
Downpayment Needed … $97,800
20% Down Conventional

Home Purchase Price … $942,500
Home Purchase Date …. 3/17/2006

Net Gain (Loss) ………. $(482,840)
Percent Change ………. -48.1%
Annual Appreciation … -16.1%

Mortgage Interest Rate ………. 5.08%
Monthly Mortgage Payment … $2,119
Monthly Cash Outlays ………… $3,500
Monthly Cost of Ownership … $2,970

Property Details for 3141 MICHELSON Dr 1307 Irvine, CA 92612

Beds 2
Baths 2 baths
Size 1,517 sq ft
($322 / sq ft)
Lot Size n/a
Year Built 2006
Days on Market 3
Listing Updated 12/15/2009
MLS Number U9005224
Property Type Condominium, Residential
Community Airport Area
Tract Marq

According to the listing agent, this listing may be a pre-foreclosure or short sale.

Stylish urban high-rise living in a highly desired end-unit with rounded walls of glass. This very chic property is located on the 13th floor of the Marquee Park Place towers & offers one of the best views available. Floor-to-ceiling windows & balconies with fabulous panoramic city lights & mountain views. Home is showcased with sophisticated finishes & style including Ralph Lauren paint and artistic design and photography by DominickJR.com Rich cherry hardwood flooring throughout the living, dining & kitchen areas. A cozy fireplace enhances the spacious living room. The modern gourmet kitchen is open to the living room and includes GE Mongram stainless steel appliances & gorgeous granite countertops. Designer furnishings are available for purchase. Marquee Park Place towers offer extensive amenities including 24 hour concierge, resort-style pool, spa, fitness center & entertainment rooms. Centrally located to world-class shopping, restaurants, the airport, freeways & beaches.

As an artistic shot, I really like the photo above. The radiating shadows and the way the sun brings out the tone of the wood, the rhythmic curve of the window lines, the distant view, there is much to like about this photo; however, it is not supposed to be an art shot, it is supposed to convey accurate information about the property. It fails.

Again, this is an intesting way to focus attention on the Buddha, but a horrible way to display a bathroom.

Notice the amount of distortion in these photographs. Do you think that room divider in the left photo really curves like that. The photo on the right is misleading, IMO. That is a straight counter, and it looks like it arcs nearly 90 degrees. The distortion is so bad it makes you think the room looks nothing like it really does.

What I get from these photos is (1) the sense that I need my eyesight checked, and (2) someone dropped acid before shooting these pictures and created some fantastic art that is an embarrassment for showing property.

How do you see it?

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Here is wishing you a twisted Christmas.

Underwater Homeowners

Yesterday, we discussed walking away, and today, I want to explore the issue a little further and look at both an Irvine property owner and a Wall Street Journal columnist who are 10% underwater and thinking about walking away.

Irvine Home Address … 25 BOMBAY Irvine, CA 92620
Resale Home Price …… $699,000

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{book1}

we’re flesh and bone
together and alone
and we’re looking for a home

silver moonlight fills the sky
calling gently to the evening tide
you’re unfolding right before my eyes
and when you move
you move right through me

Underwater — Delerium

Underwater homeowners — homedebtors — as they have become derisively known on bubble blogs, each followed a different path to their destruction. I came across a Wall Street Journal article on Patrick.net, Underwater Houseowner Should Have Waited Longer To Buy, actually the title is Confessions of an Underwater Homeowner. By BRIAN R. FITZGERALD.

“One in four borrowers is underwater on a mortgage in the U.S.

Count me among them.

My family’s modest, suburban New Jersey house is now worth about
$30,000 less than our current balance. We never dreamed of walking
away, but the idea of “strategically defaulting,” is something we had
to at least consider. Many others have, too, as my colleague Mark
Whitehouse reported in Thursday’s Journal (See American Dream 2: Default, Then Rent.)

We’re not home flippers or boom-era borrowers who opted for an
exotic loan with no documentation. In buying our house, we believed we
were making a life decision.”

The author spends some time describing his house search, then he added:

“We weren’t oblivious to the fact that people were stretching to buy
homes. We were adamant about getting a fixed-rate loan–rates really had
nowhere to go but up, so why would we want an adjustable rate? (That
line of thinking turned out to be an epic fail–30-year fixed rates have
been at less than 5% for weeks lately.)”

What? This guys sees his decision to use a 30-year fixed at historic low interest rates as an epic fail? He really thinks that because the Federal Reserve is doing something it has never in history done — direct purchase of Agency debt to support mortgage interest rates — and because of this interest rates ticked down slightly, so this was an epic fail on his part? It was the most intelligent thing the guy did, and he thinks it was a mistake! If people believe fixed-rate mortgages are a mistake, then we are going to be in for decades of housing market instability.

“It came time to deal with the finances. Because we were plunking down only 7% or so on the down payment, we were faced with a steep insurance fee. I was naively insulted by this PMI-the idea that we were risky borrowers out of the box. So we opted for a “piggyback” loan, a second loan that would cover the rest of the down payment and allow us to avoid the PMI. We would pay about the same per month, and when our home’s value rose, we would refinance and combine the two loans into one. A lot of the people I turned to for advice were recent homebuying colleagues facing similar questions, or longtime owners who were doe-eyed by low interest rates. I don’t recall anyone saying “Dude, wait a few years.””

Apparently, this guy wasn’t reading the bubble blogs that were loudly proclaiming that he was an idiot, and that he should have waited a few years.

Notice the idea that you refinanced into a larger mortgage later after the house value goes up. Sounds very rational, and it works really well as long as house prices only go up. The author goes on,

“We never considered purposefully defaulting, but then again we’re not falling down a catastrophic, high six-figure equity hole. After reading Mr. White’s paper, though, we decided to run some numbers, pulling together basic info on our loan, tax bracket and rental prices for comparable homes in our area, and plugged them into this calculator at PayorGo.com. This was by no means a scientific appraisal. I had to enter how long we expected to be in our home, and I really couldn’t answer “as long as it makes financial sense.” So I said seven years. I don’t know how realistic that is — my kids will be about 12 years old then. Apparently, if my home doesn’t rise 1.94% in value over the next seven years, we should call it quits.

We wouldn’t. Although, if I were laid off and unemployed for more than a few months we might have to.”

This guy should call it quits because his house is probably not going to rise in value by 1.94% every year for the next seven years. In fact, it probably will not rise at all, and it will very likely decline more in the interim. He continues,

“The price drop sometimes feels like an apparition. On paper, my home is considered less valuable than what I am paying for it. In reality, it is the same home (warts and all) that I liked when I signed the papers.”

Part of the reason it feels like an apparition is because this guy is in denial! He doesn’t have to face the consequences of his mistake, so it doesn’t feel like one. I leave the author with the last word,

“I’m not blind to the pitfalls-if I was offered a job in another city, we wouldn’t be able to sell; we can’t get a home-equity line of credit because we already tapped it. Still, my biggest challenge week to week is operating the leafblower. And if I knew in 2006 that in 2009 I’d be able to get the same home for a 20% discount AND still get a low rate, I never would have pulled the trigger.

What I do know is that this is our first home. It is where our kids-going on 5 years old- are growing up. We love our neighbors and the school system. We put in central air. I still remember the feeling of getting those keys handed to me the first time. We have sentimental equity. Home buying wasn’t a zero-sum financial game of win or lose.

The Fitzgeralds are technically underwater, but we don’t feel like we are drowning.”

Brian R. Fitzgerald is an editor at WSJ.com. Email: Brian-R.Fitzgerald@wsj.com

Irvine Home Address … 25 BOMBAY Irvine, CA 92620

Resale Home Price … $699,000

Income Requirement ……. $146,056
Downpayment Needed … $139,800
20% Down Conventional

Home Purchase Price … $737,500
Home Purchase Date …. 9/17/2004

Net Gain (Loss) ………. $(80,440)
Percent Change ………. -5.2%
Annual Appreciation … -1.0%

Mortgage Interest Rate ………. 5.08%
Monthly Mortgage Payment … $3,029
Monthly Cash Outlays ………… $4,130
Monthly Cost of Ownership … $3,150

Property Details for 25 BOMBAY Irvine, CA 92620

Beds 4
Baths 2 full 1 part baths
Size 2,300 sq ft
($304 / sq ft)
Lot Size n/a
Year Built 2004
Days on Market 3
Listing Updated 12/16/2009
MLS Number S599151
Property Type Condominium, Residential
Community Northwood

Gourmet Kitchen Award

’tis the Season to get a Great Deal! This incredible ‘almost new’ Bella Rosa detached home offers a private, cul-de-sac location in the gated area of Northwood II. This open layout features, a downstairs bedroom and bath, a beautiful granite countered, gourmet kitchen with a center island, that opens to the spacious family room and dining area. On this same level is the indoor laundry room. The direct access garage is appointed with built-ins. Upstairs has a HUGE Master bedroom, with two walk-in closets, and a luxurious master bath with sunken tub, separate shower, and dual vanities. Two additional bedrooms, a bath, and an office niche complete the second level. The enclosed yard is an entertainer’s delight… very private and the beautiful hardscape makes for a great area to hold parties. The ammenities of this gated community includes a resort-style pool, clubhouse, picnic areas, outdoor fireplace, and more. Location is everything here…This is a must-see before it is gone!

This is a must-see before it is gone! It feels urgent to me, does it feel urgent to you?

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Should You Walk Away from Home Debt?

For many underwater homeowners, walking away from their mortgage debt is the best financial decision; however, most will not walk away from their mortgages. Enough borrowers will default to make a steady stream of properties like today’s.

806 SILK TREE Irvine, CA 92606 kitchen

Irvine Home Address … 806 SILK TREE Irvine, CA 92606
Resale Home Price …… $459,000

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From the lands lying at the end of World
I am bringing this dress as a gift, it is
Made with the purest silk
She smiled at me,
She never wore the dress
Touching the fabric was like holding
Nothing in your hand

The Silk Dilemma — Elvenking

Nothing in your hand; it is what underwater homedebtors have. They occupy a house — just like renters do — but most of them do so at a huge premium to renting. Underwater homedebtors have no equity; what they do have is the dream of equity in the future. They have a position in a financial market that most resembles an option contract that is out-of-the-money.

People who are underwater today and paying a premium are still hoping they will get a return on those premium dollars when their house value rises above their mortgage and puts them back in-the-money. Mostly this is based on fantasy or Zillow Zestimates or some other such nonsense, when in reality, their property values will likely decline further, and it will take much longer than they want for prices to come back. That is the way financial bubbles deflate.

Most people will not walk away. Most will continue to suffer in silence wait the decade or more for prices to recover. People become invested in the process. Once they have held on for two or three years too long, they feel committed to seeing it through, and many will. This was the experience of the early 90s, and since that bubble wasn’t near so massive, the market did recover in 8-10 years and life went on.

{book3}

The Great Housing Bubble was much, much larger than the bubble of the 90s, and we have not deflated back to stable price levels yet. Those that hang on will likely wait much longer than those who bought in the last bubble.

Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis

Brent T. White

Abstract

“Contrary to reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners do not strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences. Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to induce homeowners to ignore market and legal norms under which strategic default might not only be a viable option, but also the wisest financial decision. Unlike lenders, individual homeowners have thus generally not acted to minimize their losses and have born a disproportionate share of the burden from the housing collapse.”

WalkingAway1029.pdf

From the main text:

“This article suggest that most underwater homeowners don’t default as a result of two emotional forces: 1) the desire to avoid the shame or guilt associated with foreclosure; and 2) fear over the perceived consequences of foreclosure – consequences that are in actuality much less severe than most homeowners have been led to believe. Moreover, fear, shame, and guilt are not mere “transaction costs” that homeowners calculate according to their own personal tolerance for each. Rather, these emotional constraints are actively cultivated by the government, the financial industry, and other social control agents in order to induce individual homeowners to act in ways that are against their own self interest, but which are – wrongly this article contends – argued to be socially beneficial.”

I totally agree with the observation made here. The powers-that-be are working in a coordinated effort to convince people to keep hanging on, not because it helps the borrower, but because it benefits the lender. The culmination of these efforts is a series of Bailouts and False Hopes.

“Unlike lenders who follow market norms, individual homeowners are encouraged to behave in accordance with social norms of “personal responsibility” and “promise-keeping.” Thus, individual homeowners tend to ignore market and legal norms under which
strategic default might not only be a viable option but also the wisest financial decision. As a result, individual homeowners have born a disproportionate share of the costs of the housing meltdown.”

When a borrower defaults at a bank, it is a tiny blip on some complicated financial statement of a large, faceless lender — the same lender that made a fortune putting the borrower into an unstable loan to begin with. Lenders made the problem, but they are trying, hoping, praying they can pass off the responsibility to everyone else — particularly underwater homeowners. It is the individual homeowners who bear the greatest burden and it is the borrowers who will pay the price through a decade of debt slavery with the feeble hope of appreciation to bait them on.

{book2}

IMO, this is where it gets even worse. For the whole system to hold together, kool aid intoxication must be sustained. If the underwater homeowners truly accepted the idea that prices may not come back in a reasonable time — and prices will never come back as quickly as homedebtors imagine — people will default in larger numbers.

In one of the more damning portions of the paper, Dr. White writes:

… social control agents such as the government, the media, and the financial industry use both moral suasion and disinformation to cultivate these emotional constraints in homeowners.

Is he a conspiracy-theory nutter, or is he an accurate observer of what is going on? I will let you decide.

Should You Walk Away?

I found a link to a site, Pay or Go. With a few simple inputs the site will tell you whether or not it is in your best interest financially to walk away. It also has a number of informative links to major newspaper articles on the subject.

The calculator on the site has an important note that drives to the heart of the problem: people believe house prices appreciate faster than they really do.

IS IT IN MY ECONOMIC INTEREST TO WALK AWAY?

You decide. This calculator is just a tool to help. Numerous variables are involved but the biggest is probably your assessment of the future of housing pricing. No one can predict future prices, but the conventional wisdom says that it is probably not realistic to believe that housing prices will increase by more than 4%-8% per year on average.

It seems obvious to me that one of problems people were having with this tool was that they put in assumptions for appreciation that are too aggressive. It is the same kind of thinking that inflated the bubble.

Faith in market kool aid is not enough. With a massive overhead inventory of those who want or need to get out at breakeven (including the lenders and their shadow inventory), no amount of wishful thinking is going to make prices rise. Timing Does Matter. Low interest rates may help cushion the blow, but peak prices are not right around the corner.

I am starting to believe that kool aid intoxication may never go away, particularly now that it is in the government’s best interest to keep it tasty and keep it flowing.

806 SILK TREE Irvine, CA 92606 kitchen

Irvine Home Address … 806 SILK TREE Irvine, CA 92606

Resale Home Price … $459,000

Income Requirement ……. $95,908
Downpayment Needed … $91,800
20% Down Conventional

Home Purchase Price … $650,000
Home Purchase Date …. 6/29/2007

Net Gain (Loss) ………. $(218,540)
Percent Change ………. -29.4%
Annual Appreciation … -13.7%

Mortgage Interest Rate ………. 5.08%
Monthly Mortgage Payment … $1,989
Monthly Cash Outlays ………… $2,800
Monthly Cost of Ownership … $2,300

Property Details for 806 SILK TREE Irvine, CA 92606

Beds 3
Baths 4 baths
Size 868 sq ft
($329 / sq ft)
Lot Size n/a
Year Built 2007
Days on Market 62
Listing Updated 11/7/2009
MLS Number 9405653
Property Type Condominium, Townhouse, Residential
Community Columbus Grove
Tract Oakp

According to the listing agent, this listing may be a pre-foreclosure or short sale.

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ALL CAPS

A MUST SEE! Wow! I am so motivated….

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I could have titled this post, “How to Lose a Fortune Quickly.” A 30% drop in just over 2 years is remarkable… documenting the transaction that began 5 months after I started warning buyers on the IHB… that is priceless.

Unemployment and Foreclosures

As unemployment keeps rising so will foreclosures; in fact, foreclosures will not peak until well after unemployment does.

35 POTOMAC Irvine, CA 92620 kitchen

Irvine Home Address … 35 POTOMAC Irvine, CA 92620
Resale Home Price …… $599,999

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{book1}

I been laid off from work
My rent is due
My kids all need
Brand new shoes

So I went to the bank
To see what they could do
They said son – looks like bad luck
Got-a hold on you

Money’s Too Tight to Mention — Simply Red

A recent Bloomberg article, U.S. Foreclosures to Reach Record 3.9 Million in 2009, “We are a long way from a recovery,” John Quigley,
economics professor at the University of California, Berkeley,
said in an interview. “You can’t start to see improvement in
the housing market until after unemployment peaks.” The UCLA Anderson Forecast Orange County, believes foreclosures can decline in the face of rising unemployment. I don’t know why. As I noted:

The recession in the early 90s was caused by a slowdown in housing
and real estate just like this one. That recession also saw slowdowns
in defense contracting and other industries that made problems even
worse. The recession ended in 1992, but the effect lingered as people
had to be retrained to work in other fields, so unemployment did not
peak until 1993. The delay between the end of the recession and the
peak in unemployment is well documented
.

There were many reasons for the foreclosure crisis of the mid 90s,
and we have all of those problems back with more force. The
foreclosures caused by unemployment do not occur on the day a borrower
loses their job. The delay caused by draining all sources of savings,
maxing out credit lines and utilizing legal maneuvers can slow the
process for two or three years — as we have seen with properties
profiled here daily; therefore, it is reasonable to assume foreclosures
will peak two or three years after a major unemployment crisis
. In
fact, I would argue it is unreasonable to assume that foreclosures have
peaked for this cycle — as the UCLA Anderson Forecast does —
considering unemployment has not peaked, and the newly unemployed will
cause defaults.

Last time around house prices bottomed as foreclosures peaked. It is
unclear if either one caused the other. For example, if house prices
bottomed simply because prices were affordable and supply was low, then
foreclosures may peak not because borrowers are not distressed, but
because distressed borrowers can sell into the resale market rather
than go through foreclosure. Remember, foreclosures are not a sign of
distress as much as they are a sign of distress that cannot be masked
by selling in the open market.

You can buy a house if you plan to be there for a long time and you recognize prices will probably go lower. If you are buying a house because you think prices have bottomed, and you better hurry because you might be priced out, you will be upset and disappointed.

35 POTOMAC Irvine, CA 92620 kitchen

Irvine Home Address … 35 POTOMAC Irvine, CA 92620

Resale Home Price … $599,999

Income Requirement ……. $124,377
Downpayment Needed … $120,000
20% Down Conventional

Home Purchase Price … $540,000
Home Purchase Date …. 3/15/2004

Net Gain (Loss) ………. $23,999
Percent Change ………. 11.1%
Annual Appreciation … 1.8%

Mortgage Interest Rate ………. 5.01%
Monthly Mortgage Payment … $2,580
Monthly Cash Outlays ………… $3,240
Monthly Cost of Ownership … $2,580

Property Details for 35 POTOMAC Irvine, CA 92620

Beds 3
Baths 1 full 2 part baths
Size 1,424 sq ft
($421 / sq ft)
Lot Size 3,500 sq ft
Year Built 1985
Days on Market 4
Listing Updated 12/9/2009
MLS Number S598384
Property Type Single Family, Residential
Community Northwood
Tract Gl

Highly upgraded two story home with nicely landscaped wrap around yard, attached 2 car garage; hardwood floors,totally remodeled kitchen with granite counters, added counter space; new cabinets; custom window coverings;large master bedroom with ceiling fan; dual sinks in master bath; two closets. This home is gorgeous!! Must see!

Exclamation points and the venerable “Must see.” Typical realtorese.

I do like the photograph of the front of the house. The rich blue sky, the fall colors and the interesting shadows make it a nice photo. I don’t know if it helps sell this house as the front yard looks unkempt, but it is a cool photo.

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When the current owners bought this place back in 2004, they must have felt they had reason to celebrate. They paid $540,000 on 3/15/2005, but after waiting 60 days, they managed to get an appraisal for $594,000, and opened a HELOC bringing their debt to that amount. It is possible they simply went through the motions to get the credit line as there are no further refinances after 2004.

$3,000,000 Irvine Tract Home?

Do tract homes in Irvine go for more than $3,000,000? Well, they used to…

16 PRAIRIE GRASS Irvine, CA 92603 back

Irvine Home Address … 16 PRAIRIE GRASS Irvine, CA 92603
Resale Home Price …… $2,975,000

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{book1}

Soft spoken with a broken jaw
Step outside but not to brawl
Autumn’s sweet we call it fall
I’ll make it to the moon if I have to crawl and

(I’m) With the birds(sharing) I’ll share
(this lonely) This lonely view
(I’m) With the birds(sharing) I’ll share
(this lonely)This lonely view
(I’m) With the birds(sharing) I’ll share
(this lonely)This lonely view

Scar Tissue — Red Hot Chili Peppers

Should “Sycamore Plan Two” and $2,975,000 go together? Can tract homes today really be worth $3,000,000 in Irvine? Owners still think they are worth that much, so many of them are offered for sale; unfortunately, buyers do not agree. Much of our high-end inventory sits there in an overpriced fantasy world hoping for loose financing to save them. It isn’t going to happen.

Can you identify the lot with the most negatives in this picture?

I will give you a hint. It is the only lot that has no view, backs on to the side of a higher property, is not on a corner, and is not pie shaped to give any additional area.

If this home is a $3,000,000 tract home, then the inside must be finished with gold, or every home in this neighborhood is worth more than $3,000,000. Since neither seems likely, since recent comps on Vernal Springs went for $2,400,000, and since the high end is ridiculously inflated, I don’t think this house will sell for $3,000,000. If they lower it to $2,400,000 they might get out before prices go lower.

16 PRAIRIE GRASS Irvine, CA 92603 back

Irvine Home Address … 16 PRAIRIE GRASS Irvine, CA 92603

Resale Home Price … $2,975,000 WTF

Income Requirement ……. $547,558
Downpayment Needed … $595,000
20% Down Conventional

Home Purchase Price … $3,125,000
Home Purchase Date …. 3/13/2006

Net Gain (Loss) ………. $(328,500)
Percent Change ………. -4.8%
Annual Appreciation … -1.3%

Mortgage Interest Rate ………. 5.00%
Monthly Mortgage Payment … $12,776
Monthly Cash Outlays ………… $16,850
Monthly Cost of Ownership … $12,290

Property Details for 16 PRAIRIE GRASS Irvine, CA 92603

Beds 5
Baths 5 full 1 part baths
Size 4,820 sq ft
($617 / sq ft)
Lot Size 15,790 sq ft
Year Built 2004
Days on Market 3
Listing Updated 11/17/2009
MLS Number U9004951
Property Type Single Family, Residential
Community Turtle Rock
Tract Shsm

Exceptional Sycamore Plan Two with Main Floor Master Suite situated in the exclusive residential golf preserve of Shady Canyon. A very functional floor plan with 5 bedrooms, 5.5 bathrooms, including detached guest casita. With Spanish Revival influences of the early 20’s and 30’s, this gracious home creates an authentic sense of a true California style. Amenities include an entry library, wine alcove, formal living room and dining room with cathedral two story ceilings, a chef’s kitchen that opens to the family room and breakfast nook. Nestled in the foothills, this private lot boasts numerous outdoor courtyards, a sparkling pool and spa, built-in-barbeque and inviting outdoor fireplace.

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These owners have a $2,000,000 mortgage, but it isn’t likely this will be a short sale. Since there will be no loan modifications at that loan amount, the owners are on their own — which is probably why they are selling.

If you had $3,000,000 to spend on a house, would you spend $3,000,000 for a tract home in Shady Canyon?