Category Archives: Special Irvine Homes

Las Vegas leads nation in underwater homes and foreclosures

Las Vegas continues to lead the way with the highest rate of foreclosures and underwater homes.

Irvine Home Address … 7 BITTERWOOD Irvine, CA 92604

Resale Home Price …… $1,066,000

Dig for gold

Dig for fame

You dig to make your name

Are you pacified?

Hot and cold

Bought and sold

A heart as hard as gold

Yeah! Are you satisfied?

Metallica — King Nothing

Las Vegas remains nation's capital for underwater homes and foreclosures

by JON PRIOR — Thursday, November 11th, 2010, 2:52 pm

One of every 70 homes in Las Vegas received a foreclosure filing in October.

For 19 of the last 20 months, the city has held the highest rate of foreclosures for any metro area. And with more than 80% of its homeowners underwater on their mortgage in the third quarter, Las Vegas continues to hold the nation's top spot for negative-equity homeowners and rates of foreclosure.

Since February 2009, Las Vegas has held the highest foreclosure rate every month except November 2009 when Merced, Calif., passed it, according to RealtyTrac data. Merced was also the last city to have the most foreclosures 21 months ago. That February, the Las Vegas foreclosure rate was at one in 60, more than seven times the national average.

But the volume of foreclosures has gone down. In the first quarter of 2009, there were 35,321 Las Vegas properties that received a filing, compared to the third quarter of this year when 32,288 properties received a filing. It's a decrease of 8.5% over that span.

Still, Las Vegas holds a foreclosure rate nearly five times the national average, and having such elevated concentrations for a prolonged period time shows. Squatters sleep in tents on abandoned developments dreamed up during the bubble, and casinos are muted. Metro-Goldwyn-Mayer, owner of the MGM Grand, filed for Chapter 11 in November.

According to a report from MDA DataQuick, the median home price in Las Vegas has fallen more than 58% from the peak in November 2006 to land at $130,000 in September. Such staggering drops has left four out of every five homeowners in Las Vegas owing more on their mortgage than the home is worth, according to a recent study from Zillow.

Hundreds of projects are planned in the downtown redevelopment area, according to city officials, including the $40 million, first phase of Symphony Park. Still, plummeting prices and underwater homes are a millstone around the neck of the market, according to Zillow Chief Economist Stan Humphries.

“Beyond the lost tax credits, the [Nevada] housing market has been undermined by a weak economic recovery, a lack of significant job growth and potential homebuyers’ concerns about job security,” according to DataQuick.

There is really only one reason prices are so low in Las Vegas: the bubble there was almost entirely subprime, and lenders foreclosed. The entire amend-extend-pretend policy at the banks was a direct reaction to the Las Vegas housing market. Las Vegas is a textbook study in housing bubbles.

When the foreclosures mounted, the must-sell inventory pushed prices lower and sparked a vicious circle of accelerated default that caused prices to overshoot fundamental valuations to the downside just as bubble bloggers and others predicted. Prices are being held down by the weight of inventory, and prices will continue to suffer until the inventory is liquidated. It is the nightmare scenario the Federal Reserve and the banking cartel is hoping isn't repeated in Orange County.

For me the appeal is twofold: (1) There will be no shortage of property flips over the next several years, and (2) valuations are so low that cashflow investing makes sense. All my education and experience in real estate tells me this is the right place at the right time. I blog about it here because I believe in it. I go out there and put my time, effort, and money where my mouth is.

Las Vegas will recover emotionally

Over the last couple of months I have been making weekly trips to Las Vegas. On occasion, I make my way to the craps tables to be part of the action. I am not much of a gambler. I can't get too excited about risking money when I don't have an edge, but playing $3 or $5 craps is entertaining, and watching the people at the tables is a unique study in human behavior.

When a game of craps starts, everyone is excited and hopeful. People place their bets and go about trying to make money from random chance. Will fate smile upon them? As the dice roll, if the table is hot and people are winning, many gamblers will press up their bets to see if their numbers come up and they can make a fortune. So it is with real estate.

During the housing bubble, every home owner was suddenly given a gift of equity from the market gods. Many chose to parlay that equity and buy several investment houses. As prices continued to rise and speculators pressed their bets, everyone was the real estate craps table was having a great time.

Then a 7 is rolled.

There is a pregnant moment when the dice are rolling. Will your number come up, or will a 7 wipe you out? When the inevitable 7 is finally rolled, there is a collective deflating sigh released by everyone at the table. All the money still on the table is lost.

Las Vegas residents have either seen or participated in moments like this as long as they have lived there. The losing hand is part of everyone's gambling experience. Through desensitization, Las Vegas residents have become very resilient about losing. Most pick themselves up and move on. So will it be with the housing bust.

Las Vegas residents will get over the emotional scars quickly. By and large, they won't be stressing about their deflating home values like many in California will. In Nevada, they don't have a history of rapidly rising home values and a culture of dependency on mortgage equity withdrawal. They all enjoyed it while it lasted during the bubble, but most will go back about their business. Like remembering that pressed-up $30 odds bet they lost on the 6, Las Vegas residents will remember what their homes sold for in 2006, but they will accept it is no longer worth that and move on. Contrast with Californians who will hang on to their kool aid beliefs until prices come back — no matter how long that takes.

Perhaps you disagree with my broad generalizations, and there are obviously exceptions, but I believe residents of Las Vegas will recover emotionally even though many have been wiped out financially. They have seen it too many times before. The emotional recovery from financial loss is part of their culture.

Playing the Don't

As a contrarian investor, I look for opportunities in place like Las Vegas where others see only troubles and disaster. Out of crisis comes danger and opportunity. In contrarian investing, you profit while the herd is losing — like playing the Don't Pass at a craps table. In craps, you can play either side of the bet. If you play the Don't, it is just like being the casino. You win when others at the table lose and visa versa.

It's fascinating being at a table playing the don't. When everyone else is winning and cheering, you curse to yourself as your point bets get hit one by one and you lose money. When everyone loses and feels the collective defeat, you feel great relief as you finally get paid for your bets still on the table.

Playing the Don't often requires keeping a low profile. Cheering about your winnings as others just lost everything doesn't make many friends at the table.

Distressed asset investing in Las Vegas foreclosures is much like playing the Don't. Each property I acquire is a loss for someone else. As each loan owner gives up in Las Vegas, there is an investor or some other family looking to find opportunity in the collective loss of the housing market crash.

Bank Error in Their Favor

The bank began foreclosure proceedings on this property in early 2009. The borrower had not made payments since 2008. The original Notice of Trustee Sale was filed on 6/9/2009. These notices give the trustee one year to call a sale. The bank didn't want to foreclose so this property became part of shadow inventory. On 7/27/2010, they had to file another notice of default and start the process all over again. The processed quickly (91st day) on 10/28/2010 to make up for the expiration error.

This kind of procedural mistake is more common when the system is being overwhelmed. The banks are rewarded by their own procedural inefficiency. If the banks foreclosed on every delinquent borrower quickly, they would soon own 10% to 30% of the housing stock in the United States as REO. With a 10% delinquency rate and substantial strategic default — true strategic default not accelerated default — the banks would be a massive property REIT.

Since the banks have delayed foreclosure, they have kept much of the illusory debt alive on their balance sheets (40% underwater mortgages have a high book value and a low recovery value). They have been rewarded with time by their own bureaucratic ineptness. Time the Federal Reserve hopes the banks can use to earn enough to pay off the losses. It may work. It may not. Probably not.

Foreclosure Record

Recording Date: 10/28/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 07/27/2010

Document Type: Notice of Default

Foreclosure Record

Recording Date: 06/09/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 03/06/2009

Document Type: Notice of Default

The previous owners had a dream of a perfect Irvine remodeled tract home, and they borrowed a $1,000,000 to make their dream come true. It's a bit to close to the noise and air polluted Irvine Center Drive to command a huge neighborhood premium. Basically, they paid peak price for the house, then they remodeled and over-improved it. Since this now a short sale, the market has concluded these owners did not add value to match what they spent.

  • This house was purchased on 6/6/2003 for $455,000. The owners used a $364,000 first mortgage, a $91,000 second mortgage, and a $0 down payment. The borrowing you are about to witness was preceded by a $0 loan. These borrowers never had any of their money at risk.
  • On 5/11/2004 they opened a HELOC for $157,000.
  • On 5/31/2005 they got a larger HELOC for $234,000.
  • On 6/27/2005 they refinanced with a $540,000 first mortgage.
  • Then they remodeled the house. On 7/29/2005 they obtained a $998,000 building or construction loan.
  • On 6/15/2006 they got a HELOC for $100,000.
  • On 9/13/2006 they got another loan for $118,539.
  • Total property debt is $1,116,539 assuming the $100,000 loan was rolled into the $118,539.
  • Total mortgage equity withdrawal (part renovation costs) is $661,539 all of which was lender funds given out after the transaction started with no money down.

Can you see why houses were so popular. Imagine today that you could find a lender who would…

  1. give you all the money to buy a house,
  2. give you a couple hundred large spending money for the first two years,
  3. and give you another half a million dollars if you made that house they gave you into your dream house.
  4. Of course with the promise that there would be plenty more free money forever from the magic housing ATM.

The couple that created this masterpiece (sarcasm to taste) was offered and given everything stated above. Who would turn that deal down? If you had known then what you do now, would you do anything differently?

Irvine Home Address … 7 BITTERWOOD Irvine, CA 92604

Resale Home Price … $1,066,000

Home Purchase Price … $455,000

Home Purchase Date …. 6/6/2003

Net Gain (Loss) ………. $547,040

Percent Change ………. 120.2%

Annual Appreciation … 11.5%

Cost of Ownership

————————————————-

$1,066,000 ………. Asking Price

$213,200 ………. 20% Down Conventional

4.38% …………… Mortgage Interest Rate

$852,800 ………. 30-Year Mortgage

$205,413 ………. Income Requirement

$4,260 ………. Monthly Mortgage Payment

$924 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$178 ………. Homeowners Insurance

$85 ………. Homeowners Association Fees

============================================

$5,447 ………. Monthly Cash Outlays

-$1009 ………. Tax Savings (% of Interest and Property Tax)

-$1148 ………. Equity Hidden in Payment

$341 ………. Lost Income to Down Payment (net of taxes)

$133 ………. Maintenance and Replacement Reserves

============================================

$3,764 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$10,660 ………. Furnishing and Move In @1%

$10,660 ………. Closing Costs @1%

$8,528 ………… Interest Points @1% of Loan

$213,200 ………. Down Payment

============================================

$243,048 ………. Total Cash Costs

$57,700 ………… Emergency Cash Reserves

============================================

$300,748 ………. Total Savings Needed

Property Details for 7 BITTERWOOD Irvine, CA 92604

——————————————————————————

Beds: 4

Baths: 4 baths

Home size: 4,600 sq ft

($232 / sq ft)

Lot Size: 6,780 sq ft

Year Built: 2005

Days on Market: 149

Listing Updated: 40469

MLS Number: S621737

Property Type: Single Family, Residential

Community: Woodbridge

Tract: Pt

——————————————————————————

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

Property Now a Short sale! Spectacular Custom Home in the Heart of Woodbrisge. Four Spacious Bedrooms, and Four Full Baths, PLUS Home Office,(Could be 5th Bedroom) Laundry/Craft Room,and Media/Bonus Room with drop down screen. The Master Bedroom has a Luxurious Master Bath with a Giant Soaking Tub and Separate Shower, all in travertine and granite materials. The Gourmet Kitchen has Quality Cabinetry,Chef's Sink, Walk-in pantry,Butler's Pantry,state of the art appliances,Built-in Refrigerator, and eating area which is adjacent to the Family Room with B.I.Cabinetry and Media Niche. Huge Dining Room for larger families and a Dramatic Stairway off the Decorator-Perfect Living Room with a Classic Fireplace. Flooring is a beautiful dark wood with partial carpeting.A comfortable front porch and Winding Walkway leads visitors to the Front Door of the larger front yard. Located on a cul de sac street and close to Park, Schools,Pools,Shopping etc. All offers will be submitted to lender equally.

All offers will be submitted to lender equally? Why does this agent have to make a point of saying that. Is it because listing agents screen offers to their benefit?

Money Magazine

Two years ago, I enjoyed the local attention in the Orange County Register when I published the book and my identity. Now, I am pictured in an article in this month's Money Magazine (No, I am not on the cover). Go buy the magazine and see for yourself. Hopefully, they will have an online version soon I can link to.

Whether or not you like what I write or support what I do, you have to admit, getting into Money magazine is pretty cool.

I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.

Have a great weekend,

Irvine Renter

How to Lose $1,100,000 in Irvine Real Estate

A recent trustee sale in the North Korea towers sets a new standard for housing bubble losses in Irvine: $1,099,400. Perhaps Irvine isn't such a safe haven after all.

Marquee at Park Place at Night

Irvine Home Address … 3131 MICHELSON Dr #1702 Irvine, CA 92612

Trustee Sale Price …… $653,100

He Wants To Dream Like A Young Man

With The Wisdom Of An Old Man.

He Wants His Home And Security,

He wants to live lke a sailor at sea.

Beautiful Loser, Where You Goona Fall?

You Realize You Just Can't Have It All.

Bob Seager — Beautiful Loser

The Marquee at Park Place: The North Korea Towers: The Beautiful Loser. Every original owner has lost a fortune. Some have realized their losses and given up, and some are still holding on waiting for 20 years when prices come back. Today's featured property transacted for 63% off the peak. That is quite a fall.

Was the housing bubble foreseeable? Did buyers like those profiled below simply get caught up in an unusual event, or was their foolishness obvious to anyone willing to examine the costs and benefits to make a rational decision?

I take you back to the prime of the housing bubble. In June of 2004 the kool aid was free flowing, people believed prices could only go up, and everyone who bought real estate was going to make a fortune. How wrong they were….

Penthouse Living at Marquee Park Place Offers Luxury, Panoramic Views

Publication: Orange County Business Journal

Date: Monday, June 7 2004

The luxurious penthouse condominiums atop the 17th and 18th floors of the Marquee Park Place residential towers in Irvine offer distinctive floorplans with up to 2,088 square feet of living space and panoramic views of city lights, distant mountains and the coastal horizon.

Orange County's first high-rise residential community, Marquee Park Place is being built by Bosa Development in ' the Park Place commercial and residential district. Nearly 95 percent of Marquee's 232 luxury condominiums are sold or reserved to date.

Marquee Park Place is Orange County's first high-rise residential community.

With the first move-ins scheduled for late 2005, Marquee Park Place consists of two gleaming concrete and glass 18-story towers. Each of Marquee's distinctive towers will house two-bedroom, two-bath luxury homes, as well as two-bedroom plans with den, ranging from approximately 1,275 to 2,088 square feet. Complementing the towers are four unique two-story townhomes that will be built as part of the Marquee community.

"The Marquee penthouses are elegantly designed and luxuriously appointed," said Ingrid Siikov, sales executive for Marquee Park Place. "The views from every penthouse are spectacular. When you're on the penthouse floors of Marquee Park Place, you're in your own world."

The marketing copy sounds very exciting, doesn't it? Living there seems like the American dream. And the prices will go sky high after the rich Asians come over to buy them later on.

Spectacular views

The Penthouse Plan F encompasses approximately 2,088 square feet and features a master bedroom suite with master bath and large walk-in closet. The bedroom suite has direct access to the home's expansive view deck with up to 700 square feet that commands a spectacular view of the surrounding city lights, mountains and coastal horizon.

The stylish home also has a large second bedroom with walk-in closet, spacious living room with an exterior view balcony, formal dining room and contemporary kitchen.

The Penthouse Plan H floorplan features 1,908 square feet with a view deck off the dining room and covered deck off the master bedroom.

When Pat Burkhart read about Marquee Park Place last year, she knew immediately that she wanted Marquee to be her new home. Currently living in Newport Beach's Big Canyon golf course community, Burkhart was the first person to buy a Marquee penthouse, and she says she can't wait to move in. "I'm very excited about living at the Marquee," she exclaims.

I wonder how excited she is now?

Stylish, safe living

Burkhart is not new to living in a high-rise community. When she lived in Singapore in the late 1990s, she lived in a high-rise and she says, "I loved it. I could walk to stores, movie theaters, just about everyplace I wanted to go. I think living in the Marquee will be the same."

That is part of the problem with these towers: it isn't the same as living in an urban area. It has all the inconveniences of suburban, car-dependant living and all the inconveniences of urban living — no yard, plenty of noise, and so on.

A world traveler, Burkhart says she also likes the idea of being able to lock her door and leave on a trip without concern for maintenance or security. And when she's home, she can savor the view from her penthouse vantage point. "I've wanted to live in a high-rise community ever since Singapore, and the Marquee will be perfect for me and my lifestyle."

Another penthouse buyer who can't wait to move into the Marquee is Jenny Szell, who is planning to sell her larger single-family detached home in Irvine to downsize and simplify her life. An interior designer, Szell says she lived in a high-rise apartment in Marina del Rey and was enamored with the lifestyle and the view.

"I really look forward to moving into Marquee Park Place," she says. "The convenience of high-rise living is very attractive to me. It's all very exciting."

Szell points out that she was first introduced to Bosa Development and its high-rise communities when she visited Vancouver, where Bosa is headquartered, and immediately decided that she wanted to live in a high-rise. "I was pleasantly surprised when I discovered that Bosa was building the Marquee in Irvine. It took only 15 minutes for me to complete the sale."

It took this woman only15 minutes to complete a sale on a nearly $2M condo? Brilliant!

New trend in condo sales

Burkhart and Szell are among several single professional women who've purchased Marquee homes, and they also represent a national trend in condominium sales, according to the National Association of Home Builders. About a third of condo buyers today are single women, compared to those who purchase single-family homes, where single women makeup 20 percent of buyers.

Given how bad the condo markets have already been crushed nationwide, single professional women must not be too happy about the housing bubble.

In addition to the Marquee penthouses, Siikov says buyers can still choose from a selection of the Marquee Plan E signature residences, 2,063 square-foot homes on the 13th through 16th floors. Along with panoramic views, the Plan E encompasses special amenities such as a breakfast nook, a den, powder room, and spacious living and dining room areas contiguous to the contemporary kitchen.

Beautiful amenities

All of the striking Marquee homes are appointed with the finest materials and fixtures, including quality wood cabinetry of cherry, walnut or zebrawood, and professional quality stainless steel appliances, and a state-of-the-art home-office communications/ Internet panel. Other amenities include rich carpeting and flooring selections in hardwood, limestone and marble, granite countertops, high ceilings, seven-foot interior doors, and a convenient storage locker.

Reflective of a five-star resort, the Marquee community will be served by a gated circular driveway with classic porte codiere and secured entrance leading to the elegant lobby with 24-hour concierge. Additionally, a 24-hour entry attendant will monitor access to the complex and closed-circuit cameras are stationed throughout the high-rise community. Residents and guests will park in a fourlevel, gated garage; each residence will have two reserved parking spaces in the garage.

The landscaped Marquee complex also features a business center, social room, billiards room, and an inviting outdoor plaza with a pool, barbecue area, lush gardens, and fitness facility with changing and locker rooms.

For $998 a month in HOA dues, the amenities need to be outstanding. The cashflow drain on these properties is enormous, particularly for those still paying on the ridiculous mortgages.

The Marquee Park Place sales gallery and model homes are open 11 a.m. to 5 p.m. Saturday through Thursday, and are closed Fridays.

To visit the Marquee sales gallery, from Jamboree Road take Michelson Drive east and turn left at Carlson Drive into Park Place. Drive through two stop signs going past the Edwards Cinemas, and take the first right after the second stop sign, at the six-story office building (3121 Michelson Drive) where the sales gallery is in Suite 150. Park in the parking structure adjacent to the office building (tickets will be validated). From Culver, take Michelson Drive west to Carlson Drive, turn right into Park Place.

For more information on Marquee Park Place contact the Marquee sales gallery, at 949-474-7703 or visit www.marqueeparkplace.com. For more information about Bosa Development, visit www.bosadev.com.

For more happy owners, please see Jan. 22, 2006: Orange County's high-rise era is under way.

The biggest loser

It is a policy of the IHB not to reveal the names of owners of properties. I am not out to embarrass any particular kool aid intoxicated fool but rather the mindset and thought process that produced their bad decision. Unfortunately, the name of the owner is in today's post because it is listed in the article above. I won't tell you which one because it doesn't really matter. Everyone who bought here was been wiped out.

The owner of this property paid $1,752,500 on 2/17/2006. She may have put down a deposit in 2004, but the sale is listed as occurring in 2006. She used a $1,226,600 one-year ARM and a $525,900 down payment. Ouch!

The property went up for auction on 7/2/2010 with an opening bid of $630,000: the bank was ready to lose half its stake on the courthouse steps. The bidders drove the price up to $653,100 leaving a total property loss of $1,099,400.

Let me repeat that: closed sale to closed sale, the loss was $1,099,400. The price of speculating in real estate can be quite high or those who have no idea what they are doing. Do you think the flipper will fare any better?

Marquee at Park Place at Night

Irvine Home Address … 3131 MICHELSON Dr #1702 Irvine, CA 92612

Trustee Sale Price … $653,100

Home Purchase Price … $1,752,500

Home Purchase Date …. 2/17/2006

Net Gain (Loss) ………. $(1,099,400)

Percent Change ………. -62.7%

Annual Appreciation … -17.9%

Cost of Ownership

————————————————-

$653,100 ………. Asking Price

$130,620 ………. 20% Down Conventional

4.61% …………… Mortgage Interest Rate

$522,480 ………. 30-Year Mortgage

$129,291 ………. Income Requirement

$2,682 ………. Monthly Mortgage Payment

$566 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$54 ………. Homeowners Insurance

$998 ………. Homeowners Association Fees

============================================

$4,300 ………. Monthly Cash Outlays

-$450 ………. Tax Savings (% of Interest and Property Tax)

-$674 ………. Equity Hidden in Payment

$226 ………. Lost Income to Down Payment (net of taxes)

$82 ………. Maintenance and Replacement Reserves

============================================

$3,483 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$6,531 ………. Furnishing and Move In @1%

$6,531 ………. Closing Costs @1%

$5,225 ………… Interest Points @1% of Loan

$130,620 ………. Down Payment

============================================

$148,907 ………. Total Cash Costs

$53,300 ………… Emergency Cash Reserves

============================================

$202,207 ………. Total Savings Needed

Property Details for 3131 MICHELSON Dr #1702 Irvine, CA 92612

——————————————————————————

Beds: 2

Baths: 2 baths

Home Size: 2,062 sq ft

($436 / sq ft)

Lot Size: n/a

Year Built: 2006

Days on Market: 3

Listing Updated: 40219

MLS Number: U10000651

Property Type: Condominium, Residential

Community: Airport Area

Tract: Marq

——————————————————————————

Penthouse Suite. .. 2 bedroom plus den. Highly upgraded. .. ultra luxury with 24 hour concierge. HOA dues were just lowered below $1,000. Unit comes with 2 parking spots next to elevator. .. Floor Plans can be obtained at www. bosadev. com H Model on 17th floor

Free Wine, Food and Gifts Plus a Tour of an Epic Real Estate Disaster

Astoria Central Park West begins liquidation sales today with a big event for the public from 6 to 9 PM. They are featuring wine tasting, cocktails, hors d'oeuvres, desserts and gift bags as well as tours of model units.

Irvine Home Address … 401 Rockefeller, Irvine, CA 92612

Resale Home Price …… $400,000+?

{adsense-ir}

{book1}

You sit and you stare and you wait and you wonder

You think "Maybe it's me and I'm being a fool."

You start to believe it's a curse that you're under

So let me out

Or let me in

And tell me how, we can win

Cause I really wanna know now

Before I begin

To let you go (to let you go)

So let me know

I'd rather be wandering hungry and homeless

Than here in the warmth of a silent defeat

You've gotta be honest with me and be ruthless

Ben's Brother — Let Me Out

Honest and ruthless; I can do that. Lennar and its equity partner want out of this disaster, and they would take the hungry and homeless — if they qualified for a loan. For years, we have stared with wonder, "What fools will buy there?" and live in the warmth of silent defeat like those in the North Korea Towers. We are about to find out because Astoria Central Park West is opening for tours and sales.

I first profiled Astoria Central Park West on April 4, 2009. In that post, I noted, "… Astoria at Central Park West is a clear loser — (for) the ownership entity that developed this property (Lennar has only a small investment). None of these units sold at the peak, and now that we are nearing a long, flat bottom, these units are hitting the market. The early buyers will be knife catchers, but in a couple of years, some of these units will be good buys — at about $300,000 to $350,000." The properties for sale now are floors 7-10 which should carry a premium to the lower floors. I wonder how many of the 3rd floor units they sold for $519,000? I wonder how those owners feel about the new and lower prices? Perhaps I will ask again when they sell floors 11-15….

With this profile, the grand opening gets much more exposure than it received through the concerted efforts of its marketing department. No other resource reaches thousands of people specifically interested in Irvine real estate, but they do have to give up control of the message. If an extra hundred or more people attend due to this post, do you think they will thank me? I won't hold my breath.

Astoria front Astoria People

Irvine Home Address … 401 Rockefeller, Irvine, CA 92612

Resale Home Price … $400,000+?

Income Requirement ……. $83,296

Downpayment Needed … $14,000

3.5% Down FHA Financing

Home Purchase Price … $750,000

Home Purchase Date …. 7/1/2006

Net Gain (Loss) ………. $(374,000)

Percent Change ………. -46.7%

Annual Appreciation … -16.4%

I don't know what the actual asking prices are on these units as the liquidators sellers have been careful not to publish detailed information that might discourage people from attending. The numbers I have used above are based on their website as well as rumor and speculation, and they could be very wrong.

I heard through various industry sources that Lennar had projected an average price point of around $750,000 for these units. As I have pointed out on numerous occasions with the North Korea Towers (Marquee at Park Place), cashflow valuations support about half of 2006 price levels. The North Korea Towers are likely worse due to the extremely high HOA dues, but then again, prices there have not hit bottom yet. I don't know what the HOA dues are at Astoria Central Park West, but they will likely be quite high too.

Current bids from all-cash or heavy-cash buyers at the North Korea towers are in the $350,000 to $400,000 range. Of course, none of those transact because lenders are unwilling to take the $500,000+ write-offs necessary to exit the building. Someone yelled fire (probably me), and lenders decided to stay and burn. The asking prices for the Astoria units are starting in the low $400,000s, and I would not be surprised if Lennar seduces some of the bidders from the North Korea Towers who may be enamored with the Park Place, but are tired of waiting for short-sale approval.

All Sizzle, No Meat

The website for Astoria Central Park West is slick and beautiful, but it contains almost no useful information.

If you click on the plans tab, you are shown a floor-by-floor overview of the units, but unit detail is completely absent. It is like looking at a subdivision map without the house floorplans; few care about the arrangement of units, but many would like to know how these units lay out. Putting the overview without the unit detail frustrates a potential buyer looking for information.

The features tab contains the obligatory picture of a barefoot couple lovingly enjoying their shoebox. I appreciate evocative words, but "sophisticated bathrooms?" Bathrooms don't seem like something that can be sophisticated. Sophisticated: 1 (of a person, ideas, tastes, manners, etc.) altered by education, experience, etc., so as to be worldly-wise; not naive ; 5 of, for, or reflecting educated taste, knowledgeable use, etc. Do sophisticated people in their sophisticated bathrooms have sophisticated bowel movements?–I assume it smells great, right?

If you never noticed all the bare feet in new home ads, you will now (sorry). Some marketing consultant long ago noticed that bare feet suggests the comforts and coziness of home. Doesn't the couple in the picture look like they have the life all of us want?

The sizzle on the website is real; the photo gallery shows many spectacular pictures of first-rate photography. IMO, they made a mistake by putting the inside unit pictures below the scroll line where most won't see them, but the photos themselves are marvelous.

The financing tab had an interesting surprise:

Builders often buy-down the interest rate to artificially lower the payments for early years. Personally, I think the practice is egregious differing in no way from the subprime 2/28 programs that proved so disastrous. Lennar and their partner obviously do not care about the long-term viability of ownership of buyers; any who use their advertised financing will not be living there 7 years from now. The the builder bought down the interest rate on an ARM which is taken out at the bottom of the interest rate cycle; this interest rate is going to rise, and it is going to make future payments unaffordable. I suppose these will appreciate so much over the next 7 years that it won't matter, right? Bubble thinking is not dead.

While we are on the subject of financing, I want to share a recent email I received. The subject was, "WE CAN SAVE YOUR DEAL"

I can honestly say that if an IHB client needed a 60% DTI to complete a deal that I would strongly advise them to pass rather than commit to a lifetime of debt servitude or near-certain foreclosure. As long as these lending practices persist, lenders will continue to lose money, and we will continue to have inflated, unmoving prices.

Astoria Central Park West

From 6 to 9 PM Astoria Central Park West is featuring wine tasting, cocktails, hors d'oeuvres, desserts and gift bags as well as tours of model units. I may see you there, but you won't notice me in disguise.

Irvine Home Improvements Show No Bounds

Today we have another over-improved property bought at the peak. Properties like these will rival the North Korea towers for the most foolish investments during the bubble.

15332 MONTPELLIER Ave Irvine, CA 92604 front 2

Irvine Home Address … 15332 MONTPELLIER Ave Irvine, CA 92604
Resale Home Price …… $1,250,000

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WTF

I know you’re still just a dream
Your eyes migth be green
Or the bluest that I’ve ever seen
Anyway you’ll be blessed

And you, you’ll be blessed
You’ll have the best
I promise you that
I’ll pick a star form the sky
Pull your name from a hat
I promise you that
I promise you that
Promise you that
You’ll be blessed

Blessed — Elton John

California real estate is truly blessed; you can spend unlimited amounts on acquiring and improving houses, and someone will always come along and pay enough for the owner to recoup all their foolish spending and then some. Back in October of 2009, I covered the topic of Superadequacy and looked back on a number over-improved homes littering the Irvine landscape.

Castle 1

Do you remember the
Castle at Kron and Ecclestone Circle? Or perhaps the monstrosity at Angell and Michelson? Or the Joke on Karen Ann Lane? The trend in over-improvement during the bubble is most noticeable in the omnipresence of pergraniteel.

During the bubble, the more you spent, the more you made. People
actually believed that adding common improvements — something anyone
could do to their own taste — would add more value than the
improvement cost. Flippers made money because they were there; breathing was the only prerequisite to success. Skill
and financial acumen had nothing to do with it, as evidenced by the losses they took when they were left holding the bag.

2 Angell Front

4931 Karen Ann Ln front

Home improvement and flipping shows became so common, they developed
their own channel. Like moths to a flame, fools flocked to flip houses.
The infamous flops are profiled here.

Today’s featured property is another one where you have to ask yourself, why?

Why did someone take an ordinary house — overpay for it — then
proceed to demolish it in favor of something that is vastly
over-improved for the area. This makes no sense. If this made sense, we
could drive our entire economy on building and rebuilding homes…
wait, we tried that once, didn’t we?

Yesterday’s featured property was another in the superadequacy genre.

111 HILLCREST   Irvine, CA 92603  inside111 HILLCREST   Irvine, CA 92603  kitchen

Over the last year or so, WTF asking prices have been somewhat less common as sellers simply did not bother. Now with a hint of stability in prices sellers are behaving as if the bubble never happened, the decline was a aberration, and prices have already surpassed the peak on their way to the moon.

15332 MONTPELLIER Ave Irvine, CA 92604 front 2

Irvine Home Address … 15332 MONTPELLIER Ave Irvine, CA 92604

Resale Home Price … $1,250,000

Income Requirement ……. $262,076
Downpayment Needed … $250,000
20% Down Conventional

WTF

Home Purchase Price … $770,000
Home Purchase Date …. 2/2/2006

Net Gain (Loss) ………. $405,000
Percent Change ………. 62.3%
Annual Appreciation … 12.3%

Mortgage Interest Rate ………. 5.11%
Monthly Mortgage Payment … $5,436
Monthly Cash Outlays ………… $6,630
Monthly Cost of Ownership … $4,620

Property Details for 15332 MONTPELLIER Ave Irvine, CA 92604 Superadequacy

Beds 5
Baths 5 baths
Home Size 3,800 sq ft
($329 / sq ft)
Lot Size 6,000 sq ft
Year Built 2007
Days on Market 10
Listing Updated 1/22/2010
MLS Number P718464
Property Type Single Family, Residential
Community El Camino Real
Tract Rc

Located in the heart of Irvine, spectacular and magnificent home custom designed by a renowned architect and completely remodeled in 2007, with spacious living room, dining room, family room, den, office, and 5 spacious bedrooms upstairs, each with attached full baths and built-in closet organizers. Top-notch materials, including imported travertine, wood, and bamboo flooring, iron-wrought stairway, upgraded crown molding, baseboards, and window treatments, all new electrical, plumbing, dual-pane windows, enhanced insulation, dual central AC/heating, and so much more to impress your guests. Gourmet kitchen with upgraded dark cabinetry, stainless steel appliances, and granite countertops. Upstairs laundry, large driveway, 3-car direct access garage, close to nearby park, schools, shopping & freeways. Great Irvine school district. Don’t miss this rare opportunity to own this incredible home! * Seller bought another home. * Not a short sale. * Please call to schedule a showing.

Gourmet Kitchen Award

Not a short sale. Sure at this ridiculous asking price, it will not be a short, but when it rolls back to comparable value, it might end up a short.

The owner bought the original house at the peak, and demolished the value that was there, and spent hundreds of thousands rebuilding while comparable values were tanking. If he is lucky, the improvements may have brought the house back up to his purchase price, but recouping the renovation costs and making a profit?– I don’t think so.

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Beacon Economics 2010 Orange County Forecast

Christopher Thornberg, principal of Beacon Economics, delivered the Beacon Economics 2010 Orange County Forecast. I attended, and I report to you today.

6002 SIERRA SIENA Rd Irvine, CA 92603 kitchen

Irvine Home Address … 6002 SIERRA SIENA Rd Irvine, CA 92603
Resale Home Price …… $899,900

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{book1}

Burning beacon in the night
Can’t feel its heat, or see its light
That single solitary guide,
it must get lonely there sometimes

The Beacon — A Fine Frenzy

It was lonely being right about the Housing Bubble. Surrounded by a world gone mad, solitary voices of reason like Christopher Thornberg, principal of Beacon Economics and formerly with UCLA Anderson Forecast, were ridiculed. He watched as his opinions were disdainfully set aside as the ravings of one of those “bears.”

I recently attended Beacon Economics 2010 Orange County Forecast hosted by the Building Industry Association. Christopher Thornberg gave the keynote address, and he was fantastic. When you compare his presentation with the awful UCLA Anderson Forecast Orange County, you fully appreciate what UCLA lost when he moved on.

The PowerPoint of his presentation is BIASDDec09.pdf

One slide that caught my attention was the one below that shows the inflation adjusted house price change since 1997, the last bottom. I covered this issue in the post called 1997 where I demonstrated that house prices are still well above where they should be if market conditions that existed in 1997 are extrapolated to today. Chris Thornberg’s chart matches my observation — Orange County is still vastly overpriced by historic standards, and so is most of California.

Another slide that caught my eye is the delinquency and foreclosure chart. See those two little bumps on the left side? Those where the catastrophic market-crushing foreclosure crises of the 80s and 90s — our current mess is four-times as bad, and we have not hit anything that looks like an identifiable peak. Yikes!

Beacon Economics is predicting a “W” shaped recession as shown on the slide below. Basically, if you were to take the 3 huge downspikes and imagine a big “U” that ties back in to the 3rd quarter of 2011, you see what would have happened if the Government would have done nothing. All GDP growth between now and 3rd quarter 2011 is a direct result of Government intervention. Like a surfer riding out a wave, our economy and our housing market is trying to drift to shore where we can step off in the surf without going underwater. Do you think the Government’s efforts will be successful? Homeowners sure hope so.

The big questions he raises generally pertain to Government policy. In the oral presentation, Mr. Thornberg lamented the difficulty of predicting where the economy is going when it isn’t economics he is trying to forecast, it is Government policy. As was discussed in Who Will Fix the System? our housing market is more dependent upon decisions in Washington than any other factor.

Notice from the summary that Christopher Thornberg is not calling a bottom in housing; in fact, since he is calling for a double-dip, he isn’t calling the bottom of the recession either.

On the subject of financial regulation, Christopher Thornberg was adamant that the problem is one of incentives; investment bankers and other Wall Street players pocket copious cash on manipulated market moves. As long as the system rewards volatility and malinvestment, we will have booms and busts where the winnings are privatized and the losses collectivised.

One thing he said that caught me by surprise was his characterization of Ron Paul as either a lunatic or a moron. Ouch! I know where he is coming from, Ron Paul’s ideas are loopy; shutting down the FED, eliminating the IRS, and so on; however, Ron Paul’s loopy ideas now making sense (and perhaps they never were loopy to begin with).

I don’t envy Christopher Thornberg’s task; he is making a living telling people what they don’t want to hear. It must be costing him money. He would certainly be more popular if he shilled like the UCLA Anderson Forecast Orange County, but his personal ethics get in the way.

I admire that….

6002 SIERRA SIENA Rd Irvine, CA 92603 kitchen

Irvine Home Address … 6002 SIERRA SIENA Rd Irvine, CA 92603

Resale Home Price … $899,900

Income Requirement ……. $190,170
Downpayment Needed … $179,980
20% Down Conventional

Home Purchase Price … $380,000
Home Purchase Date …. 11/26/1996

Net Gain (Loss) ………. $465,906
Percent Change ………. 136.8%
Annual Appreciation … 6.4%

Mortgage Interest Rate ………. 5.18%
Monthly Mortgage Payment … $3,944
Monthly Cash Outlays ………… $4,920
Monthly Cost of Ownership … $3,590

Property Details for 6002 SIERRA SIENA Rd Irvine, CA 92603

Beds 4
Baths 1 full 2 part baths
Home Size 2,516 sq ft
($358 / sq ft)
Lot Size 6,783 sq ft
Year Built 1971
Days on Market 1
Listing Updated 1/14/2010
MLS Number P717571
Property Type Single Family, Residential
Community Turtle Rock
Tract Bm

Turtle Rock Broadmoor Model G. Secruity gate & double door entry; 3-car garage. Fresh 2-toned painting, scraped ceilings. New floorings-upgraded carpet and laminated wood. New vertical blinds. Above-ground spa w/new cover. Downstairs master BR w/remodeled master bath. New grainte kitchen countertops, stainless stell sink w/GE range & dishwasher. Bonus/game room has a pool table and antique light fixture. Brand new water heater w/earthquake straps in garage. Overlooking community park and pool. Many upgrades unmentioned. Priced below market value for quick sale, please hurry!!

Secruity? grainte?

Many upgrades unmentioned. If they are worth mentioning, shouldn’t you mention them? It isn’t like people are worried that you might run over on your description word quota.

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This is the first really desirable property I have seen where I did not recoil with revulsion at the price. Does that make it reasonable? Based on my calculations, this property would cost about $3,600 per month to own. I imagine it would rent for that much (I didn’t pull comps), and I can see where someone at an income level to afford $3,600 a month might want to own a property like this long term. This is a debtor’s prison I might be willing to sign up for… if I could afford it. There are worse places to spend the next decade.

This seller is going to really annoy the neighbor at 6232 SIERRA SIENA Rd Irvine, CA 92603 who I profiled in Doubling Time by offering this comparable property for $370,000 less. Perhaps it will be a dose of reality, but most likely it will prompt further denial.