Need a New Castle? ** Update 1 **

Newcastle Front

Old Asking Price: $549,000

New Asking Price: $490,000

Purchase Price: $555,000

Purchase Date: 7/19/2006

Address: 609 Newcastle, Irvine, CA 92620IrvineRenter

Beds: 2
Baths: 2
Sq. Ft.: 1,260
Year Built: 1998
Stories: 2
Type: Condominium
View: Mountain
County: Orange
Neighborhood: Northwood
$/Sq. Ft.: $436
MLS#: P564715
Status: Active on market
On Redfin: 68 days

From Redfin, “Great Location in Northwood’s gated community, Spacious Kitchen with w alk-in pantry, lots of cabinets, Master Bedroom with master bath and walk-in closet, Inside laundry, Private Balcony, Close to schools, park, shops, Community Pool/Spa and much much more!!!” More exclamation points…

.

.

New CastleThis flipper didn’t even bother putting in granite tops…

As you have probably noticed, the low end of the market is showing the most signs of stress. Assuming a 6% commission, this flipper stands to lose $38,940. That’s almost $4,000 per month over the 10 months of ownership. Also, it probably won’t sell at this price, so the expect that loss to grow.

This poor seller may have to go cry in his beer…

** Update 1 **

With the new, significantly-lowered asking price, this flipper now stands to lose $94,400 after commissions.

17 thoughts on “Need a New Castle? ** Update 1 **”

  1. carl

    Irvinerenter,

    I have what may be the first failed single-family home flip in Turtle Rock. Check out 55 BETHANY DR IRVINE, CA 92603-3544. It’s currently selling for $829,000. I used to live about 6 houses down. I went to an open house and it is beautiful inside, but it’s small and backs to Turtle Rock Drive. I knew the previous owners (who sold in 2006) and it sure looks like they got away with murder, doesn’t it? They house was completely remodled between the 2003 and 2004 sales, so I don’t suspect any funny business here. Redfin says its been on 21 days but I know for a fact it has been on since at least Feb of this year.

    From Redfin:
    Date Price
    09/15/2006 $805,000

    03/03/2004 $656,000

    09/08/2003 $280,000

    09/19/1988 $319,000
    —–

  2. IrvineRenter

    Carl,

    Thank you. I did notice that one a few days ago when I was looking around Turtle Rock. I didn’t profile it because they are still asking a profitable sales price (maybe not when you look at commissions).

    If you know it has been on the market since February, it would qualify for a knife-catcher award (less than six months ownership), so maybe I should do it for that reason.

    Let’s watch for an asking price reduction and see what happens…

    Thanks again.

  3. socalhousingbubble

    609 Newcastle would appear to be essentially similar to Lennar’s Meriweather #1 in Columbus Square.

    Last known prices for these new units was $515k.

    VoC may have higher taxes, but the Newcastle unit is ~9 years old.

    SCHB

  4. Justin

    Does anyone see this falling below 400k ever?

    I’m willing to bet they do by the end of 2008.. I will say 450k by the end of this year.

  6. crucialtaunt

    Justin,

    Based on price per sq ft, the asking price for this “featured property” is around $435/sq ft. I would venture a guess based in IR’s research and predictions for the Irvine/OC market in general, that the “resistance level” is around $280-$320 for price per sq. ft. By that theory, this one could be valued at $352,00 – $405,000.

    IR, care to comment?

  7. IrvineRenter

    That looks like a good range. Assuming you could rent this for about $2,250 a month, a breakeven rental equivalent price is about $360,000. For it to cashflow to an investor, it would need to drop to about $270,000. If the rent is higher, the values would be higher as well. If products like these get dumped on the market in large numbers, you could see under $300K prices simply because the investors would be needed to clean up the mess.

  10. No_Such_Reality

    Is pretty steep. Why pay $2250 here when you can rent in Northwood for $1800? Or Sienna for $2000? We already know IAC and the others are softening their rents and the 1/2 off and other offers are starting.

    In 1999, Irvine was a well established community. The housing market had turned the corner and had already rebounded to the mean for housing.

    In 1999, 609 Newcastle sold for $198,000. Adjusting for inflation, that would put a current price at about $239. Add a few years to get there and you are at $250,000. Using $1800 as a rent base, you’d get a rent cash flow at about $210K.

    It’ll take a bit, maybe 3 years, but I suspect this place will go below 300 and possibly push mid-twos.

  11. Justin

    Yeah I took the 1999 price and adjusted for inflation, it is possible to get back down to 200k range but I think it won’t go down that low, just because I want it some badly. I will be able to afford 350k, it will be a real investors paradise in the following years.

  12. No_Such_Reality

    Don’t count on it Justin. Read up on the Depression. I’ll give you one guess what fell fasting than housing… it was rent.

    Similarly, we have a lot of properties that came on the market for apartments. We have a lot of units being built in condo developments that have already broken ground and we have a lot of housing units sitting empty. We also have occupancy levels approaching the large Apartment Corps comfort levels and dropping.

    Like the 90s, rents will be weak. They’ll hold the MSRP rent level, but their occupancy level is going to suck and they’ll cut move-in deals for 13th month free, etc. So if you’re willing to move, you can get a great deal on rent. If not, you’re shafted.

    At the same time, for investment purposes, it’ll look bleak. But, maybe you’ll get it and be able to swing the two+ months empty. Not to mention surviving the real bitter renters that got foreclosed and are now renting places smaller and crappier than the McMansion they “owned” with the 1% option ARM.

  14. Justin

    1% mta with a “minimum monthly payment option”

    gotta love it

    If wages stay up or decline slightly but property values and rent fall then won’t that save us from a recession? more income going to retail outlets etc.

    So you really see the vacancy issue rapidly dropping prices in conjunction with the overall market slowdown?

    It all will lead to declines. I suppose that’s what matters to my generation (18-25yr olds) who can’t afford a starter home right now.

  15. IrvineRenter

    “If wages stay up or decline slightly but property values and rent fall then won’t that save us from a recession? more income going to retail outlets etc.”

    Probably not. Remember, many of the homeowners out there were using their home as another source of income by borrowing against their equity to stimulate consumer spending. The decline in home values will eliminate this source of income for spending.

    After the crash, spending will pick up again because many people will be freed from crippling debt service payments; however, the road from point A to point B is through a severe local recession.

    “So you really see the vacancy issue rapidly dropping prices in conjunction with the overall market slowdown?”

    Yes.

    “It all will lead to declines. I suppose that’s what matters to my generation (18-25yr olds) who can’t afford a starter home right now.”

    Yes, and yes. High prices for entry level housing hurts everyone except current homeowners. Businesses cannot expand because they cannot attract employees due to high housing costs; young people like yourself can’t afford to live here.

  16. Justin

    Thanks!

    I can’t fathom using my house as another source of income, the American consumer is a special breed of debt creation generated by living 3 steps ahead.

    I seriously can’t wait for all this to happen, as cynical as that sounds, I am sick of living in cramped apartments and having nobody under 25 owning their own home.

    You guys need to form a team and present your empirical evidence and predictions to some sort of real estate/lending body, you could make a killing if other investors followed your predictions.

Comments are closed.