Speed of Sound

An ode to all of us waiting our turn to own a house in Irvine…

How long before I get in?

Before it starts, before I begin?

How long before you decide?

Before I know what it feels like?

Where To, where do I go?

If you never try, then you’ll never know.

How long do I have to climb,

Up on the side of this mountain of mine?

Look up, I look up at night,

Planets are moving at the speed of light.

Climb up, up in the trees,

every chance that you get,

is a chance you seize.

How long am I gonna stand,

with my head stuck under the sand?

I’ll start before I can stop,Coldplay 1

before I see things the right way up.

All that noise, and all that sound,

All those places I got found.

And birds go flying at the speed of sound,

to show you how it all began.

Birds came flying from the underground,

if you could see it then you’d understand?

Speed of Sound — Coldplay

Link to Music Video

Nearly every line of that song has meaning for those of us watching the deflation of the housing bubble from the sidelines. How long before you get in?

Well, if you are an entry level buyer, today’s property is a market entry point. These are basically glorified apartments, but they typically represent the lowest priced properties in the marketplace. At $450,000 it provides a great example of how crazy our prices are.

17 Alderglen Front 17 Alderglen Kitchen

Asking Price: $450,000IrvineRenter

Income Requirement: $112,500

Downpayment Needed: $90,000

Purchase Price: $452,000

Purchase Date: 7/16/2004

Address: 17 Elderglen #15, Irvine, CA 92604

Beds: 3

Baths: 1.5

Sq. Ft.: 1,220

$/Sq. Ft.: $369

Lot Size: –

Type: Condominium

Style: Townhouse

Year Built: 1978Rollback

Stories: Two Levels

View(s): Park or Green Belt

Area: Woodbridge

County: Orange

MLS#: S503013

Status: Active

On Redfin: 14 days

From Redfin, “Great opportunity in desirable Community of Woodbridge. This home features laminate floors throughout the main living area, living room fireplace, kitchen with newer kitchen cabinets and counters, eating area in kitchen and large laundry area which doubles as a pantry. Master bedroom has huge mirriored closet. Large enclosed patio with storage area, and direct access to your own carport. Newer water heater, newer heater and A/C unit.”

Direct access to your own carport? WTF? Is there another kind of access to a carport? Easy access to an insecure roof structure separated from your apartment condo where you can park your one car. Yea, that’s a plus.



If you are making over $100K, is this your dream home?

This is a pretty deep Rollback in Woodbridge: a 2004 loser. I don’t know which is more insane, the current asking price, or the fact that someone paid more than that in 2004?

I would estimate you could rent this for $1,800 based on the third bedroom; nothing more because the lack of a second bath. With a gross rent multiplier of 160, this place is worth about $288,000. This would put it within reach of someone making $72,000 a year, which is below the median.

If this seller gets their $450,000 asking price and pays a 6% commission, they stand to lose $29,000. Doesn’t sound like a lot, but then again, this was a “sure thing” back in 2004. They should be figuring out how to spend their $100,000 in profit, not selling at a loss.

77 thoughts on “Speed of Sound

  1. carl

    This is the first property you have profiled that I could actually afford! Astounding! And it actually costs less than the 5 bedroom house I own in Raleigh, NC.

    Of course, things will have to get a lot cheaper until I come back. I wonder how many people are in my mode of thinking? We love Irvine and Orange County, but had to leave because we couldn’t afford it, but plan (or hope at least) to come back as soon as we can. Maybe we represent a slightly higher bottom level of support for Irvine, because I would be willing to pay a premium to live there…. it is just I refuse to spend more than I can afford on an apartment.

    BTW, can you believe that people that earn over 100k can’t afford to live in Irvine unless we rent (not an option for my wife) or we get in deep underwater?


  2. RickHunter

    Finally IR! Music for the younger folks on the blog…LOL

    I was having dinner with my girlfriend and her colleagues yesterday and heard disturbing news. The periodontis informed me that the bank was reposessing her friend’s house. Guess what that friend does for a living?

    He’s a doctor. I dont know which kind but apparently, he went too far in his spending. She said that he still has his Mercedes though…LOL

    So the moral…?

    Folks that have jobs that pay $250K + took out loans they cannot afford. Even they are not immune to this Real Estate bust!

  3. Mr Vincent

    I rented an apartment for a few months that had carport parking. After that, I had one of those Gone With The Wind moments where i said to myself: “As God as my witness, I will never do that again”.

    I would not pay any price for this place. And for you future real estate investor moguls – I also would not buy it as an investment. I am reminded of my number one rule in real estate investing: Never buy a place that you yourself would not live in, because someday you might have to.

  4. IrvineHomeowner

    yeah, and another pretty good rule for investors is don’t buy a place that negative cash flows thousands and thousands of dollars per year. The goal for the investor should be to make money, I think.

  5. ochomehunter

    I live in Laguna Hills, 1400 SF townhome and pay $1450, its got most newer stuff, and carport. Heck, why would I every buy this piece of trash? I am one happy renter in OC waiting for my fair turn to pickup a single family home some day.

  6. i_left_too

    Same for me carl. I am in the Charlotte area and would only consider returning once the market has truly bottomed out. It will be interesting to see how long it takes for that to happen.

  7. caliguy2699

    To go along with the carport issue, another one I would add is to never rent/buy a two-bedroom place with only one guaranteed parking space (whether it be a single-car garage or just a one-car carport). Not worth it having to worry where you’re going to park your second car each night, assuming there are two people living there.

    And to that list a tandem garage in a place you buy or buy and hope to rent out should be a no-go as well.

    Heck, I wouldn’t even want to rent or buy a one-bedroom/den place with only one parking space, unless parking is absolutely not an issue.

  8. Iblis

    Yesterday in front of the Trader Joes at Walnut & Culver the LaRouche guys were out collecting signatures to impeach Cheney. Their line was “Foreclose on Cheney, not all those families!”.

    Simple answers and fanaticism are just peas in a pod.

  9. N Cty

    There are obviously people waiting and even will pay a premium for Socal housing.

    My point is that people don’t follow charts and there are emotional attachments to the essence of ‘home’.

    At what point does the ‘sell when everyone is buying and buy when everyone is selling’ take over?

    Also, this apartment conversion crap is exactly that. But then again maybe you have to start somewhere.

  10. Adam

    As a Midwest transplant, the last time I can remember it “truely” rained was the record setting year of ’05. Everything else since has been nothing more than spittle.


  11. ocrebel

    just found an amazing return on QH condo:

    208 TALL OAK #208, Irvine, CA 92603

    List Price: $619,900

    Last Sale: 05/22/06
    Sales Price: $720,000

    Bedrooms: 3
    Full Baths: 3
    Partial Baths: 1
    Square Feet: 1,607
    Lot Size: N/A
    Year Built: 2004
    Listing Date: 09/10/07
    On Market: 4 days
    Type: CONDO/TH
    Status: ACTIVE
    MLS #: F1733852

    “Bank owned- foreclosure agents please refer to agents remarks for prudent info. On showing instructions etc….Fabulous town-house with great floor plan, extremely sunny and bright,private end unit with abundance storage spaces. 1 bed room,1 bath downstairs liv, dining huge kit. And 1/2 bath upstaires, master suite + 3rd bedroom and bath on the top floor. Show anytime all offers must be presented with 3%deposit proof of funds &pre qualify. ”

    any taker?

  12. IrvineRenter

    “At what point does the ’sell when everyone is buying and buy when everyone is selling’ take over?”

    Late in the game. There is a time period when everyone is selling, and everyone should be selling. That time is now. When the numbers make sense is when it is time to start buying. Everyone will still be selling then.

  13. lendingmaestro

    The quail hill area will be interesting to watch. Since these were first sold in 2004 brand new from the builder, during the prime time of the housinf bubble, I believe they fall below the original price.

    Builders were making money hand over fist, selling properties far exceeding their intrinsic value (cost of construction). This is evidenced by the 100k price reductions builders are having right now. These properties have a long way to fall. $300 per sq ft would bring this place down to $482k.

  14. IrvineRenter

    I saw one this spring on Steppingstone offered for $2,500. The range for the 3 bedroom condos is probably $2,300 – $2,800 per month. GRM values of $368K to $448K.

  15. American-Screamer

    I wonder if using current rental amounts for calculating cash flow vs. buying costs is really a good measure. I have seen many more rentals on craigslist that are also current running in the realestate section. Wouldn’t lots of SFR, condos and townhomes coming on the rental push down rents thus enhancing the need for even further price reductions?

  16. No_Such_Reality

    Can someone share the “prudent info”

    Is it AKA, your comission will suck and “as is / where is”?

  17. No_Such_Reality

    Yes. But, there’s bigger issue. Getting them off the listings does something far more important, it removes the wishing prices from in front of the starry filled eyes of landlords who then thing that’s the going rates.

  18. No_Such_Reality

    I’m guessing it’s a rental. Or the owner and RE agent is incredibly lazy to not at least fold the bed comforter back down.

    Also, with the run up, would a owner stay with 3 or more kids in that apartment? I couldn’t tell if the bunkbeds were set up as beds on top, desks underneath like a dorm or if it was four beds. If guess if it was 4 kinds the 3rd bedroom would have bunk beds too. This looks like 2 boys and 1 girl.

  19. jj

    I also believe that rental value is only correlated to the RE price to a certain extent. The correlation isnt absolute and doesnt hold beyond a low end range.
    Same thing is true for $/sqft. As an example you can have same sqft but if one property is on 1 floor vs. another one on 3 floors they may be in same community and across the street, they will command different prices.

  20. NanoWest


    As the banks sell off the properties, will the selling prices be used for the comps on all of the other homes in the area? Or does the appraiser sort of look at the foreclosures and figure they are a one-time exception? Any appraisers out there that can tell us what banks are requiring at this point?

  21. covered

    We had one on about a month ago who said “officially” they can’t use them but everybody in the hood knows it is one and so should the agent. I’d be interested to hear from a local appraiser not just about this…but if they are still getting the extreme pressure to “MAI” (make as instructed) their appraisals and the recent changes in their business.

  22. jim jones

    To me the only thing more depressing than coming home to this place every night as a rental would be if I owned it. YUCK. I agree there is a lot of emotion involved in a realstate purchase. I actually got to particepate in a bidding war myself years ago. But that was for an SFR not for a crappy apt. I’ve been trying to understand the mindset of folks who would pay anything much less 452k for this place. I don’t get it. If I can only afford to live in a condoapt I sure as heck don’t want to own the place. Yikes

  23. graphrix

    Maybe so but we know who you are talking about. Thanks for posting it and BMIT is a great blog with a lot of great posts right now.

  24. hoover

    Probably could afford it, just not that AND the Mercedes and the Medical School student load debt and the credit cards and the vacations in Maui and Lake Pomo and so on and on…

  25. graphrix

    The latest census fact sheet for Irvine is available.


    2006 has been revised down on all data points from 2005. It seems that they must have overestimated the growth.

    I will have more data points to post but the one that needs to be mentioned now is:

    In 2000 22.4% spent 35% or more of their income on their mortgage.
    In 2006 39.2% spent 35% or more of their income on their mortgage.

    This is survey based not the census taking some guess at what type of mortgage people have. In 2000 more people were actually paying principle and in 2006 many are not. I suspect that the number would be higher if they were paying a fully amortized payment.

  26. biscuitninja

    ok, i’m not a first time buyer… but I know a few…
    actually I just figured out I’ve owned 16 homes (though the most I’ve ever had at one time has been 7).
    Good luck

  27. mark

    Bella Tiera in Laguna Hills was selling apt converts with carports earlier this year in the $400s. I wonder what the asking price is today for whatever inventory may be left?

  28. JimAtLaw

    How did we get to a rent multiplier of 160 for a price of 288? I thought the traditional multiplier was 100-120?

  29. IrvineRenter

    For a rental property to positively cashflow a GRM of 100-120 is right. The breakeven point for an owner occupant is around 160.

  30. lendingmaestro

    You absolutely can use them as comps, because they are recorded sales. In fact, I would argue that if the appraiser purposefully omitted it as a comp he/she would be in hot water.

  31. JimAtLaw

    Ahhhhh – after subtracting for what would otherwise be your rental costs, understood.

    Of course, if you throw in HOA fees, I imagine this tilts the balance back a bit though, let alone Mello Roos, which would probably push you back closer to the rental property math (if not further)…

  32. lendingmaestro

    This place will never drop that much in value IMO (below 300k). This gives you an idea of how hard it is to find rental properties that are good investments in California.

    Commerical real estate yields much better returns compared to residential real estate, but it requires much more capital.

  33. JimAtLaw

    Wait a second, why wouldn’t a sale of a foreclosure be used for a comp?

    If it’s “bought” by the bank for the loan value, then yes, it wouldn’t make any sense to use that value since the loan amount due may not correlate well to the market value for a property, but if it’s bought at the trustee’s sale by a third party, then that’s what the property sold for in an arm’s length transaction, and it should certainly be used!

  34. MarkChallengingPerspectives

    Homeowners will be using these “sales” as comps over the next few years as they contest their assessments.

  35. MarkChallengingPerspectives

    It’s hard in densly populated cities of “wealthy” people to find bargain properties to cash flow positively. These markets are efficient in finding undervalued residential real estate and quickly bring them back to value.

  36. MarkChallengingPerspectives

    Does anyone think it’s inappropriate to consider the tax consequences when evaluating DTIs? e.g. Say a prospective purchaser in the 37% tax bracket and determines a home would be at 28% DTI (total housing debt to gross income). And although this is traditionally an acceptable max, he’s not comfortable. Should he find comfort in the fact that after considering the mtg interest and property tax deductions his DTI is more like 21% because the difference is simply being shifted from income taxes to mtg interest and property taxes?

  37. No_Such_Reality

    LM, do you think that’ll change if the credit crunch continues and banks start to really look at whether a property is owner-occupied versus going to be a rental/investment?

    I think Cali get’s property snapped up at owner breakeven because many people dabble using owner-occupier financing thinking in 5-7 years, it’ll start to cash flow.

  38. covered

    I agree on the foreclosures to third parties. That should be black and white. Maybe it was REOs I was thinking about. There’s a loophole in there somewhere… I’m almost sure of it but I could easily be wrong. Something about the lender being high bidder by a penny at the trustee’s sale and a reversion back to the mortgagee rather than a deed transfer. That’s why I wanted to hear it from someone who appraises houses for a living.

  39. ochomehunter

    Is there something that is going to happen that we dont know about and these home builders do? About three builders have setup a 72 hour sale starting Saturday and finishing on Monday, trying to offer huge incentives and huge discounts? May be something that has to do with Fed! May be they know that there wont be a rate cut so they will get on whatever deposits they can and strangle few knife catchers?


  40. ochomehunter

    FYI – Fed’s decision comes out on Tuesday and thsese offers will run until Monday, ahead of the Fed’s decision?

  41. Sue

    A run on the bank in England

    Northern Rock Customers Crowd Branches, Withdraw Cash (Update3)

    The Bank of England said it will provide emergency cash to Northern Rock, Britain’s third-largest mortgage provider, in the nation’s biggest bailout of a financial institution in 30 years. The rising cost of credit left the lender unable to make new loans and stoked concern among customers about their money.

    Northern Rock, which has 1.4 million retail depositors and 800,000 mortgage customers, hasn’t imposed any special limits on withdrawals, spokesman Don Hunter said. The Newcastle, England-based company, which traces its roots back to 1850, had to restart its Internet banking site “over a period of time” today after unusually high usage froze the service, he said.

  42. MarkChallengingPerspectives

    I think all of the builders are trying to get rid of as much inventory as possible over the next couple months ahead of any “wave of foreclosures.” Prices are in a downward spiral and they know that they’re not going to bounce back soon. So its a “get your cash now any way possible and bunker down for the down years” and hope to survive.

  43. Sue

    Greenspan Book Criticizes Bush And Republicans


    Left alone, he said, the Fed’s policy-making body, the Federal Open Market Committee, can keep inflation between 1% and 2%, but that could require forcing interest rates to double-digits, a level “not seen since the days of Paul Volcker,” his predecessor as Fed chairman. “I fear that my successors on the FOMC, as they strive to maintain price stability in the coming quarter century, will run into populist resistance from Congress, if not from the White House,” he writes.

    If the Fed succumbs to that pressure, inflation could rise from a little over 2% at present to an average of 4% to 5% by the year 2030, he writes. Ten-year Treasury yields, now below 5%, will rise to “at least 8%” with the potential to go “significantly higher for brief periods.” This, he says, will lead to stagnant returns on stocks and bonds and much smaller gains in housing prices.

  44. Sue

    Selling a home without an agent comes with risks, rewards

    ‘I did everything myself’
    In many ways, real estate investor Joseph Compositor represents the home seller of today — and possibly the future.

    The Irvine resident decided this year to put his home and one he had bought for his son up for sale — and decided to do it himself. So he placed ads on Craigslist, signed up with a free service that got his listings in the MLS, spent a few hundred dollars on slick brochures, bought newspaper ads and networked in the neighborhood.

    “I did everything myself,” he said.

    With the potential savings on commission costs, Compositor figured he could set his asking prices below all others in the area.

    The homes sat for six months, and then two offers came in on one of the houses on the same day at full price.

    “It was so easy,” said Compositor, who paid a 2.5% commission fee to the buyer’s agent and hired a real estate attorney to help him with the paperwork.

    But his other house hasn’t seen a nibble, even after a $40,000 price reduction.

    So Compositor threw in the towel this summer and hired a full-service broker to get things moving.

    Two months later, the house is still for sale.

    “I’m convinced it’s all a matter of luck.”

  45. Sue

    Condos Hit Auction Block At Bargain Price


    According to consumer reporter Bob Hansen, a new report from Data Quick Information Systems showed August home sales in Southern California fell by 36 percent.

    What impact does this have on San Diego?

    The La Boheme Building in North Park on Ohio Street near University Avenue will be the site of a condo auction this weekend.

    The one and two bedroom condos were first offered up between $300- and $500,000. But this Saturday, 35 condos in the building are being auctioned off, with starting bids beginning at $149,000.

  46. NanoWest

    Gee——after reading this article I think it the real estate market are going to be OK………….
    especially if the home developers are willing to have a red tag sale and throw in a 15,000 dollars worth of trinkets like a washer and tv. Makes me want to go out an buy a 700,000 dollar place right now.

    The developers are pulling out all the stops to lure the last remaining suckers into the market. Here little suckers, here little suckers……..

  47. corea

    Once you start hitting the higher tax brackets the AMT clobbers you and none of your property taxes become deductable. The same goes for CA state taxes. After a few deductions your basically left with a flat tax rate.

  48. leslee

    Skyline at MacArthur Place in Santa Ana started building their 349 unit high rise condo project last January and missed the market to start sales at the worst timing. last month!…at $700K for very small one bedroom units and now are at the 18th floor of construction with only 18 in escrow!! they have slashed prices and still no sales so the prediction is from other developers that these twin towers will convert to “for rent” apartments!

  49. Ames Tiedeman

    The bubble is huge, yes. But keep in mind that these bubbles are regional. Look at how well places like Austin, Texas, are doing. We have never had a national housing collapse except during the Great Depression. Regions like San Diego that have been hit and will fall further will be much higher in the next 10-15 years. A bubble yes, but opportunity awaits.

  50. ph

    No kidding. Even the rent prices $1800 is more than what I wanted to pay for when the laundry area can double as a pantry. I guess the realtor felt compelled enough to mention it since everyone wants their laundry room to double as a pantry!

  51. ph

    Funny, didn’t Greenspan started this whole mess. I guess if he was still in charge he would cut the interest rates to negative territory. Whoopi, we all be making money.

  52. awgee

    They do not know anything that you don’t. Some of the builders are starting to get desperate. More will become desperate. And they will become more desperate. Anecdotally, I went to check out one of those promotions on Friday, and I was the only one there, besides the salespeople. Have any of you all gone to any of these promotions? Or do you intend to go?

  53. awgee

    Has anyone else noticed that Merrill is calling these “fair value adjustments”, instead of mark to market? What the heck is “fair value”? There is mark to market and there is b______t, and there is no “fair” inbetween.

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