This house goes on sale ev’ry Wednesday morning
And taken off the market in the afternoon.
You can buy a piece of it if you want to
It’s been good to me if it’s been good for you.
Take the grand look now the fire is burning
Is that your reflection on the wall?
I can show you this room and some others
If you came to see the house at all.
The House Song — Peter, Paul & Mary
It is Wednesday, so I assume the house is for sale. I suppose part-day listings is one way to generate a sense of urgency. During the rally flippers were practically day trading houses.
Asking Price: $585,000
Income Requirement: $146,250
Downpayment Needed: $117,000
Purchase Price: $585,000
Purchase Date: 12/01/2004
Address: 14781 Doncaster Road, Irvine, CA 92604
1st Loan $468,000
2nd Mtg. $87,750
Downpayment $29,250
Beds: 3
Baths: 2
Sq. Ft.: 1,216
$/Sq. Ft.: $481
Lot Size: 5,000 sq. ft.
Type: Single Family Residence
Style: Contemporary
Year Built: 1970
Stories: One Level
Area: El Camino Real
County: Orange
MLS#: S506347
Status: Active
On Redfin: 16 days
From Redfin, “BEAUTIFUL SINGLE LEVEL IN A GREAT LOCATION WITH PRIVATE ENCLOSED FRONT COURT YARD. WALKING TO SCHOOLS, PARK & LIBRARY. NEW KITCHEN, BATHROOMS, HIGH BEAM CEILING, DOBLE PANEL WINDOWS, SLIDING DOORS, SKYLIGHTS, HARDSCAPED, COVERED LATTICE PATIO, 20X20 PORCELAIN TILE, CENTRAL AIR AND HEATING SYSTEM.”
ALL CAPS, AGAIN.
What is a DOBLE?
.
.
$481 / SF in El Camino Real? Good luck with that. If this property sells for its asking price assuming a 6% commission, the borrower stands to lose $29,250 (a total loss), and the bank stands to lose $5,850.
What commentary would you like to see closing this post?
- Greedy buyer gets burned?
- Poor homeowner leaves broken hearted?
- The market continues to drop?
- California dream a nightmare?
- Stupid buyer should have known better?
- Another victim of unscrupulous lenders?
How about, “It is what it is?”
“Stupid buyer should have know better” pretty well covers it.
This is exactly the type of commonplace house that Americans of ordinary means are supposed to be able to aspire to- a smallish, aging home with no distinction but fairly comfortable and not too cramped.
We’re pretty far away from the proverbial “American Dream” when a prosaic ranch house past its best years sells for a price that requires an income that only 3% of the population of this country has.
After listening to other Irvine posters in here, and judging by Irvine incomes, this little place should sell for about $300K, max.
—–
I’ll make it a movie pitch: how about, “Convinced hysterical real estate prices make perfect sense, buyer makes a terrible miscalculation. Heartbreak (or hilarity) ensues.” It works as either tragedy or farce, depending on how you spin it. For tragedy, I’d go with Sally Field in the title role (recent Awards blue language a plus here) and for a comedy, Will Farrell in the title role, with Ben Stiller as the Realtor! I see a 35 Million Box Office on opening weekend….,
Great entry in the OC Register Blog (Padilla) on foreclosures today….mentions the IHB.
I’m sure you’ve just given some Hollywood exec a great idea Don. Will’s people are already talking to Ben’s people.
The link for the OC Register blog on foreclosure is:
http://mortgage.freedomblogging.com/2007/10/10/few-buyers-for-foreclosures-in-oc/
Methinks the buyer seriously overpaid in 2004. For goodness sake, I bought a house for $360/sq-foot in Turtle Rock just a year earlier than our hero.
This one isn’t so much a rollback, but more of a well deserved ass-whooping. Do you have any visibility on the price/sq-foot for the neighborhood in late 2004?
Carl
Do my eyes deceive me or are those Christmas lights along the garage roof?
Another ending:
Greed all around and nobody wants to take responsibility for being suckered by yet another Fed-induced bubble.
Off topic:
Peter, Paul and Mary: I see them when I’m flipping by the PBS fundraiser, singing old chestnuts to bald fat guys in leather jackets, and also singing Puff the Magic Dragon to soccer Grandmom’s. But I’ve seen the occassional documentary or something where they show old footage, like from the era of this album cover. Can anybody older than me confirm: Was Mary Travers “hot,” or not? How many people pretended to get into Folk just because they wanted to nail Mary, or Joan Baez? I mean besides Bob Dylan.
A 1200 sq ft house built in 1970. $325K tops!
I think It will eventually sell @ 300K. May need another 12-18 months.
Off topic here, still relative to Housing:
Why do the market report skewed data like:
1. Median in lueu of average or price/SF
2. Home sales in lieu of actual count that passed escrow
3. Mortgage applications in lieu of actual approved? This would eliminate duplicate and failed numbers.
NAR is a big culprit and I wonder why this has never been on the front pages of News?
Been lurking here now for awhile. Really enjoy this blog…
Maybe the seller here thinks the price is justified. After all, how many other homes are there where you can save time in the morning by taking a shower AND a dump at the same time? Check out the last picture if you don’t believe me.
I haven’t laughed this hard in a long time! Thanks
You can let your fantasy go John!
It’s only a fogged up mirror on the shower door.
Damn. I actually thought this house was worth its outrageous asking price. LOL
I’m growing tired of reading ridiculous assertions about projected prices on this blog. $300K?
If you honestly think that then you have not considered this: How many foreclosures in a row would it take this house to drop $285K, or roughly 50%? 1, 2, 3…10?
Let’s assume this owner walks and the prperty becomes an REO. So the bank puts it back on the market. Given loss mitigation procedures, they will price it probably very similar to how it is currently priced. And guess what? A bank can and will sit on it for a while. So what if it’s on the market for 60 or 90 days. They will only lower the price gradually, whereupon it would probably sell before they crossed the $500K mark.
You have to go through that process at least 3 times assuming similar losses to work down to the $300K point.
OR, you get a number of properties doing this at once that create a downward spiral effect. Go look at El Camino neighborhood this house resides in. On that side of Yale there 4 houses for sale (excluding the condos where Walnut turns). Hardly the conditions for a downward spiral.
A recent post questioned whether fear is gripping the market. IR did a great job of pointing out enclaves where there shocking amounts of green dots (for sales). In the interest of fairness, follow the redfin link and look at this neighborhood. If anything, I would comment on how few houses are for sale here.
And please don’t bother responding with comments about how in 1983 you sold some piece of crap for a loss and now own a crystal ball.
I say 200k max
sorry – I didn’t quote it correctly. I was referring to the original article and how the bank would loose $6k from the sale.
Personally, I think $500,000 is about the right price. One story homes are hard to find in Irvine and a lot of older people are downsizing and want a one story house – not like those horrific $400,000 studios with steep stairs in Portola Springs.
The downward spiral due to foreclosures is the crux of the bear argument and I honestly believe will be the single most important factor in prices over the next 5 years.
Is there a reliable source for foreclosure properties in Irvine?
Looks like a first time buyer is losing their starter house and down payment. Sad.
Whilst I’m a true believer that prices will continue to fall, $325,000 is not going to happen. This whole area is undergoing a bit of renovation with people updating these things. So if you buy at $425,000, put $60,000 or so into it, you have a brand new house, smallish, on a decent size lot in Irvine for under $500,000. 3- or 4-bed / 2-bath, completely updated with fruit trees in the back and a rose garden in the front. Will easily outsell a microCondo in Oak Creek. Personally, I don’t want a McMansion – just a decent place with a yard, garage, updated throughout and a payment that won’t strangle me. I’d pay $425,000 and do the upgrades I want or, if it’s already done right, I’d pay upper $400,000 to low $500,000 today.
“We’re pretty far away from the proverbial “American Dream” when a prosaic ranch house past its best years sells for a price that requires an income that only 3% of the population of this country has.”
I don’t think that word means what you think it means.
http://en.wikipedia.org/wiki/American_dream
Personally, I agree with PIAR. $480,000 will be okay price for this house. It is hard to find a house in Irvine with land and no mello roos.
Family Guy,
Prices are a function of supply and demand.
Rising prices form a self-reinforcing pattern. (2000 to 2005)
Declining prices also form a self-reinforcing pattern. (2006 to 2011)
If anything, IR is EARLY in the game. You can’t see the outcome of the game because we’re still in the 1st quarter.
Professional betters can often determine what will happen in a sporting event based on prior experiences. Many here are trying to apply the same logic there to the housing market to know when to “jump in”. If houses can go up 30% per year by only turning over 1/10th of the stock, they can go down by similar amounts, with the exception of the theory of sticky prices and illiquidity of declining price thinly-traded markets.
As a final note… banks cannot hold nonperforming assets, or their friendly FDIC or Federal Reserve auditors force them to liquidate immediately to protect depositor assets. Securitized mortgage bondholders have placed similar covenants on their servicers. The prices of REOs will fall to reflect the current market. The more they fall, the more they reinforce the cycle.
There’s no guarantee we will return to historical affordability, nor is there a guarantee we won’t fall much further but we can guess or estimate what it will be.
I completely agree. Overall i conform with the bearish tone with RE prices at this juncture but to suggest a 50% drop from today’s levels is aburd. In such an event, the total value erosion to the US economy would be the biggest blow ever in our history and the result would be much more catastrophic than a resession. Just imagine the impact of every household losing half of their home values.
Agree, this could be the perfect home for many people. I had a very similar home in Mission Viejo 3/2/1400sf that had the most appealing character. It needs to be updated, but couldn’t imagine comparing it to a condo.
” I’d pay $425,000 and do the upgrades I want or, if it’s already done right, I’d pay upper $400,000 to low $500,000 today.”
hahaha a sucker’s is born every minute….
And a fool and his money will soon be parted.
snicker.
If you take the 1991 sales price and inflate it with a factor of 5% through today, you get to roughly $425K. I’d say this house settles back to the $375-425K range eventually. $300K does seem awfully low and would be less than a 3% inflation factor from the ’91 pricing.
FamilyGuy,
If you haven’t already joined the forums I track a good chunk of the foreclosures in the foreclosure thread and I try to update it weekly. I use to update it more often but as the foreclosures ramp up it had been difficult to keep up. I really hope you check it out and I look forward to having more of discussion on the foreclosures with you.
You might want to check out http://www.foreclosureradar.com as they seem to have the best site. Over at the OCR on Matt’s blog he used them for the data he posted on. They seem to have the most up to date info but you do have to pay for it. There isn’t a site out there where you can get a full picture without paying for it.
BTW Chuck beat me to it in that the banks can’t hold the properties that long. Eventually they will have to drop the price to sell because if they don’t they will have to reduce the amount they are worth on their balance sheet. As soon as this happens you will start to see more bank owned foreclosure auctions like that at http://ushomeauction.com/.
LA Times story quotes CAR as saying a 4% price drop this year. Don’t laugh. I tend to agree. After about ten years of that, we will see over a 50%
Picking another market top like 1991 is like comparing the price of stocks with March 2000. Not exactly an arbitrary point.
Chuck
Yeah. I’m getting so tired of the news always toting buying a pre-built nice big home on credit as the American dream.
Wasn’t the original American dream that, in America, unlike in the Old World, it was actually possible to obtain a piece of your own land after much toil and hard work? As opposed to the Old World (ie. Europe) where you’d toil your whole life on someone elses rented land and never, ever be able to buy it? That Amercia was a land where it was actually possible to get ahead and you could have savings and land?
That dream was in a world where you had to earn and save everything. Or go way out to the wilderness and homestead, digging up grass for sod walls and a leaky sod roof and then fending off freezing winters, starvation, wolves, and what have you for 5 years to get title to your claim.
If people really want a piece of the original “I want a home” but I have no money dream, go up and homestead in the frozen North.
P.S. in Canada, anyhow, I think you can still do just that. Don’t know about Alaska.
P.P.S. and if the reports are right, and global warming opens a passage though Canada’s northern waters, maybe you can even pick the right frozen patch of dirt for a port and flip it many years later :).
RE in some area of Japan experienced 85% discount, avg is 50% during 1990-2000. Hong Kong about 50%. But these countries still doing well.
Since prices in US, esp in Irvine, gone up 150%-200%, why it can’t go down 50% ?
If it’s true that San Diego leads us in what’s going to happen (which has held true so far), then the future looks like this
http://calculatedrisk.blogspot.com/2007/10/reo-auction-in-san-diego.html
Excerpt form the San Diego article below:
“Lenders are now aggressively cutting prices on REOs. The average LIST price is almost 20% off the previous selling price! Ouch. Ramsey also notes that many of these homes were previously purchased with 100% LTV, so the homeowners were substantially underwater and workouts were near impossible.”
Real Estate in the U.S. Economy
William Poole
President, Federal Reserve Bank of St. Louis
http://www.stlouisfed.org/news/speeches/2007/10_09_07.html
Has anyone seen the census figures for the state of California over the last couple of years? The figures indicate that California is currently losing residents to other states. Where is the demand for these “hot properties” going to come from? The short answer is that prices will go down much more than people think…….
Just think if what appears to be happening locally continues. Over in Orange they are starting to crack down on the Day Labor situation.
Also in Lake Forest and Laguna Beach.
http://www.ocregister.com/news/day-city-center-1885967-laborers-council
This keeps up and the undocumented are going to avoid Orange County. They will always follow the path of least resistance. Move up to LA or Bakersfield. This is a large number of people putting a strain on the lower end rental prices. Good news if you are going to college.
But yes. People are leaving the state of California.
I like this house, it’s single level with full sized garage and drive way. Has yard for a dog, and assuming you can get the permits, might have some expansion potential. I’d love to put in an enclosed patio in the back.
Down-sides, it’s 37 years old, small-ish (1216 sq ft) for 3 bedroom SFR, bit close to the 5 FWY (noise/pollution). If I’m not mistaken, this property has no HOA?
If the house was bigger and selling for under $500k, I might actually get off my butt to go look at it.
San Diego Foreclosure Graph
I think you are wrong about that Ponzi. The ’91 top was NOTHING compared to the recent run-up from trend. Just because it was the top of a market cycle does not mean the data is useless. You need to consider scale/magnitude. There was only a 12% total appreciation in median from ’88 to ’91. That is less than the annual appreciation rate in recent years… Even from that ’91 top, median values only settled back 12-13% before they started running again. Even if you take the lowest median since ’91, inflate that 5% annually, you still come to around $400K. There is very little difference yielded between using 1991 and 1995 prices…
Based on this nearby comparable:
http://orangecounty.craigslist.org/apa/442180795.html
The house in this post should not rent for more than $2500 a month. With a 160 gross rent multiplier, the value would be $400,000. I think the $2,500 rent is generous considering you could rent the house in the link above for $2,500 and it is single-story, 400 SF larger, and has another bedroom. Take the rent down to $2,250 and the value drops to $360,000.
And yet there have been multiple posts that there is interest for this property in the high $400’s. So while your equation may be fundamentally sound, it would seem to be an incorrect barometer of value in this case.
Any reason for the momentary ‘big’ drop offs in January and Sept?
I highly doubt the japs leveraged themselves up to their eyeballs in RE debt so they could buy, more real estate, fake tits, and a 85k BMW.
Nice comparable. I wonder how long it will be vacant after being on the infamous IHB?
IR’s valuations are purely mathematical inorder to eliminate mania based pricing. Everything on this earth has an intrinsic value as well as a perceived value. I consider the intrinsic value of a home to be the cost of land plus the cost of constructing it. The rent multiplier is a way a calculating a reasonable price for a property that yields rental cash flow. When you look at rental rates vs price and current mtg payments you begin to realize that most units were purchased to “flip” and not to generate cash flow. Some properties cannot even generate positive cash with a neg am payment!
For the last several years I have marveled at the ability for people to get a construction loan for 425k and then get a completed appraisal done 6 months later for 600K. That’s ridiculous. The spread between the intrinsic value of a property and its current candyland list price is narrowing. That difference between the 650k and 425k above is purely phantom perceived value; therefore, there is no fundamental/mathematical calculation that we can use to predict whether the price will increase or decrease from 650k. It will rise and fall based upon the psychology of the market. If there are more sellers than buyers prices will fall, and if there are more buyers than sellers, prices will rise.
The psychological component only affects the “willingness to buy” whereas the “ability to buy” is dependent upon the financing available. Even if the willingness to buy remains constant or even increases slightly, and massive decrease in the ability to buy will negatively impact the market
I will repeat again–>I say 200k max 😆
FG
for the third time I say 200k max 😀
you will soon be a knife catcher with your attitude about Irvine is different. 😆
that’s just my opinion about a 30 y/o POS house in Irvine. in all fairness the accurate price will be some where close to 300k. 🙁
CAR turns bearish
State home prices expected to drop
http://www.latimes.com/business/la-fi-realtors11oct11,1,4548500.story?coll=la-mininav-business
Amid ‘doubt and fear,’ Realtors gather in Anaheim
http://www.ocregister.com/news/percent-market-internet-1884896-home-business
I don’t disagree with anything you just said. I’m just not sure what your point is.
My comment still stands. In fact, my personal opinion is that this house will sell north of $500K.
I appreciate your opinion.
It’s just wrong.
sorry, forgot make a smiley face
; 0 )
Betcha $5 FG that it sells south of five hundy… Methinks some sucka will spend high $400’s on the place.
I still think the rent multiplier understates the fair value of any house from an ownership perspective. The right to control, and the inflation hedge both offer a premium to the pure rental evaluation. The government provides a ton of incentives to own a home, those incentives have value (e.g. what other investment offers tax-free gains up to $250/500K?). I know we’ve been around the bend on this one several times, so I am not looking for a response (not that I am discouraging one!).
I have not determined exactly what this premium amounts to, and it must change over time (especially when considering HPA or HPD).
On another topic, El Camino is rough. This is an old neigborhood that is aging poorly. Some of the houses have been “updated”, but the results leave much to be desired. In terms of Irvine Monopoly, El Camino would be analagous to Baltic Avenue.
http://en.wikipedia.org/wiki/Monopoly_(game)
Realtor economist ‘apologizes’
http://lansner.freedomblogging.com/2007/10/10/realtor-economist-apologizes/
Prior to the bubble, in most areas of the country, a GRM of 120 was the norm. A GRM of 160 does represent a premium. Also, the GRM was less than 160 from 1995-1998 even here in Irvine.
I agree with you about El Camino Real. You can generally get a more house for the money, but I am not thrilled about the surroundings.
PMI report is out
http://www.pmi-us.com/media/pdf/products_services/eret/pmi_eret07v3s.pdf
United States market Risk Index
#1 – Riverside-San Bernadino-Ontario, CA
#2 – Las Vegas-Paradise, NV
#3 – Santa Ana-Anaheim-Irvine, CA
#3 – Phonix-Mesa_scottdale, AZ
#4 – Los Angeles-Long Beach-Glendale, CA
I agree this house will probably sell for more than $500K in today’s market. All we are saying is that it will not sell for more than $400K at the bottom in 3-5 years. So if the future buyer gets their “bargain” and waits 10 years, they might get out even.
My guess would be a January dropoff is caused by the lack of activity in December (throwing someone out at Christmas time is pretty cruel, plus nobody is working.) The drop in September was probably a reaction to the spike in August. A moving average would smooth these irregularities out.
Interesting link awgee posted on the “first time home buyer needs advice in this market” forum thread
Home buying: Lies planners will tell you
When deciding how much mortgage to take on, the math is pretty simple.
http://money.cnn.com/2007/10/10/pf/ask_the_mole.moneymag/index.htm?postversion=2007101009
“The downward spiral due to foreclosures is the crux of the bear argument and I honestly believe will be the single most important factor in prices over the next 5 years.”
The crux of the bear argument is AFFORDABILITY.
From lack affordability comes INSOLVENCY, often predicated by deliquincy and foreclosure.
The crux of the bear argument is really simple. Not enough people live in Southern California with either the assets or incomes to support the million dollar homes in Irvine, as well as all the other ‘premium’ areas in SoCal.
BTW, to see what Ponzi and Graphrix mean, look at Jim the Realtor’s blog for what happens when the banks realize they are have REO in a soft market. Look Acqua Vista property, http://www.bubbleinfo.com/journal/2007/10/7/reality-part-2-92101-condos.html That’s more than 35% off of a 2005 price.
70%
United States market Risk Index
Wow. OC is considered even riskier than Phoenix, Sacremento, San Diego, Miami…Ouch. This is gonna hurt.
Here’s SFR a little closer. It was forclosed on in August, basically just as the credit crunch was starting.
It’s in Costa Mesa. Current offering price $504,900, 5% lower than what the bank took it back for, 20% below the 2005 prior buyers purchase price.
http://redfin.com/stingray/do/printable-listing?listing-id=1207208