Monthly Archives: October 2007

The King

When I was 17,
I dreamed of being king.
And having everything I wanted.
But that was long ago
and my dreams did not unfold,
so I’m still the King of Nothing.

King of Nothing — Seals & Crofts

Link to Music Video

Link to Metalica King Nothing

An Englishman’s home is his castle, or so the saying goes. Today’s seller is going to take a loss, so that makes him the King of Nothing.

Asking Price: $861,000

Income Requirement: $215,250

Downpayment Needed: $172,200

Purchase Price: $875,000

Purchase Date: 2/27/2006

Address: 10 Mineral King, Irvine, CA 92602

Beds: 4
Baths: 2.5
Sq. Ft.: 2,477
$/Sq. Ft.: $348
Lot Size: –
Type: Single Family Residence
Style: Contemporary
Year Built: 2000
Stories: Two Levels
View(s): Park or Green Belt
Area: Northpark
County: Orange
MLS#: S509200
Status: Active
On Redfin: 4 days

From Redfin, “MODEL PERFECT HOME IN PRESTIGIOUS GUARD GATED NORTHPARK W/ BEAUTIFUL POOLS, TENNIS & TREE LINED PARKS. FABULOUS PLAN OFFERS FORMAL LR & DR WHILE CAPTURING ‘GREAT ROOM FEELING’ FOR ENTERTAINING IN THE FAMILY RM. GOURMET KITCHEN W/ GRANITE, STAINLESS/BLK APPLIANCES. BONUS/4TH BR HAS WALK-IN CLOSET (NOW USED AS A STUDY NICHE). SUMPTUOUS MASTER W/ RETREAT & LUXURIOUS BATH W/ SHOWER, SOAKING TUB & WALK-IN CLOSET. UPGRADED THRUOUT W/ EXTENSIVE TILE FLOORING, SHUTTERS, CUSTOM DRAPES & VALENCES. MUST SEE!”

I AM GETTING REALLY TIRED OF THE CAPS LOCK.

CAPTURING ‘GREAT ROOM FEELING’? — You’ve lost the loving feeling…

Today’s seller stands to lose $65,660 assuming a 6% commission. Does anyone think they will get the asking price? I don’t.

Not a big loss in the grand scheme of things. When I profile a property with a loss of less than $100,000, it doesn’t seem quite as interesting, does it? I have to imagine, the $65,660 loss will be a big deal to the seller. At this point, the seller is just trying to salvage what’s left of their $150,000 downpayment. Good luck with that.

I hope you have enjoyed your visits to the Irvine Housing Blog this week. It was our pleasure to bring it to you. Please come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

Here may we reign secure, and in my choice To reign is worth ambition, though in Hell. Better to reign in hell than serve in heaven.

Paradise Lost — John Milton
.

Retirement

Old days
Good times I remember
Fun days
Filled with simple pleasures
Drive-in movies
Comic books and blue jeans
Howdy doody
Baseball cards and birthdays
Take me back
To a world gone away
Memories
Seem like yesterday

Old days
Good times I remember
Gold days
Days Ill always treasure
Funny faces
Full of love and laughter
Funny places
Summer nights and streetcars
Take me back
To a world gone away
Boyhood memories
Seem like yesterday

Old Days — Chicago

Link to Music Video

I wrote this in Brio New World “Previous generations had a formula for a “normal,” happy life. You used to save your money until you had a 20% downpayment, then you bought a house, and if you had increases in income, you could move up to a nicer place. Home ownership was a symbol of success. It proved you could save to reach a goal; it proved you were responsible; it made you happy. It was also a ticket to financial security as your home equity would become a savings account you could use to fund your retirement when you downsized to smaller accommodations. These were the rules of old.”

Today’s property is an example of someone living by the old formula.

Asking Price: $799,000

Income Requirement: $199,750

Downpayment Needed: $159,800

Purchase Price: $112,500

Purchase Date: 8/23/1979

Address: 9 Williams, Irvine, CA 92620

Beds: 4
Baths: 2.5
Sq. Ft.: 2,101
$/Sq. Ft.: $380
Lot Size: 6,030 sq. ft.
Type: Single Family Residence
Style: Contemporary
Year Built: 1979
Stories: Two Levels
Area: Northwood
County: Orange
MLS#: S457142
Status: Active
On Redfin: 407 days
Unsold in 90+ days

From Redfin, “HUGE CULDESAC LOT! Northwood charmer! Spacious home, well located, in quiet neighborhood. Downstairs den can easily be converted to 4th bedroom. Cathedral ceilings! New Appliances. Tons of storage space. Two fireplaces (Living Room & Master Bedroom). Walk-in closets in Master & guest rooms. Ceiling fans throughout. Over-size living area! Balcony off Master bedroom! Huge back and side yards with Gazebo style Jacuzzi! Close to shopping, schools, and freeways. NO MELLO ROOS AND NO ASSOCIATION FEES!!”

INTERMITTENT caps LOCK!

Exciting EXCLAMATIONS!!!

Tons of storage space? Mixing measures, weight and volume?

This is the quintessential example of an owner who does not need to sell. The house was purchased in 1979 for $112,500. There is a first mortgage for $62,400 that is probably nearly paid off. The owners have a mailing address in Grants Pass, Oregon which is likely where they are living in their retirement.

They have two choices:

They could rent this place for an easy $3,000 a month, or

They could sell the place and put the proceeds in the bank at 5%.

Surprisingly enough, either choice nets about the same income depending on the amount of capital gains taxes. It does make me wonder if they have a renter in the house now. You would think that if they decided to sell the place, they would lower the price to sell it immediately or take it off the market and get a renter in there. Sitting empty, this house makes them nothing.

If this were your retirement nest egg, what would you do?

Holly's Rollback

I ain’t got no home, I’m just a-roamin’ ’round,
Just a wandrin’ worker, I go from town to town.
And the police make it hard wherever I may go
And I ain’t got no home in this world anymore.

I Ain’t Got No Home — Woody Guthrie

Link to Bruce Springsteen Remake Music Video

Asking Price: $700,000

Income Requirement: $175,000

Downpayment Needed: $140,000

Purchase Price: $840,000

Purchase Date: 11/08/2006

Address: 2 Cypress Tree Lane, Irvine, CA 92612

Beds: 5
Baths: 2.5
Sq. Ft.: 2,419
$/Sq. Ft.: $289
Lot Size: 6,000 sq. ft.
Type: Single Family Residence
Style: Other
Year Built: 1970
Stories: One Level
Area: University Park
County: Orange
MLS#: P589071
Status: Active
On Redfin: 92 days
Unsold in 90+ days

From Redfin, “OPEN FLOOR PLAN. THERE ARE LOTS OF ROOMS. FAMILIROOM. , SUN ROOM AND BIG KITCHEN, TWO FIRE PLACE IN THE FAMILYROOM, AND IN THE LIVINGROOM. BIG MASTER BEDROOM. BATH ROOMS HAVE DOUBLE SINK.”

Ordinarily we don’t mention names here at the Irvine Housing Blog. There is no need to, but this realtor chose to feature a picture of the house with her for sale sign prominently displayed, so I have elected to make an exception in this case. Unfortunately, the sign is the most interesting part of this elevation.

Holly, please turn off your CAPS LOCK.

FAMILIROOM?

Anyone want to back on to the 405?

There are no pictures of the kitchen which makes me suspect it is of 1960’s vintage.

Do you think the flowers dressed up the computer printer and cables? Nice staging…

This was perhaps the worst trade we have seen to date. This buyer purchased in November of 2006, and it is already worth almost 20% less than they paid — 20% off in one year. I could not find any mortgage information on this property, so if someone would be so kind as to enlighten us, it would be appreciated. Any bets on 100% financing?

If the seller gets their asking price and pays a 6% commission, they stand to lose $182,000. IMO, that is a lot of money…

Big Wheeler

Left a good job in the city,
Workin for the man evry night and day,
And I never lost one minute of sleepin,
Worryin bout the way things might have been.

Big wheel keep on turnin,
Proud mary keep on burnin,
Rollin, rollin, rollin on the river.

Proud Mary — Creedence Clearwater Revival

Link to Music Video

IMO, there are four kinds of people in the market right now:

Those who are stressed out and losing sleep because of the housing slump.

Those who are in denial and not stressed out yet.

Those who can afford their payments and don’t care about prices.

Those who are not in a market position and can watch the carnage from the sidelines.

BTW, Group 4 is also sleeping well at night. Big wheel keep on turnin…

Asking Price: $850,000

Income Requirement: $212,500

Downpayment Needed: $170,000

Purchase Price: $880,000

Purchase Date: 9/21/2005

Address: 20 Wheeler, Irvine, CA 92620

1st Loan $650,000
Downpayment $230,000

Beds: 4
Baths: 3
Sq. Ft.: 2,574
$/Sq. Ft.: $330
Lot Size: 5,000 sq. ft.
Type: Single Family Residence
Style: Other
Year Built: 1986
Stories: Two Levels
Area: Northwood
County: Orange
MLS#: S509104
Status: Active
On Redfin: 2 days

From Redfin, “This is a fantastic highly desirable corner lot home in the wonderful city of Irvine. This two floor home is great for entertaining with open areas, beatiful back yard, and a bbq area. This home features 3 bedrooms upstairs, one of which is the master bedroom, and two full bathrooms. Downstairs you will find an additional bedroom with another full bath. The kitchen has been remodeled recently and has a breakfast area. There is an indoor laundry room with room for full size washer and dryer.”

Highly desirable corner lot. You mean the one backing onto the arterial at the main entrance where you will have maximum traffic?

The seller of this house put up a substantial downpayment, so this is not a short sale. If they get their asking price and pay a 6% commission, they stand to lose $81,000.

I don’t know why they are moving, but I admire that they are selling at a loss when they are not being forced out in a foreclosure. Perhaps they recognize they will lose all their equity if they wait. If so, it is a smart move.

This has nothing to do with the post, but I am always scared by this graph — updated in September 2007.

From our friend at Piggington’s.

Eve of Destruction

Don’t you understand, what I’m trying to say?
Can’t you see the fear that I’m feeling today?
If the button is pushed, there’s no running away,
There’ll be noone to save with the world in a grave,
take a look around you, boy, it’s bound to scare you, boy,
but you tell me over and over and over again my friend,
ah, you don’t believe we’re on the eve of destruction.

Eve of Destruction — Barry Mcguire

Link to Music Video

Do you get the sense that our real estate market is on the eve of destruction? Prices on the leading edge of the decline are already 20% off peak, credit is tightening and will continue to do so, the inventory is mounting, and the number of foreclosures keeps rising (We are behind San Diego, but on the same path.) There are no signs of any of these trends reversing.

What is really scary about the foreclosure trend is the fact that it does not include any of the homeowners represented in the chart above (remember the ARM reset problem?) The foreclosures and REOs we are seeing today were caused by people who started defaulting in 2006. Now that prices are clearly off the peak, most of the people needing to refinance will not be able to get it. In short, many of the homeowners represented on this chart are going to default and become REOs.

Since it takes at least 6 months to become an REO after the homeowner stops making payments, and since most people will exhaust all other forms of credit before they succumb to foreclosure, we can assume there will be a 1 year lag from the peak of the ARM reset chart to the peak of the REO problem. That puts us into March of 2009 before there is any hope of the number of REOs declining. Since it will also take some time to sell this inventory (we currently have a 20 month supply,) that puts the earliest possible bottom of the market in the Summer of 2010. Realistically, the selloff will continue into the 2011 buying season with the spring of 2011 being the earliest possible bottom.

If we are 20% off now, how low will we go?

We profiled another property near today’s recently: Run Away. They gave up on selling and pulled their property off the market. Today’s neighbor is in similar circumstances, but they have decided to get out — with a hefty loss…

Asking Price: $350,000

Income Requirement: $87,500

Downpayment Needed: $70,000

Purchase Price: $390,000

Purchase Date: 6/2/2004

Address: 131 Huntington #255, Irvine, CA 92620

1st Loan $316,000
2nd Mtg. $79,000
Downpayment $-5,000

Beds: 2
Baths: 2
Sq. Ft.: 1,000
$/Sq. Ft.: $350
Lot Size: –
Type: Condominium
Style: Cape Cod
Year Built: 1987
Stories: One Level
Area: Northwood
County: Orange
MLS#: S509250
Status: Active
On Redfin: 1 day
New Listing (24 hours)

From Redfin, “Short Sale! THis home has a newer kitchen appliances and flooring and is in good shape. Needs some paint but has a lot of potential. Come and get it won’t last long. Nice view of the trees and parking near the unit. Probably the best 2 bedroom 2 bath condo in Irvine.”

Probably the best 2 bedroom 2 bath condo in Irvine? This realtor is probably full of $hit.

Nice view of parking?

Nice picture of kitchen clutter. I particularly like how the bottle of Comet cleaner is prominently featured.

Check out the curio cabinet in the living room…

Look at that rollback: $40,000 or 10% off a 2004 price. Wow! (pardon the exclamation point.)

Another one of those surprising 100% financing deals going south. This buyer may have even obtained cash at the closing. Either way, they are walking and leaving the bank to hold the bag. If this property sells for asking price minus a 6% commission, the bank stands to lose $66,000.
This property has an interesting sales history:

Date Price Appreciation
06/02/2004 $390,000
08/03/2000 $180,000
04/01/1996 $122,500
12/13/1995 $120,000
09/25/1990 $159,000

Apparently, we have seen 20%+ drops before…