This song goes out to my new blog helper, Brittany, who has been emailing me great properties to profile and providing me with mortgage data.

Thank you…

You see my problem is this
I’m dreaming away
Wishing that heroes, they truly exist
I cry, watching the days
Cant you see I’m a fool in so many ways
But to lose all my senses
That is just so typically me
Baby, oh

Oops!…i did it again

Oops!…I Did It Again — Britney Spears

Oops! I profiled another 2004 rollback — an REO no less. I would make some comment on the line “Can’t you see I’m a fool in so many ways,” but I will just let it go…

83 Ardmore Front83 Ardmore Inside

Asking Price: $589,900IrvineRenter

Income Requirement: $147,475

Downpayment Needed: $117,980

Bank Purchase Price: $500,474

Bank Purchase Date: 10/5/2007

FB Purchase Price: $595,000

FB Purchase Date: 9/28/2004REO

Address: 83 Ardmore, Irvine, CA 92602

First Mortgage $476,000
Second Mortgage $119,000
Dowmpayment $0

Beds: 3
Baths: 2.75
Sq. Ft.: 1,638
$/Sq. Ft.: $360
Lot Size: –
Property Type: Townhouse, Attached
Year Built: 1999Rollback
Stories: Two Levels
Area: Out Of Area
County: Orange
MLS#: H07158310
Status: Active
On Redfin: 12 days

From Redfin, “Model-like condition, Immaculate, End unit, two bedrooms upstairs-like suites, one bedroom & 3/4 bath downstairs, beautiful new wood floors, new interior paint, new carpet, tile entry, fire place in livingroom, formal dining room, indoor laundry, brand new stove, soaring high ceiling, fenced patio, two car attached garages-direct access, walk in closet, gated cummunity w/ giant community pool & spa, children’s play ground, Sheridan Place at corner of portola & jamboree, make all & any offers!!”

cummunity — I won’t go there either…



So how much will the lender lose on this one? If they manage to get their asking price (doubtful) they will lose the commissions plus a few bucks. No big deal. The real story is the depth of this rollback. The REO price was 20% off a 2004 price. Let that sink in a moment…

Conventional wisdom is that we are 20% off the peak of Spring/Summer 2006. When we start seeing prices 20% off 2004, how low will we go?

I am starting to think the more likely scenario comes from How Bad Could Bad Get?

Irvine Market Decline Extreme

53 thoughts on “REOllback

  1. NanoWest

    Watching the deterioration of the home prices in Irvine is like watching ice melt. Every day we see a small indication that the market is crumbling…there will be no grand event, just the slow reduction in prices. Just as when the prices were rising you could always find a property leading the way in higher in higher prices, now we see properties leading the way in lower and lower prices.

    What is interesting this year is that inventory in OC is not decreasing the way it has in past years at this time… is sort of leveling off.

  2. tenmagnet

    Actually the early Britney was hot. Take a look at the video, she looks great. Also liked her rockin’ the school girl uniform in Hit Me Baby One More Time. Now, the more recent Gimme More Britney is scary. Talk about a train wreck.

  3. IrvineRenter

    I wonder if we have said everything there is to say about the housing bubble? I guess there isn’t much to debate or discuss anymore…

  4. SawItComing

    Unrelated but I thought you all might like it:

    Friday night at my son’s bball game I was talking to another dad. They had just moved to this area from Wisconsin, he brought up the abundance of houses for sale here and said a REALTARD® told him that the California transplants will buy them all up in the spring. (see, you will be saved by the Asians, we will be saved by you..get it?) Anyway I told him my opinion was that most of the Californians that I know that have moved here recently are broke because they didn’t research the job market properly; they just saw cheaper homes and are addicted to debt. I made some statement about HELOCS and Escalades and he started laughing. He proceeded to tell me about his neighbor who moved here from California has some “computer business”, ~32 years old, lives in a ~$350k house and went out and bought an Escalade and a Ford crew cab IN ONE DAY! The guy says he paid $68.5k for the Ford! Says neighbor must make really good money. I said it’s all borrowed and that being from there, I know the type. I told him that he probably did it on one day so the loan companies would not catch on and that people with real money would never tell anyone how badly they got ripped off buying a pickup truck. This guy must really have a self esteem problem if he thinks that a $350k house with $127k worth of iron in the driveway looks smart. BTW, I know the area where they live and $350k was 18 months ago.

  5. tealeaf

    BIG NEWS in the tealeaf household: we just sold our T.Ranch home and have joined the renter ranks. Like blogging Benny Hinn, IR hit us over the head and we found religion.

    So… the buyers of our home indicated at the ‘key exchange’ last week that they bought our place because there we were the only discounted “nice home” they could find. I nodded in agreement, mouth half open, believing for a split second that their minds would change (even after proceeds were wired, mind you!). Perhaps they were picky. They were clearly snared in the bull trap, which I’m ok with, but it does prompt a question.

    Is it just me or are the majority of these rollbacks ‘blems’ (or at the high end of the market, where there is ‘further to fall)? The blems back to a major intersection/thoroughfare/railroad track, are “fugly”, etc. It seems there are always comments about how horrible a given listing is, which may give credence to bulls.

    Bear challenge: deep rollbacks on an SFR, 3/2, 1700-2000 sf, 3000-5500 ft lot, no street noise, no railroad tracks, and modestly upgraded interior.

    Extra credit: Actual SALES on such a property (rather than a listing).

  6. buy_in_2011

    I’d argue that the property on Oakdale profiled a few days ago is close to meeting the “bear challenge”. They guy is asking $620k but paid $685k two years ago. The location is excellent (great part of Woodbridge / quiet street / no road noise from Culver or Irvine Center). It’s only 1440 sq. ft. but it is a SFR 3/2. I’m not sure about the interior. Even if he gets asking, he’s 10% down in from the 05 price.

  7. momopi

    I actually like this model, just not the price.

    Spent couple years swimming in that community’s pool. 😉 It’s pretty nice. But there is no dedicated guest parking around the neighborhood, and street parking gets tight. So if anyone is considering to buy here, don’t fill your garage with junk because you’ll need it for parking.

    Also, the living room is high ceiling and you could spend some $ to build a loft over it, if you wish, and add a couple hundred sq ft of space. The HOA has approved several add-on constructions like that in the past.

    The good: small bedroom/office downstairs with spacious 3/4 bathroom. Great if you have elderly or handicapped relative. Side yard is large enough to keep a small to medium sized dog. Location is close to Tustin Marketplace and FWY entrance.

    The bad: if we have another ranging wild fire, expect the streets around there to be blocked. The fire department is around the corner however.

  8. WINEX

    IR, I don’t think anyone can deny that there was a disconnect between housing prices and fundamentals.

    But going forward, issues about how far things will drop, how soon, how to position yourself as someone who is simply interested in buying a house, and how to position yourself as an investor are all worthwhile topics.

  9. OCNativeInIA

    Your comment is hard to read until you figure out that “this area” does not refer to central OC.

  10. tealeaf


    The oakdale property was a blem in every sense of the word.

    Your own comment was:
    “the layout of the floorplan on this model is particularly bad. Bedrooms are not well insulated from the sound of the main living room, and the kitchen is small. The 1,440 sq. ft. model has typically sold for less on a $/sq. ft. ”

    Quoth furious sugar:
    “The floor plan sucks- it is really a 2 bed/ den, as one of the bedrooms opens directly onto the living room. You also have to walk thru the master bath to get to the master bedroom. The garage is “attached” but does not have direct access to the house. And- it is a zero lot line neighborhood. ”

    Sorry — bear challenge still stands!!

  11. glennk

    I went to school @ Irvine and graduated in 1971. In those days almost none of the bubble houses even existed. I could have bought beach front in Newport beach ( where i lived) for 50K! LOL! Oh well the dollar just isn’t what it used to be. I live in Atlantic City , NJ now and property here is cheap. Kind of.

  12. tealeaf

    I knew somthing must be afoot at “Eboe” as this is the fifth time it is up for sale since 1989.

    Looking at the map, it may be due to proximity to 261/Jamboree… although Harvard Park looks like a buffer.

    Could be a ‘winna winna chickin dinna.’

  13. houseonlegs

    The problem with the bear challenge is the lot! Most homes purchased within the past few years in Irvine are “N/A” on the lot size!

  14. Mdj

    Nice price history:

    Date ———- Price
    09/30/2004 – $752,000
    08/23/1999 – $370,000
    07/03/1992 – $300,000
    02/23/1989 – $350,000

    And it listed in August asking for $869k!!!

  15. Economic Crisis

    It could be that the idea of paying 600 grand for a 1,600 sq ft townhouse is so breathtakingly absurd that your readers just didn’t know what to say, at least for a minute or two.

  16. No_Such_Reality

    tealeaf, you base property requirements rule out 95% of Irvine, if not more.

    Let alone finding one on a steep rollback.

  17. furious sugar

    It’s because “Mr. Clean” lives there and he wishes to remain anonymous.

    I have always wondered who originally coined the phrase “Mr. Clean lives here” in the realtor jargon. Must be something they taught in the real estate courses. I find that phrase particularly annoying.

  18. patience2007

    I have a couple of questions about the “Income Requirements” that are listed on these posts.

    1) For this listing, the price is at $589k with a required income of $147k, but a couple of days ago there was a house listed at $559k with a required income of $149k. Why would today’s house have LOWER required income?

    2) Are these required incomes based on a family of 4, or a single person or what? Surely a single person wouldn’t need as high of an income as a family of 4, would he?

  19. No_Such_Reality

    A quick search of redfin for 3+, 2+, lot between 4500-6500 shows 7 properties. Not a lot.

    Of the seven, 2 New Meadow is listed for 300+ days. It’s at $800K. June 2003, it sold for $700,000. So it’s 12% from mid-2003 pricing. Not too fugly, no major roads, outside of the inner loop, but, trade-offs.

    The rest, surprisingly have massive amounts of equity to play with. Most have no last sale listed or a last sale prior 2001.

  20. janitorTom

    I think it will get exciting again when median values start approaching your $300K mathematical calculations and everyone sees that you were right!

    Remember that is still at least 3 years away. It’s going to be a marathon, not a sprint!

  21. tealeaf

    A 3000 sf lot rules out 95% of Irvine? That’s barely enough dirt to handle the stucco box! Granted, Quail Hill and Woodbury would be largely excluded, but 95% of the others would be fine. The SFRs at Northwood (old and new), Deerfield, Greentree, Colony, most of Westpark, Turtle Rock, and so many others have at least 3000 feet of dirt…

    Considering I changed my position on home ownership in this market, it’s clear I am open to capitulation!!

  22. IrvineResident

    Assuming 20% down and 28% DTI:

    down = 589,900 * 0.2 = 117,980
    Mortgage = 589,900 * 0.8 = 471,920
    Income = 471,920 * 0.28 = 132,137.60

    Family needs to earn that much

  23. JP

    IR, love your blog, but I think your analysis was a little off on this one. The prior owner had purchased it for $595,000 (100% financing with a 1st and 2nd). Loan went into default and bank foreclosed on it. When they did, they did a full credit bid for the 1st and outstanding interest – $500,474. The 2nd was wiped out. Now it is a bank REO and they are asking for $589,900. The $500,474 should not be considered as a rollback price. The bank had to pay that amount since no one came in and out bid them.

  24. ElricSeven

    No one outbid them because it’s not worth that much. Unless the bank CEO’s going to live there, they’ll have to sell to the next highest bidder who’s definitely less than $500,474. Odd that such a simple concept hasn’t leaked into the Banks’ consciousness.

  25. MarketExperWayne

    All of you who are waiting for prices to be chopped in half, not going to happen in OC…, maybe 5% more decline max or you’ll be a renter for life. Believe the hype that the 5 chicken littles from this blog push daily or believe a expert, your choice.

    Housing Recovery Seen Sooner

    Orange County Register

    November 14, 2007

    Orange County real estate consultant John Burns has his new U.S. housing scorecard out. He gives national housing conditions a C-minus on decent broader economics.

    “Despite the tough times in housing, the economy continues to grow, and that will make the recovery in housing happen much sooner. The energy sector in particular is thriving, spurred by a falling dollar and skyrocketing commodity prices. Many other segments of the economy remain in good shape as well.”

  26. No_Such_Reality

    Let me explain:

    1. half the properties in Irvine aren’t SFRs.
    2. Not on a major road (ie. Culver, Jamboree, Alton etc.), Freeway or backing to a collector artery (Yale loop). That’s probably 25-35% of the properties in the older neighborhoods, luckily it has good overlap with #1.
    3. No train tracks near. That eliminate a big swath west of the I5 the whole length of Irvine.

    More importantly, again, with 3 bedroom 2 or more baths, of the 1050 homes in Irvine for sale, 7 meet the criteria of being detached on a 4500sf or bigger lot.

    Your criteria is under 1% of the listing. It also happens to be, IMHO, the single most resilent size and style of home. Everybody wants it. Okay, not everybody, Tonye wouldn’t be happy, but Tonye knows what I mean. Everybody in an attached product has what you listed as their target minimum move up. Retirees and empty nesters have it targeted as a move down. Non-owners like me or IR have it targeted as an initial buy.

    So, you have the most desirable home type around. They are less than 1% of the total listed market. Yet of the 7, some of which don’t meet your non-fugly, non-blemed, no major noise reqs and you still find one that does 1 out 7 (15% of the most desireable market), is doing a 2003 roll-back.

    Think that through.

    What of the other owners of these highly desireable homes? They’re even more dangerous. Yes, they have equity, they bought in 1996, 1999, earlier. They can roll back to 2002 or 2001 prices and still make 100%.

    Will they be forced to sell? No. But when they want to sell, they can slash and slash and slash prices until they sell.

  27. tealeaf

    Good post and analysis — a couple of thoughts.

    1) Do the numbers swing substanially shifting the lot sf component to 3000sf? Or simply removing the lot component altogether? I am open to that change in the challenge, esp. if it substantially adds to the mix of homes.

    2) I’m sorry, but street noise and train tracks are a BIG issue. My experience is the homes against the roads are the first to list, last to sell – and at a 7-10% drop in value over those in the inner tract. Amazingly, when new, the premium for a quiet lot is 3-4% (at least it was for our last home).

    3) A criterion I did not list, but feel strongly about, is power lines/telephone wires. That means ixnay on VoC, parts of Harvard Square, and even some of Oak Creek.

    We sold a 2400sf T.Ranch home with 5500sf lot, no street noise, etc, 4/3 in about 45 days in this market, as in just closing escrow a few days ago — it was priced fairly (by current WTF standards) and we got DAMN LUCKY.

    I’m thinking of renaming my handle to “escape_pod”.

  28. tealeaf

    MarketExperWayne – where were you this past summer?

    The ability to afford the fully indexed or fixed rate of payments on homes doesn’t support current pricing. Buyers now need 20% down (plus buffer for a few payments) and will exclusively want/need/get a fixed rate loan. And the investors (aka HELOC wealthy), which commanded as much as 28% of the sales during the bubble, are all but gone (and are profiled daily on this site).

  29. mark

    Two things I wish for each time I read this blog:

    1. I wish I could hold people to their forecasts; e.g. IR could be the bookie and hold the pot while others bet with real money on their extreme predictions. Then we might see how much conviction is behind every “this house isn’t worth $250K” comment. We’d aslo get to see how commited the market bulls (5% further decline) are.

    2. I also wish I could see some commenters’ financial statements; e.g. I would like to see how many commenters (discussing how stupid homebuyers of the last few years are) have financed depreciating assets like cars. My guess is quite a few.

    My point is you make the best financial decisions you can based upon the information you have available to you today, always keeping one eye toward the future.

  30. IrvineRenter


    The bank is betting you are right and that someone who couldn’t pay cash at an auction will buy this from them at over $500K if they go through a conventional purchase process. However, the fact that the bank was able to obtain this property at $95K under a 2004 purchase price in an open auction says something about where the market is.

  31. No_Such_Reality

    Change the sizing to 2000 – 2500 or 1750 – 2250 and make it a 4/2. Or make it small 1500-1750 and keep it 3/2 would be my guess.

    Otherwise, for your criteria, I think they’re great. They’re my A-list. Probably other people’s A-list too.

    If we grind out the numbers, I think they’ll stand, most of Irvine is not prime real estate. In one form or another, it’s blemished. Either roads noise, train noise, ex-military base, no-lots, etc. Irvine is based on the premise of shared public space, hence, instead of a big yard, your block has two extra house, small yards and a nice tot lot down the path at the end of the row.

    We could also continue the hunt up into bigger. 2500sf home 4bd+ on a big lot and see what we see.

    But otherwise I agree. A needs TLC homes trades at a discount. Busy street, the same. Yucky floor, fugly outside, ditto.

  32. dee

    Great work,

    Does anyone have a link to a basic graph showing what income is required to buy a home at various prices.

    i.e., You need 83k income with 20% DP for a 380k home.

    Do you know where I could find a graph of OC, and Irvine’s home prices over the last 10, 20 years.

  33. no

    This blog used to be great. Now it’s just annoying that you attach song lyics to every post. This blog has turned clownish.

  34. Gray

    Hard times ahead for mortgager lenders seeking foreclosures:
    “Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.”

    Since the interests if the banks and institutions managing the mortgages and the real investors aren’t necessarily the same, imho this is a good judgment. And the obscure ownership seems to be a widespread problem:

    “Lawyers who represent troubled borrowers complain that trustees overseeing home loan pools often do not produce proof, usually in the form of a mortgage note, that their investors own a foreclosed property. And a recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership. Such proof gives a creditor standing to foreclose against a borrower and is required by law.”

    Leaves the question why not more of the borrowers’ lawyers dispute the legal standing of the banks and try to nip the foreclosure process in the bud:
    “Because most foreclosures proceed without challenges from borrowers, few judges have forced trustees like Deutsche Bank and Bank of New York to prove ownership by producing a mortgage note in each case.”

    For house owners who became underwater, this might enhance their chances to get into a compromise deal with the real holders of their mortgages, as an consumer attorney pointed out:
    “Hopefully this will convince everybody that the time to work out these home loans is now.”

  35. Gray

    “The bank had to pay that amount since no one came in and out bid them.”

    Uh, why? Would someone pls explain this to me, since I haven’t really understood this point yet. What happens to the property if noone bids on it? Doesn’t it ownership automatically transfer to the lenders? And, regarding that the real mortgage owners may not be the bank, what interest has a bank or an institution, who only manages the deal, to bail the investors out? Sry, but afaik this has never been explained here…

  36. Gray

    Imho everybody is still very confused about where the market is. Look at this info in the OC Register:
    “Kingsley Greenland, chief executive of Boston-based DebtX, an online broker of loan sales, said amid softening home prices, delinquent first mortgages are selling in the 50-cent to 60-cent on the dollar range against unpaid principal balance.

    But each case is different and prices could be higher or lower depending on several factors, he said. For example, a delinquent subprime loan might sell in the 40-cent on the dollar range, he said.”

    Huh? Paying 50-60% of the sum of the first mortgage sounds totally reasonable. If it comes to foreclosure, it’s likely that the estate will be worth more than 40% of its 2006 price (50% of 80%). But why tf would someone buy a subprime mortgage? And even at 40%? Aren’t chances very high that most of these will be wiped out when falling prices make the equity backing them simply vanish? This sounds like a bullish gamble to me…

  37. awgee

    Mark – I voted with my wallet. We sold in 2005 and are now renting. Can you put your money where your mouth is any more than that?

  38. BerthaJean

    For some reason the “Reply to this comment” link is giving me a 404 error. Anyway, in response to why the bank had to pay what they did for this property, I found this article very interesting in this regard:

    Basically they do this to try to cover up to the fact that they own a bunch of bad loans. The bank will come in and bid at auction what they are owed on a mortgage to avoid having to declare a loss on the mortgage. They can show the note “paid in full” buy the proceeds of the auction. If they have to turn around and sell the house for less afterwards, that is “okay” because that loss hits their books differently and doesn’t contaminate their mortgage portfolio.

    Nice trick.

  39. IrvineRenter

    When a property goes to auction at the courthouse steps, it will be sold to the highest bidder even if that person bids $1. The lender or the lender’s representative will go to the auction and bid the amount of the first mortgage. If there are no higher bidders at this auction, they obtain the property for that amount. Since you have to come to these auctions with a cashiers check, ordinary buyers are excluded.

    The lender is hoping they can obtain a few extra dollars through a conventional resale process after the auction (speculators do the same.) You know the market is really bad when nobody outbids the bank. Ordinarily speculators would come in to pick up “bargains.” When a property selling for 80% of the original purchase (typical amount of first mortgage) is not considered a bargain, the market must be very bad. That is where we are now.

  40. Dr. Bill

    I agree. Then again, your opinion could be categorized by an Aerosmith song I like – “Same Old Song and Dance”. IR has been posting videos though just to “change it up a bit”. I’m just waiting for someone to hit them with copyright infringements on the artwork, MLS photos and especially the Rollback image from WalMart. Just a matter of time.

  41. IrvineRenter

    Given that our readership has been consistently growing, it appears the general public does not share your opinion.

    I always enjoy the comments from the bitter homedebtor community. Please stop by again.

    FYI, There are now over 2,800 unique visitors a day on average that stop by.

  42. Gray

    Ahm thx for the explanations, IR and BerthaJean. Ok, I understand that a bank doesn’t want a foreclosure to result in giving away still quite valuable real estate for one dollar. Participating in the bidding prevents this from happening. However, in a time where liquidity is becoming increasingly valuable, I wonder if ‘ourchasing’ the property for the amout of the first mortgage really makes sense anymore.

    Firstly, who do they want to fool? That mortgage investments result in a los of money has already become common knowledge. I don’t think that wasting money to keep up the appearance that the papers still have their nominal value will fool anyone nowadays. Ok, it might still look good in the books, but the more savvy investors and stockholders will still find out what’s going on. The losses will have to appear somewhere, even if only with some delay. And aren’t the companies obliged to show their assets with reasonable (mark to market) values, if possible? The new accounting rules will make it much more difficult to hide losses by applying fantasy values.

    Secondly, the ownership of the estates will come with additional costs´(taxes, Hoas, maintenace). This will increase the bank’s loss. Wouldn’t it be much better for the bank to establish a new policy of only bidding up to, hmm, say, 85% of the mortgage value, especially regarding concerns about shareholder value,? This would place the price of the estate at about 70%, a range that might be interesting for some bullish investors or potential houseowners looking for a bargain. The bank could say “good riddance” and having a 15% loss on the books in an area where nobody expects them to make profits right now shouldn’t make them look too bad.

    Well, I really don’t know much about this whole business, but I wouldn’t be surprised if the banks would change their policies regarding foreclosures soon. They will need their liquidity for the dire times ahead, and wasting money for ‘alibi’ reasons will soon become a decadent luxury.

  43. tonye

    I guess I’m lost why I wouldn’t like this.

    But of course I have a 5b/3ba house with a 600 sq foot second story deck with BBQ and built to hold a jacuzzi. ;-D

    While East Irvine burns I can sun myself upstairs with a nice cigar.

    And, yes, most of us who own SFHs and who’ve owned them for eons are in no hurry to sell.

    BTW, my home is actually on a Zero Lot Line on the north wall. Which is fine because we have 12 foot south facing side yards. Plus large jacuzzis. Also our windows don’t face each other.

    All in all, I think this design makes the most sense. Otherwise you get those useless narrow “canyons” between homes.

  44. no

    Bitter homedebtor? LOL. For the past year I’ve been renting at half the the price the owner is paying to carry this place. I also have no neighbors because everything else is owned by the banks and sitting empty.

    You could say I am the complete opposite of a “bitter homedebtor”. In fact, I’m happy as heck to see the RE market tanking. It’s just a pain to wade through a bunch of song lyrics, album covers and videos to read the interesting stuff here. Nobody comes here to see that stuff. They come here to read about housing in Irvine. I’d imagine you’d have even more readership if you went back to what brought many of us here. It wasn’t for the lyrics. Do you also even realize that many people don’t share your choice of music whatsoever?

    I bet you’d be getting 5k+ unique now without the useless non-related fluff here.

Comments are closed.