A Tall Oak Tale ** Update 2 **

We have a sale to report. 111 Tall Oak was asking $659,000 in the summer finally sold for $590,000. The unit was purchased on 3/6/2006 for $725,000. That is 18.6% loss in less than 2 years not including commissions. Basically, the second mortgage was a complete loss.

It looks as if our seller at 111 Tall Oak gave up trying, but the REO at 113 Tall Oak doesn’t have that luxury. When these properties were first profiled on July 30, 2007, the property at 113 Tall Oak was asking $689,000 — a wishing price. Now they are asking $579,000, and it still hasn’t sold. That is a $110K reduction in asking price (almost 20%) in about 100 days. The property was purchased by an FB on 3/6/2006 for $725,000.

Talk about a comp killer…

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way…”

A Tale of Two Cities — Charles Dickens

Does this quote from A Tale of Two Cities resonate today? The two properties I am featuring today illustrate this dichotomy. First we have a distressed homeowner about to lose a lot of money and thinks it is the worst of times, and his next door neighbor is a knife-catching flipper who thinks the market is going strong and we are returning to the best of times. It is the age of wisdom and it is the age of foolishness — depending on what happens next.

No Photo

Asking Price: $659,000IrvineRenter

Purchase Price: $723,000

Purchase Date: 3/9/2006

Address: 111 Tall Oak, Irvine, CA 92603

1st Loan $578,400
2nd Mtg. $144,600
Downpayment $0

Beds: 3
Baths: 3.5
Sq. Ft.: 1,607
$/Sq. Ft.: $410
Lot Size: –
Year Built: 2004
Stories: 3
Type: Condominium
County: Orange
Neighborhood: Quail Hill
MLS#: S485520
Status: Active
On Redfin: 92 days
Unsold in 90+ days

From Redfin, “SpleSplended DETACHED – 2 YR old Villa in Quail Hill. ULTRA-HIP Floorp lan for 21st Century-3BR/3.5BA+Tech Desk. Granite Counter-Tops, Shutters, Berber Carpet, Wood flooring, Stainless Appliances, Courtyard location. 5-Star resort amenities w/ pools, sport court, tot lots, tennis, fitness gym, several parks+walking trails. Next to Spectrum, Retail Plaza already opend, Walk to Top-Tier Alderwood school. UNI-HIGH School. This is a pre-foreclosure sale! Sale subject to lender approval.”

What makes a floorplan ULTRA-HIP?



Over 90 days on the market with no sale at this drastically reduced price. Where are the multiple offers over the asking price?

If the short sale is approved, the bank stands to lose $103,540 after a 6% commission. Since this is a 100% financing deal, The seller will undoubtedly try to simply walk away. My guess is the bank will probably approve a sale down to the total loss of the second mortgage, but they won’t take a hit on their first. That is pure speculation, and I could be wrong.

I suspect the flipper who purchased this neighboring property was not counting on 111 Tall Oak becoming a distressed , pre-foreclosure right after he purchased 113 Tall Oak as a flip. Such is life…

113 Tall Oak Front 113 Tall Oak Kitchen

Old Asking Price: $689,000IrvineRenter

New Asking Price: $579,900

Purchase Price: $603,000

Purchase Date: 3/6/2007

Address: 113 Tall Oak, Irvine, CA 92603

Beds: 3
Baths: 3.5
Sq. Ft.: 1,610
$/Sq. Ft.: $428Knife Catcher Award
Lot Size: –
Year Built: 2004
Stories: 3
Type: Condominium
County: Orange
Neighborhood: Quail Hill
MLS#: S486686
Status: Active
On Redfin: 85 days

From Redfin, “* * * PRICE REDUCTION * * * A chance to own a detached home in the prestigious Quail Hill community with it’s resort style amenities to enjoy!! This tri level home boasts a modern floorplan which is functional and comfortable. Repairs are scheduled to begin soon and will include new paint, carpet and stair repair. This home features 2 balconies, plantation shutters, a romantic two-sided fireplace, and a computer niche. .. .. don’t miss out!!”

This realtor only uses two exclamation points. I guess he is trying to restrain his enthusiasm. * * * PRICE REDUCTION * * * Is our flipper losing confidence in the market? After watching your neighbor languish on the market for 90 days at a lower price, I probably would.


If this flipper gets the asking price, he stands to make $44,660 after a 6% commission. Not bad for doing absolutely nothing (You can see from the pictures the property was not renovated.) Of course, when your own purchase and that of your neighboring property establish the market in the low $600,000s, It is going to be a difficult sell at the asking price.

This flip was purchased during the Spring of Hope, will it end in the Winter of Despair?

75 thoughts on “A Tall Oak Tale ** Update 2 **

  1. Mr Vincent

    Over 650K for 1600 sq ft? Thats sooo 2005!

    I love the listing description for the first prop: ” ULTRA-HIP Floorplan for 21st Century”

    They make it sound like its the greatest place in the world and then right at the end its like – Oh, by the way, “This is a pre-foreclosure sale!”

    Based on the pics of the second prop, these places look pretty nice and the fact that they are detached and have attached garage is a plus. Although I am surprised that the second prop already needs repairs since its 3 yrs old. I see that its a quick-flip since it was bought a few months ago.

    Yeah, the first prop will be a comp killer for the second.

  2. Masterofdamoney

    These properties still have a long way to go. Down, that is.

    $600K+ for 1600?

    I can rent 1,600 sqft for $2200-2500 a month in a nice, costal (Newport Beach, Laguna Beach, etc.) location. This one is still far away from breaking even on rent… with ANY type of financing. LOL.

    Prediction: July 2009 you can pick this up for $350-400K. Tops.

  3. Beentheredonethat

    I cannot take another picture with while tile countertops. I think I’m going to be sick.

  4. Masterofdamoney

    Hey, at least the 2nd listing HAS photos up!

    Another worthless realtor trying to sell a house with no photos? And it’s been on the market for 3 months already?

  5. NanoWest

    One of the interesting things here is the people that are purchasing as the market crumbles thinking they are getting a good deal……I am sure that the folks that purchase 113 Tall Oak for $603,000 thought is would be a sure thing that they could flip it…….surprise, surprise.

    Most likely they are thinking they can rent the place for $3,500 per month if they can’t sell it…………that will be their next surprise.

  6. No_Such_Reality

    Part of that comes from the continuing media blurbs about rent increases and how the rent is going up, up, up. The major complexes are all that are included in the survey. It seems like we a couple gets divorced, the apartment of choice is the newest best Irvine megacomplex.

    Individual units, smaller, older complexes are a different story. I’ve watched many condos and townhomes sit empty for months as their landlord tries to gouge an additional $300/month out of rent.

  7. BigD

    Wow, 350 – 400 in July 2009? I’m a big bear, but I don’t even see that happening. Even at 20% loss, the house will still be in the high 400s, even possibly low 500s. Since the market is all psychological now, once people see this home in the low 500s, I think they’ll snap it up.

  8. IrvineRenter

    To assume the market is all psychological is to say there are plenty of buyers out there ready and able to buy but they simply are not willing. I don’t believe this is the case. IMO, there are not plenty of buyers out there because the buyer pool was seriously depleted during the rally, further a significant number (20% or more) have been rendered unable to buy due to tightening credit. We have seen several properties fail to sell despite large price reductions. If there were lots of able buyers just waiting for the right price, you would not see this phenomenon.

  9. mino2126

    Was wondering if anyone on here was tracking how the auction sales are doing vs the bid price? Does anyone know where you can find that data?

  10. arraya

    Auctions here is San Diego seems to be just a formality. Lenders are buying ALL homes at the public auctions.

  11. IrvineRenter

    That is kind of scary for the market when you think about it. The lender will bid up to the value of the first mortgage — generally 80% of the original purchase price. If there are no other bidders willing to bid even a penny higher, then the property must be worth less than 80% of its original purchase price. I can infer from your observation that every property up for auction in San Diego is worth at least 20% less than its purchase price. Scary.

  12. No_Such_Reality

    We have round two of the hyped foreclosure auctions coming up. Middle of August for SD/IE, last weekend for LA/OC. http://ushomeauction.com/auction_details.php?auctionID=H-005

    I wonder how it will go. I know if the first wave from what I heard both sides were disappointed. The blogging community thought everybody over paid and the bank’s thought they got too little after the costs.

    Looks like SD has 150 on the block, IE about 300, OC 50, LA 150.

  13. mino2126

    IrvineRenter since you sorta beat me to the punch….since Lenders, in general, only lend up to 80% of the value of the home then the evidence will only get stronger that home prices will decline by atleast 20% as more and more banks have to take on the value of the property….if the SD situation takes hold here.

    To add a twist, wonder how many FB’s actually put money down and how much…hmmm.

  14. kishore (renter)

    Its amazing that the guy could purchase 113 tall oak for low 600k. Wonder how he could get it at that price.. Many of the tall oak properties were sold in late 2006 for around 700k.

  15. NanoWest


    And the purchaser thought they were getting a great deal…..how could they go wrong. That is the amazing logic of people in a bubble market…..they are unable to figure out real value. When the bubble rises you buy and then sell, and make money. It is EZ.

    The smart one was the person that decided to unload the unit and get out of the market while they could.

    This place is probably worth just north of $300,000.

  16. IrvineRenter

    Which is more amazing:

    1. These units were selling for over $700K in 2006
    2. These units are selling for the low $600s now.

    I vote #1.

  17. arraya

    Yes that is correct regarding the 20% less. And yes the vast majority were bought w/no money down.

    I just can’t figure out what there strategy is. Possibly that the market could turn around in a few months then they could re-coup there cost’s. It seems to me that they are delaying there inevitable pain, kind of like pulling the band-aid of slowly…

  18. IrvineRenter

    Banks have pre-defined loss mitigation procedures which they must follow. This helps to curb fraud, and it provides a consistent method for disposing of REOs. Part of their loss mitigation procedure is to go to the auction and bid the price up to their first loan amount.

    We may find in the future these procedures get amended to allow a market auction to take place, particularly if the number of REOs gets so large the banks can’t deal with them all.

    I think you are correct in that is simply slows the inevitable. In a way, this procedure should work to prevent a full-blown market panic. If properties can only lose 20% of their value in one sale, it will take 2 or 3 sales to get us to the bottom. Can you imagine the effect if properties were allowed to sell at auction for 50% off? That would be a market killer.

  19. tim b.

    111 Tall Oak isn’t in foreclosure…yet. It’s owned by a single woman who’s paying $4,457.11 a month to Fremont Investment & Loan, just for the 1st mortgage (according to the public records). Wasn’t Fremont Investment & Loan one of the bigger sub-prime lenders that fizzled out? Anyway if you add taxes, HOA dues, the 2nd mortgage payment, homeowners insurance, etc., she must be paying at least $6,000 a month for her house, which isn’t really a house, it’s a detached condo.

    113 Tall Oak has been foreclosed on and is now owned by…. drumroll please…. Fremont Investment & Loan. The kitchen looks like it’s in decent shape, considering it’s a foreclosure… lucky there’s no garbage in the dishwasher or the oven…

  20. arraya

    I big question is as inventories dramatically increase of REOs which bank will crater 1st and start having a “home clearance sale”

    I know that can’t hang on them too long..

  21. No_Such_Reality

    “If properties can only lose 20% of their value in one sale, it will take 2 or 3 sales to get us to the bottom.”

    In a way, I wonder if something similar with the loss mitigation procedures once it’s a REO is doing the same thing, preventing them from marking them down to rapidly below comparable sales or market inventory.

    AFAICT, if you price 10% below comps on the MLS, you’re at least 1 in 100 and stick out like a sore thumb to the 2000+ people buying a home a month.

  22. patience2007

    It’s owned by a single woman who’s paying $4,457.11 a month to Fremont Investment & Loan, just for the 1st mortgage (according to the public records).

    Where do you go to find this public information? Do you have to go to City Hall? Do you have to be in the industry to have electronic access to the data?

  23. tim b.

    You can go to the County Recorder’s Office in downtown Santa Ana to access the public records, but its quicker and easier to ask someone at a title company to do the research.

  24. graphrix

    I think what is funny is the fact that 208 Tall Oak is scheduled for the forclosure auction on 8/21 with a NTS amount of $607k. I wonder how the owners of 132 priced at $869k and 7 priced at $885k will feel about that one. Then there is 230 who paid $756k in March and 16 who paid $760 in April but then there is 118 who only paid $675k in May.

  25. arraya

    We have round two of the hyped foreclosure auctions coming up. Middle of August for SD/IE, last weekend for LA/OC. http://ushomeauction.com/auction_details.php?auctionID=H-005

    I wonder how it will go. I know if the first wave from what I heard both sides were disappointed. The blogging community thought everybody over paid and the bank’s thought they got too little after the costs.

    Looks like SD has 150 on the block, IE about 300, OC 50, LA 150.

    Yes I heard the same thing. From what I hear bank’s priced 10% under their percieved market value.

    And “real” investors did not think there was anything worth buying.

    I can’t remember where I read it buy supposedly the banks have to pay out about 18% at an auction as opposed to 6% to a RE agent.

    Which leads me to believe they will start pricing REOs more aggresivlely that don’t go to auction

  26. Mr Vincent

    Great info Tim.

    I guess there is no requirement to list foreclosure status in the for-sale listing description. I have been seeing statements like “corporate owned”, to make it not look so bad, but yeah, why not just say nothing.

    Its getting pretty desperate out there.

  27. almon

    I don’t mean to contradict, but…I live in Quail Hill and the going rental rate for a 1500sq ft detached 3BR condo is approximately $2400. Are you sure a similar place can be had for $2200-$2500 in Newport or Laguna? You wouldn’t happen to be thinking of the oldest part of Newport (that is closest to Newport Blvd and Costa Mesa)?

  28. patience2007

    I went to that website and checked to see if anything in my area is going up for auction. I found just one. I asked a question about it here: http://crashingoaks.wordpress.com/2007/07/30/auction-2235-willowpark-court-thousand-oaks/

    Can anybody shed some light on the topic?

    The site doesn’t have much information, but apparently this house will be auctioned on August 26th. Next I went to Zillow to get some information. Here’s where I’d love to get some input from industry professionals/experts. This house has a sales history of:
    04/12/2007: $571,000
    02/24/2005: $593,000
    02/15/2002: $340,000
    05/02/1996: $208,500

    Does mean that this house was foreclosed on by the lender on 4/12/07? Or did a homeowner buy it on 4/12/07 and it is already being put up for auction? What other possibilities are there here? I’m sure that the purchaser on 2/24/05 was happy that they lost $22,000 on this house in just over 2 years’ of ownership.

  29. Trinity

    The last rental price for this exact floorplan and neighborhood is $2650. This is in line with the going rate for Quail Hill.

    Using the mortgage calculator on Realtor.com. 20% down, 6.36%, 30 year fixed, and assuming “rent = mortgage = good buy,” this house should be worth $535,000. Would any of you buy this place for 535K?

  30. IrvineRenter

    No, and I wouldn’t trust realtor.com for a good rent=mortgage calculator either.

    My algorithm is much simpler. When my payment = my rent, it is OK to buy.

  31. Gavrilo Princip

    8/21/2007 2:00:00 PM
    Address: 208 TALL OAK
    Get Yahoo! Map
    City: IRVINE
    State: CA
    Zip: 92603
    County: Orange
    APN: 932-72-277

    Sale Status: Sale Date 08/21/2007
    TS Number: 0728777CA
    Notice of Sale Amt: $606,987.47
    Opening Bid Amt: 0
    Sold Amt: 0
    Sale Location: At the North front entrance to the County Courthouse, 700 Civic Center Drive West, Santa Ana, CA.
    Get Yahoo! Map
    Trustee: Premier Trust Deed Services, Inc
    Trustee Phone#: (949)790-8375

  32. rkp

    I am not sure what the exact rule of thumb is but I don’t think it is simply “rent = mortgage = good buy”. At least for me, it is more like “rent = mortgage+hoa+tax+mello roos = good buy”. However, I am not holding out for that. I probably will buy when the house total is within 15% of the equivalent rent.

  33. Kenneth

    Yes, depeding on your point of view the market is either good or bad. Right now I’d have to say collectivly it’s pretty bad but the pendulum always swings both ways.

    I bought my home in Irvine a couple of years ago when the market conditions were better. I found Michelle Phillips through the internet and through her site, I got in contact with her right away.

    Michelle specializes in Orange County real estate and more specifically Irvine homes. Her attention to my needs and the small details made my purchase an comfortable one. If you’re looking for a new home now check her out!

  34. ph7

    I can’t agree more with your assessment of the OC housing market and to a larger extent the SoCal housing market. Not to brag, but I cashed out big time 2005 from a 2001 purchase to the tune of 400k+ tax free. And this was El Monte where police helicopters do their fly-overs every night and made me realized just how bright those lights can be. Since then, I have moved out-of-state, but still waiting for the right time to get back into SoCal.

    I make good money. According to one report published by the state that only 14% of Californians were able to afford the medium housing price in 2005 which I belonged to. Even I was feeling pinched with maintaining a home and a family to support with a mortgage of $1700. So, how many buyers can actually afford those prices befuddled me. I figured no possible way those prices can be maintained no matter how many new legal immigrants with money move to the state as many of my friends were saying prices will not drop due to this simple fact. At the time I was telling everyone if prices can shoot up so quickly it can just as easily fall. They refused to listen to logic and favor the emotional. I believe we are just seeing the beginning of this fallout. It is unfortunate that many households will be devastated and ruin their financial stability for many many years to come.

    This market correction is good news for people looking to get into the housing market in the future. I, myself, am expecting around a 50% correction before I would consider to buy again. The almighty dollar is just not that easy to make and save.

    You blog is a good mix of facts and the current emotional feelings towards this market. I love to donate to your cause, but I absolutely does not want to create a paypal account and maybe many of your readers as well.

  35. Kim

    Do the realtors in Orange County believe that if they continue to use the terms “wood” and “hardwood” in reference to laminate flooring, the laminate will turn into wood? Or do they just not know the difference?

  36. Live And Work In Irvine

    When I was looking for a rental 18 months ago, I noticed numerous properties on Tall Oak and was thinking this is flipper central and people are going to be burned.

    In fact, I was afraid to enter into a lease with anyone on that street for fear of them being foreclosed on.

    Looks like the fire has started.

  37. IrvineRenter

    In my simple world, the HOA, taxes, mello roos and maintenance expenses would be covered by the income tax write off.

  38. Trooper

    IR, you now need a P.O. Box….

    FYI to all of you readers, I have had a Paypal account for 7 years and have never had one issue. I’m a naturally suspicious person too ! You are protected in any case of fraud. Paypal is owned by eBay and the security of the site is state of the art. eBay depends on it’s reliability. I have both my bank acct and credit card linked, no issues whatsoever.

  39. tim b.

    I checked this out — the 4/12/07 transaction was the bank acquiring the property via foreclosure.

  40. k.o.

    Hey Live and Work in Irvine,

    I’m trying to run around now looking for a condo rental for later this year and trying to find some good resources. What did you use when you were looking – online resources, get an agent, etc? I’m a single guy looking for a 1 or 2 bedroom, so I’m just trying to figure out what is the best route to go. Thanks!

  41. IrvineRenter

    When I found my last rental, I used firstteam.com

    They have all the MLS properties on-line.

  42. No_Such_Reality

    Try craigslist, rent.com, the ocregister, penny saver, rentometer.com, etc.

    Most importantly, narrow down what you want. Do you just need a 1/1 anywhere? A 1/1 close to work? A 1/1 close to a bunch of beach hotties? Or maybe 2/2? 2/2 and a garage? Pet/no pet, etc.

    But in general, just eyeball a complex as a fallback worst case scenario then pick up the paper and look at the private party ads. Or, pick the neighborhood and do a bike ride/drive through it to pick up the for rent signs hanging in the windows/ posted to the lawn.

  43. k.o.

    Many thanks for the information and advice. I need to definitely figure out what I want before I just start looking around. I appreciate it and it will help!

  44. Live And Work In Irvine

    Sorry for the delayed reply k.o.

    I’m trying to route replies on this blog to a specific IMAP folder on my computer and the syncing is off.

    I don’t see an email icon by the right or your name, so I don’t know if you will get this info.

    Maybe IR, can forward it to your email address on file.

    Related question for IR.

    If you comment on a post, you can subscribe to follow up comments. Is there a procedure to receive all posts by email?

    This site is so good, I don’t want to miss anything!

    Back to k.o.

    Here are a few sites, I use to monitor rentals.

    Click on area listings and type your price range. It doesn’t say specifically rentals. You have to sign up for details, but they don’t solicit you.

    In fact, you will get daily updates by email. This is how I uncovered my current house, the morning I was listed in the MLS.

    It is owned by a realtor and I think he was a little surprised that I was there so quickly. I didn’t reveal my secret weapon 🙂


    This site is interesting, but I think posters are too tech savvy. I’ve never seen a great deal, but you could find a great place.


    This isn’t as organized, but you get access to the MLS.


    This site is really good and has been mentioned on this blog before.


    Here is the First Team site that IR may be talking about. Click show leases.


  45. Larrygg

    I read the MSNBC article as well. I hope those mortgage people saved for a rainy day! More so thay have better built an ark!

  46. Stupid

    M-LEC is an interesting name. Sounds like “mmmmm …. leeeeeccc” the sound one makes throwing up after eating something really bad ….

  47. Stupid

    Sorry, commet should go with the “Citigroup, JPMorgan in Market Talks With Treasury (Update1)” link above.

  48. Major Schadenfreude

    From the linked article:

    “The transition has been rockier for Kelly Markham, who earned $200,000 in commission in 2005 as a loan officer at an Irvine mortgage brokerage…”

    “”I’ve signed up for work at a temp agency, but all I’ve gotten is five hours of work in the past four weeks stuffing envelopes in some office,” said Markham, 34, as she perused Starbucks job listings online one recent afternoon.”

  49. tonye

    Those floor plans are SO HIP because those “homes” are so close that they might as well be JOINED BY THE HIP.

    That’s the only rationale that I can figure out the word “HIP” can be used for those things.

  50. scahomeowner

    I remember sitting for builder’s first 2 release. I actually was called for the last home for release 1B. 1500sf for $400K. I wanted the larger model, better location and cheaper price at release 1 A, but did not get it. Of course, I felt bad that I did not buy when price took off soon after, but my comfort was that I would be bleeding for the high HOA, high tax and vacancy since I will either have to move to a much smaller home than the one I have or leave it vacant since it is not rentable for a year.

  51. henry

    Sorry. I had a bad one with Paypal. They only cover up to 200$ for bad transaction. I bought something on ebay and paid 400$ through PayPal. Only recovered 200$.

  52. bac

    I’ve been reading the blog for a few months, and I keep seeing you talk about “100% financing…the seller will just walk away…”

    I don’t get how you can “walk away” when the bank loses so much money on the deal. Don’t they have ways to hound you forever until you end up cowering under a flattened cardboard box somewhere? Isn’t their credit essentially ruined so that they can’t ever buy a house or a car or anything for the next five to ten years?

    I don’t understand how banks would possibly let this happen. Banks are incredibly conservative…I can’t see them doing this kind of deal…is it mostly done by scary fly-by-night outfits trying to make a quick buck and not by “reputable” banking institutions? Kind of the equivalent of getting your mortgage through a loan shark? But loan sharks have teeth and wouldn’t let you “walk away”…I think I’m just not understanding the market dynamics that brought this arrangement into being, or how any lender could think it was a good idea to just hope that people pay their mortgages on the honor system, essentially, without consequences.

  53. awgee

    bac – It is not a decision for the lenders to make. Whether or not a mortgage is recourse or non-recourse is determined by each state’s laws.

  54. Irvinehousewife

    A parent at my kids school lives at 13X Tall Oak. She tried to sell it last summer, had no offer, did not even a single soul looked at her place. She took it off the market of course. Why she want out? It is impossible to find parking after 6pm in the additional parking spots. On weekends, the park across the street is noisy and crowded with people NOT living in the neighborhood. They take up all the parking spots plus the side street parkings. And these little so call patches of gathering areas/play area around the condos are very popular with smoking teenagers, especially after midnight. Cops were called a few times. So in case there’s someone who’s interested in the Tall Oak area, keep these in mind.

  55. Laura Louzader

    Here in Illinois, I believe the lender has recourse. A massive deficiency judgment is nothing to just “walk away” from and pretend it doesn’t exist, because you won’t even be able to rent a decent apt. or get the utilities turned on after your credit is so blighted. Your credit will be worse than if you had filed bankruptcy. When you do get credit, such as for a car necessary to get to work in, you will pay steeply higher interest. Your blighted credit will make you much less employable, and will generally ruin your life, especially if you are not in a high-salary bracket to begin with.

    “Just walk away” is absolutely the last resort whether or not your lender has recourse. I have talked to many home borrowers who are severely underwater on condos purchased in the past few years, and they don’t consider this an option. They bought to have a home, and for fear of being priced out for ever, and they will do and are doing whatever they can to keep their places.

    A couple of these people bought with no down payment. Their idea was to use the low-interest period to make extra payments against the principal to build equity, and then refinance with a slightly smaller mortgage. Unfortunately, the value of their modest places has dropped far enough below their original purchase prices that their extra payments made no difference after all- they still owe more than their places are currently worth, let alone what they might be worth a year hence.

    These people are not affluent people. They are lower middle income people who bought for fear of being priced out forever, feeling had, but feeling they had no choice. The sad part is that they often traded out of substantially superior rental units to buy crud condos, just to get on the ownership bandwagon.

    If there is any way to pay, keep paying. Get three jobs, live on rice and beans, get rid of the car and take the train, buy your clothes at consignment shops, just plain make do with old stuff- these people are doing all this, simply because they would feel dishonored and defeated giving up their places without a good faith struggle to make the payments.

    We Americans need to relearn the concept of “moral hazard”, and we sure as hell won’t learn it from people like Cramer. Our authorities and financial pundits have preached (and legislated)financial recklessness and the total abdication of personal responsibility, and we are now paying the price of it.

  56. whoadude

    Irvinehousewife – I’ve lived in the Tall Oak area since they were brand new. Besides your comment about the parking in the area, I have never noticed the teenagers smoking. I jog along those park trails and gathering areas everyday and I have never seen kids just loitering and smoking. The parking however, does get bad especially on weekends but if you are home before 9pm, you can find parking on the street fairly easy. Re the park- have seen the park across the street being used usually in the summer, but these are kid’s birthday parties with families having bbqs, or picnics.

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