Crush 'Em

Party time, going down

you better not mess us around

the stakes are rich, take a hit or stay

the price is high, someone’s gonna pay

Looking for trouble, now you’ve found it

you’re a drum and we’re gonna pound it

Last one standing wins the fight

hear us scream and shout all night

down on the floor and eat the grit

this is gonna hurt a little bit

Heads I win, tails you lose

out of my way I’m coming through

roll the dice don’t think twice

and we crush (crush), crush ’em (crush ’em)

Megadeth 2Don’t need reason, don’t want names

just a John Doe to put to shame

step aside let me explain

the name of the game is pain

Now we’ve found you

We’re gonna pound you

We’re gonna beat you

Gonna defeat you

We’re gonna bust you

We’re gonna crush you

We’re gonna crush ’em

Crush ‘Em — Megadeth



Financial markets can be brutal, particularly for those who speculate. Today’s property was purchased for nearly double its cashflow value as were all the other properties in Northwood II. These properties were all built in 2004 and 2005 near the peak of the housing bubble. Most of them were purchased by speculators, and the featured property today was one of these. So what did the market do? It crushed him…

20 Torrey Pines Front20 Torrey Pines Kitchen

Asking Price: $780,000IrvineRenter

Income Requirement: $195,000

Downpayment Needed: $156,000

Purchase Price: $847,500

Purchase Date: 11/15/2006

Address: 20 North Torrey Pines, Irvine, CA 92620

Beds: 3
Baths: 2
Sq. Ft.: 1,765
$/Sq. Ft.: $442
Lot Size: 5,000 sq. ft.
Type: Single Family Residence
Style: Other
Year Built: 2006
Stories: One Level
Area: West Irvine
County: Orange
MLS#: P618797
Status: Active
On Redfin: 4 days

Gated community, best location next to green belt on the end of the Cul De Sac, bright light open floor plan. Tumbled stone flooring, granite kitchen counter’s, maple cabinets w/ cognac finish. Northwood school district.

Cognac finish? I would rather drink the stuff than finish my cabinets with it.



If this seller gets their asking price and pays a 6% commission, they will have lost $114,300 in a little over 1 year. Since this price is only 10% off the peak, and we have seen many properties going for 20% or more off peak, this property’s asking price may be $75,000 over market. This speculator may lose over $200,000 in their little foray into the housing market. It is a good thing they are getting out now, properties in this neighborhood could easily drop to near $500,000 in the next couple of years.


That concludes another week at the Irvine Housing Blog. Come back next week as we continue chronicling β€˜the seventh circle of real estate hell.’ Have a great weekend.


67 thoughts on “Crush 'Em

  1. NoWow!way

    “Northwood School District”? I had no idea that IUSD had subdivided.

    This home really has no better curb appeal than many of the homes in El Camino and old Westpark imo.

  2. NoWow!way

    There is absolutely nothing special looking about this home from the outside. The architecture is not bold or striking. The little plot of lawn with some basic landscaping greenery is typical, but much smaller of the traditional neighborhoods, in Irvine.

  3. ice weasel

    I always wanted to live in a beautiful garage that just happened to have a home attached to it.

    Love the garage door as main architectural feature.

    And without going into the usual WTF $442 per square foot foot for that thing, the issue that this house puts me in mind if this, going forward, as El Toro begins its second life as “Irvine, The Other” what’s going to happen to an already over-inflated and overstocked real estate market?

    As the economy continues to weaken or, possibly at best, stagger along as it is now, will this home gain value?

    There’s no historical proof for my real feelings on places such as this so I keep them to myself but I think there is the potential for enormous change in Irvine real estate and undistinguished homes like this are the ones that will be crushed.

  4. ex-tangelo

    Jeez. You should see my house. “Mid-century really nothing special”. Not craftsman, not modern, not Eichler, not anything architecturally bold or striking.

    Thank God.

  5. tenmagnet

    Hey Ipop,

    Ironically, this one has your three car garage and is in the same neighborhood you like.
    Are you the one that took it down?
    I bet you got it at 925K

  6. weichi


    Is it significant that none of the houses on your list have closed yet? I don’t own a home, so I’ve no idea how long it typically takes to go from escrow to closing.

    I will probably be buying in the Denver metro area in 18 months. Maybe I should start tracking some properties in the areas I might be interested in. Anyone know of any blogs or sites that track or discuss denver area real estate?

  7. Emma Anne

    Hey Irvine Renter – you say that most of these properties were purchased by speculators, as was this one. How can you tell?

  8. ipoplaya

    Yeah, kind of disappointing that this didn’t stay on the market longer. A 3000+ sf house nearby sold for under $1M recently, so I think they must have had to take low $900K range. We’ll see in 45 or so days… There are bigger places on the market today in that area with lower list as well.

  9. ipoplaya

    Not significant as yet weichl. The only one that probably should have closed appears to have fallen out of escrow initially and then went back in with a backup offer. Escrow to closing is typically going to run 30 to 60 days…

    If I was buying today, I’d probably go for a 45-day escrow with a long buyer contingency period of at least 21 days. That gives a good three weeks on the buy side to watch the market and pull out with no adverse consequences should things sour materially. We bailed an escrow during the summer on a place in Tustin Field (yeah I know, what the heck were we thinking) and all it cost us was the appraisal fee, inspection fee, and a couple hundred to compensate escrow.

  10. ipoplaya

    That’s why I maxed my HELOC and parked it in cash! Their isn’t anything left for my lender to freeze…

  11. tenmagnet

    15 Woodhaven Lane is slightly larger, 3,150sq. feet in the same vicinity and their asking 1.249M.
    That seems like quite a premium if everything surrounding it is getting hit in the low 900K. Hopefully, this downward trend continues moving to the homes on the other side of Culver.

  12. IrvineRenter

    It depends on one’s definition. IMO, anyone who pays two times the cost of renting a place like this in order to be an owner (or renter from the bank,) must believe they will be compensated in some way for this additional expense. The only way they will obtain a return on this additional investment would be through an increase in prices due to speculation. Plus, remember the mentality in 2004 and 2005; people did not care how much a house cost, they just knew it was going to go up in value, so they bought them. This is speculation.

    I imagine there are a few people who bought to own for a lifetime. There always are. It is sad for them they made that decision at the top of a real estate bubble because now they will have to endure many years of being underwater.

  13. ex-Tangelo

    “No adverse consequences”, except for losing your good-faith deposit. Well, maybe sellers accept offers without one, but the deposit is kinda the signal that you’re [agent jargon] ‘serious’. [/agent jargon]

    Our friends across the street moved away this year and sold their house to a new couple. They were on the fence about accepting the offer, because the couple making the offer had also backed out of a sale earlier, for no reason anyone understood. (Wasn’t a contingency issue, they just stopped the sale) This history made our friends think these buyers weren’t ‘serious’ or whatever, that they would fall out of escrow this time too. Agents talk to each other, and you’re not anonymous. You can get a reputation with agents. Our friends took the offer in the end, but if they had another offer, they probably would have chosen the other, even if it were lower. They just didn’t like the odds of these buyers bailing again.

    Irvine’s a lot bigger than my neighborhood so you could probably withdraw an offer capriciously and not suffer for it. But it could also mean your future offers won’t be valued as much, since sellers will suspect you’ll just tie up their house for weeks for nothing when they could have pursued a sale with someone else.

  14. ipoplaya

    ex-Tan, you do NOT lose your deposit if you withdraw from the transaction within the initial contingency period. This is definitely the case with C.A.R. standard purchase contracts. While one typically gives a reason for the withdrawal, it is not required to do so. You can just say “I’m done” and your earnest money is yours. You might not get it back for a while, but you have all rights to it.

    All you would lose are your out-of-pocket costs and a share of the escrow cancellation fee most likely. If contingencies are removed, typically at the 17-day mark, any withdrawal from the transaction by the buyer would normally mean that the deposit is forefeited to the seller…

    I agree, being some kind of serial escrow quitter is a bad idea in terms of rep. In a quickly declining market though, the impact is lessened though as there are fewer buyers.

  15. Priced_Out_IT_Guy

    At $442/sq ft, professional working individuals such as myself can afford a 700 sq ft house.

    Hrmm lets see, my apartment is 840 sq ft and costs a fraction of the price of this theoretical 700 sq ft house.

    Ladies and gentlemen, speculators and kool-aid drinkers, we are now descending from our cruising altitude of 30,000 ft to our destination of John Wayne Airport, located in sunny Southern California. Please prepare for a bumpy landing.

  16. houseonlegs

    When they purchased this property in 11/06, they financed with an 80/20, 100% financing. Then in 4/07, they took out a Heloc for 224,000, probably paid off the second with it. Assuming that the Heloc $ was spent, they owe over 900,000 on this property. The borrowers aren’t the ones getting crushed in this story, it will be GMAC mtg who gave them the Heloc, they won’t see any of it paid back.

  17. mark

    I agree with this definition. The fact that they paid twice its rental value at the market’s peak, and are now selling in a downturn, strongly suggests the homeowners bought solely anticipating appreciation. The opposite is occurring, and they want out.

    If they’d bought the house to live in for more than five years, and they could afford (30 year fixed @

  18. resident

    Big fan of the blog, thanks for putting in so much work.
    One small point of contention. I think you’re giving the peak buyers too much credit. I remember talking to people who had no clue to even consider how much they could rent a similar place for. The whole thought process was: this is a nice house, houses are going up, our mortgage broker said we can afford it, lets buy it. I would bet that 50% of the foreclosure/short selling owners never even entertained the possibility homes would go down.

  19. Irvinewanabe


    My sister-in-law had a very interesting conversation with a loan officer this week.

    My sister-in-law is in the market for a home in Covenant Hills (Ladera Ranch). She doesn’t need to sell her current home in Mission Viejo to purchase. She wanted to get pre-qualified and went to Washington Mutual this week to talk to a Loan Officer.

    The loan officer said that he has been in this business for many years in California and highly recommends NOT BUYING at this time.

    She mentioned a wonderful “deal” in Covenant Hills. A short sale for $1.5M on a house that originally sold for $2.5M in 2005. He said if you really love the house than offer $750K!!

    He was very serious and insisted that is what these homes will be selling for in two years! He said that to determine a reasonable value for a house of this size and age to look at 2001 pricing for similar size, quality, and aged houses. She went on Zillow and crudely researched homes that sold in 2001 that were of the same size and age and sure enough they were selling for around $700K.

    He continued to say that most people can’t imagine housing prices tripling and then retreating and losing all equity. However, in California, this is quite common.

    She recalled her own purchases and realized that has actually happened to her as well. She purchased a house in Mission Viejo in 1986 for $150K and watched the prices sore to $550K and then back to $180K when they sold in 1996.

    Her second home in Mission Viejo was purchased for $277K in 1996. She has watched the price of this sore to $1M in 2005 and now clearly the prices are retreating again. She doesn’t need to sell this home to buy a new upgraded version, but could it be possible that we could see prices back at $355K (considering 2% inflation from 1996 to 2008)?

    Being from the Midwest, this is hard for me to imagine! I can only hope and pray!

    Thanks for all of your hard work and interesting analysis!

  20. Stuff It

    The one you bailed in tustin field, was this the REO owned one ~3200 sq ft which went into escrow Dec for ~850K (was ~950K).

    We almost took it at 850 but decided to wait for Irvine to come down to that price

  21. 4walls4me

    I thought the HELCO was recourse and they will have to find a way to pay it back or file for BK. Am I missing something?

  22. Mike

    Interesting, we were planning to look for a SFR in Irvine and drove down to a couple of open houses last weekend. The realtor in one of the houses told us the same thing. He said, “If you can afford to wait, then rent for 2 more years. Prices will be significantly lower in 2010”. Coming from a realtor i found this interesting and now you mention a similar conversation from a loan officer.

  23. IE_Priced_Out

    No, that will never happen, let me tell you why…
    That property is in Mission Viejo, the wealthy residents of the Inland Empire are waiting to buy in OC. We all make 200k a year and drive Mercedes… we will help to keep prices up.. and up.. and up…

  24. IE_Priced_Out

    and one more thing… Mr Bush and Uncle Sam is also helping to keep prices up… and up.. and up…

  25. Major Schadenfreude

    From referenced LA Times article:

    “The cutoffs are coming as a shock to some.

    “We didn’t deserve this,” Thaleia Georgiades, a real estate agent in El Dorado, Calif., said Thursday, two days after she and her husband, a builder, learned that their Countrywide credit line had been frozen.

    “When you are self-employed, that’s the money you count on to bridge the gap during tough times. And this is a particularly tough time in both the building and housing industries,” Georgiades said.”

    So, these people, who just experienced a huge boom in their industries which (should have) resulted in HUGE incomes the past 7 years, were now tapping credit lines??????????!!!!!!!!!!!!!!!!

    Please…get to the back of the soup line where you belong.

  26. surfing in newport

    I hope not. If Ladera Ranch gets that cheap, there’s no way my wife is going to let me live by the beach:-(

    BTW, she thinks Ladera Ranch will sell for 40 cents on the dollar.

  27. Irvinewanabe

    I think Ladera has no where to go but down down down. There is sooo much supply out there it is frightening!

    Incidently, in my opinion, if you don’t have children, why even consider living in Irvine?

    Someone commented on this blog recently that there are few houses in Irvine that they would want to live in regardless of how low the prices get.

    I would have to agree. Why are there so many small, ugly houses in Irvine?

  28. surfing in newport

    I went to get pre-qualified a couple of years ago. The loan seller (seems too nice to say officer) was trying to get me to qualify for a larger mortgage based on an option ARM. I declined and only wanted to know what I would qualify for based on a 80 LTV fixed rate. He kept pushing the option ARM “you know that prices will go up by more than 3% each year”.

    If anybody bought using something other than a traditional ARM or fixed rate mortgage, they were speculating that either their income would go up or the price of the house would.

    However, I agree with your point, most people will buy as much house as they can in the nicest neighborhood that they can afford…and probably not look at comparable rentals. Most of the time this is a safe thing to do, but unfortunately for everybody (buyers and “forced” renters) the last few years were not ordinary years.

  29. Irvinewanabe

    Are you buying in Irvine because you have children and like the school system or do you just love the houses?

  30. Ron

    Because Irvine is centrally located. That’s why I live here. I have to drive to Costa Mesa, Los Alamitos, Corona, and Aliso Viejo on a regular basis for work and personal commitments. I enjoy being near the airport, and like to walk or jog by the beach.

    I don’t have kids, but with traffic the way it is, and the Socal area being as large as it is, it only makes sense to live in a central location which makes most of my drives “easy” ones. For me, that means Irvine.

    I also like being close to the Spectrum, and especially South Coast Rep and the Perf. Arts Center.

  31. ipoplaya

    Wow, the spread between jumbos and their fixed counterparts appears to have lessened substantially over recet days.

    I was seeing a 1-1.25 point differential for quite some time between a 30-year conv and 30-year jumbo. It appears to be back down to .75 only now…

  32. tonye

    Lemme see… new F250 duelie turbo diesel every year, big trailer to carry the four personal watercraft, matching Harleys, leased Mercedes for the wife’s RE business, big screen plasma TV, fancy clothes for the wife, stainless steel BBQ…

    These people are so transparent, eh?

    “We didn’t deserve this”? Huh?

  33. Mike

    yes, good schools, the region seems safe, its in the middle of 405 and 5 ( i hate teh daily traffic jams at the Y). The houses look good too. Westpark, Woodbridge, Northwood and Oak Creek looked good.

  34. tonye


    Homes to live in should be purchased based upon circumstances at purchase time: fixed loan term, home value, ability to pay, etc…

    This should be the bottom line.

    “Banking” on better circumstances down the road is speculation and what we’re seeing now is the end result of mass speculation.. which is…. ( class? ) mass bankruptcies.

  35. frenchp

    I agree with resident above. I bet a lot of people did not include a full cost analysis of “buy vs rent” before buying a house at the peak, or near the peak. I know I didn’t.

    I bought a house towards the end of 2006. I would have been much better off renting.

  36. tonye

    A fifteen dollar taxi ride to John Wayne (10 bucks plus tip),
    a ten minute drive to The Performing Arts Center and South Coast,
    five minutes to Fashion Island,
    fifteen to the Newport Peninsula,
    20 minutes to Laguna ( and half an hour to get around in the summer time once there..)

    Then there are other things

    A City Hall with people that will answer your messages
    A City Hall with a working staff
    Good schools
    A School bureaucracy that treats you like an intelligent person

    Reasonable weather and little smog
    Good bike trails ( from TR you can bike to the Upper Bay)
    Nice parks ( ever been to the IRW reclaiming lakes?)

    Safe city where you can leave your garage door opened all day

    All in all the place works for me.

    Sure, there are plastic people, but there’s lots of them everywhere anyhow.

  37. Major Schadenfreude

    Let’s not forget the awesome bike path.

    I envy people who get to ride their bikes to work and not deal with traffic. If the rest of southern California was laid out with a nice grid of bike paths, the commuting problem would be significanly diminished, IMO. However, the mentality was/is, “spare strip of land? Build!”

    I would vote for a referandum that diverts road funds to building a network of bike paths. Reduce traffic and shed pounds – exactly what we need. Also, it would cost a lot less to implement compared to building another freeway.

  38. tonye

    Do you thing those “junior jumbos” will drop to the conforming level soon?

    If I could do a refi for 500K at a conforming rate I would really like that. Maybe go into a 15 year fixed.

    Time to move to TRidge dude…. ;~P

  39. tonye

    I’ll vote for that if I can ride a Honda 750 on those bike trails…. πŸ˜‰

    But keep the Harleys out.

  40. patientrenter

    sunnyview, that February newsletter from Bill Gross that you linked to was scary and disappointing. Scary because he advocates more subsidies for lending to homeowners, to keep prices inflated. Disappointing because he talks about how the Fed’s 1% rate caused a housing bubble, so he clearly understrands that home prices are now too high.

    Could it be that he directed his clients’ money into (loans used for) buying homes at those inflated prices and now wants a bailout for his own book? Shameful. Everyone telling us a bailout is good for US is just trying to get THEIRS.

  41. CapitalismWorks

    I believe a bailout is good for the US. I assure you its not because I am “trying to get THEIRS” [sic]. Rather I would prefer to give up buying houses at fifty cents on the dollar if it means in order to do so we must endure economy-wide deflation. Watching the Dow go nowhere for the next 20 years is not exactly a recipe for happiness in the golden years. The Japan scenario is an all too real example of what can happen to economies in the wake of a deflationary spiral. No one is arguing that houses did not get ahead of themselves, nor is Gross arguing that a correction in housing should be prevented (not that it could). Instead he is advocating an easing of financing costs in order to take the sting credit/liquidity crunch that started last July. I believe he would agree that this is not a perfect solution, only that it is preferable to the risk of a Japan scenario.

    FYI there are few firms on wallstreet that got the call on housing and mortgages correct. Goldman and Pimco were two of them. Something tells me old Bill isn’t all that concerned about z-traches of subprime abs on the books.

  42. awgee

    HELOCs are recourse, but history shows that it is rare for the lender to try to get their money from the borrower.

  43. Dannyshark

    Unfortunately I am in a situation where I think I may up having to do a short sale. I owe $568 and am getting offers for around $450. Does anyone know if I will have to pay taxes on the difference?

  44. awgee

    capworks – I think that Gross means well. But, he did not get the call correct on housing and mortgages. He was way late to the game.
    My opinion – Any bailout will not help. It is pouring gas on a fire. Easy money and credit is what caused these serial asset bubbles and more of the same will just prolong the pain and make the inevitable correction much worse. It would not have gotten this bad if Greenspan had let the economy endure a natural correction instead of always trying to avoid recession.

  45. lawyerliz

    No you don’t. New law. Keep us posted on the gory details of your short sale. I for one want to know if most short sales aren’t an urban myth. And if it doesn’t make you uncomfortable, I’d like to know the name of the lender.

    Also, make your the hit to your credit is not as bad as a foreclosure would be.

  46. awgee

    Dshark – I will find out today to see if there are any exceptions to the new law that changed the tax code regarding forgiveness of mortgage debt.

  47. NoWow!way

    In california, I am told that you will owe capital gains on the difference between what you received for the home and what you owed.

    Think of it as an unintended “gift” that the bank/lender is giving to you by not making you responsible for the entire amount that you owed. Capital gains would apply to any such large gift or winning.

    Thanks for sharing this part of your story. You’re in a tough spot that I think we can all appreciate. Best of luck to you.

  48. futao

    Good or bad. it is a hard answer to choose. Yes. In a short term view, cutting the interest rate helps. Bail out whom by who? Who is paying the bill? Pay it by borrowing more?
    Why the rate cut works by Bernie and greenspan? Because those oil countries and asian countries support it by keeping selling their goods to us for IOU. Why oil keeps going up?because those asian countries need more oil, they pay with our IOU. When too much money chase a few goods, prices go up. That is the simple definition of inflation. Why food and other resources prices go up? Because they are limited and asian want more. And IOU is unlimited. By now, asian countries are finding out the IOU is losing value fast. They want to use it to buy something. Then more IOU start chasing. prices (marked by IOU) will keep going up. luckly most of the IOU are hold by the asian central banks. They are trying to promopt jobs and market stable. So they are acting together and slowly. But I can say the tide is turned, nothing can turn it back. So take advantage as possible. So more rate cut and faster when they are still supporting IOU. another thing is those asian countries also are increasing their money base following $. So a global inflation is avoidable. Another suggestion is to lock up at today’s low rate. You may not have the chance again in 20~30 years. That is why I am plausing for the increasing conforming loan limit too.

  49. futao

    Sorry. It shall be “a global inflation is unavoidable”. The point is to learn some basic finance helps. There are some other points:
    1. House could be a good tools to fight inflation. But it is already inflated too high.
    2. Gold/Sliver are inflated too. But since most central banks do not chasing it or avoid it. It still could go up if any IOU trust crisis. Hey, there are no safe haven (they are all fiat).
    3. Resources (oil or metal). Since countries are chasing them in the name of locking future needs. Their prices may not be sustainable for long before the global recession. But it may still room to go. Too risks for me.
    4. For happiness in the golden years, I will say be prepare for the worse (inflation and recession).
    5. Hey. It is not the end of world in the worst possible case. US is way ahead on education or finance services. During crisis, US will still fare better. So believe. Dow will go down with high interest rate in future. But enjoy it now. The IOU still comming back from all over the world.

  50. Peter Tork

    Irvine is centrally located? To where? Hollywood Bowl, Disney Hall, LAX, Dodger Stadium, Zoo, Staples Center, Rodeo Drive, Dozens of Good Museums, etc?

    Oh. I see. It’s centrally located to other places that are just like Irvine.

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