It’s a mistake. What else can you say about the Great Housing Bubble. It is a monumental mistake: testament to the greed and folly of man. A mistake of assuredness. An instance when man’s arrogance is only surpassed by his ignorance. Unfortunately, mistakes have consequences, and we will all pay for the mistakes of the bubble through higher interest rates, higher tax rates (to pay for a bailout), higher inflation rates, higher unemployment rates, higher bankruptcy rates, higher divorce rates, and higher depression rates.

14 Cordoba Inside

Asking Price: $700,000IrvineRenter

Income Requirement: $175,000

Downpayment Needed: $140,000

Monthly Equity Burn: $5,833

Purchase Price: $830,000

Purchase Date: 8/25/2006

Address: 14 Cordoba, Irvine, CA 92614

Short Sale

Beds: 3
Baths: 3
Sq. Ft.: 1,799
$/Sq. Ft.: $389
Lot Size:
Type: Single Family Residence
Style: Other
Year Built: 1987
Stories: Two Levels
Area: Westpark
County: Orange
MLS#: S517631
Status: Active
On Redfin: 72 days

Exceptional property in WEST PARK. A MUST SEE.

Another realtor who doesn’t seem to give a crap…



Another day, another 100% financing deal gone bad, another flipper with bad credit and another big loss for a lender. If this closes at its asking price, the lender stands to lose $172,000 after a 6% commission. Our flipper will lose his entire downpayment: nothing…



Do you ever stop to pause and reflect on the madness of the bubble? If I would not have witnessed it firsthand, I would not have believed lenders and investors would have ever risked their money so foolishly. They gave speculators money to gamble in the housing market. They assumed all the risk for the chance to make a little interest and generate some fees.


Men at WorkJump down the shelters to get away

The boys are cockin’ up their guns

Tell us general, is it party time?

If it is can we all come

Don’t think that we don’t know

Don’t think that we’re not trying

Don’t think we move too slow

It’s no use after crying


It’s a mistake, it’s a mistake

It’s a mistake, it’s a mistake

It’s a Mistake — Men at Work


72 thoughts on “Mistake

  1. BD

    Hi IR –

    Now we are in the early stages of a housing led recession. Let’s hope it is mild but, with consumer spending making up 70% of GDP we could very well be in for some bumppy times. All the numbers currently emerging around housing and economic deceleration are hitting 20 to 40 year records. As an example consumer confidence hit a number not seen since 1973! Imagine the Iraq wars and 911 and the previous housing collapse in CA and the US didn’t take us that low….

    It is precisely these recessionary forces and soon to be rising inflation and mortgage rates that will take us to fundamental support and then on through to overshoot as the fundamentals adjust to the contracting economy… your thoughts? What do you think of our current backdrop to housing? How far could we overshoot to the downside?


  2. George8

    14 Cordoba backs down to “beautiful” Main Street. How busy is this section of Main Street? It is 20 years old. It looks that age from outside. There is no interior photo.

    It is asking $700k which in my opinion is still 25-30% too high for today’s market.

    At the bottom, 160 GRM at $2500/month will fetch $400k, or $223/sf.

  3. Larrygg

    I recall not too long ago hearing my neighbors gloating about how their house value went up $100K in a few months and other stories about somebody they knew that got multilple offers on a house they were selling. Even then I could see the timebomb ticking. I do think some people have excepted the reality that their beloved tract home is not worth nearly what they were led to believe. This seller obviously needs a little more time to catch on.

  4. AZDavidPhx

    Houses might as well cost a jillion bazillion dollars when there is 100% financing.

    Americans do not care what things cost so long as they can afford some kind of monthly payment stretched out over long periods of time.

    Mortgage pimps are going going to have to be more careful next time around and make the buyers pony up some of their own cash for things they want to “buy”. Duh.

  5. NoWow!way

    “Another realtor who doesn’t seem to give a crap…”

    Realtors who are dealing with banks don’t put in much effort when the bank refuses to respond reasonably in time or price expectations when the realtor actually has a buyer for a property.

    Why go the extra mile when the bank becomes a big old boat anchor to any potential sale?

  6. AZDavidPhx

    I assume that everyone here saw that Arizona Senator McCain has come out against the proposed bailout which I assume will resonate with the majority of your readers on here.

    I look forward to seeing the levels of hypocrisy this is going to expose among fellow Republican and “conservative” homeowners whom in the past have been inclined to call into radio shows or pontificate at family get-togethers to champion the almighty “free market” with no government intervention whatsoever.

    Of course it was nothing but a fun party when the free market took us up the cliff to higher and higher house prices and created wealthy homeowners out of thin air. However, once it threw us off that cliff – WHAM! Help me this, Help us that. Government needs to step in and DO SOMETHING.

    Even though McCain cannot win the presidency, I have to respect him for coming out and telling it like it is and calling the bluff of his voter base by splashing them with a dose of true conservative wake-up juice.

    How many of these phoney baloney HOPE-NOW-calling free-market fair-weather Republicans will now switch over to a Democratic candidate?

    Should be interesting to see.

  7. 7

    I was thinking about voting Demo during the election, and after I heard what McCain said yesterday, I feel I may vote for him instead. It would be the first time I vote for a Republican presidential candidate. I hope he does not do/say anything in next few months to ruin my plan.

  8. IrvineRenter

    I think we are going to see two things happen with regard to pricing and fundamentals. First, the fundamental measures are going to decline. Rising interest rates makes financing more expensive which in turn lowers the breakeven GRM. Declining or stagnating rents will also lower projections of future fundamental values because these projections contain growth in rents. Second, I think we will see prices decline below these lowered fundamental measures because there will likely be a temporary imbalance between supply and demand. The supply of REOs is going to be greater than the number of available buyers. The number of buyers is going to be small, not due to lack of desire, but due to lack of downpayments and an inability to qualify for a loan. Very few people have been saving for the necessary downpayments. The downpayment requirement has historically been a barrier to market entry that served to keep prices near rental parity. When downpayments come back in an era of large inventories of must-sell REOs, it is a recipe for downside overshoot. I imagine we will see plenty of properties selling for GRMs down to 120, particularly the less desirable condos.

  9. westpark renter

    I rent the same exact plan, very close.
    It is a very nice 3bedrooms house. Very light, and well organised.
    2 small bedrooms are little small, but very ok.

    It is indeed 22 years old. So overall, it depends on how the owner has maintained the place. Can be day and night.

    I saw the sample plan for sale on 17 coriende a year ago. It was 817k$.
    It staid for a long time, and it is gone now, but I dont know for how much.

    This section of Main street is ok. Not best of course, but it is fine. but I think the backyard of this one is small.

    ‘My GRM’, which is higher than what IR is mentioning, will put this house arround 420k$. And indeed, when price per sqf will be below 235, I’ll seriously look to buy.

    Problem is: it is still requesting a 40% drop. Or let’s say this house will eventually go for 600k$, another 30%.

    Getting these drops in an area like Westpark, where you dont see that many flippers or 100% finances like in the North areas of Irvine will take a lot of time.

  10. zoiks

    Hi, westpark renter…

    What’s the lot size? From the pics I’d WAG 4500 sq ft.

    What’s your rent?

    Just curious. It’s not like I’m going to jump out and buy or anything.

  11. caliguy2699

    “I imagine we will see plenty of properties selling for GRMs down to 120, particularly the less desirable condos.”

    I’ve begun to notice condos in older/less desirable areas in South County beginning to get close, and it’s real ugly out there. Condos are typically about 30% off up to more than 50% off bubble pricing. This is an example listing in San Juan:

    2004 sales price: $350k
    2008 asking price: $230k

    34% off previous sale, $55k above 2002 price. I do not see an end in sight in these types of places, considering the market is absolutely overwhelmed with these properties that nobody seems to want (or, more likely, can’t qualify for)

  12. AnotherWestparkRenter

    I rent a house in this neighborhood since 2004. My house has huge yard and 2000+ square foot for $2400 per month.

  13. Kirk

    Like “bomb bomb bomb, bomb Iran?”

    McCain is a joke. The Dems are full of crap with their housing proposals. Everytime they do one hardly anyone qualifies. Good, that is how it should be.

  14. SawItComing

    How about looking at some of the things he has said in the past? That should be enough for anyone to run from him.

  15. Mike in Irvine

    BTW, i was interested in this house. I had requested the realtor to show me the place, last month we took 2 different appointments and went to the house, the owner did not even open the door :).

    I was told that this is a short sale and the owner has not benefit in getting the house sold.

  16. momopi

    At 700k, even if you put 30% down and finance the rest (30 year fixed @ 6%), the monthly mortgage alone is ~$2938. If the house can only be rented for $2400, it’s not a good buy at 700k.

  17. higherend

    So I know we are mainly focused on overall macro trends here, but what is happening at the higher end of the market? Let’s say $1.25-1.5M? And I don’t mean mini-mansions in new developments, but nicer older homes on big lots. Are we seeing the same 30% drops?

    Anybody have any insights?

  18. Northwood Chris

    You seem to imply that Democrats would be for a bailout. Well, this one isn’t for it, not for the banks nor for the greedy individuals who took out shaky loans.

    Greed is an American epidemic just like obesity. The American mentality seems to be that people can get rich without working hard, and receive services and amenities without paying for them.

    And the concepts of greed, shallowness, and ignorance as virtues, conspicuous consumption, taking without giving, etc. have their home right here in Orange County.

  19. ConsiderAgain

    Wishing $700,000, and not one picture of the interior. I don’t get it. $700k and not one picture of the inside. Gezz

  20. Alan

    Attention Democrats…

    Hillary announced her candidates for her “blue ribbon” commission to address the mortgage crisis.

    #1 Alan Greenspan, the aged and getting senile former head of the central bank who was asleep at the switch when the wheels were coming off, who is now on a book tour trying to distance himself and his policies (or lack of policy) from the current crisis.

    Does she think Americans are idiots? (wait, don’t answer that one)

  21. Alan

    My understanding is that sales volume in the higher end has dropped off the chart so what you have now is just a standoff between sellars and buyers with very little transactions actually going on.

  22. Kirk

    Yeah, I usually hate Hillary bashing, but I’m with you on this one. Greenspan… WTF?

    BTW, clearly many Americans are idiots as demonstrated by the tech bubble (including myself on this one), housing bubble (learned from my mistake) and Bush (also learned from my shameful mistake by 2003).

  23. Fester

    Perhaps listed now just as part of trying to get a loan modification approved?

    Is that eight-word, doesn’t seem to care description Relitter code for “don’t bother; not really for sale”?

  24. DeadBeatRenter

    For christ’s sake, they don’t allow democrats in Irvine…Go back to Santa Ana where you belong and take your over levereged lives with you.

  25. Donkey

    What are you talking about DeadBeatRenter? Larry Agran is the biggest democrat known to man and the city can’t make him go away.

  26. Kelja

    To: Northwood Chris

    You say, “You seem to imply that Democrats would be for a bailout.”

    Well, yes, your leadership, or would-be leadership, is most definitely for a bailout. It’s all part of the victimhood, entitlement mentality that’s developed over the last 30/40 years. Bail me out, pay for my meds, pay for my education, saaaaave me, Oh, Big Government! The mantra that is spouted from Obama/Clinton.

    You don’t know this Chris? And you call yourself a democrat!

    (BTW, The repubs also have been infected with this malady – anti-liberty, anti-self-reliance – to a degree. Not as sick as the dem’s. So far.)

    The American people are still asleep.

  27. skek

    So, that housing bubble song is a catchy little tune, IR. Where can I download the MP3? I’d put that puppy on my iPod. That’ll be me you see me rolling down Jamboree, windows down, bumping “housing bubble, what’s the trouble?” at full volume.

  28. buster

    Not to get political, but the Republicans have for eight years spent us into oblivion. Record deficits, sending billions (or is it trillions yet) to Iraq, medicare prescription (let’s buy the senior vote), etc. Seriously, how could the Democrats do any worse fiscally?

  29. someone

    You know McCain might just be the man to work out this banking mess after all he was one of the original “Keating Five.” Put that in a search engine and see what you get

  30. kris

    First of all, I love this blog. Thanks, IR!

    I’d just like to voice my displeasure regarding the “homeowner bailouts” that seem to be gathering steam. This is being sold as help to F-d borrowers and NOT lenders. However, to me, that seems like an outright lie. If our tax dollars are used to reduce principal of loans in order to make them affordable to FB’s, I forsee two things happening: First, our tax dollars will have been spent to help these FB’s. Second, most of them will end up defaulting ANYWAY due to the fact that prices WILL go down much further. Sure, their payment is more affordable and maybe even fixed, but if they end up seeing their property declining $100,000 past even the reduced loan amount, why bother? So basically the government will be spending out tax dollars to lessen the burden on lenders when the property is eventually foreclosed on. Am I off base here?

  31. ipoplaya

    Not in Irvine it’s not, at least in terms of closed sales that I have tracked. The average rollback on $1.1M+ places closed this year is to Spring ’05 price level, 15% off peak. The average for all the rest of the sales is more like Summer ’04 pricing, around 23-24% off peak…

    It’s the lower-end segment that is dragging this market down as it relates to closed sales IMO. Foreclosures have decimated the condo segment and the older smaller SFR segment. There is a whole lot on the high-end that sits, but much of that is due to WTF pricing probably. I’d be curious to see what would happen to sales volume in the high-end if sellers embrace 2004 pricing…

  32. CapitalismWorks

    What exactly is wrong with Greenspan? I guess it is fashionable at present to bash the man, but he demonstrated surprising skill as Fed Chairman during some extremely trying times.

    His interest rate policies were dead-on. The only thing he can be solidly criticized for is lack of oversight in the non-bank financial sector.

  33. CapitalismWorks

    The Reps and Dems share the common goal of maintaining power. In the past (ahem when Reagan was in office), we could rely on the illusion of smaller government, and lower taxes.

    The current crop of Republicans still provide lower taxes, but somehow they’ve managed to the keep the spending at full throttle (or beyond). It is unsustainable.

    Still I’d rather have lower taxes and deficits with the Reps, than the Dems who offer nothing more than higher taxes AND higher spending.

    As always, its a lose-lose deal.

  34. Kirk

    I’m not a Democrat, but I am for a bailout of banks once we make the shareholders eat the heaviest losses. This means that we have to let one or two big banks fail before the government really steps in. What the Fed is doing now is somewhat of a bailout, but it’s not the big bailout that will eventually have to happen. Oh, and I am also for putting a bunch of executive pricks in prison and fining them into oblivion. I’m sure there are more than a few charges that will stick. Let’s start with Mozilo.

  35. Kirk

    “he can be solidly criticized for is lack of oversight”

    Gee… you think?

    And yeah, I chopped your words to make the quote fit reality better.

    Rule#1 in appointing someone in government: Find out if they are a fan of Ayn Rand.

  36. kis

    I was told that this is a short sale and the owner has not benefit in getting the house sold.

    My brother was out looking at houses the other day, and at one house (that I think is in pre-foreclosure) the occupant/’owner’ was there. He asked my brother why he was buying, because his intention was to only sell to an investor that would be willing to rent back as a lease-option!

    So he wouldn’t even show him the house…

  37. Iblis

    Seems to me the Congress changed hands 2 years ago and nothing changed with regard to spending.

  38. George8

    How is this Dana point location? It is still asking mid $300/sf. It looks like within easy walking distance to the beach.

  39. camsavem

    How about to earn your commision?

    How many of these lazy people cashed in big time on others mistakes, now they have a chance to pay it back by actually working. Chances are hard work now will pay off down the road when the market becomes normal again.

  40. Alan


    What exactly is wrong with Greenspan… let me tell you, he overstayed. He was used to doing things a certain way and was very reliable. only moving interest rates very tiny amounts up or down and holding them there while the economy boomed and he got all the credit for the booming economy.

    Meanwhile, rot was developing in the system. He was oblivious to this creeping rot, the economy was fine and his system had always worked. rot progressed until suddenly the financial system is on the brink of colapse. 90 year old investment bank that withstood the last great depression went bk overnight. Greenspan had a chance to intervene back in 2002-3 but missed the signals and HELOCs powered the economy into boom times. Now it’s clear he missed the chance to head this off and he’s still in denial.

    If I were Hilary, Id put someone with uncommon sense like Warren Buffet on the comission and leave out her Wall Street buddies.

  41. IrvineRenter

    “What exactly is wrong with Greenspan?”

    My observation is that he was largely responsible for the parabolic blowoff of the NASDAQ bubble when he opened the spigots on the money supply in late 1999 due to Y2K fears. When the NASDAQ bubble burst — a bubble he facilitated — the economy was plunged into a recession due to the lack of business investment caused by depressed stock prices. His solution was to lower interest rates to 1% which then facilitated the housing bubble.

    IMO, if he had not dramatically increased liquidity in late 1999, the stock market crash would not have been as severe because prices would not have gone up so steeply in late 1999. He would not have then had to lower interest rates to 1% for a full year to stimulate the economy, and we would not have had the housing bubble.

  42. Mike in Irvine

    the homeowner gets to stay free till the bank or the government bails them(or forces them) out…nice plan. I am sure there are many more homeowners doing the same.

  43. FreedomCM

    how is it possible that a 1964 home (the one linked above in DP for $599) has a 2% tax rate?

    # Total Assessed Value: $49,366.00
    # Total Property Tax: $1,098.00

  44. IrvineCommuter


    Do you have any ideas of what’s going on in this TR neighborhood? These are nice big condos, but looks like there is a price war there.

    Address Date Size Price
    50 ROCKY KNOLL #19 3/26/2008 2,800 $699,999
    53 ROCKY KNOLL #39 1/24/2008 2,417 $724,999
    10/10/2007 $795,000
    14 ROCKY KNOLL 12/21/2007 3,100 $879,000
    45 ROCKY KNOLL #35 1/1/2008 2,417 $769,000
    35 MISTY MEADOWS #13 1/21/2008 2,417 $799,900
    15 ROCKY KNOLL 1/29/2008 2,417 $839,000
    40 ROCKY KNOLL 3/3/2008 2,855 $875,000

  45. kis

    I’m sure its a tough call for banks, even when they get to foreclosure. The place probably shows better if there is a tenant, but then they pull these kinds of things. Or worse, strip all the furnishings and trash the place once they know they are moving on.

  46. lendingmaestro

    Greenspan worked directly with JP Morgan to create the secondary market for mortgages. He was complicit in the creation of financial derivatives in the capital markets.

  47. Kirk

    I’m actually less critical of the rate cuts. I think he made the right call lowering the rates at various times, but I think – with the benefit of hindsight – that he held them too low for too long on at least two occasions – the times you mentioned.

    The real problem I have with Greenspan is he lowered rates and let the money flow into incredibly stupid loans that put our whole economy at risk.

    You know… yeah, a stock market crash hurts the economy. But, a stock market crash gets written off quickly, people get back to business and capital returns as stocks are considered a good buy. In addition, rotten companies go bankrupt and are liquidated. That’s capitalism and it’s good to thin out the herd. And I certainly don’t want regulation to try and artificially prop up the stock market or any other market. Nor do I want to see bad companies kept on life support.

    But, when it comes to banks… these beasts need good tight regulation and, for the love of God, it has to be enforced. Why? Because when they fail en mass they cause capital to be horded in either cash or some dumb ass investment like gold. Since both cause capital to just sit around doing nothing it takes a lot longer to have a recovery.

    Greenspan embraced these dumb loans. Screw him. These weren’t just a stupid product like a pet rock. These were “products” that have blown up the economy. And if people are offended by government stifling “innovation” then fine, keep the lame pay option loans. Just verify the friggin income! Otherwise it’s called fraud and should be prosecuted.

  48. IrvineCommuter

    Thanks ipoplaya, I also noticed some of their status changed to inactive, but none of the deals were closed, and I doubt they will be closed if the buyers see the $690K pricetag for 50 Rocky Knoll #19.

  49. no one special

    I’m still trying to figure out how they are shipping those 18 FOOT slabs of Italian marble flooring. That must be a bi*$@ to install.

  50. looker

    That’s 100% correct, there is a major loophole with the short sell. I been in one short sell property in Irvine where the owner still live there. The house of full of sh$t, there was dog sh$t on the floor, trash everywhere. Except he lock his bedroom and we couldn’t get in. What pissed me off is that he doesn’t even have to pay for association, there was bags and bags of trash in the garage next to his Porsche. It’s unbelievable how some people can find loophole in the system and abuse it. BTW, he was a real estate agent and he use to own 4 other property in Irvine, so he knows the in & out of the law and he knows how to abuse it.

  51. lynn

    When the property tax is impossibly low for the current property value, that’s Proposition 13 at work.

    I have a friend whose house is worth between $1 – 2 million and the property tax is between $1,000 – $2,000. She has lived there since the 1970’s.

  52. FreedomCM

    yes, i realize that this is an old prop 13 assessment.

    but 50K * 1% = $500.

    the taxes on this property are 2%

    how is this possible with no MR, HOA, etc?

  53. irvinerealtor

    HELOC abuse:

    Total Assessed Value: $49,366.00
    Total Property Tax: $1,098.00

    and it is an “approved” short sale at $600K?

    BTW, nothing worse than dealing with the banks for short sales. If I were buying now I’d look solely for property already at the bank (REO) or pay with some saved $$$ at the Santa Ana courthouse steps at trustee’s sale auction.

  54. Denise

    This house has one less bedroom and is 25 sq. ft. smaller than my house out in Riverside. Both are built in the same year, and my house is on a half-acre lot. My house is worth roughly $325K, and this is $700K? I know people think Orange County is special… but really… come on!!

  55. ipoplaya

    $125-150 per sf sounds about right for Riverside… It’s called jobs Denise. It’s all about the jobs. Why do you think the 91 west is so packed every day? People who live where you do have to come this way to get good work…

    Say someone lives out there and works in OC where they are way more jobs and better jobs. Gas, tolls, extra wear and tear on a car for the 25k commute miles per year will cost them $8-9K per year. That is around $700 per month and equates to $175K in mortgage @ 7%. Toss in $50K-100K for location premium, closer to the ocean, better weather, much less smog, etc., and one could easily argue a $250K differential and that doesn’t even include the time value lost in commuting.

  56. ipoplaya

    Water capacity charge and sewer maintenance charge on the prop tax bill totaling around $500…

  57. ipoplaya

    Not HELOC abuse. The assessor information is wrong. It has an assessed value of $748K so it must have been sold last year…

  58. Woodbury Renter

    wow, you guys are all sandbagging because you know that this house in DP would be a sweet buy and don’t want any competing bidders. Low mortgage, low insurance and near the beach? What is the catch – nuclear waste buried in the basement?

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