This property just reduced its asking price from $849,000 to $699,000. The lender is going to eat another one…
Living the crazy life: Wasn’t this the best part of the housing
bubble? People got to live well beyond their means as their house
served as an additional wage earner. In fact, it was even better than
having another wage earner because there were no taxes taken out with
the HELOC. It was literally free money. Today’s featured property shows
just how this works.
Income Requirement: $217,500
Downpayment Needed: $174,000
Purchase Price: $840,000
Purchase Date: 4/02/2004
Address: 12 Capistrano, Irvine, CA 92602
Upside, inside out she’s livin la vida loca
She’ll push and pull you down, livin la vida loca
Her lips are devil red and her skin’s the color mocha
She will wear you out livin la vida loca Come On!
Livin la vida loca, Come on!
She’s livin la vida loca.
Living La Vida Loca — Ricky Martin
Sq. Ft.: 2,600
$/Sq. Ft.: $335
Lot Size: –
Type: Single Family Residence
Year Built: 2002
Stories: Three or More Levels
On Redfin: 57 days
From Redfin, “Largest Alder Creek Model. Two master suites. 2nd master suite with french doors & bath. 4 bedrooms and 1 large loft that can be coverted to 5th bedroom. Beautiful dining room decorated with custom wallpaper, a spacious living room with custom hardwood floor. Upgraded kitchen countertop & stainless steel appliances. More trees than other comparable properties. Offering the best price among other similar properties for sale and in NORTHPARK! “
More trees than other comparable properties. What? There are no mature trees shading this house. Did they plant a bunch of saplings in the back? This is crazy.
This is not a rollback yet. Although, it probably will be before it sells. What makes this property really interesting is it clearly illustrates a HELOC implosion.
When this seller purchased the property back in 2004, they paid $840,000 and they borrowed $650,000 putting $190,000 down. So far so good. In December of 2005 they needed some kool aid for a Christmas party, so they took out a HELOC for $150,000. Fast forward one year, and in December of 2006, they threw another kool aid Christmas party and took out another $90,000. They now have a total of $240,000 on their HELOC and a total debt of $890,000 on their $870,000 house. Despite the large downpayment, they are now underwater and having a short sale.
This house provided them with the median income in Irvine for over two and one half years.
As I stated earlier, they actually did better than that. To clear $90,000 a year after taxes, you would need to make closer to $140,000 a year in salary. Their house was earning $140,000 a year!
Assuming this seller was employed, their house was likely earning more than they were. Graphix has done some great work on the problems with local employment figures, and others have noted the dropoff in income from non-W2 workers like realtors and some mortgage brokers. Another hidden impact on the local economy is all the houses that have been put out of work by declining prices. Calculated Risk has done extensive projections on the Mortgage Equity Withdrawal phenomenon. The charts and graphs are pretty and informative. However, it is seeing individual people with properties like today’s that bring these lofty concepts into sharper focus.
How many lost jobs, lost commissions, and lost equity extractions can our local economy take? IMO, we are already in a recession locally, and it will get much, much worse.
When I saw the street name Capistrano, I thought to go a different direction with this post. I just couldn’t get the Ricky Martin song out of my mind. For those of you who have different tastes, here is the song I didn’t use:
When the Swallows Come Back to Capistrano — Pat Boone