The Long and Winding Road — The Beatles
The course of a financial market, particularly the real estate market, is a long and winding road full of twists and turns and unexpected outcomes. It was certainly foreseeable that banks and builders might fail and the GSEs might need to be bailed out, but the how and when of these occurrences are always unpredictable and newsworthy.
We have all seen this road before. This is the third real estate bubble in California since the 1970s. Each one seems to reverberate causing the next one to be even larger and more painful than the last. The drop in prices always leads to the market entry door of affordability. It is possible that history may not repeat itself for a third time, but this seems unlikely. There was good reason for prices to retreat to this level: it doesn’t make much sense to overpay for a depreciating asset. There doesn’t seem to be any reason this will not happen again (wishful thinking by those who do not want it to happen is not a reason).
You would think that million dollar REOs would be very rare. Aren’t $1,000,000 homes the exclusive enclaves of the rich and famous. The many pretenders who paid more than $1,000,000 for tract homes in Irvine would undoubtedly like you to think so, but most of these houses were purchased by high-income (or high stated-income) individuals and families utilizing exotic financing. Irvine may have been the center of the subprime lending universe, but it was the also the center of the Alt-A borrowing universe. Very few of the loans issued in Irvine were conforming loans because during the bubble rally, the cap was far too low to be a viable financing alternative (good thing for the GSEs and taxpayers who do not have much exposure here). Also, since people in Irvine do not make the money necessary to support home prices — particularly peak prices — many, if not most, of the loans were stated-income, liar loans. In order to get the monthly cost down to manageable levels, many borrowers used Option ARM loans and have only been making the teaser-rate payment. In short, most of the loans issued in Irvine were Alt-A and jumbo loans. It is not a matter of if these loans will blow up, it is only a matter of when.
Asking Price: $1,175,000
Income Requirement: $293,750
Downpayment Needed: $235,000
Monthly Equity Burn: $9,791
Purchase Price: $1,360,000
Purchase Date: 6/23/2006
Address: 50 Winding Way, Irvine, CA 92620
| Beds: | 5 |
| Baths: | 4 |
| Sq. Ft.: | 3,500 |
| $/Sq. Ft.: | $336 |
| Lot Size: | 5,968
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Other |
| Year Built: | 2006 |
| Stories: | 2 Levels |
| Area: | Woodbury |
| County: | Orange |
| MLS#: | S547214 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 3 days |
bedrooms, 4 bathrooms, a kitchen with granite counter tops and an
island, a living room with a fireplace, a formal dining room,
individual laundry room, wood flooring, an enclosed patio, and corner
location. Home has access to the wonderful association amenities. Truly
a MUST SEE!!
Here is today’s challenge. Identify the objects in the picture of the kitchen and speculate on how each of these objects ended up there…
Today’s property was purchased by the Bank of America through Wells Fargo for $1,076,882. I don’t know why both banks are involved. The original first mortgage balance was $1,000,000 but with the skipped payments added on, the balance due on the date of the auction was the amount paid. There were two HELOCs for $223,600 and $100,000 respectively. It is unclear whether or not either one of these HELOCs was used. If not, the original owners lost $360,000, so it is likely that these two HELOCs were used to extract their equity. If this property sells for its asking wishing price, and if a 6% commission is paid, the total loss on the property will be $255,500. It looks as if the lenders will absorb most of this, and the actual loss will probably be quite a bit larger as they discount this property to sell it.
.
The long and winding road
That leads to your door
Will never disappear
Ive seen that road before
It always leads me her
Lead me to you door
The wild and windy night
That the rain washed away
Has left a pool of tears
Crying for the day
Why leave me standing here
Let me know the way
Many times Ive been alone
And many times Ive cried
Any way youll never know
The many ways Ive tried
But still they lead me back
To the long winding road
You left me standing here
A long long time ago
Dont leave me waiting here
Lead me to your door
But still they lead me back
To the long winding road
You left me standing here
A long long time ago
Dont leave me waiting here
Lead me to your door
Yeah, yeah, yeah, yeah
The Long and Winding Road — The Beatle
New Listing (24 hours)
