17 Years

Photograph — Nickelback

Most of the REOs and short sales I have profiled are homeowners or speculators who bought during the bubble. These people either did not live in the house long enough to have a storehouse of memories and attachments, or they did not care about the house at all because it was just a stucco box to trade. When these people lose their houses, they are not necessarily losing their homes. The children’s rooms don’t have a wall where their child’s height has been measured over the years, they don’t have a sidewalk with their children’s name etched in it, and they did not plant a shade tree in the back yard to enjoy in the future. Some of these stories are sad because many of these families intended to make the house their home, but they did not get a chance. However, today’s featured property is something different. It belonged to an owner that got caught up in the fantasies of the bubble, took out all their equity, and lost the family home. A home they had for 17 years…

21 Glorieta East Kitchen

Asking Price: $689,000IrvineRenter

Income Requirement: $172,250

Downpayment Needed: $137,800

Monthly Equity Burn: $5,741

Purchase Price: $343,000

Purchase Date: 4/4/1991

Address: 21 East Glorieta, Irvine, CA 92620

Beds: 4
Baths: 3
Sq. Ft.: 2,252
$/Sq. Ft.: $306
Lot Size: 5,665

Sq. Ft.

Property Type: Single Family Residence
Style: Contemporary
Year Built: 1979
Stories: Split-Level
Area: Northwood
County: Orange
MLS#: P659248
Source: SoCalMLS
Status: Active
On Redfin: 2 days

Cash in on this REO property in Northwood. Avoid the wait and
uncertainty; the bank is ready to accept your offer! This property sits
on a quiet cul-de-sac street and does not back to traffic. It’s got an
open, split-level floorplan and features a uniquely secluded rear yard
framed by an ivy-covered block wall — lots of potential. Enjoy the
association pool, spa, and tennis courts. More importantly, enjoy no
mello roos taxes.

“Avoid the wait and
uncertainty; the bank is ready to accept your offer!” If they really were as desparate as this sounds, they would have priced it lower.

This property sets the record for duration of ownership for a HELOC abuser: 17 years. Through this owner’s experience, you can really see what an addictive drug kool aid really is.

  • The property was purchased on 4/4/1991, right at the peak of the last bubble, for $343,000. The original loan amount is not available. Based on the HELOC opened in 1997 (when properties were at the bottom) and the later refinance, we can deduce they probably had a significant downpayment.
  • On 11/14/1997 they opened a HELOC for $50,000.
  • On 10/19/1998 the refinanced the first mortgage for $257,000. So far this is very conservative financial management.
  • On 7/5/2002 they sipped their first kool aid with a refinance for $350,000. It must have tasted good.
  • On 3/10/2003 they opened a HELOC for $120,000.
  • On 5/6/2004 they refinanced again for $550,000. They are drinking kool aid by the gallon now.
  • On 6/10/2005 they refinanced again for $650,000 using an Option ARM.
  • On 10/18/2005 they opened a HELOC for $95,000.
  • Total property debt is $745,000.
  • Total mortgage equity withdrawal (assuming a $257,000 starting point) is $488,000.

For the record, it this property sells for its asking price, and if a 6% commission is paid, the total loss will be $97,340.
You have to wonder if Countrywide will get this price considering they
picked it up at auction for $543,750. If they can manage to get
$145,250 more than its auction price, every flipper in the county will
be at the next auction looking for the same deal. In short, they won’t
get their asking price, and this will likely sell for under $600,000,
possibly much less.

Do you see why I often compare mortgage equity withdrawal to drug addiction through the analogy of kool aid intoxication? Think about some random drug addict who might bankrupt himself with his drug habit. How is HELOC abuse any different? These people have lost their home. It is a home they have had for 17 years, and they lost it due to this behavior. Spending $488,000 must have been fun. Drugs are fun; if they weren’t people wouldn’t use them. I imagine they felt rich and socially prominent. In the end, they were simply addicts living an illusion. It is sad that they inflicted this upon themselves (unless of course you think those evil lenders forced them to borrow like that). I can feel compassion for their misfortunes, but at the same time I feel contempt now that we the taxpayers are going to have to pay for it. Mortgage equity withdrawal is an addiction. It is a social problem even bigger than our drug problem (if you think this is an exaggeration, you have not been paying attention to the economic fallout of this behavior). Those that bought late in the rally were doomed due their timing, but those who HELOCed themselves out of their houses were doomed by their behavior. As you have all seen by the large number of these cases I have profiled, it is a huge problem that is going to sink the local housing market.

I hope these people have many photographs and memories because all that they will have are these to remember happier days (from Jim Croce).


Look at this photograph
Everytime I do it makes me laugh
How did our eyes get so red
And what the hell is on Joey’s head

And this is where I grew up
I think the present owner fixed it up
I never knew we’d ever went without
The second floor is hard for sneaking out

And this is where I went to school
Most of the time had better things to do
Criminal record says I broke in twice
I must have done it half a dozen times

I wonder if it’s too late
Should i go back and try to graduate
Life’s better now than it was back then
If I was them I wouldn’t let me in

Oh, oh, oh
Oh, god, I

Every memory of looking out the back door
I had the photo album spread out on my bedroom floor
It’s hard to say it, time to say it
Goodbye, goodbye.
Every memory of walking out the front door
I found the photo of the friend that I was looking for
It’s hard to say it, time to say it
Goodbye, goodbye.

Photograph — Nickelback

75 thoughts on “17 Years

  1. G in INdiana

    The same thing almost happened to my parents, but it was due to medical bills not spending sprees or drug addiction. From the kitchen and the out dated window treatments, you know damned well they didn’t upgrade the property. It doesn’t look like a crack den either, given how clean the place looks on the inside and out.

  2. CapitalismWorks

    Judging by the pics, I’d say they did themselves a favor getting kicked outta this dump.

    1. r€nato

      I know you were just trying to make a cute remark, but I’m not laughing.

      I’m sure they’d much rather be in this ‘dump’ than wherever they are renting now.

      1. Barren_Irvine

        No sympathy for people like this. I wanted a home in early 2000, but could not afford it. Now I know why, because people like this were driving the price up. Now they can spend next 10 years in a 900 sq ft Irvine apartment.

    1. IrvineRenter

      They had a chronic case of kool aid addiction that did not surface until the real estate bubble hit. It required $100,000 a year to treat the symptoms.

      1. AZDavidPhx


        All these people with HUGE medical bills that just coincidentally arose during the bubble rally.

        How did people with medical bills ever manage to get by before the bubble without the house their stepping up and chipping in?

        1. Bubble Popper

          Home prices weren’t the only things to skyrocket during the last five years. Medical costs and college tuition probably increased more on a percentage wise than any piece of real estate during the housing bubble time.

        2. r€nato

          AZDavidPhx, I like you. I really do. So, please, don’t let it be true that you are one of these cruel conservatives who assumes that if some unforeseeable misfortune befalls someone, it’s their fault because they are a fuckup and they deserve everything that happens to them.

          Were plenty of people irresponsible with HELOC intoxication? Absolutely. But it’s also true that shit happens in life. People get sick and we have a health care system which is geared towards providing terrific care to those who can afford it, and everyone else gets thrown to the wolves should they make the irresponsible decision to get cancer.

          1. AZDavidPhx

            I never said that at all. I think that those kinds of the people are the ones who do need to be helped. And I will be the first one to voluntarily pay more in taxes to make sure that my neighbors have health insurance.

            But at the same time you have to look around. Whenever we get one of these posts, there is someone who comes by and plays the medical bills card. I don’t believe that medical bills are the normal explanation for this home-equity extraction that is being documented day after day on here.

            And many times when you see media stories about troubled home-owners, they always say “We took out the money to pay bills” which is code for “We took out the money to pay credit card bills”.

          2. Sammy

            People should insure against medical problems or save enough money to insure themselves against any medical misfortune BEFORE they buy a house, a new car, a boat, college educations for their kids, big screen TVs, new landscaping, etc.

            Its all about priorities.

          3. Medical Broker

            Many people choose not to get medical insurance until they get sick. They can afford to drive Hummers, get fake boobs and buy expensive clothes, but decide they don’t need insurance…… until it is, they get cancer. Well, guess what? Too late! Could you drive without car insurance, get in a huge accident, then apply for car insurance and expect the insurance to pay for your accident? Yes, there are some people that truly cannot afford insurance (and there are government programs that deal with this) but many choose a lifestyle over medical insurance. It is a choice. ….And many choose to have fun & drink kool aid, rather than pay for security.

          4. BubblePopper

            I’m tired of people being so judgmental without having all of the information.

            If you’ve never been sick or had a broken ankle or known anyone who has been the hospital, you really have no idea how much hospital bills cost these days. I have an aunt who was recently diagnosed with cancer. The bills are astronomical. She’s retired from a government job, with health insurance and her husband at age 70 is still working so he can keep his health insurance. Without the double insurance, they would be taking equity out of their home or moving in with their kids.

            I suppose they should have saved $1,000,000 extra in addition to their expected retirement so they could pay for these unforeseen circumstances. They do not own a flat screen TV nor do they drive new expensive cars. Both of their children went to public universities and one worked his way through school and the other had full scholarship.

          5. AZDavidPhx

            Not only are they expensive, the slimebag insurance companies “decline” to pay for as many things as they can weasle their way out of.

            Fortunately, I have not had a health crisis yet but it’s pretty disgusting to see how others are treated. I certainly wouldn’t want to be treated like that.

            I’ll be the first to support higher taxes for universal health care “just because” it is the right thing to do.

          6. Schadendude

            He’s right. For every cruel conservative, there’s a bleeding heart liberal who’s willing to excuse any behaviour. I’d be willing to be helocs to pay medical bills are extremely rare. Who has a mortgage but no medical insurance ?

          7. BubblePopper

            My point was you can still have insurance, even double insureance, and still have to pay a huge out of pocket fee.

            You can also have insurance and a mortgage but have relatives who are not so unlucky. Now I would agree it would be stupid to do so, but there are people who would pull equity out of their home in order to help siblings, children, parents or childhood friends.

            I know if you live in South OC or if you watch Flip This House & Property ladder, you think that every single person who has a HELOC is busy flipping homes or buying things they do not need in order to look good, but believe it or not there are people who have had bad luck, lost a job, or had a spouse die who tapped into their home value for immediate cash. Sure they should have had an emergency fund, but sometimes life is not so simple and clear cut.

          8. Major Schadenfreude

            “… the slimebag insurance companies “decline” to pay for as many things as they can weasle their way out of”

            And if that business unit is so successful at that tactic, they treat themselves to $500 million “resort weekends” for the mid level managers – even if their parent company has to be propped up by taxpayers.

            That’s some industry.

          9. MalibuRenter

            I think an observation from people who win lotteries may also apply to many people who took out tons of home equity.

            Many of them do things that aren’t quite selfish and irresponsible, but they sure go through a lot of money. Some of the not-so-bad things lotto winners often do are: pay for a relative’s tuition; pay for a relative’s tuition; loan money to someone in need (might as well just kiss it goodbye); open that business they’ve always dreamed of (that failed, otherwise these stories don’t end with a foreclosure).

          10. Sammy

            $500Million? I believe AIG spent $400K on that weekend resort and it was for independent salesmen. Only 10 employees of the company were invited.

    2. ipoplaya

      Hey AZ, remember this place featured here around a month ago?

      [url=https://www.irvinehousingblog.com/blog/comments/you-owe-how-much/]22 Ninos[/url]

      It was a property you said would rot on the market, was way overpriced, etc:

      [i]Astute Observation by AZDavidPhx

      2008-09-09 12:00 PM

      No, I don’t. Under your logic, if they priced it at 749K then it would have sold within a couple of days. Instead it is now going to rot on the market and chase it down.

      Astute Observation by ipoplaya

      2008-09-09 12:03 PM

      Yes it likely would have, probably for $750-760K. [b]Why take $750-760K off a list of $749K when you can get $780-800K instead?[/b] They may chase the market down but I doubt it. If they take what the market offers them, they’ll be in escrow within weeks…[/i]


      1. AZDavidPhx

        I know –

        I clearly underestimated the pool of stupid buyers (and lenders) that are still out there.

        I’m curious how much of a down payment the buyer put into the toilet. Do you have any way of finding that out?

      2. HebrewHammer

        …..That’s nice 😛

        Since today is Yom Kippur maybe the buyer and the lender can atone for the sin they just committed of propping up a ridiculous price on a house that will be a REO within a year.

        1. AZDavidPhx

          Well we all know that.

          Ipoplaya isn’t concerned with the big picture. He just wants to have his “I told you so” little-man moment to overcome his insecurity that has been building up for the last year as the market has been tanking despite all of his bullish Pollyanna “Prices will never drop we are all rich” hubris.

          He can’t argue that prices won’t crash anymore so he has re-arranged the goal posts, headed for the hills alongside his cronie IrvineRealtor, and switched to “houses are still selling” which is a lot safer for him because houses are always going to sell (by law of average). It’s a good strategy – the broken clocks get to be right twice a day.

          1. ipoplaya

            IPO = someone with a decent understanding of the Irvine RE market.

            AZDave = a blowhard chicken little with not much understanding or experience with regard to most on which he posts.

            Stick to the funny pics AZ, that’s about the extent of your usefulness here… When houses like Ninos are still selling in the $600s a year from now, I’ll make sure to remind you then too.

          2. AZDavidPhx

            What was the down payment on that house, Ipoplaya?

            It will be a good property and case study to track. I look forward to coming back and looking at the prices of the neighboring houses 1 year from now to estimate how much money those knife catchers blew.

            It would be nice to know how much of the loss was theirs and how much of the loss was the lender’s. Find out the info and post it.

          3. HebrewHammer

            IPO = someone with a decent understanding of the Irvine RE market.

            …lets take a look at that statement for a moment shall we

            While Irvinerenter supports his statements with sound economic theory and historical data of the Orange County housing market, you just simply justify your David Lereahish assertions because some schmuck payed way too much for a house, not giving any real analytical insight beyond that.

            Not to mention you’re the one who does most of the name calling around here 😀

            Doesn’t really add to your creditability much now does it?

          4. ipoplaya

            I said this house would sell for $780-800K and also quoted high $700s. That’s what it sold for… That’s enough cred for me. Any frequent posters here, even AZ, will have admit that my take on current market RE pricing in Irvine, is as sound if not better than anyone’s, including IR.

            Early this year I started posting above the slowing rate of home price declines in Irvine and prices leveling out. I suggested back then that continued annualized declines rates of 15-20% that many here trumpeted would never occur. People dismissed those notions then but what I postulated has come to pass. Now we’re into October and homes are selling for what they did in March and for what they did in June. RE prices in Irvine have fallen 3-5% at most since early this year…

            The only real claim I make about future prices is that they will be higher than that AZ predicts, as he is a serial under-estimater. I don’t claim to know the future, just what is happening today.

          5. alan

            I side with ipop here, he does know what current selling prices in Irvine are.

            That said, I have no idea how these prices are being sustained and I suspect there will be crash in the not too distant (< 6 month) future.

          6. Woodbury Renter

            Ipo – you are right about the market refusing to acknowledge the obvious. I am frustrated with the slowness of the decline in house prices. My bet is that the Option ARM implosion (well documented and predicted by IR) over the next several years will finally be the spark that wakes people up and sends prices down towards income and cash flow equivalecy fundamentals. In the meantime I have told my wife to hunker down and be patient as it looks like we will need to keep renting at least one more year.

          7. AZDavidPhx

            Ipoplaya –

            I don’t have any problem with your knowledge of what a house sold for today. My point is that that knowledge is meaningless.

            I am looking at where the prices are going in the long run. Not at where they are right now.

            It is not hard to look at the income numbers alongside California’s spending deficit and conclude that something is not quite adding up.

            When you come on here and boast about how some house sold for some inflated number – all it tells me is that the lenders have not learned anything and are still making the same loans that got them into trouble to begin with.

            Let’s see the down payment numbers on all of these properties that you are profiling. That will be a lot more telling.

          8. Schadendude

            ipo – pull your head out of your @ss buddy and look around… this is the perfect economic storm.. once and a lifetime event. the only thing that will save the RE asset class is hyperinflation..

            Dow is down another 223 as I write this.

            Were you ditching the day they taught situational awareness ?

          9. AZDavidPhx

            Ipoplaya –

            I had a look over your data sheet. It looks like the majority of people buying in your area are definitely not first time buyers.

            One loan in particular did stand out and strike me as very strange.

            3 weeks ago,
            26 Dewey 92620
            sold for 735,000$ with 0% down.

            3 days later
            39 Secret Garden
            Sold for $738,852 with a whopping 13,448$ 2% down payment.

            Granted, these are exceptional cases, but it is still pretty obvious that the lenders are gambling on prime borrowers.

          10. alan

            “that knowledge is meaningless.”

            “I am looking at where …. in the long run.”

            Hey AZ…

            In the long run, were all dead!

            You should just admit you were wrong, I’ll forgive you.

          11. houseonlegs

            Public records are showing no mortgage data on 26 Dewey, that does not mean $0 down financing.

            39 Secret Garden is correct per public records, FHA loan.

          12. Major Schadenfreude

            $735,000 with ZERO DOWN???!!!

            You’ve gotta be kidding me?! I’m speechless!

            (Actually, I’m not and just wrote a post with unprintable words, but erased it. I’ll try and be cool).

          13. Dave

            I agree with David.

            The Berkeley Hills just peaked in 2008, or may still be going up.

            Which makes no difference whatsoever.

            They will lose 65% of their current list price with a few years.

            What is happening now in Irvine has very little bearing on what will be happening in next year.

            If these buyers didn’t put down 20%, and cannot swing the mortgage at 3x gross on a single income in a secure job on 35% DTI, classical, historically supported underwriting standards very strongly suggest these buyers will eventually default.

            These underwriting standards were developed for a reason.

          14. ipoplaya

            Here’s the situation today Schadendude:

            Listed Irvine housing inventory is quite low relative to recent past and recent sales. Months inventory for the city is perhaps 4-5 months of product on the market which typically means a fairly stable price environment.

            Mortgage rates are still at or near historical lows.

            Government intervention continues to enable historically lower underwriting standards, e.g. FHA doing loans for only 3% down up to 41% B/E ratio.

            My “awareness” of these facts allows me to view current market dynamics more realistically. Does yours?

            Only hyperinflation of wages will save the RE class, not hyperinflation of commodities, consumer goods, food, etc. Hyperinflation there will kill RE further.

          15. Matt

            People, people, people.

            Honestly, I think you’re debating a semantic point. People could be buying houses now at the prices they are posted at.
            Houses could not be objectively worth as much as they are paying for them and go down in the future.

            Let’s face it: a cause of this bubble was very large numbers of people buying things for more than they were worth.

            Where we all might have a real disagreement is one where we think the prices people will be willing/able to pay are going to go from here. But, I’m not going to lose any sleep if I say “nobody in their right mind would pay that much for that” and someone does. Nor will I lose any sleep if generally accepted market indicators don’t predict accurately; anyone who tells you they can predict everything without error is generally lying.

          16. Schadendude

            ipo – It’s a bit country, and there are lots of economic players. What should concern you is not what you can observe individuals doing, but what you observe the herd doing. For what the micro giveth, the macro will taketh away.

            Watch the LIBOR and TED spreads grow along with unemployment rates. RE is done, but dumb folks can always be sold by a clever salesman.

            So what exactly is your theory then, that we’re close to a bottom ?

            LOL cmon dude, seriously.

  3. Texas Triffid Ranch

    Sigh. I’m not going to jump on the “medical bills” bandwagon. I’m just going to note that this sounds suspiciously like a couple that recently retired, say within the last couple of years, and didn’t save anywhere near enough for retirement. It’s okay, though, because HELOCs are as good as cash, right? Get ready to see a lot more of these: out here in Dallas, you’re already seeing similar longterm residences popping up on the market, and all because the owners watched the Joneses do all of the things in retirement that they dreamed of doing.

    In a related aspect, expect the whole market for reverse mortgages to implode in the next few weeks. The last thing any bank is going to want is to take over houses when their owners die, when the sale value is a fraction of what the bank paid for it during the boom.

  4. Larrygg

    What makes the Kool-Aid very tasty is the fact that the money is tax free. You take out a $150K HELOC and you get to spend it all. Not like a lottery win or a win at a casino where you get taxed by Uncle Sam. It’s all yours to spend as you wish. I wonder where they live now?

  5. ipoplaya

    The asking price on this REO is not too much above CMV. It should be able to sell for $650K for sure, likely $675K I’d think…

    Some fool will think it’s got to be a great deal because it is an REO and pay $690K. I think you put too much faith in the auction process IR. Properties get missed there.

    1. IrvineRenter

      If they can turn a quick $100K from the auction price, you won’t see too many more that get “missed.”

      1. ipoplaya

        I’ve seen a few in recent months that have turned profits of $50-100K in less than three months holding time… I’m tracking a couple of more in escrow that could be $50-100K flips as well.

      2. Dave

        Berkeley Hills is still going up, or just peaked. Lot of houses now coming on the market though. A whole lot of them last sold in 2008… and marked up 10-20% from last sale. Marked up like $200,000 since July.

        Beginning of the end for the Berkeley Hills in my opinion.

  6. abdul rahim

    lotsa stores and eateries will go bye bye as those with heloc money vanish from the face of the earth. linens ‘n’ things is going under — not just bankrupt but out of business.

    anybody predict any other chains about to take the dirt nap forever?

    1. ventouxbob

      – I have one that I think may Tank. it’s a subsidary of home depot.

      HOME GOODS. I went in there last week on the week-end Man was it empty.

      we were having a ball lauging at the 4k refrigeraters, 1.5k esspresso maker. etc etc..

      they will tank.

      IKea on the other hand? they may be one to grow.
      cheap stuff. 350 for a fridge.

  7. Genius

    I’m somewhat shocked it went for $343k in 1991. Isn’t that a bit on the high side? I could be mistaking Irvine for some other place I was researching.

    There’s really no use arguing over prices and speculation guys(I know, kinda funny coming from me right?). All will be revealed in due time.

    1. alan

      91 was the height of the last bubble. Prices declined 20% over the next few years so by the mid 90’s properties like this could have sold for $275k.

  8. Genius

    Ack, I should read the entirety of the blog post before commenting.

    “peak of the last bubble”

    In 30 years will the homes built today look as ugly as this one does to me right now? I hope not.

  9. Geoff

    Are we just assuming that this person (or family) spent all their equity withdrawl and has been kicked to the curb? They could have easily used one of their several HELOC withdrawls to make a decent downpayment on a new house. Am I missing something here, or isn’t this a reasonable explanation?

    1. IrvineRenter

      If they had pulled their equity out in one lump sum, we all could speculate on uses for the money other than consumption. However, since these owners showed a pattern of incremental withdrawals, it is far more likely they simply took out the money and spent it.

      1. Mikee

        I’m thinking college tuition. They’ve been there 17 years, so they probably just got through the college tuition years.
        My Dad did the same thing, but only took the minimum he needed and (we) paid it off quickly.

        USC is over 40K a year now!! If you have three kids going through college, with no scholarships and make too much money for assistance, then a HELOC makes sense.
        Not saying this is the case here, but may be one explanation. And get this, they don’t have to pay it back!! Win-win (for them.)

  10. camsavem

    As Jim Morrison liked to say, “were all just a bunch of slaves”.

    I think the HELOC abusers had the right idea,take the money while you can get it. Being honest and saving has brought me nothing but pain and misery. I got to watch the entire OC party likes its 1999, and now I am left holding the bag as my business slows and my investments get flushed.

    I have lost over a 100K the last 18 months.

    At least the HELOCer’s got to have some fun with that 100K loss, plus they dont have to pay the taxes on the forgiveness of debt.


    1. garbler

      Sadly, I agree with you. Doing things the right way never got me anywhere. Washington only cares about amoral thiefs or lazy losers.

      1. Kirk

        And it’s nice to see the Fed and Treasury wage a war against fixed income investors. This is a risky time and they seem to think it’s okay to have low yields on loans. Now the Treasury is going to buy a bunch of CP, because the companies think it is their constitutional right to borrow at low rates. The private sector is buying CP when it’s priced right. This is no different from home sellers that refuse to lower their price and then end up getting foreclosed on. These low rates and government handouts are making things worse. Just nationalize the f*cking banks and let the rates soar. If the rest of corporate America keeps crying about having to actually pay to borrow money then nationalize them too. I’m sick of supporting a bunch of whining “free market” a**holes that can’t seem to accept what an actual free market is.

  11. mmg

    I have a question for the smart bunch over here, what is the effect of the last 4 weeks on home buying esp locally, what does that do to home priced while intoxicated (with koolaid 😆 ), is this winter going to be the capitulation phase?

    I know I have been busy following the market but just got to thinking, what happens locally?

    1. Matt

      My thinking (ie, what someone who is possibly smart but not informed thinks):

      I’m not sure. I see a few different strands, and I’d be interested in other people’s thoughts.

      1) As stocks plummet, people become more nervous about making any kind of investment, including a house. This could either hurt the high end more than the middle or lower (as people with money who want to buy play a more conservative card), or just hurt all markets.

      2) As stocks plummet, some people might choose to invest there instead, figuring there must be some undervalued assets. Context: what took the housing market a year to drop, the Dow did in a week. Some of that might have been panic selling.

      3) As stocks plummet, someone’s down payment fund might be shrinking. This one’s simple: less money available, buy less house or no house.

      4) As stocks get more volatile, people leave the market and want a safe haven for their money. Some of those people might figure they’ll sink their nest egg into a house for retirement on equity instead of on dividends. Might lead to price support, in this case.

      5) As the whole economy goes to hell in a handbasket, a lot of folks will be scared and fear doesn’t lead to wanting to make the most expensive investment you’ll ever make.

      6) Fear over the market might lead to owners trying to sell while they can (fearful they hold a depreciating asset). Seems unlikely to me; you gotta figure these people would already be selling.

      7) Rate cuts could filter into mortgages or might not. THey might not because banks are still scared houses are overvalued and don’t want to foreclose (which a recession makes more likely, even for a good borrower). So, they might not lower rates to cover those expenses (and recoup losses from the last 4 years). On the other hand, competitive pressures might lead to lower rates. I’m totally unsure on this.

      Those are the 7 that come most readily to my mind. In the end, I think the net is that it hurts any housing market, but possibly hurts OC less than other markets (simply because so many people buy here with less down and care about rates more, so the underlying rate cuts might have the larger effect. However, the more I think about it, the more I realize I don’t know.

  12. BH in HB

    To MMG,
    I have had a number of buyers put their purchases on hold til after the election. Their are many wealthy individuals opting to rent high-end homes because of the uncertainty of the market. The general public is probably not looking at this market as a great buying opportunity. It may be a good time to buy it may not but if you can buy based on cash flow you can’t go wrong.

    1. mmg

      thanks, here in OC if I were to buy based on cash flow, the seller would get Screw#d 😆

      Also what happens to bank’s psychology, any lenders out there to share what they are seeing. will banks be lending 1 mil for McPOS in IRVINE or south OC?.

    2. HAH

      The election won’t change a thing. The government has already shown all its cards, there’s nothing left to do but sit it out the ride and wait to see what happens.

  13. Schadendude

    “Government intervention continues to enable historically lower underwriting standards, e.g. FHA doing loans for only 3% down up to 41% B/E ratio.”

    …and yet prices continue to fall…

    You don’t get it, do you ?

    You are now dubbed, the US economic information minister. The entire economy is beginning to collapse around your ears and you’re still cheerleading for the asset class that lead the charge.

    Rates at historic lows ? Guess you better pay inflated prices while you can, cause LIBOR and TED spreads are growing. Time is running out to catch that machete.

    When unemployment spikes, RE is going to get destroyed even worse than it is now.
    Count on it.

  14. make sense

    Why it is right when the market is going up, it is a crisis when it goes down, it makes no sense to me. everything develops as circle, peak comes from bottom, vise versa…..I don’t think there is a crisis but some people want to say it is crisis, crisis is crisis no matter you speak out or not. ..let the market tell and do its own job……price is equal to value only when a couple with $150k can aford a decent house in Irvine
    http://yousaymesay.blogspot.com/search/label/Tell My Son what to do

  15. Jake

    Wow, I grew up on this street. I remember that house, although I wasn’t living there anymore when these people bought it.

    Even though I don’t know the owners, this one is definitely hitting “close to home”.

  16. mickeyc

    Would you mind adding me to your blog roll? I have been writing this for about a year and a half as emails to friends and I’ve decided to put it up in a blog format.
    I have read your blog since early 2007 and it helped me out immensely.

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