Seasons in the Sun — Terry Jacks

But the hills that we climbed
were just seasons out of time.

House prices in our local real estate market, like prices in many others, climbed a mountain of debt to heights they should have never seen. There will be a time when those prices are justified — perhaps 20 years from now — but seeing those prices in 2006 was a season out of time.

Friends, Irvinites, countrymen, lend me your ears; I come to decry the housing bubble, not to inflate it. The evil that men do lingers on through a devastated economy; the good is oft interred with their foreclosure. So let it be with the housing bubble. The noble Irvine Renter hath told you that homedebtors were greedy. If it is so, it is a grievous fault, and grievously have homedebtors answered for it.

To everything there is a season. A time to gain, a time to lose. A time to time to laugh, a time to weep. A time to build up, a time to break down. A time to dance, a time to mourn.

The Great Housing Bubble is over. It is time to move on. The Ponzi Scheme has collapsed. The lifestyle of mortgage equity withdrawal has come and gone. The dream of endless appreciation is a fantasy gone awry. Winter is upon us.

We had joy, we had fun, we had seasons in the sun.
But the wine and the song,
like the seasons, all have gone.

So where do we go from here? It is pretty frightening when you consider all the analogies of our current situation are to the Great Depression. It is clear that what is to come is going to be very bad, and we have not seen the worst of this yet. Our elected officials and the bureaucrats at the Federal Reserve are doing all they can to straighten out this mess. Hopefully, their meddling in the financial markets will not do more harm than good. I have my doubts. What happens is largely out of our hands. Even the people who are supposed to be in control are not. They more they try to reassure us, the more anxious I become. If events were under control, no assurance would be necessary.

It is natural to become reflective in a time like this. It is a good opportunity to reassess what is important and what is not. Most people are being forced to sacrifice possessions and pretenses of wealth. For some people, their attachments to these objects and illusions will cause them a great deal of suffering. For others, being released from these attachments will be a spiritual blessing. Difficult economic conditions create circumstances of loss and mourning. How we deal with these circumstances speaks to our character, and if we learn its lessons, it will reveal the path to true happiness, contentment and feelings of abundance.

{book}

Today’s featured property is a new condo sporting a significant discount. We have profiled another property in this neighborhood. Whoever owns it now cannot be happy with this new comp.

Asking Price: $399,000

Income Requirement: $99,750

Downpayment Needed: $79,800

Monthly Equity Burn: $3,325

Purchase Price: $535,000

Purchase Date: 3/15/2006

Address: 24 New Season, Irvine, CA 92602

How does one get “close to everythings”?

Another realtor who obviously does not give a crap.

This property was purchased on 3/15/2006 for $535,000. The owner used a $500,000 first mortgage, and a $35,000 downpayment. That is all gone.

If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $159,940.

This property is being offered for 25% off its peak purchase price.

I hope you have enjoyed this week at the Irvine Housing Blog. Come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

{book}

Goodbye to you, my trusted friend.
We’ve known each other since we’re nine or ten.
Together we climbed hills or trees.
Learned of love and ABC’s,
skinned our hearts and skinned our knees.
Goodbye my friend, it’s hard to die,
when all the birds are singing in the sky,
Now that the spring is in the air.
Pretty girls are everywhere.
When you see them I’ll be there.
We had joy, we had fun, we had seasons in the sun.
But the hills that we climbed
were just seasons out of time.
Goodbye, Papa, please pray for me,
I was the black sheep of the family.
You tried to teach me right from wrong.
Too much wine and too much song,
wonder how I get along.
Goodbye, Papa, it’s hard to die
when all the birds are singing in the sky,
Now that the spring is in the air.
Little children everywhere.
When you see them I’ll be there.
We had joy, we had fun, we had seasons in the sun.
But the wine and the song,
like the seasons, all have gone.

Seasons in the Sun — Terry Jack

Corrosion of Conformity — Albatross

How can I respect your crime
When all you criminals whine
They bought and sold you, run on, run on

The conforming loan limit through the GSE’s is currently limited to $625,000 in our area. This is down from the $729,750 temporarily allowed under the Economic Stimulus Act of 2008. Any loan larger than this amount is considered a jumbo, and jumbo loans carry a higher interest rate. The current spread on a 5/1 ARM (a method of financing I do not recommend) is only 9 basis points; however, the spread on 30-year fixed rate loans is 130 basis points. Also, jumbo loans generally have higher downpayment requirements than conforming loans. All this means that the jumbo loan market is thinner because fewer buyers have the cash for the downpayment or the income to qualify.

Since our real estate market is collapsing from the bottom up, the slice of the market starting to show stress now is the bottom of the jumbo market — $685,000 to $900,000. Homes priced to sell in this range are having a hard time finding buyers, and prices are starting to drop. Today’s featured property is a short sale priced at $775,000. It recently dropped its price $80,000 in an effort to chase the market.

My home is kind, man it pays to be blind

I want to share with you a couple of recent experiences I had that demonstrate to me the power of conformity and denial.

I have been arranging to speak at various groups active in my industry. There are a great many even in my industry that do not fully understand what is happening and why. One of these groups told me they would like to have me as a speaker, but only if I am planning to give a Pollyanna message of hope. Well, there is always hope, but the reality is not particularly positive, so I will not be speaking there any time soon. The reason is simple. They are in denial, and they want to maintain that even at the expense of seeing reality. I can not and do not live my life this way, so it is difficult for me to relate to this mentality, but I do understand their desire for denial and the reason for their enforced conformity.

I subscribe to a reporter lead service to try to generate free publicity. Yesterday, I had a phone interview with a reporter doing a story on people who cannot sell who are renting out their houses. I explained to her that those homeowners with a positive cashflow do not have a problem, but many bubble buyers cannot cover their cost of ownership with rents, and they do not have any good options. They can either sell the property today for a loss, or lose money each month until prices come back (which is going to take years). Many, if not most, of the people who try to rent it out will end up in foreclosure anyway. This reporter got upset with me because my message was not positive, and she had to spin this story in a positive light. I didn’t know what to say. All I can do it report reality. What she needed was someone from the NAR to tell her that prices will be back at the peak in two years and those who rent out their losing venture will be made whole soon. I couldn’t say that because it is not reality. Even the media is under pressure to conform to the culture of denial.

I have often wondered why our government sets up its method of reporting recessions so that it isn’t announced until it is almost over. Now that I see the powerful need for denial among the populace, I think I understand.

Asking Price: $775,000

Income Requirement: $193,750

Downpayment Needed: $155,000

Monthly Equity Burn: $6,458

Purchase Price: $985,000

Purchase Date: 7/20/2005

Address: 75 Rockport, Irvine, CA 92602

This property was purchased on 7/20/2005 for $985,000. The owner used a $784,000 first mortgage, a $196,000 second mortgage, and a $0 downpayment.

If this sells for its asking price, and if a 6% commission is paid, First Franklin stands to lose $256,500.

This property is being offered for 21% off its 2005 purchase price.

{book}

Well I’m feelin’ left behind, Lord what a waste of time
They’re coming to get you, run on
How can I respect your crime
When all you criminals whine
They bought and sold you, run on, run on

I should have seen the signs
Now the memories far behind
It was no big loss,
Fly on, Albatross yeah

Corrosion of Conformity — Albatro