Irvine's Median Property

People have different ideas on what a median property looks like in Irvine. Based on its sales history, today’s featured property certainly qualifies.

Asking Price: $580,000

Address: 26 Bunker Hill, Irvine, CA 92620

Neighbor — Gnarls Barkley

Now my neighbor likes where I stay
But doesn’t, know, the price that I pay

Contrary to popular belief among the bulls, a median income household is supposed to be able to afford a median priced house. I have written at length about Affordability in the post of the same name. When prices are very high relative to incomes, affordability is very low. Usually this is associated with people using affordability products (toxic financing).

Very low affordability creates bizarre alternatives for those who do not wish to play the toxic financing game. For instance, today’s featured property is an old, smallish 3/2 in an average neighborhood. It sold for $740,000 in 2005. At that price, this property is only affordable to a household making $185,000 putting $148,000 down. Look at the house. Does it look like the property you would expect someone who is making that kind of money to live in? A household making $185,000 a year is in the top 20% of wage earners. Since rents are directly tied to incomes, these wage earners could still rent a property in the top 20% of Irvine’s properties. Therefore, the alternative facing those looking for housing at the peak was to chose between renting the property the is commensurate with their income, or buying a property that was several rungs down the property ladder.

With the conditions of the bubble rally–greed for rapid appreciation, fear of being priced out, the belief that prices cannot fall, no-limit financing alternatives, and an unbridled sense of entitlement–it is not surprising that few people stayed within conservative financing guidelines. When you think about it, the bigger surprise is that anyone did behave conservatively.


Today’s featured property is a great example of a median property in Irvine. Half of Irvine’s properties are nicer, and half are not as nice. The strongest evidence for this comes from the sales history. I used the DataQuick numbers for Irvine (current value is a guess), and as you can see, the difference between the actual sales price of this property and the Irvine Median is very small over a large number of transactions.

Sales History

Date Event Price
Median Difference
13-Feb-09 Listed $580,000 $580,000 $0
15-Jul-05 Sold $740,000 $643,000 $97,000
4-Apr-05 Sold $660,000 $625,000 $35,000
3-May-04 Sold $615,000 $620,000 ($5,000)
14-Mar-03 Sold $435,000 $421,000 $14,000
9-Mar-01 Sold $339,000 $321,000 $18,000

Continuing the theme of matching the median, I believe this property will fall down to the the low $400s somewhere below the 2003 purchase price, perhaps lower if there is overshoot.

The last sale, the one to the current owner looks fishy to me. The flipper before them did not get a bargain. There was no huge discount based on comparable pricing. Despite this fact, this flipper was able to find someone willing to pay $80,000 more for this property 3 months later. This purchase prices is clearly too high. Why would someone do this? Ignorance is one answer (or defense), but in a fraud scheme, the buyer would be in on the deal, and they would be getting a piece of the $80,000 profit.

Does it look suspicious? Yes, it does. Was this fraud? Probably not in this case as it was not 100% financing. Unfortunately, that leaves buyer ignorance…

Asking Price: $580,000


Income Requirement: $145,000

Downpayment Needed: $116,000

Monthly Equity Burn: $4,833

Purchase Price: $740,000

Purchase Date: 7/5/2005

Address: 26 Bunker Hill, Irvine, CA 92620

Beds: 3
Baths: 2
Sq. Ft.: 1,647
$/Sq. Ft.: $352
Lot Size:
Property Type: Single Family Residence
Style: Other
Year Built: 1977
Stories: 1
Area: Northwood
County: Orange
MLS#: S563623
Source: SoCalMLS
Status: Active
On Redfin: 3 days

Beautiful single level house in Northwood with a very spacious
floorplan. Home is complete with granite countertops in kitchen and
bathroom. Home is in quiet neighborhood close to schools, shops, and

This house was purchased on 7/5/2005 for $740,000. The owners used a $592,000 Option ARM and a $148,000 downpayment. On 5/19/2006 they opened a HELOC for $134,000 taking out most of their equity (or at least gaining access to it). Assuming they took out their downpayment, the total debt on the property is $726,000 plus three and one-half years of accumulated negative amortization. Does anyone want to bet that this owner hit their 110% cap causing a mandatory recast? If so, the property debt is closer to $775,000.

In any event, a $580,000 asking price is going to be a short sale, and the lender is going to lose money. I don’t know how much, but it could easily be $250,000 or more.

This is one of many Option ARM implosions we are going to see. There is no hope for these people because their payment after the recast is going to be astronomical. If they could afford it, they probably would not have taken out the option ARM to begin with. However, even if we give them the benefit of the doubt and assume they could afford the payment, why would they bother. Who is going to pay 2 or 3 times the going rental rate for a property that is $250,000 underwater? Nobody is.


Now my neighbor likes where I stay
But doesn’t, know, the price that I pay
My neighbor!! My neighbor!!
Myyyyy neighbor… wants what he sees
My neighbor!! My neighbor!!
Myyyyy neighbor… thinks he wants to be me
But he’ll never be

From out my window, seems just fine
But in his mind, again his world is far from kind
So I invited him over, could this make a new friend
But once I got to know ya, wish I never let you in

Now my neighbor likes my clothes
But hadn’t seen me with my scars exposed
My neighbor!! My neighbor!!
Myyyyy neighbor, ohhh dissatisfied
My neighbor!!
My neighbor’s, behavior… is unjustified
I’m sick and tired

I don’t know, if he lives all alone
But if you’re scared of the darkness best leave the lights on
I had a talk with my neighbor
Say it simple and plain
I guess, he understood me
He never came back again

Now my neighbor, likes my car
But no matter where you go, there you are…

Neighbor — Gnarls Barkley

34 thoughts on “Irvine's Median Property

  1. granite

    I’m renting in Northwood in a similar size house for $2260, less than half the monthly equity burn. I may not have a pool in my backyard but then I’m not backed up to Bryan. Even the low $400s doesn’t make sense to me.

    I know, I know, it’s Irvine. Maybe I don’t have enough of “a sense of entitlement”.

    1. mmg

      I will have to disagree with IR on this one, at the bottom this property will be in the low 300s if not lower, the house was built in the 70s, also nicer neighborhoods will pull away buyers if they can get a newer or bigger house a few miles away for the same price (let’s say lake forest, Tustin).

      The way the economy is heading (down the toilet :lol:) this is a WTF pricing.

      1. ockurt

        I have to disagree with you…people won’t necessarily move to Lake Forest/Tustin even if they can get a bigger/nicer place especially if they work in Irvine. Those extra few miles make a big difference traffic-wise; one of the reasons Irvine commands a premium.

        1. Kirk

          I have to disagree with you… I would move to either Lake Forest or Tustin if Irvine prices don’t come down to a reasonable level. I would even move to Costa Mesa for that matter.

          Hey, I expect Irvine to cost more, it’s nicer, but if that more means that I don’t get to retire early then screw Irvine.

          Since this is how I think, I imagine it’s how many people who sat this fiasco out think. Which means Irvine prices are going to hit a reasonable level and I won’t have to move to Lake Forest, Tustin or Costa Mesa.


          1. ockurt

            I think you’re agreeing with me in a round-about way…you really won’t move to Fake Forest/Tustin/Costa Mesa and you’ll pay a premium to live in Irvine.

            All I was saying is that many people pay that premium over other cities because of the factors we discussed.

  2. NoWowway

    Are they still occupying the property? There are zero pictures of the interior or anything else besides the front of the house. Price is north of $350/sf which is ridiculous for a 32+ year old house.

    I wonder what the feng shui of the home would be with all that unrest of people moving in an out, home price uncontroled, financial chaos, lies, limited/no social connections to neighbors. If I were considering a home like this, I would wonder if the neighborhood is plagued with other ghost owners who come to haunt a home for years/months and then disappear.

    There is a home across the street from us and it was taken over by a flipper who bailed out and found someone else to buy it not even a year later. The people moved in a couple of years ago, but it seems that none of the neighbors have bothered to get to know the new couple who seemed to have bought it for a flip and then got stuck. As soon as they moved in, they were busy with constructio and at some point the Home Depot trucks stopped the deliveries of construction materials, the people became hermits and the front yard has been left half-done.

    This type of activity changes the neighborhood. There is no sense of commitment or continuity with houses that are flipped, vacant, in various states of dis/repair, new moving trucks with renters, more for sale signs. I don’t know what I dislike most – the neighbors who are living a lie and then are gone and replaced by foreclosure signs or the “new” neighbor who doesn’t bother to say hello to other neighbors and immediately starts some aggressive home “improvement” construction followed by “for sale” signs.

    1. george8

      It is still very WTF ask price. Additionally it is a short sell. It is just a waste of time on all paries.

  3. NoWowway

    In conversations lately, there seems to be a familiar sentiment that if one only had some cash right now, there are outstanding deals to be had and prices are at the bottom. There is a lot of optimism out there.

    Contrast that to a realtor friend who has been in the business 30+ years who has a price strategy that works in a down market. He lists the home low enough to get multiple bids and winds up with close to where the market is at – give or take. He had two recent failed properties. Each property had multiple bids and the homeowners countered with some kind of wishing price from their heads and the bidders walked. The actual comps supported the bidders, but the owners had too much at stake to settle for the highest bid. One of the homeowners is going to stay until forclosed upon – that is their new strategy. The other one is going to list with someone else.

    1. maliburenter

      At recent rates of home price decline (2.5-2.6% per month), the price on this home is dropping by $15,000 per month, $500 a day, $21 per hour.

      This should be at its 2003 sale price of $435k by the end of the year.

    2. Fermi Pyle

      “Each property had multiple bids and the homeowners countered with some kind of wishing price from their heads and the bidders walked”

      If the multiple bidders bid the asking price, wouldn’t the reluctant owners be obligated to pay commission for backing out? I doubt that the owners’ counteroffer was above their asking price. So it appears that the multiple bids were well below the asking price and the counteroffers were somewhere in the middle ground, but the realtor considers that behavior outrageous.

      I don’t get it. The asking price was portrayed as the realtor’s idea. If a realtor makes a listing with an unreasonable asking price, then owners shouldn’t be faulted for thinking the home is worth something close to that amount. The problem lies with the realtor.

      1. ignorantoutsider.

        Theres the owner/fk**d knife-catcher-wishing price that nobody would bid at, then theres the realtor wishing price which just might get a full price bid if some truly delusional slug wandered by, but is really an invitation to bid somewhere within $60.000. Owners and delusional realtors search for a middle ground between this and the asking. Sane bidders drop out at this point as the first offer is usually the real world value. Knife catchers split the difference. It will be lower, and lower, and lower if you wait. As for value here $350 sqf for a 1600 sf house on a postage stamp lot should buy a whole lot of granite.

    1. maliburenter

      There might be predatory lending. However, it would be predation on the ultimate holder of the loan, not the homeowner.

      Where is the video of the crying lender? How about the crying employee of a bank that was stupid enough to write option arms and is now laying off tons of employees? If that employee is from a nonmortgage part of the bank, they could be a genuine victim. Hmmm, that is a good story idea. Maybe I’ll talk to Matt Padilla about that.

    2. AZDavidPhx

      Vargas was inundated with offers to refinance, by phone, mail and in person. “There were so many mortgage brokers after me, it wasn’t even funny,” he said.

      GASP! The boogey man was frothing at the mouth breaking down the man’s door trying to loan him money!

      Vargas’ younger sister, Rebecca Deleon, said she often tried to shoo away loan officers during visits to Vargas’ home. “Every time I went over there, he had a new person that was trying to give him a loan,” Deleon told

      Lock the door! Don’t open it for strangers! Don’t call them ahead of time and invite them over!

      In need of additional funds for his own home care and a pair of car loans, Vargas finally agreed to a loan. He insists the salesman told him the deal would refinance his house with a new reverse mortgage requiring no monthly payments.

      AH-HAH! And there we finally arrive at the core of the matter. After all the talk of D-Day veterans, love, medical bills, harassment – it turns out that he needed a personal baby sitter and a couple of cars. He had no choice but to cave in to the pressure of those sleazy money hustlers! They would not have it any other way, nope.

      “They told me I didn’t have to send any money until I passed,” he says. “Then they started sending me all these bills.”

      GASP! He had a verbal agreement with the loan hustler and the lender won’t honor it! All they deal with are these damn legal contracts that people SIGN on to. These stupid courts only know how to enforce legal contracts and always ignore those important details that are not in writing! I totally hate that!

      Vargas said he is still as sharp mentally as ever but admitted that he didn’t read all the loan documents


      and was sometimes confused about the terms of the loans, partly because he had medical issues that for a time confined him to a wheelchair.

      Reading and thinking doesn’t require walking. In fact it’s often best to sit down and think things over for awhile.

      But he insisted that he never signed up for any loan he did not believe to be a reverse mortgage.

      WHOOPS! Probably should have read all of those loan documents that you admit that you didn’t look at.

      “God opened up my eyes” about what lies beneath the mortgage meltdown, he said.

      A little late! Talk about being asleep on the job there, Mr. God.

      Indeed, Vargas’ refinancing nightmare occurred during the peak years of mortgage securitization

      This guy totally deserves free money that should not have to be paid back. It’s not his fault that he drank the kool-aid, jumped in bed with the hustlers, and wagered his house on ever increasing appreciation. Have you no heart?

  4. IrvineRenter

    Why your home’s value will keep falling

    At least some in the MSM are telling the truth.

    “How low? One measure suggests a further 14.5% drop.”

    “Shiller says the financial stimulus package hammered out in Washington does very little to offset pessimism in property markets. First-time homebuyers will be eligible for a tax credit of $8,000, but it will be spread out over several years. “I can’t believe that’s going to have a huge effect on this massive housing market,” Shiller says.”

      1. IrvineRenter

        Yes, everything recorded in the property records should show up on Redfin. Their data is not always current, but there is no reason cash sales would be excluded.

    1. maliburenter

      Normally I would click on a link and read the article. However, MSM is the CNBC of the internet. They were how many years behind IHB and Calculated Risk pointing out the problems in the housing market?

    1. tonyE

      OTOH I;m very much against helping out morons who got way over their head. The writing was on the papers they signed… weren’t they aware that at some point in the future they’d get locked into a much larger payment?

      However, as a long term homeowner who never drunk the KoolAid, I see that this is driving us into very low interest rates, performing jumbo loans and some sort of stabilization of prices.

      So, this creates a golden chance to refinance our existing mortage. We just started the paperwork and we’re being quoted just above 5% on a fixed loan. Imagine, we locked into 6 1/8 in 2003 and now we can do it even lower.

      I just don’t recall 5% on a jumbo ever. Indeed, I don’t recall 4.5% on a conforming either. My parents got 5% on a performing loan in 76 and that’s as low as I can remember.

      So, this opportunity is also golden for those with good credit, a job and plenty of equity. Which is pretty much where the majority of homeowners are.

      Renters? Well… I can see that they may be hoping for a crash to buy in. But a crash will affect more than just the price of homes but the economy.

      And today, it’s hard to get a loan. Imagine if the economy crashes very hard. Then even a 0% loan on a $200K McMansion will be unobtainable because we won’t have any jobs.

      1. Mikee

        I got a 5.5% fixed on my just-below-jumbo loan in 2004. Then I got a HELOC on the amount above the jumbo level for a variable rate. That Var rate right now is 3.75%.
        I’ve never tapped the extra funds available on my HELOC because I don’t like the variable rate, and don’t want to get stuck.
        I could pay off my HELOC today with money in the bank, but at 3.75% I’ll let it ride.

  5. George Williams

    D-Day vet’s tale parallels mortgage meltdown. A truly sad story about the level of outright fraud that some perpetrated in order to continue their exorbitant lifestyle.

    This is a very interesting test case since it revolves around who is allowed to foreclose on a home. I hope they do flush the cockroaches out of the walls as it were with mandatory loan ownership disclosure. Will be interesting what names pop up.

  6. freedomCM

    “Continuing the theme of matching the median, I believe this property will fall down to the the low $400s somewhere below the 2003 purchase price, perhaps lower if there is overshoot.”

    You should have looked at the adjacent properties for their price histories. They all sold for the low-mid $200s in the 90s. 4X median income then.

    Why shouldn’t these houses, now 10 years older, go for the same or less? 4 X $80k = $320k.

    They just aren’t that nice!

    1. NOT

      IR, May I suggest an Affordulator(tm) addition to the RentVsOwnulator(tm)? It should do a more accurate job of the above calculation for all to have access to. It should “attempt” to encode some of the practices that the banks are going to be forced to go back to (as you have outlined both on here and in your book) such as the 80% loan/20 down rule etc.. This will further enable torpid folk like myself to not think about the math 🙂

    2. QualityPicks

      I think IR just doesn’t want to appear as a “mega” or “perma” bear. But I’m with you. I still remember in 1999, being scared to death for getting into a $260k loan to buy a $286k townhome. I made $90k back then and I was considered to be “well paid”. Now a days, I’m sure anybody making $110k feels like a loser that can’t afford much. Any mortgage broker straight out of McDonalds with no college education and no experience could make >$100k a year. I really believe we will go back to the days were someone who makes $100k will be considered as making pretty good money. Why? because the people I know that have a lot of experience and good education are making that much. Wages haven’t increased that much and whatever tiny-bit they have increased was based on a fake and leveraged economy.
      I considered 1999 a “boom” year and it was. Why is it that going back to 1999 prices is now considered a “depression”?

      But this will be a very slow process thanks to government intervention, so I really think the bottom will be more like in 2015.

      1. newbie

        $286k/$90k= 3.2 cost to income. That’s reasonable if the townhouse was reasonable.

        If the current govt assisted refinancing with no forgiveness provision gets passed (debt is never forgiven as with student loans), the US will change back to the company store towns that control housing for life. Instead of working for the coal mining companies or sharecropping, lots of people will be working for the bank/govt.

        Say $200,000 old bad debt and yearly wages of $80,000 ($6667 per month). That’s 22% ($1458 per month) old debt service at 8% interest. 15% Fed Tax ($1000 per month), 8% CA Tax ($533 per month), 25% Rent ($1600 per month, because house was foreclosed), 7% SSI ($467 per month), 10% Food and utilities ($667 per month), 4% Car/Gas ($267 per month), 2% clothes and other luxuries ($133 per month) and 8% ($533 per month) for child support. That adds up to 101%, so another day another day deeper in debt.

        What a life in the new America.

  7. AZDavidPhx

    How much money did the guy receive? If he did not get 1 penny of that money then he truly is a victim. However – that doesn’t look like the case. He says his signatures were forged and maybe they were, but then he should have returned the money without using it. Otherwise, the forgery is a moot point.

    I really do not have a lot of schadenfreude on this one. I feel pretty sorry for the guy’s situation and I think that it is a sad that the hustlers took advantage of his situation.

    My main problem with this article is that it is loaded with pathos manipulation and comes off as a reporter trying to put on a dramatic playwright and spin the audience with irrelevant details. It lacks neutrality.

    There are also things that make me think that lawyers are making up junk to pad the complaints such as “I can’t understand because I am in a wheelchair”.

    The guy was totally taken advantage of – but come on. Enough is enough with homeowners spending their equity and accepting 0% blame.

  8. la jolla real estate agent

    Yes People have different ideas on what a median property. Today’s featured property certainly qualifies.

Comments are closed.