There seems to be bullishness in the air. That tells me we are nowhere
near the bottom. Bullishness equals denial; we must go through
capitulation before this is over with.
Oh let the sun beat down upon my face, stars to fill my dream I am a traveler of both time and space, to be where I have been To sit with elders of the gentle race, this world has seldom seen They talk of days for which they sit and wait and all will be revealed
There has been an upwelling of bearish sentiment lately, justifiably so. Rents are dropping, unemployment is rising, and foreclosures are increasing: macroeconomic forces are working against the market. So it makes me wonder, “Could it really get that bad?”
Our little bear rally is being precipitated by artificial government stimulus and a lack of inventory due to the artificial constraint on supply from the foreclosure moratorium. Notice the key word “artificial” was used twice to describe how both the supply and the demand is being manipulated. These manipulations will both end and fail, but probably not before bringing a new round of knife catchers into the market over the next couple of months.
Ignoring the short term manipulations and returning to the long-term relationship between prices and fundamental valuations, it is apparent that prices must still fall. The only real question is by how much, and when will it stop. The chart below is from my worst-case scenario two years ago. The question of the day is, “Could it really get that bad?”
Incredible Opportunity, lowest price home 4 bedroom 3 bathroom home in
Irvine. A cook’s delight, beautifully renovated kitchen, cherry
cabinets, slab granite countertops, stainless steel appliances.
Upgraded tile flooring, plantation shutters, crown moulding. Main floor
bedroom, and bathroom. Fabulous corner lot, large backyard with a
gazebo. Large secondary bedrooms, nice storage. Master suite is large,
with 2 closets. Nice inside tract location.
This property was purchased on 4/25/2006 for $810,000. The owners used a $648,000 first mortgage, a $121,500 second mortgage, and a $40,500 downpayment. If this property sells for its current asking price, and if a 6% commission is paid, the total loss on the property will be $246,094. Another day, another quarter million dollar loss in Irvine.
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.
🙂
{book6}
I found out long ago It’s a long way down the Holiday Road
Holiday Road Holiday Road
Jack be nible, Jack be quick Take a ride on a West Coast kick
Get on up when youre down Baby, take a good look around I know its not much, but its okay Keep on moving anyway
Before you can answer the question of the day, you need to see just how close to the 5 this house really is. The wall in the picture and the street out front is the only thing separating this property from the freeway. Check out the images below:
I found an interesting website that discusses the effects of freeway pollution on health. I found the following on that site:
“The majority of studies show that health effects begin along roadways that carry 20,000 or more vehicles per day, and are strongest for persons who live, work or go to school within about 3 football fields from the edge of a freeway….
Why is freeway pollution bad?
More than 100 major studies have been published over the last decade documenting the relationship between freeway pollution and health. These are some of the findings:
* Children who lived within 200 meters of a high-traffic roadway were nearly two times more likely to be hospitalized for asthma than similar children who lived further away from traffic (Lin et al., 2002). * Cough during the first year of life correlated strongly with the level of vehicle-related air pollution measured in front of the child’s home (Gehring et al., 2002). * Children exposed to higher levels of traffic-related pollution before the age of 3 were more than two times more likely to develop asthma than similar children exposed to lower levels of traffic pollution (Zmirou et al., 2004). * Pregnant women who lived close to high-traffic roadways during pregnancy were more likely to give birth prematurely or have a low-weight baby, putting the child at risk for health problems in life (Wilhelm and Ritz, 2003) * Increasing residential exposure to particulate pollution from roadway traffic was strongly associated with an increased risk of being admitted to a hospital for heart problems (Janssen et al., 2002). * Adults who lived within 200 meters of a busy roadway were 7 percent more likely to die from a stroke than those who lived further from the roadway (Maheswaran and Elliott, 2003).”
It doesn’t make you want to live by a freeway, does it?
People do live by freeways, and they will continue to do so. The real question is “how much does a property need to be discounted for you to live by a freeway?”
Charming property in the Revere gated community. This turnkey home with
a popular open floor plan have one bedroom and bath downstairs and 3
bedroom 2 bath upstairs. Tile flooring in the living room, dining,
kitchen & carpets thru out the bedrooms. Custom two tone painting,
ceiling fans, wood shutters, dual pane windows and very light and
bright. Near freeways, shopping, entertainment and great schools.
Custom surround sound prewired, maple cabinets thru out and much much
more! This contemporary home will not last long!!
home will not last long!! Do you feel the sense of urgency to buy, buy! BUY!!!
thru out
As you can see, this description has two of my favorite realtorspeak expressions: Turnkey and light and bright.
This property was purchased on 11/10/2005 for $850,000–almost a million dollars to live on a freeway. The owner used a $650,000 first mortgage, a $200,000 HELOC, and a $0 downpayment. If the house sells for its current asking price, and if a 6% commission is paid, the total loss to the lender will be $239,000. This property is being offered for 24% off its 2005 purchase price.
{book6}
Get on up when youre down Baby, take a good look around I know its not much, but its okay Keep on moving anyway
Feels like I should be screaming Trying to get it through to my friends Sometimes it feels that life has no meaning But I know things will be alright in the end
Short sales are a market oddity. They are there, and you can see them, but yet they have no substance because you can’t buy one. Short sales constitute our Ghost Inventory.
In the first days of the spring time made you up and split from one thousand enemies made a trail of, of a thousand tears made you a prisoner inside your own secrecy
Back in February, I described short sales as Foreclosures-In-Waiting, and they are because very few short sales avoid foreclosure auction. They are technically listed as inventory, but since banks rarely approve short sales, it is as if they don’t exist.
Several local realtors have been attempting to apply techniques of measuring available inventory and sales velocity to compute time on the market. This is one of the least predictive and most useless indicators of market direction. It does provide some indication of whether or not buyers and sellers may currently have a market advantage in negotiation, but it does little else.
Currently the computation of inventory is distorted because short sales are counted, but they are not really there. It is currently much more of a seller’s market than what the time on the market would suggest. There is very little real inventory available right now, and what there is is mostly REO. A seller’s market does not mean that prices will rise, but the REO sellers that are in the market will not need to make as many concessions to sell the property. The non-REO sellers are priced above the market, and they are largely wasting their time.
The remaining inventory can be categorized by asking prices in two different strata: (1) the organic sales owners with WTF asking prices, and (2) REO priced to move. There are very few organic sales (defined as not being a short sale or REO), and there will not be many going forward. Sales volumes are still anemic by historical standards, and the volume that is occurring will not absorb the REOs entering the system. So despite the seller’s market, prices will go down. (Don’t take my word for it, check out Mr. Mortgage’s 2009 Upper-End Housing Market Outlook)
In the meantime, keep watching the short sale listings. They do not tell you much about the current market, but they speak volumes about where the market is going. The short sales you see advertised today will be REO in a year. There are plenty of short sales in the market right now, so the pipeline of REO will continue to flow.
Beautiful NorthPark condo. Premium upgrades. Rich Dark Wood Floors,
Staineless Appliances,Custom Paint, 20 Foot Ceilings,Shows like a
Model,Closet Organizers in both rooms.Fireplace in Living Room. An
absolute beauty
Just as a rhetorical, philosophical question, “Can beauty be absolute?”
Why Is This In Title Case?
Staineless?
The realtor has a nice Mercedes with the custom rims. Why did he put it in this picture?
This property was purchased on 10/31/2006 (Halloween? Is that where the ghost theme came from?). The owner used a $480,000 first mortgage, a $120,000 second mortgage and a $0 downpayment. I doubt she cares much about the price given her investment.
If this property sells for its asking price, the total loss to the lender will be $200,500 after a 6% commission.
{book5}
In the first days of the spring time made you up and split from one thousand enemies made a trail of, of a thousand tears made you a prisoner inside your own secrecy
There’s a ghost in me who wants to say “I’m sorry” Doesn’t mean I’m sorry
At the first hour of the springtime made you up and split from one thousand enemies
now I see you from the corner clock strikes and I know you will be drinking alone
There’s a ghost in me who wants to say “I’m sorry” Doesn’t mean I’m sorry.
Realtors have developed their own language and sales techniques to manipulate buyers. The practice is so widespread that most accept this indoctrination as being the way real estate is sold. Does it have to be that way?
What would you do? To get to me What would you say? To have your way Would you give up? Or try again
If any of you have every perused a typical realtor website, they attempt educate and inform like the IHB does. The main difference is they are not attempting to elucidate the truth, they are attempting to indoctrinate people into the nonsensical tenets of realtorspeak and kool aid intoxication. Realtors attend sales seminars and learn from other agents how to manipulate buyers through emotional appeals. The art and science of real estate sales is largely a study in the psychology of exploitation. Those that master these techniques make more money than those who do not.
During the bubble, buyers got caught up in the crazy fantasies of kool aid intoxication. Buyers wanted to believe the nonsense; they demanded it. A realtor or mortgage broker who attempted to talk a buyer out of overpaying for a particular property would lose the business to someone selling the fantasy. Making a living telling the truth and behaving morally is more difficult in financial manias. There is no reward for being realistic when nobody wants to live in reality.
The dynamics of a financial mania tend to drive good people out of the business. What you end up with are those who prospered during the mania by manipulating buyers and behaving in a completely self-centered manner. Is it surprising to see these same people call the bottom every few months? They don’t care about buyers, they only care about their next commission. That leaves us where we are today with an entire industry so completely imbued with bullshit that few recognize the truth any longer and even fewer speak it.
Realtorspeak must die. The general public is waking up to the fact that they have been lied to for far too long. If people desired duplicity, the websites and blogs of realtors would be getting much more traffic. Instead, people come to the IHB to experience an alternate reality; the truth.
Everyone was worried last week that the solitary voice of truth and reason was lost. Nothing has been lost. We would rather stick to our principles and fail than change who we are. Judging by the popularity of the IHB, now that the bubble has popped, the world is ready for a change of direction. We will lead it.
Beautiful atrium features an in-ground Jacuzzi spa with waterfall
framed by bricks. Sundeck off loft overlooks atrium. Two story living
room with fireplace. Master bedroom boasts a soaring ceiling, mirrored
closet doors and ceiling fan. Scraped ceilings, plantation shutters
throughout, ceiling fans in loft and dining room. Main floor powder
room with custom beach mural. Attached 2 car garage with new roll up
garage door. Woodbridge offers residents 22 swimming pools, 15
beautiful parks, paddle boat & canoe rentals at the Beach Club, and
rental facilities for events.
One of the reasons I chose this property today was because of the well-written description above. The realtor described the property accurately, featured its positive qualities, and used a minimum of flowery adjectives. There are no exaggerations, the punctuation is generally correct (There are sentence fragments), the words are spelled right, and it doesn’t employ any of the cheezy sales techniques I ridicule daily. It is possible to write a good property description without using realtorspeak; this description proves it.
I don’t know what is going on with this floorplan. Is there really only 1 bedroom and 3 baths? I think that is a mistake, but I don’t know.
Is it just me, or does anyone else think that mural is really tacky?
The owners of this property bought in 1995, but the final sales prices is not in my database. Here is what I do know:
On 6/16/1997 they opened a stand-alone second for $40,000.
On 11/3/1999 they refinanced their first mortgage for $201,000.
On 8/23/2000 they opened a HELOC for $20,000.
On 11/4/2002 they refinanced with a $234,000 first mortgage and a $10,000 second mortgage.
On 5/22/2003 they opened a HELOC for $40,000.
On 10/1/2004 they refinanced with a $325,000 Option ARM with a 1% teaser rate.
On 10/1/2004 they opened a HELOC for $50,000.
On 7/8/2005 they opened a stand-alone second for $77,000.
On 2/10/2006 they opened a stand-alone second for $135,000.
Total property debt is $460,000 ($325,000 + 135,000) plus negative amortization.
Total mortgage equity withdrawal is about $250,000. I can’t be sure of the amount.
These were typical Irvine homeowners who doubled their debt and now cannot afford their properties. It is a story we have seen dozens of times, and we will see it dozens more. If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $46,400.
{book6}
What would you do? To get to me What would you say? To have your way Would you give up? Or try again If I hesitated To let you in Now would you be yourself Or play your role Tell all the boys I keep you low If I saw no Would you turn away? Or play me off Or would you stay, oh, oh
Unsold in 90+ days
