I am always surprised by the low quality of many listing photos on the MLS. In many instances these pictures are so bad that no picture at all would be better. What is the point of putting up a picture that reveals nothing about a property?
Occasionally these pictures are atrocious in an attractive way. We have a thread in our forums devoted to Funky Listing Photos. Let’s take a look at what our members have found:
Sometimes the listing agents want to enhance their pictures with a little photoshop work.
Isn’t the oil painting effect picturesque?
Sometimes the listing agent can’t be bothered to get out of their car and photograph the property.
Perhaps they are worried about running into a meth lab or crackhouse.
Some places are just dirty and need to be cleaned.
Some are downright crappy. Can someone tell me what that board is doing in the toilet?
It isn’t only the people who have bathroom problems.
Some animals are in better shape than their owners.
And some have more taste.
Pink is the new black.
Dean Martin is the man.
It is possible to over stage a property. Am I buying the dishes too?
The pictures of today’s featured property has a unique artistic effect. Perhaps an artist will want to buy this dungeon property for a studio? Perhaps not.
Lender owned. Quiet,Serene location for this studio unit in the Springs
complex.Lots of trees and overlooks stream. Extra storage. Close to
shopping and freeways.
Quiet,Serene… yes, the tranquility is everywhere… Particularly since this is almost half off its 2006 purchase price.
This property was purchased at the peak for $253,000. The owner used a $202,400 Option ARM first mortgage and a $51,600 downpayment. He did open a HELOC for $28,900 a year later, so he may have pulled out his downpayment. In either case, he lose whatever he put into the property, and now his credit is trashed.
If this property sells for its current asking price, and if a 6% commission is paid, the total loss on the property will be $123,374.
This propperty is being offered for 46% off its peak purchase price.
I hope you have enjoyed this week at the Irvine Housing Blog. Be sure
to come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
Prices have stabilized locally through a combination of very low interest rates and very high downpaments. Downpayment amounts have been steadily declining as those few with substantial downpayments have spent themselves. Now, the other component of the purchase price is under tremendous pressure; rising interest rates is reducing loan amounts.
When interest rates go up and incomes do not — a condition we are witnessing now — the amounts people can borrow declines. In the short term it means many deals that went into escrow assuming the borrower could get a 4.5% rate are going to fall out of escrow. The cumulative impact of all these deals falling out of escrow over the next 30 to 60 days is going to be a drop in transaction volumes. By August, this will translate into lower prices as people bidding on properties must adjust their offers to the new level of financing.
It looks as if 4.5% interest rates are gone for good. So what does that mean for future home values?
The brief stabilization we have been experiencing was caused by
interest rates under 5%, and large downpayments. Now that most of the
knife catchers have burned up their downpayment money and interest
rates are approaching 6%, 15% of the buying power in the market just
evaporated. As interest rates keep climbing, buying power keeps
diminishing. This will lead to even lower transaction volumes and lower
prices.
Unless interest rates start dropping again — which doesn’t seem likely — the Spring rally the market has been enjoying is dead.
It should not be surprising that the rally isn’t sustained. There is no way our housing market or the local economy is at a
bottom. Californians have borrowed too much money, far more than their incomes can support. As long as this debt exists, house prices will continue to
decline, and the economy will suffer.
Think about it, if 20%-30% of the population has more debt than they
can service—which they do thanks to liar loans and unstable loan programs—these debt levels must be decreased to
serviceable levels. Reducing these debt levels requires a sale,
foreclosure or bankruptcy. To complete a sale, someone who can afford
the debt must buy a house from someone who cannot afford the debt.
There are only so many of these people out there who are able and
willing to do this. The rest—all the rest—will go through foreclosure.
There are many who believe that loan modifications are the answer. I have expressed my doubts about principal reductions being part of these modifications (see No Forgiveness). Any loan modifications that do occur will simply restructure debt to the maximum serviceable payment level. This will drain all disposable income from borrowers and wipe out our local economy–unless you believe appreciation and mortgage equity withdrawal are coming back soon.
To the extent that loan modifications succeed, our local economy
will suffer. Imagine an economy where everyone is has received loan
modifications. They are all trapped in their homes because they have no
equity, and they are making the maximum possible loan payment their
overlords believe is possible. How is that any different than serfdom?
In such an economy, there would be little or no discretionary spending
to support local businesses because every available penny will be going
toward debt service.
Many individual homeowners are praying for loan modifications that are not going to happen. It is a classic example of being careful what you wish for because if everyone were to get a modification, it would be a disaster.
Prime end unit with elegant 20 ft ceiling entry, hardwood floor and
open floorplan. Kitchen with granite counters and Beechwood cabinetry,
deep cast iron sink, convection oven/microwave.
Somebody paid $645,000 for a two bedroom condo. Unreal.
It didn’t take long for this woman to lose everything. The property was purchased on 1/26/2007 for $645,000. The owner used a $516,000, a $129,000 HELOC, and a $0 downpayment (it is possible she put $129,000 down and was pre-approved for a HELOC).
If this property sells for its teaser asking price and a 6% commission is paid, the total loss on the property will be $269,940. This property is being offered for 38% off its peak purchase price.
Any increase in pricing brings delusional sellers out of hiding. They put their properties on the market at WTF price levels and hope to hit the lottery.
Most people watched prices go up in California during the Great Housing Bubble and they had no idea how and why it happened; most didn’t care, they just enjoyed feeling rich. The only explanation most people could come up with is that California real estate is “different.” We are running out of land, you know.
The higher up the property ladder you go, the stronger the belief in price-drop immunity becomes. The people who bought $1,000,000+ homes are under the impression that buyers might be a bit scarce right now, but that their homes have still been increasing in value by 10% or more per year.
They are in for a rude awakening.
Once there is the slightest sign of life in this price range, all the overextended borrowers and those discretionary sellers looking to cash in their lottery tickets put their houses for sale. This adds to the already bloated inventory of homes priced to sit at the high end. These properties will sit on the market until the owners tire of the listing, or in many cases succumb to their debts and end up in foreclosure.
I have made some bold predictions on this blog and many people did not believe possible when I made them. I have said a number of times that the high end is going to crash very hard — in some places 65% or more (particularly near the beach). I stand behind that prediction. It isn’t a matter of “if” it is just a matter of “when.” (BTW, I am not alone in this prediction.)
HIGHLY DESIREABLE NORTHPARK SQUARE FOUR BEDROOM, THREE BATHROOM HOME.
THIS GREAT HOME HAS A PERFECT FLOORPLAN. OPEN KITCHEN WITH ALL THE TOP
OF THE LINE FEATURES, INCLUDING A CENTER ISLAND WITH BAR
SEATING,GORGEOUS QUARTZ COUNTERTOPS,FULL TILE BACKSPLASH AND BUILTIN
DESK WORK STATION. 20 INCH TRAVERTINE STYLE DESIGNER FLOORING,BEAUTIFUL
BERBER CARPET AND PLANTATION SHUTTERS. THERE IS A MAIN FLOOR BEDROOM
AND BATH. THE UPSTAIRS INCLUDES THE ADDITIONAL BEDROOMS AND
BATH,LAUNDRY ROOM, LOFT,BALCONY, WONDERFUL MASTER BEDROOM AND BATH,
WITH LARGE SOAKING TUB AND WALKIN CLOSET. THIS IS A WONDERFUL FAMILY
HOME IN A PRESTIOUS COMMUNITY WITH RESORT STYLE AMENITIES, THAT
INCLUDE,POOL,SPA, SPORT COURT,PARKS AND GAZEBOS. ALL IN AN OUTSTANDING
BECKMAN HIGH SCHOOL NEIGHBORHOOD.
ALL CAP
DESIREABLE? PRESTIOUS? WALKIN? BUILTIN?
This property was purchased near the peak on 5/24/2006 for $1,024,500. It is difficult to check comps because “No similar recent past sales could be found.” The owners have a $960,000 first mortgage on the property, and there is a $25,000 HELOC. Realistically, these people are already $100,000 or more underwater, but if someone is willing to relieve them of their debt burden, it looks like they are willing to move out.
SPECTACULAR VIEW!! Preimium Pie Shape lot brings city, canyon, mountain
and snow view in winter. Each room has views.Most beautiful Estate in
desirable gated community.* Crown molding, built-in
entertainment,closet organizer, custom tile in all baths, suround
speaker system, Gourmet Kitchen, stainless steel appliance, trough sink
with swain neck stainless faucet, central vacumn system, Upgraded can
lights t/o house, Plantation wood shutters, Distressed hardwood floor,
BBQ, fountain, fireplace in courtyard, BRING YOUR GUEST-CASITA in
private location, professional landscaping with custom painting.
**Master suite has balcony with gorgeous view and open space.
Preimium? suround?
vacumn?
Most beautiful Estate? I find this kind of BS particularly annoying. First, this isn’t an estate, it is a tract home, and second, are you sure it is the most beautiful?
Like many owners in Turtle Ridge, these people believe their properties are “special.” They also bought at the peak, but since their property is so beautiful, it has appreciated $750,000 since they bought it.
WTF?
Based on neighborhood comps, they might be able to get out at breakeven if they wanted to sell today, but that would not give them the huge profit they are due.
One of the great features of the IHB is going to be seeing these WTF asking prices years from now. When properties like these are back under $1,000,000, these $2,500,000 asking prices are going to be a hilarious testament to just how crazy the housing bubble was.
There was a crooked man and he walked a crooked mile, He found a crooked sixpence upon a crooked stile. He bought a crooked cat, which caught a crooked mouse. And they all lived together in a little crooked house
Follow her down to a bridge by a fountain, Where rocking horse people eat marshmallow pies. Everyone smiles as you drift past the flowers, That grow so incredibly high.
So where do crooked little houses on crooked little lots come from? Are the planners and designers high? In land planning, there is a tradeoff between the width of a lot (which translates into development costs) and the attractiveness of the street scene. Narrow lots are most cost effective, but they make for garage-dominated elevations and an unattractive street appearance.
Alley-loaded products are one possible solution, but the additional alleys eliminate back yards and drive up development costs. Many different solutions have been implemented to improve the street appearance while keeping lots narrow and cost effective. One such attempt at innovation is represented by the angled lots of the neighborhood where today’s featured property is located.
When you drive down the streets in these neighborhoods, on one side you will see garage doors, but on the other side, you will see the side of the garage that has often been dressed up with windows or other architectural features. Since the house fronts are at an angle to the street, the lines along the front elevations are broken, and the street takes on a more varied and attractive appearance.
Unfortunately, this kind of neighborhood is a nightmare for planners and surveyors because the lot lines have so many corners and crooked lines (A typical lot is a rectangle with four straight lines). Compare a normal rectangular lot to the lot outlined in red above. These neighborhoods are also difficult to build because the moving lot lines creates confusion on the construction site. The architecture has to be tailored to the lot as well.
It you drive around this neighborhood (or look at Google Street View), you can see the results of what the land planners intended. Some may consider it successful, and others may not. Developers for the most part are not impressed with the concept as evidenced by the fact you no longer see subdivisions designed in this way.
{book7}
As if on cue, the realtor has managed to take a series of crooked photographs to go with this crooked house on its crooked lot. Perhaps these fish-eye lenses are not a panacea for interior photography.
Quiet & private cul-de-sac location. Highly upgraded with wood
floors, French doors, plantation shutters throughout, vaulted ceilings
recessed lighting, huge private yard with gazebo, state of the art fire
and burglar alarm system, built in wall to wall garage cabinets,
breakfast nook, newer appliances, newer paint. Beautiful association
parks, pools and tennis courts. Close to great schools, shopping,
entertainment and more!
This property was purchased on 5/31/2000 for $327,000. These owners have paid down their mortgage since purchasing, and the current debt is only $250,000! Perhaps you think I am crazy for making a big deal of this, but it is so rare, that I have to celebrate it when I see it.
If this property sells for its current asking price, the owners stand to make a fortune. At $475/SF, I don’t give it much chance, but at least with some IHB exposure, people will know it is there.
In 2004, Alan Greenspan, then the head of the Federal Reserve, had this to say, “Indeed, recent research within the Federal Reserve suggests that many
homeowners might have saved tens of thousands of dollars had they held
adjustable-rate mortgages rather than fixed-rate mortgages during the
past decade.” Many people took this as a tacit endorsement of these loans by the head of the Federal Reserve.
The ignorance of Greenspan’s statement reveals a pathological mindset among policy makers in Washington; the people in charge genuinely believed the general population capable of managing their own financial risks — risks they often are not aware of and obviously do not understand. For evidence of this ignorance one has to look no further than the nationwide epidemic of foreclosures. Regulators took this same attitude toward major financial institutions. The resulting flaunting of risk is the direct cause of the severe economic recession we are now enduring.
When an entire population is encouraged to take tremendous risk, the resulting losses can be so large that neither the individuals nor the institutions that encouraged them can absorb the losses. The Government must step in as the counter-party who absorbs the losses others cannot; hence, you and I and everyone else is paying for the excesses of The Great Housing Bubble.
{book3}
The government is going to tackle the issue of how much risk can financial institutions take on in upcoming policy and regulation debates. Today, I want to focus on whether or not people should be allowed to risk foreclosure with an adjustable-rate mortgage.
I have already made my position known in Bring Back Paternalism in the Mortgage Market. I am no longer the Reagan Era free-market capitalist I used to be. I am not alone in making this philosophical change. Privatizing profits is great, but the need to nationalize the losses reveals that free-market capitalism never really existed, and perhaps needs to be further regulated in order to protect the public interest.
Much of the risk sold into the mortgage market during the bubble has already blown up in the form of subprime loans. The worst loan program was commonly known as the two-twenty-eight (2/28), and it was given to subprime borrowers. It has a low fixed payment for the first two years, then the interest rate and payment would reset to a much higher value and recast to a fully amortized schedule for the remaining 28 years. Anecdotal evidence is that most of these borrowers were only qualified
based on their ability to make the initial minimum payment (Credit
Suisse, 2007). The demise of this loan has flattened the low end of the housing market.
All adjustable rate mortgages (ARMs) are risky because the payments can go higher thus increasing the likelihood of borrowers losing their homes. Interest-only ARMs are bad because they
generally have a fixed payment for a short period followed by a rate
and payment adjustment. This adjustment is almost always higher;
sometimes, it is much higher. At the time of reset (or recast), if the borrower is
unable to make the new payment (salary does not increase), or if the
borrower is unable refinance the loan (home declines in value below the
loan amount), the borrower will lose the home. It is that simple.
These risks are real, as many homeowners have already discovered.
Given the problems with ARMs, why do people use them? What is their incentive? When compared to fixed rate mortgages, people who use ARMs can finance greater sums and thereby outbid more conservative borrowers. This enables the reckless to outbid the responsible to obtain real estate. This is a powerful inducement to take on the risk of ARM loans; however, since borrowers have proven unwilling to accept the consequences of their risky behavior (foreclosure), it is legitimate to ask if this behavior should be permitted at all (Obviously, I don’t think it should be).
The problems with ARMs are many and obvious, but the overriding problems was the failure to qualify people based on the largest payment possible under the loan program. Let me explain.
Buried in the terms of your loan contact is the maximum interest rate you could be charged on the loan. Many people who signed up for 4% ARMs this year have a clause buried in their contract whereby the interest rate could increase by several percentage points during the life of the loan. Most people are qualified based on their ability to make the payment based on the initial rate period; if interest rates go up, or if there is an amortization recast, the loan blows up and the borrower loses the home.
Lenders are willing to loan people money on these terms because they believe (1) interest rates will not go up that much, or (2) people will either refinance into another ARM or (3) sell the home. As the Great Housing Bubble proved, those assumptions are erroneous.
All ARMs rely on the fact that lenders believe they have transferred the risk to some other party — either a borrower or an insurer. However, when too much risk has been concentrated on borrowers or insurers, they become unable to absorb the losses and the whole system becomes unstable.
The only way ARMs can be a stable lending vehicle is if the borrower is qualified based on the payment required with the largest combination of loan balance and interest rates allowable under the terms of the note. Anything less than that leaves a dead zone where borrwers can fall into the foreclosure abyss.
Dead Zone of ARM Interest Rates
If people were qualified based on the payment required at the contractual limit, ARMs would no longer be dangerous — and they would no longer be useful as an “affordablity” product. Lenders might be able to construct ARMs with low contractual limits to permit ARMs under certain circumstances, but they would no longer function as an affordability product, and borrwers would not have to choose between risking foreclosure or missing out on buying a property to the competition.
The beauty of fixed-rate mortgages is that borrowers can truly manage their payment risk. Since the payment is fixed, they know they can make the payment barring a job loss (which we have seen plenty of). An ARM provides no mechanism for the borrower to control their payment risk. If the terms of the note allow the interest rate charged to skyrocket, the borrower will surely default.
The scary part of this story is that we are still writing ARMs with unstable terms. I have written about the Temporary Affordability and the Third Foreclosure Wave. We are still building this foreclosure tsunami of the future, and nobody seems to care because we are solving our immediate problems with excess foreclosures. Putting people into unstable loans just pushes the problem out a few years, but it does not solve it.
If we are lucky, this third wave of foreclosures will coincide with the upcoming wave caused by Option ARMs and interest-only ARMs given to Alt-A and Prime borrowers. If interest rates go up dramatically while that wave is cresting, we may flush all these bad loans out of the system once and for all… Perhaps I am too much of an optimist. Until we stop writing ARMs with unstable terms, the housing market will continue to be volatile and prone to bouts of numerous foreclosures.
POOL VIEW! Beautiful Greystone plan 3 with one bedroom down, cathedral
ceilings, corian counter tops, laminated wood floors, ceiling fans,
Euro-white cabinetry in kitchen, mounted custom mirror in dining room,
end unit with slate stone hardscape in spacious side and back yard.
Priced right for a quick sale.
POOL VIEW? You mean, I am expected to pay over half a million dollars, and the pool isn’t even mine? WTF?
I don’t know why, but this listing really bothers me. Is this what life in Irvine has come to? We are expected to pay $565,000 for a 3 bedroom condo with a view of a pool. Shouldn’t half a million dollars get you a single-family detached home with a yard and a pool of your own?
Priced right for a quick sale? If you say so….
This property was purchased on 12/12/2003 for $520,000. The owners used a $408,000 first mortgage and a $112,000 downpayment. Since then they have opened HELOCs for $206,000 and $261,300 respectively. Based on the increasing demand for HELOC limits, it appears they have taken out this money. If so, they are not losing their downpayment, only their good credit.
If this property sells for its current asking price, and if a 6% commission is paid, the total gain on the sale will be $11,100. The total loss will depend on how much of the HELOC money was taken out.
