Nobody wants to face the consequences of their decisions. Most would rather fly away than face the music. Today’s owners are no exception; they already spent their house, so it is time to walk away and let someone else clean up the mess.
This property was purchased on 10/31/2001 (Halloween?) for 317,000. The owners used a $253,600 first mortgage, a $31,700 second mortgage, and a $31,700 downpayment.
On 2/26/2003 they refinanced with a $290,000 first mortgage.
On 10/23/2003 they opened a HELOC for $100,000.
On 4/7/2004 they opened a HELOC for $150,000.
On 5/7/2004 they opened a HELOC for $136,000.
On 3/17/2006 they opened a HELOC for $250,000.
On 8/3/2006 they refinanced their first mortgage with a $560,000 Option ARM.
Total property debt is $560,000 plus negative amortization.
Total mortgage equity withdrawal is $274,700.
This house provided these owners with $55,000 per year in tax-free spending money. It would take a $75,000 salary to take home that kind of money.
Next time around, are you going to be picking up your bags of cash from the lenders?
Spacious Home with Vaulted Ceilings, Open Floor Plan. HUGE Long Family
Room with Lovely Bricked Fireplace and Wet Bar. Living Room with
Fireplace, Formal Dining Room, Kitchen with Newer Appliances and
CounteTops. Extra Room with air conditioner off of the Large Master
Bedroom that can be used as an office, den, playroom or storage.
Central air through rest of the house. Large Private backyard that
backs to Greenbelt 2 Car Garage with newer roll up door. Walk to
shopping, Restaurants, Award winning Irvine Schools
Why do realtors alternate between sentence case and Title Case?
If this property sells for its current asking price, and if a 6% commission is paid, the total gain on the sale will be $154,000, a 58% gain. However, since they have already spent the money, this will be a short sale, and the lender stands to lose $90,000 plus negative amortization.
Back in April I announced that we were forming a brokerage to help people buy and sell homes. Some of the comments were less than enthusiastic. Despite the few naysayers, we believe there is a need for the service we provide, so we have been working over the last few months to ready ourselves to take on this task. In September I am going to present a series of introductory posts describing how we will operate.
I chose the song Take it Easy this morning because we want to provide peace-of-mind with the process. Part of making people be at ease is providing accurate information so people can make informed decisions. To that end, we have developed proprietary Property Valuation Reports for the IHB community based on the principles I have been writing about for the last few years. I would like your feedback to make the reports better.
Much of the information presented in the report is freely available on our site, and with our calculator (new and upgraded ones coming) this work can be done by anyone independently. However, many people do not want to do this work themselves, and for those people, we are here to help.
Cover Sheet
The report cover sheet contains summary information; it has some pictures, the address, and a few defining characteristics to identify the property. The first piece of summary data is the asking price, and this is followed by the Comparable Value, the Likely Transaction Price, and the IHB Fundamental Value.
When we prepare a Brokers Opinion of Value, we include what we believe to be the most Likely Transaction Price based on recent comparable sales and the trend of the market. This is our best guess at what the final sales price of this property will be.
The IHB Fundamental Value is based on the rental comps with some subjective adjustment based on a property’s desirability. Since market information is always changing, the report is time sensitive, and it is dated for reference. What follows is our report for today’s featured property.
The second page of the report is full of of data and calculations. It looks daunting at first, but it is arranged to provide six (6) data points critical to understanding a property purchase:
Monthly Payment
Monthly Cash Outlays
Monthly Cost of Ownership
Monthly Ownership Gain (loss)
Total Cash Costs
Total Savings Needed
The first three items on the list look superficially similar, but they all provide slightly different information. The monthly payment is the check you will write each month to your lender; pretty basic. We assume conventional 30-year mortgages in our calculations because it is the stable financing of long-term homeowners.
The monthly cash outlays is the total amount of all checks a homeowner will need to write each month to be current on payments, including property taxes, insurance, HOA fees and other expenses. This amount is often much larger than most people realize. Some will try to reduce their monthly cash outlays by deferring property taxes to a lump sum payment every six months, but the expense is still there, and this total can eat up a significant portion of someone’s take-home pay. I recommend using an impound account to pay property taxes to avoid the last-minute scramble.
The monthly cost of ownership is a more accurate accounting of the true cost of owning property. There are many items which add to or subtract from the actual cost of ownership such as (1) income tax savings, (2) equity hidden in the payment, (3) lost income on the downpayment money, and (4) maintenance and replacement reserves.
Once the full cost of ownership is properly calculated, this figure can be compared to the cost of a comparable rental. Any cost savings or ownership premium is reflected here. As mentioned previously, blue chip properties often carry an ownership premium whereas undesirable properties generally demonstrate significant positive cashflow.
The final area of concern is having the cash available to close the deal. The downpayment is an easy expense to identify, but it is not the only cash a buyer will need to obtain the property. Buyers have to budget moving and furnishing expenses, closing costs and interest points (if any) to accurately assess their cash needs. Also, it is not a good idea to spend all your cash on a house and leave no emergency reserves. The spreadsheet estimates 6 months net salary based on the financing qualifications for the loan amount. The total cash costs plus emergency reserves equal the total amount of liquid savings needed to close the transaction.
Estimates of Value
The third page looks at values and sets the stage for negotiation. It is composed of three sections:
Comparative Sales Value and Negotiating Range
Cashflow Value and IHB Fundamental Value
Asking Price and Value Ranges (chart)
Back in May, I wrote Negotiating for Real Estate, where I outlined the negotiation process and described how the top and bottom of the negotiation range is established. The Comp Range is a measure of the highest and lowest prices of recent comparable sales. The Comparable Sales Value is a blend of the mean and the median of comps used to establish value. By blending the two values, it recognizes outliers without putting too much emphasis on them.
In a stable market, properties may trade at a premium or discount to
rental parity based on their desirability as owner-occupied housing.
The most desirable “blue chip” properties trade at a 10% premium to
rental parity, and transitory rental properties trade as low as 25%
below rental parity. When the IHB prepares a Brokers Opinion of Value,
we subjectively rate the property based on its owner-occupant
desirability, and we adjust the cashflow value of based on our market
experience. The resulting value is a theoretical basis for a property’s
minimum value in the open market. When prices begin to fall, they
generally do not stop until all properties in a market reach their
fundamental value.
The chart showing asking prices and value ranges displays all the numbers in an intuitive format and shows the relationships between the numbers. For instance, in the chart below, the negotiating range and the comp range is significantly above a property’s current cashflow value. A buyer wanting to pay cashflow value will not obtain this property as market comps reflect a large ownership premium. This is currently the case in Irvine and in the beach communities. It is not the case in most other markets.
Comparable Sales, Comparable Rentals and concept notes
Page four of the report has the raw data on comparable sales and comparable rentals used to generate the report. This important raw data eliminates much confusion and debate over current valuations. The sections on Comparable Sales Value and Likely Transaction Price and Cashflow Value and IHB Fundamental Value generates the most questions and confusion, so a more detailed explanation of these concepts is included.
Report notes
In an effort to explain many of the concepts and calculations in the report, we have included a line-by-line series of notes detailing any assumptions.
Ignorance is …
George Orwell in 1984 wrote, “Ignorance is Strength” to describe how power is maintained by the few through the ignorance of the many. Those who are responsible for helping people buy and sell homes have preyed on the ignorance of buyers for generations to maintain their strength. They see little reason to change.
Thomas Gray in “Ode on a Distant Prospect of Eton College” wrote the line, “Ignorance is Bliss” to illustrate that ignorance to a problem creates happiness — while the ignorance lasts. This bliss may be welcome at times when the problem is intractable, but ignorance that prevents people from taking appropriate action does not lead to bliss, it leads to pain.
I used the tools encapsulated in this report to avoid buying during The Great Housing Bubble. I have shared my methodology with you, and now, the IHB set up to work with you to apply these techniques to your personal situation.
Informed Decisions
I want people to make informed decisions. I wrote about the housing bubble because I wanted people to have information, and for a couple of years, all data pointed to renting — in Irvine, it still does. This is changing, and many markets have properties trading at or below the IHB Fundamental Value (IHB_Brokers Opinion_of_Value_14802_Devonshire_Ave_Tustin,_CA_92780.pdf). Based on these reports, some people will wait, some people will look elsewhere, and some people will buy anyway. We do not attempt to persuade; most people are self-motivated when it comes to real estate, and when contemplating such a large purchase, pressure just makes the process stressful.
In time the numbers will say “yes” to Irvine. I will know when the time is right because my analysis will tell me. Now, the same information is available to you.
Immaculate Turnkey Home located adjacent to the surrounding open spaces
of Shady Canyon. A large open gourmet kitchen features stainless steel
appliances, beautiful countertops, center island, vast counter space,
pantry and upgraded cabinetry. Spacious master suite features ,
accented with french doors, walk in closet and private dual balconies
with panoramic view. Italian travertine found throughout the master
bath and Through-out first floor. Berber Carpeting on second floor.
French Doors, Entertain in your own private patio. Enjoy resort style
amenities. Walk to school, parks, pools, spas, barbecue areas,
amphitheater, fitness center, sport field, basketball courts, tennis
courts, tot lots, shopping & dining. You will love this home and
living in Quail Hill! Quail Hill is minutes away from the beautiful
Laguna Beach as well as Orange County’s entertainment center the Irvine
Spectrum.
With the information provided in the report for this property, there isn’t much more for me to add. Due to the tight supply in our market right now, this seller will probably get an offer near asking. With the artificially low interest rates, fundamental valuations have caught up with this 2003 purchase price; unfortunately, nothing justifies its 2009 asking price — it will sell for that much anyway.
Contact us
If you would like to work with these reports to help you buy or sell a home, please contact our recommended realtor, Shevy Akason. He is using these reports with his clients. You can contact him at 949-769-1599 or shevy.akason@evergreenrealty.net.
The housing bubble is unwinding like many asset bubbles before it. Understanding and recognizing these stages will help you better time your home purchase; Timing Does Matter.
Market conditions are constantly changing. These conditions can best be understood as part of a series of psychological stages the market must pass through in order to work of the excesses of the housing bubble. I first wrote about the stages of a bubble in Houses Should Not Be a Commodity. I rewrote and expanded that work in The Great Housing Bubble which is reprinted in this post. For more conceptual background on the basics of market function, please read Efficient Markets vs Behavioral Finance.
Psychological Stages of a Bubble
Once a bubble starts to form, it will go through several identifiable stages: enthusiasm, greed, denial, fear, capitulation, and despair. Each of these stages is characterized by different speculator emotional states and different resulting behaviors. There are outside forces that also act on the market in predictable ways in each one of these stages. Most often, these outside factors serve to reinforce the market’s herd behavior and exacerbate changes in price.
Precipitating Factor
There is often a precipitating factor causing the initial price rally that pushes prices above their supported fundamental values. A bubble rally is usually kicked off by some exogenous event, but it may occur simply because prices have been rising and investors take notice, or it can be merely the result of a lack of investor fear and the widespread belief prices cannot go down. In a typical market, there is a significant selloff when prices exceed fundamental valuations. This selloff is a natural reaction to inflated prices as a decline to fundamental valuations is normal and expected. Many seasoned market observers will “sell short” here to profit from the initially inflated values caused during the take-off stage. However, in a financial mania, this sell off is short-lived, and it traps many who are bearish on asset pricing on the wrong side of the trade. This “short squeeze” may prompt a feverish activity of buying as short sellers cover their positions before their losses get too great. A short squeeze may act as a precipitating factor. In a securities market, a precipitating factor may be a very large order hitting the trading floor, and in a real estate market it may be a dramatic lowering of interest rates as it was in the Great Housing Bubble. Regardless of its cause, the initial price rise has the potential to spark sufficient interest to prompt further buying and set a series of events in motion which repeat with a remarkable consistency. Market bubbles can be found in all financial markets and on multiple timeframes.
Figure 35: Psychological Stages of a Bubble Market
Enthusiasm Stage
At the beginning of the enthusiasm stage, prices are already inflated, so there is cautious buying from traders looking for trends and momentum. If prices fail to drop to fundamental valuations and instead push higher, media attention is often drawn to the speculative market. The general public starts to take notice of the money being made by people who have bought the featured asset and they begin to participate in larger numbers. Of course, this stimulates more buying and prices continue to climb. The market sentiment turns very bullish. Buyers are everywhere and sellers are scarce. At this point, prices are completely detached from fundamental valuations, but people are not buying because of the underlying value, they are buying because prices are going up.
In residential real estate markets, the enthusiasm stage is often greeted by lenders with open arms. With prices rising, there is little risk of loss from default. If a borrower gets in trouble, they can simply sell into rising prices, and neither party takes a loss. With neither party fearing loss, and since lenders make most of their money on the transaction itself through origination fees, there is an inevitable lowering of standards to meet market demand. This in turn creates more market demand leading to further lowering of standards. The credit cycle reinforces the bullish psychology in the market and helps push prices even higher.
Greed Stage
In the greed stage, the bullish sentiment reaches a feverish pitch and prices rise very rapidly. Every owner in the market is making money and most believe it will go on forever. As prices continue to climb, buyers become very enthusiastic about owning the asset, and they tell all their friends about their great investment. The word-of-mouth awareness and increased media coverage bring even more buyers to the market. Egomania sets in as everyone thinks she is a financial genius. Any intellectual analysis at this stage is merely a cover for emotional buying and greed. During the Great Housing Bubble, there were many instances of properties receiving a dozen or more offers the day they were listed, with many in excess of the asking price. Encouraged by realtors, some buyers wrote emotional letters to sellers to convince them why they should be bestowed with the honor of home ownership.
Most people who are bullish already own the asset, but for prices to continue to rise there must be more buying. For buying to occur, someone who was either bearish or ignorant of the rally must be convinced to buy. In other words, a greater fool must be found. Once everyone is made aware of the market rally and is convinced to buy, you simply run out of new buyers. Once there is a shortage of potential buyers, prices can only go down.
Denial Stage
When the limit of affordability is reached and the pool of available buyers is exhausted, prices start to decline. At first market participants are still overwhelmed by greed, and they choose to ignore the signs that the party might be over. In 2007 most real estate markets were in the denial stage as prices had not dropped enough to cause real fear. Denial is apparent in polls in mid-2007 where 85 percent believed their home would rise in value during the next five years, and 63 percent believe a house is a good investment. That is denial. It is also apparent in the number of homes purchased during the greed stage that are held for sale at breakeven prices-even if this is above market. When the inventory is large, and houses stay on the market for a long time, prices are too high. Sellers who refuse to lower their prices to take a small loss are in denial about the state of the market. They believe bids will increase and some buyer will come along and pay their price-after all, that is the way it was just a couple of years prior. Buyers who bought in the enthusiasm stage are still ahead, so they feel no urgency to sell. They have made good money already and they will hold on with hopes of making a little more. Since they believe the asset will appreciate again (and they have no exit strategy), this group of buyers does not sell. In contrast, the few traders who still hold positions liquidate and go back into cash. Successful traders recognize the emotion of denial as a signal to exit their positions to lock in profits or prevent further damage.
In the denial stage of a residential real estate market, many speculators are unable to obtain the sale price they desire. The accumulation of unrealistically priced houses starts to build a large inventory of homes “hanging” over the market. Overhead supply is a condition in a financial market when many units are held for sale at prices above current market prices. Generally there will be a minor rally after the first price decline as those who missed the big rally but still believe prices will only go up enter the market and cause a short-term increase in prices. This is a bear rally. It is aptly named as those bullish on the market buy right before the bear market reverses and quickly declines. For prices to resume a sustained rally, the overhead supply must be absorbed by the market. Once prices stopped going up and actually began to fall, demand is lessened by diminished buyer enthusiasm and the contraction of credit caused by mounting lender losses. With increasing supply and diminished demand prices cannot rally to absorb the overhead supply. The overall bullish bias to market psychology has not changed much at this point, because owners are in denial about the new reality of the bear market; however, the insufficient quantity of buyers and the beginnings of a credit crunch signal the rally is over and the bubble has popped.
Fear Stage
In the grieving process there is a shift from denial to fear when the reality being denied becomes too obvious to be ignored or pushed out of awareness. There is no acceptance of reality, just the idea that reality might be fact. The fact that an investment might turn out to be a very poor financial decision with long-term repercussions to the speculator’s financial life is generally very difficult to accept. The imaginings of a horrifying future creates fear, and this fear causes people to make decisions regarding their investments.
The most important change in the market in the fear stage is caused by the belief that the rally is over. Price rallies are a self-sustaining price-to-price feedback loop: prices go up because rising prices induces people to buy which in turn drives prices even higher. Once it is widely believed that the rally is over, it is over. Market participants who once only cared about rising prices suddenly become concerned about valuations. Since prices are far above fundamental values and prices are not rising, there is little incentive to buy. The rally is dead.
Another major psychological change occurs in this stage after people accept the rally is dead: people reassess and change their relationship to debt. During the rally, debt becomes a means to take a position in the housing commodity market. Nobody cares how much they are borrowing because they never intend to pay off the loan through payments from their wage income. Most believe they will pay off whatever they borrow in the future when they sell the house for more than they paid. Once prices stop going up, people realize they are simply renting from the bank, and the only way to get ahead and build equity is to pay off a mortgage. The desire to borrow 8 to 10 times income diminishes rapidly as people realize they could never pay off such a large sum. What started in the denial stage as an involuntary contraction of credit, in the fear stage becomes a voluntary contraction of credit as people simply do not want to borrow such large amounts of money.
In August of 2007, a more serious credit crunch gripped financial markets, and during the times that followed there was increased liquidation of bank held inventory. Banks tried to get their wishing prices through the prime selling season, but by the end of the year, there was pressure to get these non-performing assets off their books. The sales of bank foreclosures and the ongoing tightening of credit drove prices down an additional 5% to 10%. This caused some major problems for owners of residential real estate. Fear began to grip the market.
By the time a financial market enters the fear stage, greed stage buyers are seriously underwater. Comparable properties may be selling for 10% less than their breakeven price, and there is little hope that prices will rally. Some sell at this point and take a loss, but most do not. People who bought in the enthusiasm stage come up to their breakeven price and face the same decision the greed stage buyers faced earlier: sell now or hold out for a rally. Even though there is good reason to fear, most do not sell here. They regret it later, but they hold on. Speculators generally only sell an asset when the pain of loss becomes acute. The pain threshold is different for each individual, but there is no real pain until the investment is worth less than the purchase price, so few sell for a profit or at breakeven. Inventories grow in the fear stage because many would like to sell, but sales volumes are light because few are willing to sell at prices buyers are willing to pay.
Prices do not rally here because there are even fewer buyers in the market and a reduced appetite for debt due to the change in market psychology. There are more and more sellers either choosing to sell or being forced to sell, and since there are more sellers than buyers, prices continue to drop. During the fear stage, a majority of buyers during the rally go underwater on their mortgages and endure the associated pain and stress. In the past, since the bubbles of the 80s and 90s were largely built on conventional mortgages, people just held on. During the Great Housing Bubble, people used exotic loan financing terms, and they simply could not afford to make their payments. They borrowed from other sources until their credit lines were exhausted and they imploded in foreclosure and bankruptcy. During this stage many renters who would otherwise have purchased a home put off their purchase and save more money because they correctly see the decline in prices has momentum and prices should continue to drop further.
Capitulation Stage
The transition from the fear stage to the capitulation stage is caused by the infectious belief that the rally is over. There is a tipping point where a critical mass of market participants either decide to sell or are forced to sell. In residential real estate, people are compelled to sell by anxiety, and the mechanism for force is foreclosure. Once a critical mass of selling is reached, the selling causes prices to decline further which in turn causes more selling. This convinces even more people the rally is over yielding even more selling: a downward spiral. The same price-to-price feedback mechanism that served to drive prices up during the rally works to drive prices down during the crash. Collectively, everyone in the market accepts prices are going to drop further, and they need to get out: Now! Of course when everyone knows prices are going to drop, and everyone is trying to sell, there are very few buyers. Each market participant has a different threshold for pain. Some give up early; some give up later; some stubbornly try to hold on, but in the end, by choice or by force, everyone who cannot afford their home sells out and capitulates to the forces of the market. Each seller accepts the market rally was a bubble, and the frenzy of selling activity clears out the overhead supply. The capitulation stage is the counterpart of the greed stage. Sellers are everywhere and buyers are scarce. This puts prices into free-fall until a critical mass of buyers is ready to buy again.
Since buyers in the aftermath of a bubble tend to be the risk averse who did not participate in it, they will make cautiously low offers on properties. Buyer caution is reinforced by lender caution. In stark contrast to the days of bubble lending, large downpayments are suddenly required, appraisals are carefully reviewed, eligibility is tighter, and most exotic loan programs are gone. This cautious buying together with desperate sellers causes the market to drop below normal valuation standards. The market enters the despair stage. Here the market participants think nobody wants the asset, and nobody ever will again. Of course, nothing could be farther from the truth as those who recognize the fundamental value of the asset are buying it in preparation for the next cycle.
Despair Stage
From a perspective of market psychology, it is difficult to tell when the ca-pitulation stage ends and the despair stage begins. Both stages have an extremely negative bearish sentiment. It is called the despair stage because most who own the asset are in despair and wish they did not own it, and the general public is still selling. Most who still own their homes are able to afford the monthly payments, but realize they will face a large loss if they sell their house anytime soon. They feel like prisoners in their own homes because they are unable to relocate for a better job or any other reason. One distinguishing feature of the despair stage is the increased buying activity of investors-true investors, not the speculators who were wiped out during the price decline. Investors are not in despair during this stage. This is the time they were anticipating to make their purchases.
There is an extreme emotional toll paid by those who participated in the mania. Losing a home to foreclosure is devastating. The emotional ties to a home go beyond seeing it as an investment. A home is supposed to be a safe haven where people raise a family. It is a unique reflection of the family, adorned with mementos and family photographs. Being forced to leave the family home is difficult for reasons that have nothing to do with money. Unfortunately, this is often followed by personal bankruptcy, and the difficulties in bankruptcy have everything to do with money.
In some ways, those who endure foreclosure may be the lucky ones as they get to leave their debtor’s prison and go find an affordable rental. The income that used to go toward housing is now freed up to go toward living a life. Those homeowners who hang on, who are desperately underwater, and who are putting 50% or more of their income toward a house worth less than they owe on it, their circumstances are arguably even more dire. There is no light at the end of their tunnel; they must live with their pain every day.
The despair stage is not desperate for everyone. What makes the despair stage different from the capitulation stage is that buyers who focus on funda-mentals like rental savings or positive cashflow return to the market and begin buying. Affordability has returned to the housing market, and those who did not participate in the mania finally get their chance to become homeowners-at reasonable prices. These buyers are not concerned with appreciation; they simply want an asset which provides a savings or a cash return on their investment. They are not frightened by falling prices because their financial returns are independent of the asset’s market valuation. It is the return of these people to the market that creates a bottom.
Where are we now?
The psychological stage of the market here in Irvine is different for the various market segments. The high end of the market is still firmly in denial. The Immunity Syndrome is in full effect. In some of the beach communities, this denial is moving toward fear because the inventory is so large, but here in Irvine, denial rules the high end. The middle of the market is showing fear. The price reductions are more numerous, and the occasional property like today’s show the transition from fear to capitulation. As we have documented on many occasions, the low end has already capitulated.
* * * Property is being sold as a Short Sale * * * Subject to lender
approval * * * Beautiful 3 bedroom, 2 bath home located minutes away
from Irvine Spectrum * * * Property features tri-level floorplan, like
new paint, carpet, granite countertops. Stunning Turnkey Townhouse in
Best Location Viewing Greenbelt. Fully Upgraded & Customized with
Cherry Hardwood Floors, Ceramic Tile, Premiu m Carpets & Neutral
Two-Tone Paints. Awesome Kitchen with Cherry Cabinets, Stainless Steel
Appliances and Granite Counters, Island & Backsplash. Large Great
Room w/ Fireplace & Ceiling Surround Speakers. Formal Dining Rm,
Computer Room w/ Built-ins, Inside Laundry Rm, Main floor BR & BA.
‘PERFECT’! HOA Pool, Spa, Gym, Fireplace & More,
Beautiful Quail Hill 3 story Townhome. 3 bedrooms 3 baths, fireplace.
Balcony off Living Room and a Balcony off the Kitchen. Granite counters
and upgraded cabinets in kitchen. Enter from street thru greenbelt.
Attached 2 car garage. Community pool/spa/park.
It is pretty rare to see a 33% price reduction, but today’s featured property manages it. Of course, they are playing the short sale bidding war game, but when you look behind the gambits and into the mind of the seller, you see capitulation. This seller is no longer going to obtain the fantasy price that would have avoided all pain from their mistake. Now it is only a matter of how bad the consequences are. That is capitulation.
Will other owners give up and capitulate? Will mass capitulation lead to the collapse of pricing like in Las Vegas? With our current buying frenzy, this doesn’t seem likely, but market conditions can change quickly, particularly if new supply is added to the market.
cause I gonna make you see Theres nobody else here No one like me Im special, so special I gotta have some of your attention Give it to me cause I gonna make you see Theres nobody else here No one like me Im special, so special I gotta have some of your attention
TURNKEY AND TASTEFULLY REMODELLED. MAIN FLOOR MASTER BEDROOM.4
bedrooms, 3 full BATHS. 2 BEDROOMS ON LOWER LEVEL. TOTALLY NEW KITCHEN
WITH BRAND NEW STAINLESS STEEL APPLIANCES,REFERIGERATOR. RESURFACED
CABINETS, corean COUNTERTOPS. WOOD FLOOR IN MOST OF LOWER LEVEL. NEW
GRANITE SINK AND TILED WALLS IN both BATHROOMS. beautiful home with NEW
STONE FIREPLACE IN FAMILY ROOM. FRENCH DOORS & WINDOWS, CEILING
FANS, CENTRAL AC.LOTS OF STORAGE..PRICED TO SELL. GORGEOUS
NEIGHBORHOOD..HUGE YARD WITH LIME TREES.ELEGANT CURB APPEAL AND
professional LANDSCAPING. LARGE DRIVEWAY, 2 CAR GARAGE.CLOSE TO ALL THE
SCHOOLS. WALK TO MIDDLE AND ELMENTARY.THIS IS A MUST SEE!AND A GREAT
BUY FOR THE WONDERFUL, ESTABLISHED NEIGHBORHOOD OF IRVINE. NO MELLO
ROOS, NO ASSOCIATION DUES…AND LOW TAX RATE.
When I started writing for the IHB, many bulls used to come to the blog and tell me I was wrong. Many of these people became knife catchers because they thought prices were at the bottom and there is a fortune to be made in California real estate. I am standing alone, and I see them sinking, weighed down by their fool’s gold.
There are many ways to look at the behavior we saw during the Great Housing Bubble. On Tuesday, I wrote about HELOCs as Risk Mitigation, and I wrote from the perspective that predatory borrowing is a rational choice given the circumstances.
The MEW spending frenzy we witnessed made homes very desirable. The general public has not forgotten the fun of the HELOC party. Many of today’s buyers are hoping for their own consumer orgy — chasing their own fool’s gold.
What if they are right? What if prices go up? What if we fuel another massive wave of debt creation and unsustainable spending?
There are people buying today because they believe prices have bottomed, just as they have for the last three years. Can the fantasy of kool aid intoxication be self-fulfilling? Will those chasing today’s fool’s gold be proven correct by their own actions?
The more some people pay for housing, the more others can borrow to spend and stimulate the economy. The Ponzi Scheme is great while it grows larger. Can we continually create one Ponzi Scheme after another?
EXCELLENT LOCATION CLOSE AWAY FROM SOUTH LAKE IN WOODBRIDGE COMMUNITY.
ALL WOODBRIDGE AMENITIES INCLUDING TENNIS, BIKE PATHS, SPORTS COURTS,
POOL AND SPA, AND MORE. GROUND LEVEL UNIT. GOOD SIZE LIVING ROOM,
3BEDS, 2 BATHS. PERFECT FOR FIRST TIME BUYER. YOU MUST TO SEE IT!!
YOU MUST TO SEE IT!! [shakes head] You must be kidding?
This property was purchased on 8/27/2003 for $315,000. The owner used a $252,000 first mortgage, a $63,000 second mortgage, and a $0 downpayment.
On 7/21/2005 he refinanced with a $360,000 first mortgage and pulled out $45,000 on his $0 investment.
On 10/26/2006 he refinanced again with a $432,000 first mortgage.
Total initial investment is $0.
Total property debt is $432,000.
Total mortgage equity withdrawal is $117,000.
Who was the fool here? This guy’s credit is trashed, but he got to spend $117,000. Was he the fool, or were we the fools for not doing the same?
Come fly with me, let’s fly, let’s fly away
Spacious Home with Vaulted Ceilings, Open Floor Plan. HUGE Long Family
