Beds: 2 Baths: 3 Sq. Ft.: 1,181 $/Sq. Ft.: $466 Lot Size: – Property Type: Condominium Style: Rustic, Santa Barbara Stories: 3+ Floor: 1 View: Greenbelt Year Built: 2004 Community: Turtle Ridge County: Orange MLS#: S589191 Source: SoCalMLS Status: Active On Redfin: 4 day
Charming 3 story townhouse in Turtle Ridge. Lots of upgrades from granite counters, maple cabinets to tile & carpet. All stainless steel appliances, built-in in living room & master bed room. Sunny & bright private corner location. Just blocks from Newport Coast… but with out the Newport Coast price. Totally move in condition!!! Don’t miss this out standing home!
We all complain about the prices in Irvine — which are ridiculous and will continue to fall — but many of these overpriced properties are very attractive homes and beautiful places to live.
Pretty woman walkin down the street Pretty woman, the kind I like to meet Pretty woman, I dont believe you Youre not the truth No one could look as good as you Mercy
Today, as we look over this beautiful Irvine home, I thought I would tell you the history of Irvine home prices in pictures.
The Home Price Story
Once upon a time, a prospective homeowner sought his dream home. It is a fearful and daunting task.
After much deliberation and bidding wars which forced him to overpay, our intrepid home owner paid a price in the clouds, but he is happy and enjoying life.
A wicked recession hits and the support for this homeowner’s resale home price begins to erode.
After a time, there is no support, and all the sustains prices is the air from The Great Housing Bubble.
{book3}
Everyone in the industry thought it would go on forever…
Beds: 4 Baths: 5 Sq. Ft.: 4,600 $/Sq. Ft.: $402 Lot Size: 10,277 Sq. Ft. Property Type: Single Family Residence Style: Contemporary Stories: 2 View: Pool Year Built: 1999 Community: Northwood County: Orange MLS#: S588025 Source: SoCalMLS Status: Active On Redfin: 8 day
One of the finest homes ever to be offered in the prestigious community of Rosegate. Built by Taylor Woodrow, this spectacular former model home creates an atmosphere of casual elegance while providing ultimate privacy. Designed with an easy flow through out the home, this versatile floor plan will suit any lifestyle. Appointed throughout with the finest of upgrades, no detail has been overlooked. In addition to four bedrooms there is an office on the main level and a bonus room on the upper level. Soaring ceilings and plenty of windows allow for an abundance of natural light throughout the home. Fireplaces are found in the family room and formal living room as well as the master bedroom. Enjoy the ultimate in outdoor living. Oversized lot with salt water pool and spa, covered loggia with custom kitchen, built in barbeque, ceiling fans, heaters, mist system and fireplace. Outdoor shower completes this amazing resort style backyard.
One of the finest homes ever to be offered… Give me a break.
These owners are leveraged, but not to the degree their buyer likely will be. Do you think there are many people making $350K+ in this economy?
.
And so concludes another week at the Irvine Housing Blog, chronicling the Irvine home market since September of 2006.
I can see clearly now, the rain is gone, I can see all obstacles in my way Gone are the dark clouds that had me blind It’s gonna be a bright (bright), bright (bright) Sun-Shiny day.
I think I can make it now, the pain is gone All of the bad feelings have disappeared Here is the rainbow I’ve been prayin?for It’s gonna be a bright (bright), bright (bright) Sun-Shiny day.
Financial markets must discover a clearing price in order to find an equilibrium where prices no longer fall. When there is excessive spreads between the asking prices of sellers and the bids of potential buyers, the market has not found a clearing price, and prices will continue to fall.
When lenders enabled people to borrow whatever they wanted to buy houses, people were able to outbid one another for properties and drive prices up quickly. Once the toxic financing that enabled this to occur was removed from the market, borrowing power plummeted, and bids went down with them.
Sellers miss the memo, and their asking prices remain in a strange fantasy-land where the bubble never occurred.
The result is a widening of the spreads between bids and asks and a decline in transaction volumes. As we have seen here in Irvine, spreads can remain wide as long as transaction volumes are low.
If you look at the long-term chart of Irvine sales, you see that transaction volumes were steady from 2000-2005. Then in 2006, volume went on a three-year decline down to approximately 60% of its historic norms. That is where we are today. The market may seem “hot” due to the lack of available inventory, but the transaction volume says the market is anything but healthy.
Low transaction volumes and a large bid-ask spread demonstrates that buyers and sellers are not in agreement on prices. This standoff will continue until bidders raise their bids or sellers lower their asking prices. Since bidders are not likely to have access to toxic financing again soon, bids will not be going up. Asking prices will need to come down.
Bids do not firm up again until prices are at fundamental valuations because it is at these price levels where there are a large enough number of qualified bidders to increase transaction volumes and clear out the inventory. We are not there yet.
It isn’t a big mystery as to what needs to occur; prices must fall. Let’s examine a couple of low end properties trying to find bottom support.
{book1}
Asking Price: $183,900
Income Requirement: $45,975 Downpayment Needed: $36,780
Purchase Price: $300,000 Purchase Date: 6/4/2006
Gain (Loss) after 6% Commission: -$127,134 Percent Change: -38.7% Annualized Appreciation: -11.8%
Beds: 1 Baths: 1 Sq. Ft.: 639 $/Sq. Ft.: $288 Lot Size: – Property Type: Condominium Style: Bungalow Stories: 1 Floor: 1 View: Creek/Stream Year Built: 1977 Community: Northwood County: Orange MLS#: P702788 Source: SoCalMLS Status: Active On Redfin: 1 day New Listing (24 hours)
This is a great bank owned 1 BR, 1 BA unit in The Springs complex, nicely located for easy access and guest parking. This home is a lower end unit in good condition. The patio allows for outdoor BBQ’s. Granite counters in the kitchen. Breakfast bar and dining area. Running streams, community pool, spa, club house and tennis courts are within the complex. Property being sold in ‘as is’ condition. There is a $75 doc fee paid by buyer at closing. All offers are ‘subject to’ and ‘contingent upon’ final review and acceptance by the investor and/or mortgage insurer.
You and I own this one… well, more accurately, IndyMac owns this one which is owned by the FDIC which is supposedly funded by the banks, but we all know that the US Taxpayer will end up holding the bag. Therefore, we all own a piece of this loss.
As this one is only 40% off the peak, it still has further to fall.
{book7}
This second one will not be marketed as “light and bright.” Hmmm… It is marketed as LIGHT AND BRIGHT!
OMG! Did the realtor even look at the pictures?
I am speechless.
Asking Price: $204,900
Income Requirement: $51,225 Downpayment Needed: $40,980
Purchase Price: $322,000 Purchase Date: 6/3/2005
Gain (Loss) after 6% Commission: -$129,394 Percent Change: -36.4% Annualized Appreciation: -8.5%
Beds: 1 Baths: 1 Sq. Ft.: 715 $/Sq. Ft.: $287 Lot Size: – Property Type: Condominium Style: Contemporary Stories: 1 Floor: 2 View: Greenbelt, Treetop Year Built: 1980 Community: Woodbridge County: Orange MLS#: L30910 Source: SoCalMLS Status: Active On Redfin: 1 day New Listing (24 hours)
WOW..THIS IS AN OUTSTANDING VALUE FOR WOODBRIDGE! REO BANK OWNED UPPER LEVEL SPACIOUS ONE BEDROOM LIGHT AND BRIGHT CONDO IN PRESTIGIOUS WOODBRIDGE COMMUNITY CLOSE TO FREEWAYS, UNIVERSITY, AWARD-WINNING SCHOOLS, MAJOR SHOPPING AREAS, AND WITH LAKE AND ASSOCIATION PRIVILEGES! CLOSE TO PARKING AND WELCOMING VIEWS OF THE GREENBELT, THIS UPPER LEVEL CONDO IS AN END UNIT WITH A PRIVATE ENTRY BALCONY PORCH, VISTA OF TREES, A LARGE LIVING ROOM WITH WINDOWS ON TWO WALLS, A SEPARATE DINING ROOM, A SUNNY KITCHEN WITH UPGRADED COUNTERS, A LARGE MASTER SUITE WITH SMALL BALCONY PLUS A DRESSING AREA WITH A WASHER/DRYER CLOSET, AND A SEPARATE BATHROOM WITH SHOWER/TUB.
VISTA OF TREES. Hmmm… I imagine you can see them, too.
ALL CAPS.
Look at how long this one has been moving through the system:
Foreclosure Record Recording Date: 05/09/2008 Document Type: Notice of Sale (aka Notice of Trustee’s Sale) Document #: 2008000222010
Foreclosure Record Recording Date: 02/04/2008 Document Type: Notice of Default Document #: 2008000051931
Foreclosure Record Recording Date: 08/24/2007 Document Type: Notice of Sale (aka Notice of Trustee’s Sale) Document #: 2007000526514
Foreclosure Record Recording Date: 05/16/2007 Document Type: Notice of Default Document #: 2007000318854
This owner stopped making payments in late 2006 or early 2007. It was not foreclosed on until June of 2009.
Nobody has made a payment on this unit for as long as I have been writing for the IHB. Unbelievable.
When a mortgage holder gets behind on payments, they often “cure”
the deficiency — well, at least they used to. The cure rate in early
2007 was 45%; It recently fell to 6.6%.The
cure rate is the ratio of the number of loans cured divided by the
number of delinquent loans in the system. It is a measure of the
percentage of loans each month that leave Shadow Inventory. It is a
direct measurement of one of the methods of exiting the system — the
other being foreclosure. When a property goes delinquent, what isn’t
cured is a foreclosure.
Cure rates are very low right now because there is so much shadow
inventory in the system that has no chance of curing. This makes the
denominator of the calculation larger than it should be (Loans Cured /
Total Delinquent) because delinquent loans are not becoming REO on
time. There are about 15,000 loans in Preforeclosure Inventory that
should be REO but due to foreclosure moratoria and other policies,
Shadow Inventory (Preforeclosure Inventory plus REO) has been growing.
This is consistent with anecdotal reports I have heard.
Today, I want to take a closer look at cure rates and relate the micro-economic decisions of individuals to the macro-economic statistics.
Cure Rate and Equity
Defaults are loan disease. There are many causes of the disease, from unemployment to loss of market value, but there is only one symptom that lenders care about — defaults. There are two important dates concerning defaults; (1) the date when lenders consider a borrower to be a default problem which is 60 days after payment was due, and (2) the date when the Notice of Default is permitted to be filed which is 90 days after payment was due.
The lenders do not control the first date — when the borrowers actually quit paying — but they do control the second date — when they file a notice of default. What is customarily a 30 day gap has extended by months. Part of our famed Shadow Inventory is trapped in this moratoria gap.
Patients who are in good health cure from disease better than those in poor health. Borrowers whose finances are strong — have equity — will cure at better rates than those who are underwater or facing a rental savings enticement. Many who see better futures in different circumstances will walk away from the debts and succumb to the loan disease. In borrowers terms, the cure for loan disease is to quit paying.
Curing Default
There are many factors that influence who will cure their loan and who will not. One of the most important of these factors is their equity position.
When people have equity in their homes, they cure at very high rates. Either the loan officer will modify the loan, or they will force sale. The owner generally will choose to sell and obtain their equity to live on. If you have a borrower in default with a low Loan-to-Value (LTV), they will cure either by loan modification or open market sale at nearly 100% rates.
As LTVs get higher, percent equity or Equity Position gets lower. As the equity position gets smaller a number of negative factors work together to lower cure rates quickly:
Lenders feel less security extending credit.
Loan modifications are more difficult to obtain.
Success of loan modifications declines.
It becomes more difficult to sell, particularly when equity falls to zero.
Absent faith in appreciation, borrowers have little incentive to cure.
If savings by renting is reasonable, borrowers have incentive not to cure.
The combination of these factors means that cure rates fall off to nearly zero as homeowners go underwater. (BTW: We will have stories of people who bought in 2006 who paid their mortgages for 25 years to get back to the value they paid. These loan (lone?) survivors will be like the Japanese WWII veterans who come out of the jungle after all these years, and they are still fighting the war.)
The equity position changes as prices change. The more prices fall in a market, the more people default and fail to cure. This adds inventory which further depresses prices; a downward spiral ensues. Have you taken a careful look at the Case-Shiller Index for Las Vegas? You see exactly what happens when you hit the downward spiral.
If there is a reason for lender collusion to withhold inventory, it is their collective fear of recreating Las Vegas in every market in America. They have not begun to face the staggering losses they will take in Orange County.
Default Rates
Default rates would also graph very much like cure rates because the same reasons that people may not cure a loan are also reasons they may wish to default. Going underwater and having rent savings available will push and pull people out of their homes. Financially, it is often the right thing to do.
This means that house prices get a double whammy; when property owners go negative-equity, they (1) default and (2) fail to cure. They become ruthless incurable defaulters adding inventory to the downward spiral — like today’s featured property owner.
Asking Price: $655,000
Income Requirement: $163,750 Downpayment Needed: $131,000
Beds: 5 Baths: 3 Sq. Ft.: 3,450 $/Sq. Ft.: $190 Lot Size: 8,191 Sq. Ft. Property Type: Single Family Residence Style: Contemporary Stories: 2 Year Built: 1998 Community: Walnut County: Orange MLS#: P702865 Source: SoCalMLS Status: Active On Redfin: 1 day New Listing (24 hours)
In CUL-DE-SAC. Largest plan in complex. Huge drive way! Over $200k in upgrades with brand new re-designed kitchen and state of the art appliances. Re-built bathrooms upstairs and downstairs. Newly built opened stairwell unlike any other in this plan. Combination of hardwood & 22 inch Italian tile floors downstairs and all mahogany wood upstairs. Crown molding throughout entire home. Bonus HUGE loft with custom sink area for entertainment upstairs! 1 Bedroom downstairs that can be office and 4 spacious bedrooms upstairs, perfectly situated; all upstairs bedroom has walk-in closets!
The owner of this property put $230,000 down. That must hurt.
Looking to the sky to save the values in the towers on Jamboree? I don’t think there will be pennies from Heaven — dollars from Washington maybe — but the market for these units will continue to crumble. I first documented the problems in The Plaza in the post, School of Hard Knocks.
The owner of today’s featured property is learning a tough lesson as well. When the foreclosure went through, he lost his $295,600 downpayment. That must have hurt.
Just Say Nothing?
When I wrote last Friday’s post Good Karma, it was astutely pointed out that for every buyer I saved I made life more difficult for a seller. This is true. In my defence, I note that the seller already made their decision when they bought previously. The decision to sell is about mitigating consequences. It is the buyer who is agreeing to take on the consequences of the decision anew, and they deserve good information to make that decision.
Does educating buyers to consequences make it good and right to sellers? It works for me. I will let you decide for yourself. Isn’t choosing to say nothing and failing to help when you can an action for which you must answer to yourself?
The astute observation points to a deeper issue; what should the Cassandra’s of this world do? The School of Hard Knocks is expensive education. Would you dissuade buyers if you thought they were making a mistake?
I received the following from an anonymous reader:
Hello IHB,
I’m a renter in the Bay Area. One of my coworkers recently announced he was going to buy a condo. It’s a new building, just recently thrown up, and he announced he was purchasing a unit, 1300 sq ft, a one car garage and a patio big enough for 2 chairs and no bbq allowed (but it’s got granite and stainless!) for the low low price of $400K.
I lived in this neighborhood for 2 years until last May. It’s awful. the 7-11 across the street routinely has vagrants drinking and sleeping in the parking lot. There is a light rail track that constantly stops traffic. And, as it turns out, the condo building is across the street from a halfway house where the state of California releases mentally challenged inmates that cannot be reintroduced directly into the community. The police used my driveway twice to conduct searches of cars they pulled over because they knew that we were not violent criminals and felt safe about using our space. My neighbor was attacked in broad daylight and his truck was stolen. Someone pulled a gun on my other neighbor at 7:30 AM, but then ran away, and the police assured us it was a mistake and the gang bangers had the wrong house (Oh, you mean they could have accidentally come to my house?)
My point/ question is, that when someone announces that they’re going to be homeowners, and especially first time homeowners, everyone oohs and aahs and congratulates and smiles. I was the only one who did not. I asked a coworker if it’s proper for me to pull him aside and think long and hard and tell him my experiences in that neighborhood. Everyone, including my mother, told me that would be rude and that it’s absolutely not my place to do so.
Anyway, on the day they signed the papers, they discovered the halfway house for mental inmates, which was buried in flowery language somewhere in the CC&R’s, and their second night their garage was broken into and all of my coworker’s prized musical instruments and lots of personal effects like good winter jackets, etc. were stolen.
I have also had other friends buy pointless, horrible property in other places and one has chosen foreclosure and walked away to live with her parents, destroying her and her husband’s credit for years after the condo they bought for $450 was appraised in the low 200s. Another is having their marriage dissolve after the wife nagged the husband into buying a house in a highly overinflated area at the peak, where the house has lost 50% of its value.
When is it proper for someone to speak up and stop the madness? Had I had the balls to tell my coworker not to buy there, I might be an a-hole raining on his parade, but he wouldn’t have lost $10K in musical instruments and be living across from a minimum security psych ward. Was I wrong not to speak up, put a fake smile on and congratulate?
How would you deal with this situation?
Asking Price: $702,900
Income Requirement: $133,078 Downpayment Needed: $140,580
Beds: 2 Baths: 3 Sq. Ft.: 1,790 $/Sq. Ft.: $393 Lot Size: – Property Type: Condominium Style: Other Stories: 1 Floor: 8 View: City Lights, Mountain, Panoramic Year Built: 2007 Community: Airport Area County: Orange MLS#: S588594 Source: SoCalMLS Status: Active On Redfin: 3 day
Super mountain, city lights and horizon views! Corner unit featuring a grand foyer and gallery. The kitchen has granite countertops, Viking appliances and beautiful cabinets. Floor to ceiling windows and wrap around balcony. Wood flooring throughout most of the unit, carpeting in the bedrooms. Fireplace in the living room. The building has a lobby entrance, two pools, jacuzzi, conference room, gym and more. On-site management.
They didn’t waste much time foreclosing on this guy.
Foreclosure Record Recording Date: 04/17/2009 Document Type: Notice of Sale (aka Notice of Trustee’s Sale) Document #: 2009000189064
Foreclosure Record Recording Date: 12/26/2008 Document Type: Notice of Default Document #: 2008000590159
It looks like he gave up about a year ago. It must have been tough to accept that he lost almost $300,000 in 18 months.
Pretty woman walkin down the street
Late summer thread, on the internet
In 
If there is a reason for lender collusion to withhold inventory, it is their collective fear of recreating Las Vegas in every market in America. They have not begun to face the staggering losses they will take in Orange County.
