IHB News 4-3-2010

This weekend's property is an REO priced near rental parity.

Irvine Home Address … 13 COLUMBUS Irvine, CA 92620

Resale Home Price …… $745,000


Regrets I've had a few

But then again too few to mention

I did what I had to do

And saw it through without exemption

I planned each charted course

Each careful step along the byway

And more, much more than this

I did it my way

Frank Sinatra — My Way

IHB News

This was an eventful week with several national blogs picking up on Monday's story that Bank of America to Increase Foreclosure Rate by 600% in 2010. We were picked up again by Patrick.net with Loan Modifications Succeed by Increasing Borrower Entitlements. We had over 30,000 visitors for the week.

Housing Bubble News from Patrick.net

Spring Outlook: Housing Sales Looking as Bleak as Ever (realestate.yahoo.com)

Chicago Sees Nation's Steepest House Price Drop For January (cbs2chicago.com)

More housing trouble (thehill.com)

Loan Modifications Succeed by Increasing Borrower Entitlements (irvinehousingblog.com)

Californians may have to pay income tax on canceled mortgage debt (mercurynews.com)

Hear why foreclosures dampen housing's future (lansner.freedomblogging.com)

MLS Inventory Creeping up, Section 8 Vouchers for Granite Countertops (doctorhousingbubble.com)

Watch out for fraud in short sales (mortgage.freedomblogging.com)

No Flood Insurance? No Problem! (cnbc.com)

Countdown to Renter's New Year (reallyf'edhomeowner.com)

Irish Banks: "Worst Fears Have Been Surpassed" (Mish)

Irish taxpayers takes on banks' toxic debt (thisismoney.co.uk)

Half of commercial RE mortgages to be underwater (bubblemeter.blogspot.com)

Multi-Generational Loans Program Starts Up (patrick.net)

House price dip continues (money.cnn.com)

Case-Shiller House Prices Go Up — and Down (timiacono.com)

Housing prices headed for double dip (cnbc.com)

From bucolic bliss to 'gated ghetto' (latimes.com)

Real Estate Still Overpriced in California (mybudget360.com)

Should houses be worth twice what they were in 1996? (gregfielding.housingstorm.com)

U.S. housing market shifts from liar loans to hard cash (theglobeandmail.com)

Signs point to higher mortgage rates ahead (heraldtribune.com)

California lawmakers are the highest paid in the nation (latimesblogs.latimes.com)

Failing US banks need to fear government closure (news.yahoo.com)

States of Bewilderment: The Mad Hatter reigns supreme (theautomaticearth.blogspot.com)

Downtown NYC Towers Empty as Best Market Falters (bloomberg.com)

Unstoppable Canadian housing market may have met its match (financialpost.com)

10 Signs of Speculative Mania in China (Mish)

House prices post smallest annual loss in 3 years (latimes.com)

Realtors expect house values to decline or remain flat (heraldtribune.com)

How Speculative Madness Changed the Housing Market (realestatechannel.com)

Some who can afford mortgages prefer to walk (chron.com)

Bank of America to Increase Foreclosure Rate by 600% in 2010 (irvinehousingblog.com)

Obama's mortgage plan won't bring relief (guardian.co.uk)

New foreclosures far outpacing new loan modifications (washingtonpost.com)

With foreclosures, python refuses to digest pig (snl.com)

Some CA house buyers get new state tax credit (sfgate.com)

Silicon Valley firms slip in workplace rankings (sfgate.com)

A Silicon Valley/Venture Capital Solution to the Housing Crisis (watchingmarcitz.com)

4 Problems With The Mortgage Interest Deduction (theatlantic.com)

Irish bank declares Wisconsin school trusts in default (google.com)

Wealthy Unload Munis; Junk, Corporates, Equities; Take Some Chips Off The Table (Mish)

In gold we trust (theglobeandmail.com)

Guaranteeing your neighbor's mortgage with your money (theautomaticearth.blogspot.com)

Best Protection Against Another Housing Bubble May be Painful Lessons (housingwatch.com)

House sellers are getting desperate on Flickr (flickr.com)

Lower House Prices Can Fix What Government Can't (businessweek.com)

Artifically inflated prices means houses remain unaffordable to responsible buyers (Charles Hugh Smith)

Can new program curb foreclosures (to raise cost of house for young families)? (heraldtribune.com)

Second mortgages complicate efforts to harm homebuyers (washingtonpost.com)

Being penalized again and again for not taking stupid risks (eyeonmiami.blogspot.com)

End of Risk-subsidy Programs May Delay Housing Inflation (time.com)

Act like you can't make house payment; you might get a write down (lewrockwell.com)

Houseowners Debate a Bailout (Overspend and Cry is best strategy) (nytimes.com)

Financial Blogger On Ethics Of Mortgage Modification (npr.org)

Some people are too far gone (theautomaticearth.blogspot.com)

Report shows "strategic defaults" increasing (blogs.reuters.com)

Get ready for at least 5 more years of underwater mortgages (weblogs.sun-sentinel.com)

Pinpointing Bay Area house price falls by ZIP code (sfgate.com)

California unemployment rate holds steady at miserable 12.5% (latimes.com)

Honolulu rents fall, but still 2nd priciest in U.S. (honoluluadvertiser.com)

Shake, Rattle, Seattle (nytimes.com)

Why your house is not investment you think it is (old but good) (finance.yahoo.com)

Why We Have An Income Tax (patrick.net)

Another Advantage for the Biggest Banks (nytimes.com)

The Party of Cruelty (kunstler.com)

Writer's Corner

I have decided to take a small piece on the weekend open thread for me. I have always tried to keep my personal interests unrelated to real estate out of my posts. I am not very interesting, and people come here for news and analysis rather than because I am interesting. I recognize that, so I keep myself out of it — mostly.

If you have no interest in anything outside of my views on real estate, you may skip the writer's corner, and you will not miss a thing.

My beliefs and character come through in my daily real estate commentary, so you already know me in ways that matter, but I want a place where I can share off-the-wall things that catch my eye during the week, a place I can talk about my interests an hobbies: writing, blogging, video games, science, astronomy, biology, history, local destinations, the Green Bay Packers, golf course design, whether or not Tiger Woods will win the Masters, anything I am focused on at the moment.

Saturn's Hexagon Cloud

For Christmas I bought my two pre-teen cousins the Universe series on DVD. I thought it was so cool I bought a copy for myself, and I either watch it or Star Wars: The Clone Wars with my morning breakfast all this year… Yes, I am a total nerd.

I was watching Universe's discussion about new images from the Cassini spacecraft of a strange but persistent cloud formation on Saturn that forms a nearly perfect hexagon. How does that happen? I was floored when I saw this. I thought it was made up.

Scientists don't have a clue how such a formation can exist. From Wikipedia: "The straight sides of the northern polar hexagon are each about 13 800 km long. The entire structure rotates with a period of 10h 39 m 24s, the same period as that of the planet's radio emissions, which is assumed to be equal to the period of rotation of Saturn's interior. The hexagonal feature does not shift in longitude like the other clouds in the visible atmosphere."

Very strange.

Featured property

This REO is priced near rental parity. With no HOA or Mello Roos, the cost of ownership is under $3,000 per month.

Irvine Home Address … 13 COLUMBUS Irvine, CA 92620

Resale Home Price … $745,000

Home Purchase Price … $644,739

Home Purchase Date …. 1/19/2010

Net Gain (Loss) ………. $55,561

Percent Change ………. 15.6%

Annual Appreciation … 59.2%

Cost of Ownership


$745,000 ………. Asking Price

$149,000 ………. 20% Down Conventional

5.11% …………… Mortgage Interest Rate

$596,000 ………. 30-Year Mortgage

$156,197 ………. Income Requirement

$3,240 ………. Monthly Mortgage Payment

$646 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$62 ………. Homeowners Insurance

$0 ………. Homeowners Association Fees


$3,947 ………. Monthly Cash Outlays

-$796 ………. Tax Savings (% of Interest and Property Tax)

-$702 ………. Equity Hidden in Payment

$299 ………. Lost Income to Down Payment (net of taxes)

$93 ………. Maintenance and Replacement Reserves


$2,842 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$7,450 ………. Furnishing and Move In @1%

$7,450 ………. Closing Costs @1%

$5,960 ………… Interest Points @1% of Loan

$149,000 ………. Down Payment


$169,860 ………. Total Cash Costs

$43,500 ………… Emergency Cash Reserves


$213,360 ………. Total Savings Needed

Property Details for 13 COLUMBUS Irvine, CA 92620


Beds: 4

Baths: 2 full 1 part baths

Home size: 2,508 sq ft

($297 / sq ft)

Lot Size: 5,250 sq ft

Year Built: 1980

Days on Market: 3

MLS Number: S611281

Property Type: Single Family, Residential

Community: Northwood

Tract: Pl


According to the listing agent, this listing is a bank owned (foreclosed) property.

4 bedroom, 3 bathroom pool home located in charming neighborhood. Bonus room can easily be 5th bedroom as well. Entertainer's kitchen offers granite counters and cherrywood cabinets and built-in cabinet lights. Cherrywood Staircase and built-ins in living room. Fabulous backyard with pool. Upstairs Loft and much more. Hurry! this home will not be around long!

Happy Easter

26 thoughts on “IHB News 4-3-2010

  1. OrangeRenter

    Speaking of astronomy: what is that Black Hole under the roof peak, framed by that weird arched section above the window?… The window frame that doesn’t match the windie next to it?

    The is quite possibly the ugliest elevation I’ve ever seen. I couldn’t stop staring at the photo.

    Perhaps they added on a 2nd floor, and realized the plans didn’t match the existing roof line? Uuuuggly!

  2. tonyE

    “The hexagonal feature does not shift in longitude like the other clouds in the visible atmosphere”

    A standing wave.

    Also, we don’t know how long it has been there…. it may be a temporary event but its period may be longer than our observation of it.

    1. IrvineRenter

      I went to a show with my son at the Discovery Science Center (The Cube). The performer was an expert at blowing bubbles. As part of his act, he blew a cube-shaped bubble like the guy in this video.

      The square bubble could easily be made into a hexagon by adding two more bubbles to the “ring” that holds the inner bubble in place.

      When I see this hexagon shape, I wonder if each vertex of the shape is where two large convection cells come together. If the planets atmosphere broke down into 6 stable convection cells, the hexagon shape could result where they come together. Watch the video link of the bubble guy to better understand what I mean.

      I am amazed this formation is stable. It even rotates and keeps its shape. Given the chaos of the rest of the atmosphere, it is amazing a structure like this can exist much less be stable. And your right, we have no idea how long it has been there.

      1. Chris

        “The performer was an expert at blowing bubbles.”

        Is he a relative of Greenspan? :-O

  3. lowrydr310

    Rental parity? What moron would pay $3900 a month to rent a house? Or do you consider the “monthly cost of ownership” as rental parity?

    Regardless, even though there’s ‘hidden equity’ included in the total monthly cash outlay, $3900 is an awfully hard pill to swallow.

    But hey, if there’s someone out there willing to pay inflated prices, then good for them. 30 F*@#&ng; years of debt slavery.

    1. Chris

      lowrydr and IR, have you ever considered that Irvine rents have not dropped like flies yet? Check out IAC websites and you should see anecdotal evidence.

      Unless Irvine turns into the next Hemet (God forbid), I wouldn’t hold my breathe on Irvine housing price drop.

      “$3900 is an awfully hard pill to swallow.”

      Non-Manhattanites are saying the same thing. But then Manhattan is different (hmm….where have I heard that phrase before?)

      1. lowrydr310

        I happen to live not far from Manhattan (the part of NYC, not the beach in LA county) and $3900 is still ridiculous along with most other prices – thank you, socialist rent control! The smart ones rent in NJ for 1/3 of that, for a house/apartment that’s twice the size. Put the difference in an investment account, and the only downsides are slightly longer commutes (by train) and the fact that it’s NJ.

        1. newbie2008

          Are you saying the rent in NJ is only $1300? If so for what? s.f., utilities? Twice the size of the 13 Columbus house (2x 2500 = 5000 sf for $1300 or 0.26 per sf)?

          The earthquake seems like a gentle rock in Irvine. On the second floor, it seem like a large semi-truck going down the street.

          As a landlord, I seems to be always repair or replacing something. HVAC, Refrig, dishwasher, water heaters, clogged drains. It never ends. Hopefully I can make some money from the rentals someday.

    2. Planet Reality

      You should subtract the tax benefit to buying from the $3900.

      If you don’t have enough money to cover property tax payments you shouldn’t be buying.

      3950 – 800 is 3150

      That’s about rental parity. Irvine Renters calculations are favoring buying after that. The hidden equity, maint. Etc approximately balance out. Irvine Renters 2800 per month calculation is too low.

      1. Chris

        “You should subtract the tax benefit to buying from the $3900.”

        That’s assuming you got enough AGI for the tax benefit.

          1. newbie2008

            Iviners might not get the fully deduction, because of the AMT.

            What’s better, alot of small earthquakes or one big one?

    3. IrvineRenter

      “Or do you consider the “monthly cost of ownership” as rental parity?”

      Yes, I compare the actual monthly cost of ownership versus rent to compute rental parity. Of course, this is an owner-occupant calculation. An investor isn’t motivated until the rent covers the total monthly cash outlays. This generally lowers the price about 25% for a cashflow investor.

  4. jb

    I agree with you, Planet…I think that the hidden equity goes toward the selling costs for the first 6 years or so. After that, the appreciation/depreciation of the house comes into play, which is *somewhat* of a gamble.

    That said, renting a house like this has its own costs at $3,150. For example, you can’t do anything about that ugly roofline. Ownership has its privileges.

    1. E

      So what is an owner going to do about that “ugly roofline”?

      Spend a ton of money.

      What’s a renter to do?

      Rent a place that doesn’t have an “ugly roofline”

      Renting has it’s priveleges.

  5. OrangeRenter

    I don’t know how to properly post a link, but if you can see this story from abcnews, you should include it in a weekday profile. It validates everything you’ve said about LTV limits, cash-out refinancing and toxic loans.


    I’ve been in the mortgage industry for almost 10 years, and I’ve never worked for a lender that would touch Texas (except for purchase loans). This story explains why, and Texas works as a control group to prove all your lending theories are correct!

        1. tonyE

          Even when expanding a home? I’m not talking about redoing a kitchen, I’m talking about teardowns and second story additions.

          Unless done wrong, that adds significant value.

          One of my neighbors built their second story with a construction loan on top of their mortgage. The funds went to either the contractor or were paid when she showed them receipts of materials and/or labor. When the construction was finished she refinanced her 1st and construction loan into a new 1st.

  6. AZDavidPhx

    We felt the earthquake all the way over here in AZ.

    First time I have ever felt that – like a horizontal pulse rocking the building slightly.

    1. E

      It seems that many of the people commenting on tha L.A. Times are from Phoenix.

      How much is the deductible for earthquake insurance again?

      Good thing we rent!

      1. AZDavidPhx

        It’s a pretty big event for us.

        People were completely freaking out. It only lasted about 20 seconds but it was quite the strange sensation to be sitting still in your chair and feel yourself being rocked back and forth.

        Do it again Do it again!

Comments are closed.