Second Home Communities Are Ravaged by Foreclosures

Properties in second-home communities are falling into foreclosure at high rates. Unlike Irvine where a substitute buyer may be active in the market, second-home markets cannot be supported by the local population making a fraction of the money the original owners make.

Irvine Home Address … 12 HARTFORD Irvine, CA 92604

Resale Home Price …… $299,000


It was 1989 my thoughts were short my hair was long

Caught somewhere between a boy and man,

She was 17 and she was far from in-between

It was summertime in Northern Michigan

Splashing through the sandbar, talking by the campfire,

It's the simple things in life like when and where

We didn't have no Internet but man I never will forget

The way the moon light shined upon her hair

Kid Rock — All Summer Long

I grew up in a small town in Wisconsin named Friendship. Isn't that a great name for a sleepy, rural community? I am going back there two weeks from today to recharge at Friendship Lake and climb the Friendship Mound, my spiritual home.

Do you see the rock face in the photos? That is the face of the Friendship Mount that looks down on the small community of 698 people. In my will, my final request is for my ashes to be released to the breeze on that rock.

I have always been attached to this place. In my quest to abandon my own attachments, this one has been very difficult to let go. I moved away when I was 11, back at 18, away again at 21. Whenever I think about "home," this community is what comes to my mind.

Have you ever spun donuts in your car on a frozen lake? Sat in an ice shanty drinking beer and pretending to fish?

Have you ever walked for miles through the woods without seeing civilization? Or met up with a curious deer?

I find that if I am away too long, I forget what is real. I lose my connection to the simple things in life that matter. I get too busy to stop and feel the ecstatic joy of being alive.

When I go back, the sun rises at about 5:00 AM and sets about 9:00 PM leaving many hours of sunlight to fill the day. Summer in the Northwoods is a very special time.

Life is slow in Friendship, Wisconsin. Nothing of import happens there, no big decisions are made, and the wheels of commerce barely turn, which is why I live here in Irvine rather than there in my tiny home town.

Some day, I will likely own property in Friendship. Unlike the equity locusts of the housing bubble, I don't plan to take the money out of the equity of my primary residence to do it. That mistake was common in the housing bubble as baby boomers flush with equity invaded towns like Friendship and drove property values sky high. Now that the bills are coming due, many people are simply not paying them and allowing their lake homes to go into foreclosure.

A quiet foreclosure trend in Minnesota: lake homes

Recession discourages buyers as cabin prices, sales drop

Getting the chance to sell a lake home in northern Minnesota was once a cause for celebration among real estate agents.

"Now, it's like, 'Oh, no, another lake shore listing,' " said Kay Bowman, a real estate agent with Century 21 Land of Lakes in Grand Rapids.

A few years ago, prices for lake homes were climbing at double-digit rates as buyers seemed convinced that all cabins in the land of 10,000 lakes soon would be gone. Sellers at the time also could count on demand from buyers who tapped equity from primary residences in the Twin Cities or elsewhere to finance a purchase up north.

But nowadays, selling a lake home is no day at the beach. Vacation home prices have fallen, buyers are waiting for bargains, and bank foreclosures — once unheard of on certain lakes — dot the shorelines, providing low-price competition for other sellers.

One of every 10 vacation homes purchased nationally in 2009 was in foreclosure, the highest such rate in five years, according to the National Association of Realtors. Real estate agents say there's a similar trend in Minnesota, although they point out that foreclosures aren't the only reason for slow sales at the lake.

"It's consumer confidence — sales are down for almost all big nonessential purchases," said Mike Peller, president of the Duluth Area Association of Realtors.

"We are down approximately 40 percent in values since 2007," said Marc Kuhnley, an agent in the Brainerd Lakes area with Edina Realty. "Of course, that 40 percent isn't off a true value — it's off of a false value that was driven by the market."

This reporter and the quoted Realtor seem to get it: there was a housing bubble.

Five years ago, people buying lake homes had plenty of equity in their first home to draw on, Swierczek pointed out. Plus, buyers were more confident about their own financial health, as well as that of the housing market.

That's all changed.

A report this spring from Minneapolis-based HousingLink suggests bank foreclosures were making appearances lakeside. Several counties in cabin country were among those with the biggest jump in bank foreclosures between the first quarters of 2009 and 2010.

For example, Lake County — the picturesque home to Two Harbors, Split Rock Lighthouse and miles of pristine Lake Superior shoreline — saw a 650 percent jump in bank foreclosures in the first quarter, according to HousingLink.

The rate of increase is much more dramatic than the actual numbers, since the county's foreclosure count jumped from just 2 to 15. Still, county officials say vacation homes now are among the mix of bank foreclosures in an area that had just two properties repossessed by banks during all of 2000.

Year-to-date in 2010, Lake County has conducted 30 foreclosure sales.

In the Brainerd Lakes area, banks are involved in about two of every five sales of waterfront property, whether by way of foreclosure or a short sale, estimated Marc Kuhnley, the Edina Realty agent. The listings have helped push prices downward — particularly at the spendy end of the market.

A lake home in the Brainerd Lakes area originally listed for nearly $1.7 million sold after two years on the market for $999,000, Kuhnley said. Another home originally listed for nearly $1.8 million is now down to about $1.3 million after three years on the market.

"Currently, there are 80 lake properties over $1 million dollars on the market up here," Kuhnley said. Homes in that price bracket are selling at a rate of about six per year, he added, so it could take a long time to burn through the supply.

It will take a long time locally to absorb the jumbo loan properties. It will take forever to sell them in communities where none of the local wage earners can afford them.

"We are seeing a lot more bank-owned properties in the Brainerd Lakes area market, which is predominately lakeshore homes that are second residences," said Terry Pederson, an agent with Re/Max Lakes Area Realty in Crosslake. "If you're a buyer, it couldn't be a better time."

That's bullshit. Prices will come down much more in these markets. This housing market has to go from being the repository of free money of mortgage equity withdrawal to buyers who must now make two payments. That probably a 90% reduction in the potential buyer pool.

"People aren't coming up here to buy," she said. "So, you have this great volume of homes that we didn't used to see. If you could list something on the lakeshore, you used to say, 'Oh, great, I have a lakeshore listing.' "

Nearby sellers get the point.

"It is very slow," said Thomas Bloomquist, an Itasca County resident who is trying to sell a four-bedroom home with 200 feet of shoreline along a small lake in rural Grand Rapids. This year marks the third consecutive spring that Bloomquist's home has been on the market, with a current list price of $279,000.

Bloomquist works as a foreclosure prevention counselor with a nonprofit group in Duluth, so he knows that federal efforts to prevent foreclosures are focused only on primary residences.

A foreclosure prevention counselor who is underwater and listing a second home at a WTF listing price? That is funny.

It's understandable, he added, since a second home or cabin is "not a real need; it's a want."

"With the collateral damage from employment losses and so many households down to one wage earner," he said, "that luxury of having the second home just isn't there."

Christopher Snowbeck can be reached at 651-228-5479.

Did she go buy a second home?

The owner of todays featured property paid $127,000 back in 1994, and she only borrowed $70,650 to do it. She completely ignored the housing bubble until on 5/9/2005 she refinanced with a $200,000 first mortgage. What do you think she needed the money for? Whatever she did, it is costing her this condo.

Foreclosure Record

Recording Date: 05/20/2010

Document Type: Notice of Default

Irvine Home Address … 12 HARTFORD Irvine, CA 92604

Resale Home Price … $299,000

Home Purchase Price … $127,000

Home Purchase Date …. 2/10/1994

Net Gain (Loss) ………. $154,060

Percent Change ………. 135.4%

Annual Appreciation … 5.2%

Cost of Ownership


$299,000 ………. Asking Price

$10,465 ………. 3.5% Down FHA Financing

4.91% …………… Mortgage Interest Rate

$288,535 ………. 30-Year Mortgage

$61,278 ………. Income Requirement

$1,533 ………. Monthly Mortgage Payment

$259 ………. Property Tax

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

$25 ………. Homeowners Insurance

$273 ………. Homeowners Association Fees


$2,090 ………. Monthly Cash Outlays

-$144 ………. Tax Savings (% of Interest and Property Tax)

-$352 ………. Equity Hidden in Payment

$20 ………. Lost Income to Down Payment (net of taxes)

$37 ………. Maintenance and Replacement Reserves


$1,651 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$2,990 ………. Furnishing and Move In @1%

$2,990 ………. Closing Costs @1%

$2,885 ………… Interest Points @1% of Loan

$10,465 ………. Down Payment


$19,330 ………. Total Cash Costs

$25,300 ………… Emergency Cash Reserves


$44,630 ………. Total Savings Needed

Property Details for 12 HARTFORD Irvine, CA 92604


Beds: 2

Baths: 1 full 1 part baths

Home size: 1,000 sq ft

($299 / sq ft)

Lot Size: n/a

Year Built: 1977

Days on Market: 17

Listing Updated: 40318

MLS Number: P735817

Property Type: Condominium, Residential

Community: El Camino Real

Tract: Hp


This lovely townhouse style end unit has it all!!!! There are two large bedrooms upstairs with a walk in closet, has laminate floors downstairs, eating area kitchen,spacious patio, spearate laundry room,view of greenbelt from upstair bedroom, close to pool, and playground.

spearate? Do you think the realtor used enough exclamation points?

I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.

Have a great weekend,

Irvine Renter

31 thoughts on “Second Home Communities Are Ravaged by Foreclosures

  1. AZDavidPhx

    You are right on about the second homes. As a kid, I used to go up to Traverse City, MI. Stayed in a cottage on Long Lake. During the 90’s they started tearing down all of the cottages and erecting McMansions. Now the place is covered with “million dollar” lake houses that nobody is going to buy. Very sad, they took a community that was available to all and turned it into a playground for the nouveau riche. I am sure this has played out in small communities all over the midwest. Shame.

    1. Swiller

      If you didn’t live there David…the locals called you a “fudgie”, because they *always* bought Doug Murdick’s fudge…probably still do to this day. Did you happen to go for the “Cherry Festival”?

      Some of the areas around Traverse are extremely beautiful. This is not the Michigan most know however, and apparantly, is part of Michigan most will never have a chance to know due to the massive division in wealth in America.

      On a side note, the old theatre downtown was completely restored by…Michael Moore! LOL!

      1. AZDavidPhx

        Been there, done that. Traverse City is a great place. Agreed, not what you think of when Michigan comes to mind. I have thought of buying property on the lake up there but 350K for a 900 square foot cottage that is not a primary residence is just not in the cards. That’s assuming you can even still find one as most of the real estate now starts at 500K and up to 1Mil now that the builders have forced everyone to buy McMansion. Hopefully the recession will bring these secondary housing markets back down to reality. I am keeping my eyes on that area.

        I thought I heard that Michael Moore lives in Traverse City.

        1. Sue in Irvine

          I grew up in Birmingham, Michigan. We would go up to Petoskey in the summer for weekends. And don’t forget Mackinaw Island.

    2. Chris M

      Back in the 80s, we always went camping at Lake Charlevoix. We’d always stop at Sleeping Bear Dunes on the way home. It’s not much of a mountain by California standards, but a 300ft high sand dune is still quite impressive. Climbing the sand is hard work! These days we camp in Door County, WI. It’s about 1/2 the distance from where I live. I do love that Lake Michigan sand.

  2. Swiller

    Wow, only $299,000 for forty acres in Irvine? Mista sir, how long ya think I’d be a workin dat 40 acres so it’s finally mine?

  3. IrvineRenter

    Happy days are here again:

    Most Improved U.S. Housing Markets 2010

    No. 17: Santa Ana-Anaheim-Irvine, Calif.

    Q1 Home price index: 2.4 percent
    Q1 Foreclosure rate (YOY change): 2.3 percent (up 28.6 percent)
    Q1 90+ day delinquency rate (YOY change): 7.9 percent (up 44.9 percent)
    April 2010 unemployment rate: 9.5 percent

    The real estate market in Santa Ana, especially for condos, was among the worst in the country. Signs of improvement are emerging now as home prices and sales improved in the first quarter, and unemployment ticked down slightly in April.

    It is amazing that the government can make house prices tick up when the delinquency rate is nearly 8% and unemployment is 9.5%.

    1. AZDavidPhx

      and interest rates are at historic lows and buyer bait is stimulating house sales.

      Think about it – this is all they have to show for all of their Herculean effort to prop up the dead system that now has nowhere to go but down.

  4. lowrydr310

    There has to be a sad story behind this one; something doesn’t smell right – maybe a job loss or medical problem.

    Personally, if I had a $70K loan that originated in 1994, assuming there were no other financial ‘surprises’ I would have tried to pay it off. Even with the $200K refi, this place could easily be rented for more than the current expenses.

    I just don’t get it, why did this place ever go into foreclosure?

  5. jumpcut

    “Do you think the realtor used enough exclamation points?”

    He must have taken lessons from Shevy.

    1. Bravo

      Tsk tsk You failed to realize that Shevy added an exclamation point to three separate sentences whereas this description has 4 exclamations on sentence.

      True, there are too many exclamations in either description. But your latest attempt to discredit IR and Shevy is a FAIL.

      1. IrvineRenter

        We teased Shevy to no end at our last meeting about the exclamation points. He will probably be afraid to ever use another one in his life. He should have realized he would be a lightning rod for those who don’t appreciate the IHB.

        1. es

          Don’t forget to find a graphic for “breathtaking” featuring a guy getting punched in the gut and obviously having the wind knocked out of him.

      2. irvine_home_owner

        I don’t think anyone is trying to discredit IR. Most of us long timers have the utmost respect for him and just want to point out the inconsistencies in the message he sends on criticizing other realtors while his own in-house one is guilty of the same type of mistakes.

        Practice what you preach… if you are claiming you are offering a better real estate experience… than don’t do the same thing other realtors do, and that starts with the listing description and photos.

        FWIW: I would probably use IR if I hadn’t already committed to IR2.

  6. AZDavidPhx

    But take note – they are sending the guilty party to re-education camp to unlearn those bad habits. The host could have behaved like an ActiveRain blogger and deleted all of the comments. Instead, they let the critics show up and do their anonymous bashing and they make an effort to correct the problem. I respect that.

    Give credit where credit is due.

    1. irvine_home_owner

      “Give credit where credit is due.”

      I’ll give partial credit. Full credit will apply if IR opens up comments on the same post as an IHB listing.

      You gotta’ take as well as you give. Even the most non-constructive criticism has some lesson to be learned.

      BTW: Both the Lake Forest and Mission Viejo IHB Exclusives still only have external photos of the property (on the post for the MV one… I assume that’s a drawing of what the kitchen is supposed to look like?).

      1. another IR fan

        He doesn’t HAVE to do anything. Leaving your spiteful comments up over the years should be proof enough that he can take it.

    2. S.O.S.

      Agree with Dave. Some of the comments here remind me of those [url=]Type A / “Stress Junkie”[/url] stage parents you see on TV and at Little League games.

      I think Larry’s got the message. Let him do what he chooses to do about it. It’s his call. There’s only so much unsolicited advice a person can give without sounding obnoxious. That technique is not likely to make the other party more receptive. If he wants our opinions, he’ll ask for them.

      1. irvine_home_owner


        So what type of people are the people who give their opinions to other people saying they shouldn’t be telling other people their opinions?

        Cue the Alanis Morissette song.

        1. S.O.S.

          “You gotta’ take as well as you give. Even the most non-constructive criticism has some lesson to be learned.”

          Due to your quote above, I can’t imagine you would object to anything I have to offer.

          1. irvine_home_owner

            “I can’t imagine you would object to anything I have to offer.”

            No objections whatsoever… I’m not the one saying what opinions can or can’t be posted here.

            I appreciate ALL opinions… maybe you should read my quote above again.

            The song is still playing.

  7. Will

    Friendship, Wisconsin sounds (and looks) wonderful. There’s also a Friendship, Maine. I worked with a friend whose family lived there and she went back there every year and said it was a great place.

    By contrast, can you imagine someone growing up in the North Korea towers and thinking wistfully of them as “home?”

    Speaking of which, Irvine Renter, when can we have another visit to North Korea? Are things picking up in the towers? I wonder what those charmingly sterile units rent for now…any recent sales?

    1. bltserv

      Speaking of North Korea Towers.
      Across the street from NKT is Astoria.

      I was at a party on Memorial Day. A couple that are long time friends told us they had spent the morning at Astoria looking at the units. Guess how many units have “Closed” so far ? Seven.
      That place has been for sale for over a year.
      and 7 units. Can you say bloodbath for the developer.
      I guess that $ 900.00 HOA might be an issue too.

      1. Chris

        Hey, look at the positives.

        With $900 HOA/mo, I’m surprised they could sell seven units.

  8. SanJoseRenter

    Yes, I vote for a North Korea Towers follow-up too.

    Always good for a hearty laugh.

Comments are closed.