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.
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.
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
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
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,